AICPA Auditing and Attestation 2 — Questions and Answers
Question 1: An auditor discovers that a client's internal control over cash disbursements is weak. Which audit response is most appropriate?
- Withdraw from the engagement immediately
- Increase substantive testing over cash disbursements (Correct answer)
- Issue a qualified opinion without further testing
- Rely solely on management's representations
Correct answer: Increase substantive testing over cash disbursements
When control risk is assessed as high, auditors compensate by performing more extensive substantive procedures in the affected area.
Question 2: Which type of analytical procedure compares current-year financial ratios to prior-year ratios and industry benchmarks?
- Trend analysis
- Ratio analysis (Correct answer)
- Regression analysis
- Reasonableness testing
Correct answer: Ratio analysis
Ratio analysis evaluates relationships between financial statement items and compares them to historical data and industry norms to identify unusual fluctuations.
Question 3: Under PCAOB standards, an integrated audit requires the auditor to express opinions on which two items?
- Financial statements and management's discussion & analysis
- Financial statements and internal control over financial reporting (Correct answer)
- Internal controls and compliance with laws
- Going concern and internal controls
Correct answer: Financial statements and internal control over financial reporting
PCAOB AS 2201 requires auditors of public companies to opine on both the financial statements and the effectiveness of internal control over financial reporting.
Question 4: When an auditor is unable to obtain sufficient appropriate audit evidence about a material account balance, the appropriate audit report modification is:
- Adverse opinion
- Qualified opinion or disclaimer of opinion (Correct answer)
- Unmodified opinion with an emphasis paragraph
- Compilation report
Correct answer: Qualified opinion or disclaimer of opinion
A scope limitation that is material but not pervasive results in a qualified opinion; if pervasive, the auditor issues a disclaimer of opinion.
Question 5: Which sampling method gives every item in a population an equal and nonzero chance of selection?
- Haphazard sampling
- Judgmental sampling
- Random sampling (Correct answer)
- Systematic sampling with a random start
Correct answer: Random sampling
Random sampling (probabilistic) ensures each population item has an equal chance of selection, supporting valid statistical inference.
Question 6: The concept of 'audit risk' is best described as the risk that:
- The client will commit fraud during the audit period
- The auditor expresses an inappropriate opinion on materially misstated financial statements (Correct answer)
- Internal controls will fail to prevent errors
- The auditor's report will be misunderstood by users
Correct answer: The auditor expresses an inappropriate opinion on materially misstated financial statements
Audit risk is the risk that the auditor issues an unmodified opinion when the financial statements are materially misstated.
Question 7: A predecessor auditor's working papers may be reviewed by a successor auditor primarily to obtain information about:
- The client's future business plans
- Significant accounting policies and prior audit findings (Correct answer)
- Management's competence and integrity evaluations
- The client's tax return positions
Correct answer: Significant accounting policies and prior audit findings
Successor auditors review predecessor working papers to understand prior-year audit scope, significant accounting policies, and issues that may affect current-year work.
AICPA Auditing and Attestation 2
An auditor discovers that a client's internal control over cash disbursements is weak.
Which audit response is most appropriate?