Question 1

Before applying principal substantive tests to the details of accounts at an interim date prior to the balance sheet date, an auditor should:

Accepted Answer

A)  Assess control risk at a low level for the assertions embodied in the accounts selected for interim testing. 
B)  Determine that the accounts selected for interim testing are not material to the financial statements taken as a whole. 
C)  Consider whether the amounts of the year-end balances selected for interim testing are reasonably predictable. 
D)  Obtain written representations from management that all financial records and related data will be made available. 
A)  Assess control risk at a low level for the assertions embodied in the accounts selected for interim testing. 
B)  Determine that the accounts selected for interim testing are not material to the financial statements taken as a whole. 
C)  Consider whether the amounts of the year-end balances selected for interim testing are reasonably predictable. 
D)  Obtain written representations from management that all financial records and related data will be made available.

Question 2

For effective internal control purposes, the vouchers payable department generally should:

Accepted Answer

A)  Stamp, perforate, or otherwise cancel supporting documentation after payment is mailed. 
B)  Ascertain that each requisition is approved as to price, quantity and quality by an authorized employee. 
C)  Obliterate the quantity ordered on the receiving department copy of the purchase order. 
D)  Establish the agreement of the vendor's invoice with the receiving report and purchase order. 
A)  Stamp, perforate, or otherwise cancel supporting documentation after payment is mailed. 
B)  Ascertain that each requisition is approved as to price, quantity and quality by an authorized employee. 
C)  Obliterate the quantity ordered on the receiving department copy of the purchase order. 
D)  Establish the agreement of the vendor's invoice with the receiving report and purchase order.

Question 3

In assessing the competence of a client's internal auditor, an independent auditor most likely would consider the:

Accepted Answer

A)  Internal auditor's compliance with professional internal auditing standards. 
B)  Client's policies that limit the internal auditor's access to management salary data. 
C)  Evidence supporting a low assessed level of control risk. 
D)  Results of ratio analysis that may identify unusual transactions and events. 
A)  Internal auditor's compliance with professional internal auditing standards. 
B)  Client's policies that limit the internal auditor's access to management salary data. 
C)  Evidence supporting a low assessed level of control risk. 
D)  Results of ratio analysis that may identify unusual transactions and events.

Question 4

The concept of materiality would be least important to an auditor when considering the:

Accepted Answer

A)  Adequacy of disclosure of a client's illegal act. 
B)  Discovery of weaknesses in a client's internal control. 
C)  Effects of a direct financial interest in the client on the CPA's independence. 
D)  Decision whether to use positive or negative confirmations of accounts receivable. 
A)  Adequacy of disclosure of a client's illegal act. 
B)  Discovery of weaknesses in a client's internal control. 
C)  Effects of a direct financial interest in the client on the CPA's independence. 
D)  Decision whether to use positive or negative confirmations of accounts receivable.

Question 5

The sample size of a test of controls varies inversely with:

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 6

A CPA is engaged to examine management's assertion that the entity's schedule of investment returns is presented in accordance with specific criteria. In performing this engagement, the CPA should comply with the provisions of:

Accepted Answer

A)  Statements on Standards for Accounting and Review Services (SSARS). 
B)  Statements on Auditing Standards (SAS). 
C)  Statements on Standards for Consulting Services (SSCS). 
D)  Statements on Standards for Attestation Engagements (SSA
E) . 
A)  Statements on Standards for Accounting and Review Services (SSARS). 
B)  Statements on Auditing Standards (SAS). 
C)  Statements on Standards for Consulting Services (SSCS). 
D)  Statements on Standards for Attestation Engagements (SSA
E) .

Question 7

Which of the following is a term for an attest engagement in which a CPA assesses a client's commercial Internet site for predefined criteria that are designed to measure transaction integrity, information protection, and disclosure of business practices?

Accepted Answer

A)  ElectroNet. 
B)  EDIFACT. 
C)  TechSafe. 
D)  WebTrust. 
A)  ElectroNet. 
B)  EDIFACT. 
C)  TechSafe. 
D)  WebTrust.

Question 8

Which of the following procedures would an auditor ordinarily perform during the review of subsequent events?

Accepted Answer

A)  Review the cut-off bank statements for the period after the year-end. 
B)  Inquire of the client's legal counsel concerning litigation. 
C)  Investigate significant deficiencies in internal control previously communicated to the client. 
D)  Analyze related party transactions to discover possible irregularities. 
A)  Review the cut-off bank statements for the period after the year-end. 
B)  Inquire of the client's legal counsel concerning litigation. 
C)  Investigate significant deficiencies in internal control previously communicated to the client. 
D)  Analyze related party transactions to discover possible irregularities.

Question 9

Comfort letters ordinarily are:

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 10

Which of the following statements concerning material weaknesses and significant deficiencies is correct with respect to an audit of a nonissuer?

Accepted Answer

A)  An auditor need not identify and communicate material weaknesses separately from significant deficiencies. 
B)  All material weaknesses are significant deficiencies. 
C)  An auditor should report immediately material weaknesses and significant deficiencies discovered during an audit. 
D)  All significant deficiencies are material weaknesses. 
A)  An auditor need not identify and communicate material weaknesses separately from significant deficiencies. 
B)  All material weaknesses are significant deficiencies. 
C)  An auditor should report immediately material weaknesses and significant deficiencies discovered during an audit. 
D)  All significant deficiencies are material weaknesses.

Question 11

An auditor's report that refers to the use of an accounting principle at variance with generally accepted accounting principles contains the words, "In our opinion, with the foregoing Explanation, the financial statements referred to above present fairly...." This is considered an:

Accepted Answer

A)  Adverse opinion. 
B)  "Except for" qualified opinion 
C)  Unqualified opinion with an explanatory paragraph. 
D)  Example of inappropriate reporting. 
A)  Adverse opinion. 
B)  "Except for" qualified opinion 
C)  Unqualified opinion with an explanatory paragraph. 
D)  Example of inappropriate reporting.

Question 12

Jones, CPA, is auditing the financial statements of XYZ Retailing, Inc. What assurance does Jones provide that direct effect illegal acts that are material to XYZ's financial statements, and illegal acts that have a material, but indirect effect on the financial statements will be detected?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 13

This question presents independent factual situations an auditor might encounter in conducting an audit. List B represents the report modifications (if any) that would be necessary. Select as the best answer for each item, the action the auditor normally would take. The report modifications in List B may be selected once, more than once, or not at all. Assume: - The auditor is independent. - The auditor previously expressed an unqualified opinion on the prior year's financial statements. - Only single-year (not comparative) statements are presented for the current year. - The conditions for an unqualified opinion exist unless contradicted in the factual situations. - The conditions stated in the factual situations are material. - No report modifications are to be made except in response to the factual situation. Item to Be Answered A principal auditor decides to take responsibility for the work of another CPA who audited a wholly-owned subsidiary of the entity and issued an unqualified opinion. The total assets and revenues of the subsidiary represent 17% and 18%, respectively, of the total assets and revenues of the entity being audited. List B Report Modifications

Accepted Answer

A)  Describe the circumstances in an explanatory paragraph preceding the opinion paragraph without modifying the three standard paragraphs. 
B)  Describe the circumstances in an explanatory paragraph following the opinion paragraph without modifying the three standard paragraphs. 
C)  Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the opinion paragraph. 
D)  Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the opinion paragraph. 
E)  Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the scope and opinion paragraphs.
F) Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the scope and opinion paragraphs.
G) Describe the circumstances within the scope paragraph without adding an explanatory paragraph.
H) Describe the circumstances within the opinion paragraph without adding an explanatory paragraph.
I) Describe the circumstances within the scope and opinion paragraphs without adding an explanatory paragraph.
J) Issue the standard auditor's report without modification. 
A)  Describe the circumstances in an explanatory paragraph preceding the opinion paragraph without modifying the three standard paragraphs. 
B)  Describe the circumstances in an explanatory paragraph following the opinion paragraph without modifying the three standard paragraphs. 
C)  Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the opinion paragraph. 
D)  Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the opinion paragraph. 
E)  Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the scope and opinion paragraphs.
F) Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the scope and opinion paragraphs.
G) Describe the circumstances within the scope paragraph without adding an explanatory paragraph.
H) Describe the circumstances within the opinion paragraph without adding an explanatory paragraph.
I) Describe the circumstances within the scope and opinion paragraphs without adding an explanatory paragraph.
J) Issue the standard auditor's report without modification.

Question 14

An auditor concludes that a substantive auditing procedure considered necessary during the prior period's audit was omitted. Which of the following factors would most likely cause the auditor promptly to apply the omitted procedure?

Accepted Answer

A)  There are no alternative procedures available to provide the same evidence as the omitted procedure. 
B)  The omission of the procedure impairs the auditor's present ability to support the previously expressed opinion. 
C)  The source documents needed to perform the omitted procedure are still available. 
D)  The auditor's opinion on the prior period's financial statements was unqualified. 
A)  There are no alternative procedures available to provide the same evidence as the omitted procedure. 
B)  The omission of the procedure impairs the auditor's present ability to support the previously expressed opinion. 
C)  The source documents needed to perform the omitted procedure are still available. 
D)  The auditor's opinion on the prior period's financial statements was unqualified.

Question 15

Which of the following best describes the auditor's responsibility with respect to fair values?

Accepted Answer

A)  The auditor should determine whether management has the intent and ability to carry out courses of action that may affect fair values. 
B)  The auditor should assess the risk of material misstatement of fair value measurements. 
C)  The auditor should obtain sufficient appropriate audit evidence to provide reasonable assurance that fair value measurements and disclosures are in conformity with GAAP. 
D)  The auditor should make fair value measurements and disclosures in accordance with GAAP and should identify and support any significant assumptions used. 
A)  The auditor should determine whether management has the intent and ability to carry out courses of action that may affect fair values. 
B)  The auditor should assess the risk of material misstatement of fair value measurements. 
C)  The auditor should obtain sufficient appropriate audit evidence to provide reasonable assurance that fair value measurements and disclosures are in conformity with GAAP. 
D)  The auditor should make fair value measurements and disclosures in accordance with GAAP and should identify and support any significant assumptions used.

Question 16

Which of the following procedures would yield the most reliable evidence?

Accepted Answer

A)  A scanning of trial balances. 
B)  An inquiry of client personnel. 
C)  A comparison of beginning and ending retained earnings. 
D)  A recalculation of bad debt expense. 
A)  A scanning of trial balances. 
B)  An inquiry of client personnel. 
C)  A comparison of beginning and ending retained earnings. 
D)  A recalculation of bad debt expense.

Question 17

A CPA wishes to determine how various publicly-held companies have complied with the disclosure requirements of a new financial accounting standard. Which of the following information sources would the CPA most likely consult for this information?

Accepted Answer

A)  AICPA Codification of Statements on Auditing Standards. 
B)  AICPA Accounting Trends and Techniques. 
C)  SEC Quality Control Review. 
D)  SEC Statement 10-K Guide. 
A)  AICPA Codification of Statements on Auditing Standards. 
B)  AICPA Accounting Trends and Techniques. 
C)  SEC Quality Control Review. 
D)  SEC Statement 10-K Guide.

Question 18

An auditor should consider the tolerable rate of deviation when determining the number of check requests to select for a test to obtain assurance that all check requests have been properly authorized. The auditor should also consider:

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 19

An auditor most likely would be responsible for communicating significant deficiencies in the design of internal control:

Accepted Answer

A)  To the Securities and Exchange Commission when the client is a publicly-held entity. 
B)  To specific legislative and regulatory bodies when reporting under Government Auditing Standards. 
C)  To a court-appointed creditors' committee when the client is operating under Chapter 11 of the Federal Bankruptcy Code. 
D)  To shareholders with significant influence (more than 20% equity ownership) when the significant deficiencies (reportable conditions) are deemed to be material weaknesses. 
A)  To the Securities and Exchange Commission when the client is a publicly-held entity. 
B)  To specific legislative and regulatory bodies when reporting under Government Auditing Standards. 
C)  To a court-appointed creditors' committee when the client is operating under Chapter 11 of the Federal Bankruptcy Code. 
D)  To shareholders with significant influence (more than 20% equity ownership) when the significant deficiencies (reportable conditions) are deemed to be material weaknesses.

Question 20

When disclaiming an opinion due to a client-imposed scope limitation, an auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also omit the:

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Exam 1: CPA Auditing and Attestation Exam

Before applying principal substantive tests to the details of accounts at an interim date prior to the balance sheet date, an auditor should:

For effective internal control purposes, the vouchers payable department generally should:

In assessing the competence of a client's internal auditor, an independent auditor most likely would consider the:

The concept of materiality would be least important to an auditor when considering the:

The sample size of a test of controls varies inversely with:

A CPA is engaged to examine management's assertion that the entity's schedule of investment returns is presented in accordance with specific criteria. In performing this engagement, the CPA should comply with the provisions of:

Which of the following is a term for an attest engagement in which a CPA assesses a client's commercial Internet site for predefined criteria that are designed to measure transaction integrity, information protection, and disclosure of business practices?

Which of the following procedures would an auditor ordinarily perform during the review of subsequent events?

Comfort letters ordinarily are:

Which of the following statements concerning material weaknesses and significant deficiencies is correct with respect to an audit of a nonissuer?

An auditor's report that refers to the use of an accounting principle at variance with generally accepted accounting principles contains the words, "In our opinion, with the foregoing Explanation, the financial statements referred to above present fairly...." This is considered an:

Jones, CPA, is auditing the financial statements of XYZ Retailing, Inc. What assurance does Jones provide that direct effect illegal acts that are material to XYZ's financial statements, and illegal acts that have a material, but indirect effect on the financial statements will be detected?

An auditor concludes that a substantive auditing procedure considered necessary during the prior period's audit was omitted. Which of the following factors would most likely cause the auditor promptly to apply the omitted procedure?

Which of the following best describes the auditor's responsibility with respect to fair values?

Which of the following procedures would yield the most reliable evidence?

A CPA wishes to determine how various publicly-held companies have complied with the disclosure requirements of a new financial accounting standard. Which of the following information sources would the CPA most likely consult for this information?

An auditor should consider the tolerable rate of deviation when determining the number of check requests to select for a test to obtain assurance that all check requests have been properly authorized. The auditor should also consider:

An auditor most likely would be responsible for communicating significant deficiencies in the design of internal control:

When disclaiming an opinion due to a client-imposed scope limitation, an auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also omit the:

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