CPA Auditing and Attestation (AUD) : Audit Engagements-Evidence

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Example Questions

Example Question #1 : Audit Engagements Evidence

A “proof of cash”

Possible Answers:

compares the beginning balance per the bank plus deposits minus checks with the beginning book balance plus receipts minus disbursements

requires an attestation report from the controller

recalculates the cash account

involves counting the physical cash on hand

Correct answer:

compares the beginning balance per the bank plus deposits minus checks with the beginning book balance plus receipts minus disbursements

Explanation:

A proof of cash is an audit technique designed to roll forward each line of the bank reconciliation from one period to the next. The beginning balance of the bank is compared to the beginning balance of the book and the receipts and disbursements are traced to the ending balances.

Example Question #2 : Audit Engagements Evidence

When an auditor requires verification of material accounts receivable balances, they would most likely:

Possible Answers:

Request a positive confirmation from management

Request a negative confirmation from management

Request a positive confirmation from the customer

Request a negative confirmation from the customer

Correct answer:

Request a positive confirmation from the customer

Explanation:

A “positive confirmation” requires the recipient to respond affirmatively to the auditor regarding the account balance.  The positive confirmation is used to confirm material amounts.

Example Question #3 : Audit Engagements Evidence

When no response is received from a positive confirmation the auditor should:

Possible Answers:

switch to a negative confirmation

resend the confirmation

issue a qualified opinion

write off the receivable

Correct answer:

resend the confirmation

Explanation:

A “positive confirmation” requires an affirmative response.  If during the course of an audit a “positive confirmation” is not received, it is incumbent upon the auditor to follow up on outstanding confirmations, resending the confirmation if no response is received.

Example Question #4 : Audit Engagements Evidence

Of the following elements, which is applicable to a CPA firm's quality control policy and procedures in an audit practice?

Possible Answers:

Information processing

Technology selection

Engagement performance

Professional skepticism

Correct answer:

Engagement performance

Explanation:

Performance of the engagement is one of the 6 interrelated elements of quality control.

Example Question #5 : Audit Engagements Evidence

A basic objective of a CPA firm is to provide professional services that conform to professional standards. Reasonable assurance of achieving this basic objective is provided through:

Possible Answers:

CPE

A system of peer review

A system of quality control

Compliance with Generally Accepted Reporting Standards

Correct answer:

A system of quality control

Explanation:

A system of quality control establishes policies and procedures that provide reasonable assurance of conforming with professional standards.

Example Question #6 : Audit Engagements Evidence

Of the following, which is not an instance to use an Emphasis of Matter paragraph?

Possible Answers:

Change of CEO

Going concern issue

Change in accounting principle

Special purpose framework

Correct answer:

Change of CEO

Explanation:

The only other time to use this paragraph would be when subsequent events lead to a change in the audit opinion.

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