Certified Public Accountant Communication & Stakeholder Relations 2

Question 1

A CPA discovers a material misstatement in a client's financial statements after the audit report has been issued. Which stakeholder should be notified FIRST?

Accepted Answer

The client's management and those charged with governance

Answer

Per AU-C Section 560, the CPA should first inform management and those charged with governance before determining further action regarding subsequent discovery of facts.

Question 2

When communicating audit findings to an audit committee, a CPA should ensure the communication is:

Accepted Answer

Timely enough to enable the committee to take appropriate action

Answer

AU-C Section 265 requires that significant deficiencies and material weaknesses be communicated in writing on a timely basis so the committee can act.

Question 3

A CPA in public practice receives a subpoena for client records. The BEST course of action is to:

Accepted Answer

Notify the client and consult legal counsel before responding

Answer

AICPA ethics rules require the CPA to notify the client and obtain legal counsel before releasing confidential client information in response to a legal process.

Question 4

Which communication element is MOST critical when a CPA presents a going-concern opinion to stakeholders?

Accepted Answer

The conditions and events that raised substantial doubt

Answer

ASC 205-40 and auditing standards require disclosure of the specific conditions and events creating substantial doubt about an entity's ability to continue as a going concern.

Question 5

A management letter (letter of recommendations) issued after an audit is primarily intended to:

Accepted Answer

Communicate internal control and operational improvement suggestions to management

Answer

A management letter communicates constructive suggestions for improvements in internal controls, efficiency, and other operational matters to management, not to external parties.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Communication & Stakeholder Relations 2