CPA Auditing & Assurance Services 2

Question 1

Which sampling method gives every item in the population an equal and nonzero chance of selection?

Accepted Answer

Simple random sampling

Answer

Simple random sampling ensures each item has an equal and nonzero probability of being selected, satisfying statistical sampling requirements.

Question 2

An auditor discovers a material weakness in internal control over financial reporting. What must the auditor do?

Accepted Answer

Communicate the weakness in writing to management and those charged with governance

Answer

Under AU-C 265, auditors must communicate material weaknesses in writing to management and those charged with governance.

Question 3

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

Accepted Answer

To establish the terms and conditions of the audit engagement

Answer

An engagement letter establishes the agreed-upon terms of the audit, including the objective, scope, and responsibilities of each party.

Question 4

When testing controls, an auditor finds 3 deviations in a sample of 60 items. The tolerable deviation rate is 5%. What should the auditor conclude?

Accepted Answer

The controls may not be effective; consider increasing substantive testing

Answer

A 5% sample deviation rate (3/60) equals the tolerable rate, and considering sampling risk, the auditor should increase substantive testing.

Question 5

Which of the following best describes 'professional skepticism' as required by auditing standards?

Accepted Answer

A questioning mind and critical assessment of audit evidence

Answer

Professional skepticism involves a questioning mind and critical assessment of evidence, neither assuming dishonesty nor unquestioned acceptance of management claims.

(CPA) Certified Practicing Accountant Practice Test

(CPA) Certified Practicing Accountant Practice Test

CPA Auditing & Assurance Services 2