CCA CCA Audit & Assurance 2

Question 1

What is the difference between a Type I and Type II subsequent event?

Accepted Answer

Type I provides evidence of conditions existing at year-end and requires adjustment; Type II reveals conditions arising after year-end and requires disclosure only

Answer

Type I subsequent events reflect conditions existing at the balance sheet date and require adjustment to the financial statements; Type II events arise after year-end and require disclosure but not adjustment.

Question 2

What is the purpose of an engagement letter in an audit?

Accepted Answer

To formally define the scope, responsibilities, and terms of the audit engagement

Answer

An engagement letter documents the agreed terms between auditor and client, including audit scope, management and auditor responsibilities, and the basis for fees.

Question 3

Which assertion addresses whether transactions are recorded in the correct accounting period?

Accepted Answer

Cutoff

Answer

The cutoff assertion ensures that transactions and events are recorded in the proper accounting period, preventing premature or delayed revenue and expense recognition.

Question 4

What is a significant deficiency in internal controls?

Accepted Answer

A less severe deficiency than a material weakness, yet important enough to warrant attention by those charged with governance

Answer

A significant deficiency is less severe than a material weakness but still important enough to be communicated to those charged with governance (e.g., the audit committee).

Question 5

What is the auditor's responsibility regarding fraud under US GAAS?

Accepted Answer

To plan and perform the audit to obtain reasonable assurance about whether financial statements are materially misstated due to fraud or error

Answer

Under AU-C 240, auditors must maintain professional skepticism and design procedures to detect material misstatements from fraud, but are not guarantors of fraud detection.

(CCA) Certified Corporate Accountant Practice Test

(CCA) Certified Corporate Accountant Practice Test

CCA CCA Audit & Assurance 2