AICPA Auditing and Attestation 4

Question 1

Under AU-C 265, which parties must an auditor communicate identified material weaknesses in internal control to?

Accepted Answer

Management and those charged with governance

Answer

External regulatory agencies and the public

Answer

Only the audit committee

Answer

Only senior management in a written report

Question 2

Which of the following is an example of a substantive analytical procedure?

Accepted Answer

Comparing commission expense as a percentage of sales to the prior year

Answer

Reperforming a bank reconciliation

Answer

Observing the client counting physical inventory

Answer

Confirming accounts receivable balances with customers

Question 3

A CPA firm that audits a public company client and also provides bookkeeping services for the same client has most likely violated which independence principle?

Accepted Answer

Management functions threat under independence rules

Answer

Objectivity

Answer

Confidentiality

Answer

Due professional care

Question 4

Which assertion is most directly tested when an auditor confirms accounts receivable with customers?

Accepted Answer

Existence

Answer

Completeness

Answer

Valuation

Answer

Presentation and disclosure

Question 5

Under GAAS, the standard of 'due professional care' requires that an auditor:

Accepted Answer

Exercise the skill and diligence of a reasonably competent auditor

Answer

Guarantee the accuracy of the financial statements

Answer

Detect all instances of fraud and error

Answer

Obtain absolute assurance about material misstatements

Question 6

An auditor performing a review engagement under SSARS provides:

Accepted Answer

Limited assurance based primarily on inquiry and analytical procedures

Answer

Reasonable assurance that financial statements are free of material misstatement

Answer

No assurance—only a compilation of management's data

Answer

Positive assurance that internal controls are effective

Question 7

Which condition would most likely cause an auditor to withdraw from an engagement before completion?

Accepted Answer

Discovery that management has been systematically falsifying records and is unwilling to correct them

Answer

A client changes its fiscal year end

Answer

The client hires a new CFO mid-year

Answer

The auditor identifies a single immaterial error in accounts payable