Exam 1: CPA Auditing and Attestation Exam

A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor's:

An accountant may compile a nonissuer's financial statements that omit all of the disclosures required by GAAP only if the omission is:

This question consists of an item pertaining to possible deficiencies in an accountant's review report. Jordan & Stone, CPAs, audited the financial statements of Tech Co., a nonissuer, for the year ended December 31, 20X1, and expressed an unqualified opinion. For the year ended December 31, 20X2, Tech issued comparative financial statements. Jordan & Stone reviewed Tech's 20X2 financial statements and Kent, an assistant on the engagement, drafted the accountants' review report below. Land, the engagement supervisor, decided not to reissue the prior year's auditors' report, but instructed Kent to include a separate paragraph in the current year's review report describing the responsibility assumed for the prior year's audited financial statements. This is an appropriate reporting procedure. Land reviewed Kent's draft and indicated in the Supervisor's Review Notes below that there were several deficiencies in Kent's draft. Accountant's Review Report We have reviewed and audited the accompanying balance sheets of Tech Co. as of December 31, 20X2 and 20X1, and the related statements of income, retained earnings, and cash flows for the years then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants and generally accepted auditing standards. All information included in these financial statements is the representation of the management of Tech Co. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements. Because of the inherent limitations of a review engagement, this report is intended for the information of management and should not be used for any other purpose. The financial statements for the year ended December 31, 20X1, were audited by us and our report was dated March 2, 20X2. We have no responsibility for updating that report for events and circumstances occurring after that date. Jordan and Stone, CPAs March 1, 20X3 Supervisor's Review Notes There should be no reference to the American Institute of Certified Public Accountants in the first (introductory) paragraph.

Under which of the following circumstances would a disclaimer of opinion not be appropriate?

The auditor's report on internal controls and compliance with laws and regulations in accordance with Government Auditing Standards (the Yellow Book), is required to include:

Which of the following are elements of a CPA firm's quality control that should be considered in establishing its quality control policies and procedures?

When an accountant compiles a financial forecast, the accountant's report should include a(an):

An auditor was engaged to conduct a performance audit of a governmental entity in accordance with Government Auditing Standards. These standards do not require, as part of this auditor's report:

An auditor concluded that no excessive costs for idle plant were charged to inventory. This conclusion most likely related to the auditor's objective to obtain evidence about the financial statement assertions regarding inventory, including understandability and classification, and:

To determine whether accounts payable are complete, an auditor performs a test to verify that all merchandise received is recorded. The population of documents for this test consists of all:

Which of the following statements might be included among additional written client representations obtained by the auditor?

This question will represent a statement, question, excerpt, or comment taken from various parts of an auditor's documentation file. Letter choices A-P represent a list of the likely sources of the statement, question, excerpt, or comment. Select, as the best answer for each item, the most likely source. Select only one source for each item. The company considers the decline in value of equity securities classified as available-for-sale to be temporary.

In performing tests of controls over authorization of cash disbursements, which of the following statistical sampling methods would be most appropriate?

Which of the following internal control activities is not usually performed in the vouchers payable department?

While observing a client's annual physical inventory, an auditor recorded test counts for several items and noticed that certain test counts were higher than the recorded quantities in the client's perpetual records. This situation could be the result of the client's failure to record:

Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed?

In confirming a client's accounts receivable in prior years, an auditor found that there were many differences between the recorded account balances and the confirmation replies. These differences, which were not misstatements, required substantial time to resolve. In defining the sampling unit for the current year's audit, the auditor most likely would choose:

In assessing the competence and objectivity of an entity's internal auditor, an independent auditor least likely would consider information obtained from:

When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase the:

Which of the following procedures would an auditor ordinarily perform first in evaluating management's accounting estimates for reasonableness?