Certified Public Accountant (CPA) Audit 5

Question 1

Which of the following would most likely be considered a 'material weakness' in internal control over financial reporting?

Accepted Answer

Restatement of financial statements due to a material error in a prior period

Answer

A restatement of financial statements for a prior-period material error is a strong indicator of a material weakness in ICFR under PCAOB AS 2201.

Question 2

According to the AICPA Code of Professional Conduct, the concept of 'objectivity' requires a CPA to:

Accepted Answer

Be free from conflicts of interest and not subordinate professional judgment to others

Answer

Objectivity requires CPAs to be impartial, intellectually honest, and free from conflicts of interest that could compromise their professional judgment.

Question 3

When testing internal controls over cash disbursements, which procedure provides the best evidence that payments were made only for authorized goods and services received?

Accepted Answer

Vouching cancelled checks to approved purchase orders and receiving reports

Answer

Vouching cancelled checks to supporting documents (POs and receiving reports) tests whether disbursements were authorized and goods were actually received.

Question 4

The auditor's report date is significant because it represents the date through which the auditor:

Accepted Answer

Has searched for and evaluated all subsequent events

Answer

The report date indicates the last date through which the auditor has evaluated subsequent events and obtained sufficient appropriate audit evidence.

Question 5

An auditor is performing a compilation engagement. The accountant discovers that the financial statements are not in conformity with GAAP and management refuses to revise them. The accountant should:

Accepted Answer

Withdraw from the engagement or disclose the GAAP departure in the compilation report

Answer

Under SSARS, if management will not correct a GAAP departure, the accountant should either disclose the departure and its effects in the compilation report or withdraw.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant (CPA) Audit 5