Question 1

Which of the following procedures would an auditor most likely perform in auditing the statement of cash flows?

Accepted Answer

A)  Reconcile the amounts included in the statement of cash flows to the other financial statements' amounts. 
B)  Vouch a sample of cash receipts and disbursements for the last few days of the current year. 
C)  Reconcile the cutoff bank statement to the proof of cash to verify the accuracy of the year-end cash balance. 
D)  Confirm the amounts included in the statement of cash flows with the entity's financial institution.

Question 2

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

Accepted Answer

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

Question 3

A limitation on the scope of an audit sufficient to preclude an unqualified opinion will usually result when management:

Accepted Answer

A)  Is unable to obtain audited financial statements supporting the entity's investment in a foreign subsidiary. 
B)  Refuses to disclose in the notes to the financial statements related party transactions authorized by the Board of Directors. 
C)  Does not provide the auditor with an engagement letter specifying the responsibilities of both the entity and the auditor. 
D)  Fails to correct a significant deficiency in internal control communicated to those charged with governance after the prior year's audit.

Question 4

Government Auditing Standards published by the Government Accountability Office:

Accepted Answer

A)  Only apply to audits of governments. 
B)  Only apply to audits of governments receiving federal financial assistance. 
C)  Primarily apply to audits of federal financial assistance. 
D)  Only apply to audits of federal financial assistance programs operated by state and local governments.

Question 5

An enterprise engaged a CPA to audit its financial statements in accordance with Government Auditing Standards (the Yellow Book) because of the provisions of government grant funding agreements. Under these circumstances, the CPA is required to report on the enterprise's internal controls either in the report on the financial statements or in:

Accepted Answer

A)  The report on the performance audit. 
B)  The notes to the financial statements. 
C)  A letter to the government funding agency. 
D)  A separate report.

Question 6

An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that the entity being reported on had significant transactions with related parties. The inclusion of this separate paragraph:

Accepted Answer

A)  Is considered an "except for" qualification of the opinion. 
B)  Violates generally accepted auditing standards if this information is already disclosed in footnotes to the financial statements. 
C)  Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing Explanation" 
D)  Is appropriate and would not negate the unqualified opinion.

Question 7

Which of the following procedures does a CPA normally perform first in a review engagement in accordance with Statements on Standards for Accounting and Review Services (SSARS)?

Accepted Answer

A)  Inquiry regarding the client's principles and practices and the method of applying them. 
B)  Inquiry concerning the effectiveness of the client's system of internal control. 
C)  Inquiry to identify transactions between related parties and management. 
D)  Inquiry of the client's professional advisors, including bankers, insurance agents, and consultants.

Question 8

This question presents independent factual situations an auditor might encounter in conducting an audit. List A represents the types of opinions the auditor ordinarily would issue. Select as the best answer for this item, the action the auditor normally would take. The types of opinions in List A 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 A Types of Options

Accepted Answer

A)  An "except for" qualified opinion. 
B)  An unqualified opinion. 
C)  An adverse opinion. 
D)  A disclaimer of opinion. 
E)  Either an "except for" qualified opinion or an adverse opinion.
F) Either a disclaimer of opinion or an "except for" qualified opinion.
G) Either an adverse opinion or a disclaimer of opinion.

Question 9

When there is a significant change in accounting principle, an auditor's report should refer to the lack of consistency in:

Accepted Answer

A)  The scope paragraph. 
B)  An explanatory paragraph between the second paragraph and the opinion paragraph. 
C)  The opinion paragraph. 
D)  An explanatory paragraph following the opinion paragraph.

Question 10

Which of the following is not true regarding an engagement to provide a written report on the application of accounting principles?

Accepted Answer

A)  An accountant is prohibited from providing a report on the application of accounting principles to a transaction not involving the facts and circumstances of a specific entity. 
B)  The accountant's written report on the application of accounting principles should include an identification of the specific entity involved. 
C)  An accountant is prohibited from providing a report on the application of accounting principles to a proposed future transaction involving the facts and circumstances of a specific entity. 
D)  The accountant's written report on the application of accounting principles should include a paragraph restricting the use of the report.

Exam 1: CPA Auditing and Attestation Exam