Question 1

A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain:

Accepted Answer

A)  A statement of limitations on the use of the report. 
B)  An opinion about whether management's assertion is fairly stated. 
C)  Negative assurance that control risk has not been assessed. 
D)  An acknowledgment of responsibility for the sufficiency of the procedures.

Question 2

An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of follow-up on errors reported by the customers. This test of controls most likely is performed to support management's financial statement assertions of:

Accepted Answer

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

Question 3

For a nonissuer, a control deficiency would be considered a significant deficiency when the likelihood and magnitude of potential financial statement misstatements are:

Accepted Answer

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

Question 4

In auditing accounts payable, an auditor's procedures most likely would focus primarily on management's assertion of:

Accepted Answer

A)  Existence. 
B)  Understandability and classification. 
C)  Completeness. 
D)  Valuation and allocation.

Question 5

In establishing the existence and ownership of long-term investments in the form of publicly-traded stock, an auditor most likely would inspect the securities or:

Accepted Answer

A)  Correspond with the investee company to verify the number of shares owned. 
B)  Confirm the number of shares owned that are held by an independent custodian. 
C)  Apply analytical procedures to the dividend income and investments accounts. 
D)  Inspect the cash receipts journal for amounts that could represent the sale of securities.

Question 6

An auditor has previously expressed a qualified opinion on the financial statements of a prior period because of a departure from generally accepted accounting principles. The prior-period financial statements are restated in the current period to conform with generally accepted accounting principles. The auditor's updated report on the prior-period financial statements should:

Accepted Answer

A)  Express an unqualified opinion concerning the restated financial statements. 
B)  Be accompanied by the original auditor's report on the prior period. 
C)  Bear the same date as the original auditor's report on the prior period. 
D)  Qualify the opinion concerning the restated financial statements because of a change in accounting principle.

Question 7

An accountant should perform analytical procedures during an engagement to:

Accepted Answer

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

Question 8

Dunn, CPA, is auditing the financial statements of Taft Co. Taft uses Quick Service Center (QSC) to process its payroll. Price, CPA, is expressing an opinion on a description of the controls placed in operation at QSC regarding the processing of its customers' payroll transactions. Dunn expects to consider the effects of Price's report on the Taft engagement. Price's report should contain a (an):

Accepted Answer

A)  Description of the scope and nature of Price's procedures. 
B)  Statement that Dunn may assess control risk based on Price's report. 
C)  Assertion that Price assumes no responsibility to determine whether QSC's controls are suitably designed. 
D)  Opinion on the operating effectiveness of QSC's internal controls.

Question 9

In performing an attest engagement, a CPA typically:

Accepted Answer

A)  Supplies litigation support services. 
B)  Assesses control risk at a low level. 
C)  Issues a report on subject matter (or on an assertion about subject matter) that is the responsibility of another party. 
D)  Provides management consulting advice.

Question 10

Which of the following statements concerning audit evidence is correct?

Accepted Answer

A)  To be appropriate, audit evidence should be either reliable or relevant, but need not be both. 
B)  The measure of the sufficiency of audit evidence lies in the auditor's judgment. 
C)  The difficulty and expense of obtaining audit evidence concerning an account balance is always a valid basis for omitting the test. 
D)  A client's accounting data can be sufficient audit evidence to support the financial statements.

Question 11

Which of the following factors most likely would cause a CPA not to accept a new audit engagement?

Accepted Answer

A)  The prospective client's unwillingness to permit inquiry of its legal counsel. 
B)  The inability to review the predecessor auditor's working papers. 
C)  The CPA's lack of understanding of the prospective client's operations and industry. 
D)  The indications that management has not investigated employees in key positions before hiring them.

Question 12

Which of the following is true about the term "likely misstatement?"

Accepted Answer

A)  It refers to misstatements that have not been specifically identified, but which are likely to exist based on the auditor's judgment. 
B)  It refers to the cumulative effect of misstatements from prior years on the current year's financial statements. 
C)  It refers to misstatements that have been specifically identified by the auditor. 
D)  It includes both identified misstatements and an estimate of unidentified misstatements.

Question 13

An auditor's purpose in reviewing credit ratings of customers with delinquent accounts receivable most likely is to obtain evidence concerning management's assertions about:

Accepted Answer

A)  Understandability and classification. 
B)  Existence. 
C)  Rights and obligations. 
D)  Valuation and allocation.

Question 14

A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probably:

Accepted Answer

A)  Increase the extent of tests of controls of the inventory cycle. 
B)  Request the client to schedule the physical inventory count at the end of the year. 
C)  Insist that the client perform physical counts of inventory items several times during the year. 
D)  Apply gross profit tests to ascertain the reasonableness of the physical counts.

Question 15

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

Accepted Answer

A)  Review transactions occurring prior to the completion of field work that indicate variations from expectations. 
B)  Compare independent expectations with recorded estimates to assess management's process. 
C)  Obtain an understanding of how management developed its estimates. 
D)  Analyze historical data used in developing assumptions to determine whether the process is consistent.

Question 16

The auditor with final responsibility for an engagement and one of the assistants have a difference of opinion about the results of an auditing procedure. If the assistant believes it is necessary to be disassociated from the matter's resolution, the CPA firm's procedures should enable the assistant to:

Accepted Answer

A)  Refer the disagreement to the AICPA's Quality Review Committee. 
B)  Document the details of the disagreement with the conclusion reached. 
C)  Discuss the disagreement with the entity's management or its audit committee. 
D)  Report the disagreement to an impartial peer review monitoring team.

Question 17

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

Accepted Answer

A)  Confirming a sample of material accounts receivable established after year-end. 
B)  Comparing the financial statements being reported on with those of the prior period. 
C)  Investigating personnel changes in the accounting department occurring after year-end. 
D)  Inquiring as to whether any unusual adjustments were made after year-end.

Question 18

The third standard of fieldwork states that the auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit. The appropriate audit evidence required by this standard may be obtained, in part, through:

Accepted Answer

A)  Flowcharting the internal control structure. 
B)  Proper planning of the audit engagement. 
C)  Analytical procedures. 
D)  Audit documentation.

Question 19

When an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, the appropriate form of report to be issued must include a(an):

Accepted Answer

A)  Regulation S-X exemption. 
B)  Report on pro forma financial statements. 
C)  Unaudited association report. 
D)  Disclaimer of opinion.

Question 20

In which of the following circumstances would the use of the negative form of accounts receivable confirmation most likely be justified?

Accepted Answer

A)  A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major customers. 
B)  A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances. 
C)  A small number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major customers. 
D)  A small number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances.

Exam 1: CPA Auditing and Attestation Exam

A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain:

An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of follow-up on errors reported by the customers. This test of controls most likely is performed to support management's financial statement assertions of:

For a nonissuer, a control deficiency would be considered a significant deficiency when the likelihood and magnitude of potential financial statement misstatements are:

In auditing accounts payable, an auditor's procedures most likely would focus primarily on management's assertion of:

In establishing the existence and ownership of long-term investments in the form of publicly-traded stock, an auditor most likely would inspect the securities or:

An accountant should perform analytical procedures during an engagement to:

In performing an attest engagement, a CPA typically:

Which of the following statements concerning audit evidence is correct?

Which of the following factors most likely would cause a CPA not to accept a new audit engagement?

Which of the following is true about the term "likely misstatement?"

An auditor's purpose in reviewing credit ratings of customers with delinquent accounts receivable most likely is to obtain evidence concerning management's assertions about:

A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probably:

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

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

When an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, the appropriate form of report to be issued must include a(an) :

In which of the following circumstances would the use of the negative form of accounts receivable confirmation most likely be justified?