CPA Auditing and Attestation (AUD) : Audit Reports
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #2 : Professional Standards
Of the following, which provides the most authoritative guidance for an audit of an issuer?
An article in the AICPA CPA letter addressing frequently asked questions on a new auditing standard
General guidance provided by the PCAOB
Audit disclosure checklists obtained from a continuing professional education class
Specific guidance provided by the Statement on Auditing Standards
General guidance provided by the PCAOB
General guidance by the PCAOB is the most authoritative level of auditing guidance for audits of issuers.
Example Question #3 : Professional Standards
An auditor has been prevented from conducting full due diligence and proper audit procedures for the engagement of a company. He does not feel that he has examined enough evidence and is deciding how to issue an opinion. Which should be his choice?
Modified
Disclaimer of opinion
Unmodified
Misstatement
Disclaimer of opinion
The auditor cannot issue a positive or negative opinion, simply disclaiming the opinion since he was unable to determine anything about the company.
Example Question #1 : Audit Engagements Evidence
A “proof of cash”
recalculates the cash account
involves counting the physical cash on hand
requires an attestation report from the controller
compares the beginning balance per the bank plus deposits minus checks with the beginning book balance plus receipts minus disbursements
compares the beginning balance per the bank plus deposits minus checks with the beginning book balance plus receipts minus disbursements
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:
Request a positive confirmation from management
Request a negative confirmation from management
Request a negative confirmation from the customer
Request a positive confirmation from the customer
Request a positive confirmation from the customer
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:
write off the receivable
switch to a negative confirmation
issue a qualified opinion
resend the confirmation
resend the confirmation
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 #16 : Audit Reports
Of the following elements, which is applicable to a CPA firm's quality control policy and procedures in an audit practice?
Technology selection
Professional skepticism
Information processing
Engagement performance
Engagement performance
Performance of the engagement is one of the 6 interrelated elements of quality control.
Example Question #4 : 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:
CPE
A system of quality control
A system of peer review
Compliance with Generally Accepted Reporting Standards
A system of quality control
A system of quality control establishes policies and procedures that provide reasonable assurance of conforming with professional standards.
Example Question #18 : Audit Reports
Of the following, which is not an instance to use an Emphasis of Matter paragraph?
Change in accounting principle
Change of CEO
Going concern issue
Special purpose framework
Change of CEO
The only other time to use this paragraph would be when subsequent events lead to a change in the audit opinion.
Example Question #1 : Audit Engagements Auditors
In auditing “professional skepticism” requires:
Distrust of management
Critical assessment of audit evidence
Disbelief of audit evidence.
Proof of every transactions
Critical assessment of audit evidence
As stated in PCAOB; AS 1015: “Due professional care requires the auditor to exercise professional skepticism. Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence.”
Example Question #20 : Audit Reports
Reasonable assurance is:
A low level of assurance
An adequate level of assurance
A high level of assurance
Assurance that satisfies management
A high level of assurance
Reasonable assurance is defined as a high level of assurance that the financial statements are free of material misstatement. This level of assurance is not absolute.
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