CPA Auditing Principles & Procedures 3

Question 1

Which engagement letter provision is considered most critical for defining the auditor-client relationship?

Accepted Answer

The scope of services and responsibilities of each party

Answer

The engagement letter must clearly define the scope of the audit and the responsibilities of both the auditor and management to avoid misunderstandings.

Question 2

A walk-through test is primarily performed to:

Accepted Answer

Confirm the auditor's understanding of the flow of transactions and related controls

Answer

Walk-through tests follow a transaction from origination through processing to confirm the auditor's documented understanding of transaction flows and controls.

Question 3

If control risk is assessed as low, the auditor should:

Accepted Answer

Reduce the extent of substantive tests

Answer

When controls are deemed effective (low control risk), the auditor can reduce substantive testing because fewer misstatements are expected to pass through controls.

Question 4

Which of the following best describes 'professional skepticism' in an audit?

Accepted Answer

Maintaining a questioning mind and critically assessing audit evidence

Answer

Professional skepticism requires auditors to maintain a questioning mind and critically assess evidence without assuming either honesty or dishonesty.

Question 5

An auditor selects 50 invoices for testing and finds 3 errors. Using attributes sampling, what does the auditor compute?

Accepted Answer

The sample deviation rate

Answer

In attributes sampling, the auditor calculates the sample deviation rate (errors found / sample size) to evaluate the rate of control deviations.

(CPA) Certified Practicing Accountant Practice Test

(CPA) Certified Practicing Accountant Practice Test

CPA Auditing Principles & Procedures 3