CPA Auditing and Attestation (AUD) : Communication with Management

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Example Questions

Example Question #1 : Communication With Management

During the course of the audit, the auditor uncovers a serious misappropriation of cash attributed to the senior accountant. This is required to be communicated to

Possible Answers:

IRS

police

audit committee

management

Correct answer:

audit committee

Explanation:

The audit committee is the appropriate group as it is a representative of governance.  Governance communication is established in AU section 380.

Example Question #1 : Communication With Management

“Significant Difficulties” encountered through an audit that should be communicated to governance include:

Possible Answers:

Significant delays in management providing information

The unavailability of expected information

Restrictions imposed on the auditor

All of the answer choices are correct.

Correct answer:

All of the answer choices are correct.

Explanation:

AU Section 380 identifies specific instances of communication.  The instances included for communication to the government are significant delays, unavailability of information, and restrictions placed on auditors.

Example Question #2 : Communication With Management

According to AU 380, the auditor must communicate to those charged with governance all items related to the audit except those that:

Possible Answers:

Both A and B

Are restricted by law

The auditor's judgment deems them immaterial

Neither A and B

Correct answer:

Both A and B

Explanation:

Auditors must communicate all items to governance except those that the auditors in their professional judgment deem immaterial.  Auditors may also be restricted by law in their communication with governance.

Example Question #3 : Communication With Management

An auditor's communication with those charged with governance is required to include the:

Possible Answers:

Discussion of disagreements with management about matters that significantly impact the financial statements

Justification for the auditor's selection of sampling methods

Assessment of the quality of the entity's earnings as compared to the previous year

Basis for the auditor's preliminary judgement about materiality

Correct answer:

Discussion of disagreements with management about matters that significantly impact the financial statements

Explanation:

The auditor should discuss with those charged with governance any significant disagreements with management, whether or not satisfactorily resolved, about matters that are significant to the financial statements or to the auditor's report.

Example Question #4 : Communication With Management

An auditor's communication of internal control related matters noted in an audit usually should be addressed to:

Possible Answers:

The chief financial officer

The chief accounting officer

Management and those charged with governance

The director of internal auditing

Correct answer:

Management and those charged with governance

Explanation:

An auditor's communication of internal control related matters noted in an audit usually should be addressed to management and those charged with governance.

Example Question #5 : Communication With Management

An auditor should communicate a deficiency to a non-issuer client's management only either orally or in writing when there is a:

Possible Answers:

Material weakness

None of the answer choices are correct

Control deficiency

Significant deficiency

Correct answer:

Control deficiency

Explanation:

Communication of deficiencies in internal control varies on reporting to management. Significant deficiencies and material weaknesses for example need to be communicated in writing.

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