CPA Auditing and Attestation (AUD) : Compliance, & Government Audits
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #1 : Compliance, & Government Audits
Procedures performed under an attestation engagement
Comply with SEC Regulations
Comply with government regulations
Comply with GAAP
Meet the intended purpose of the engagement
Meet the intended purpose of the engagement
In order to comply with terms of engagement under an attestation, the engagement should meet the intended purpose of the engagement.
Example Question #2 : Compliance, & Government Audits
Anderson CPA’s entered into an Agreed upon Procedure engagement with Delany Inc. Management of Delany discussed the terms of the engagement with auditors but refused to put the terms in writing. Anderson should:
Do not perform the agreed-upon terms unless they secure payment
Withdraw from the engagement
Alert regulatory authorities of the departure
Perform the terms as to their oral agreement
Withdraw from the engagement
SSAE 18 requires that the terms of the engagement be in writing. Because management is refusing to express the terms in writing the firm should not accept the engagement and withdraw.
Example Question #3 : Compliance, & Government Audits
The agreed-upon procedure report should:
Indicate the auditor is independent
All of the answer choices are correct
Include the identification of the engaging party
Include an appropriate address
All of the answer choices are correct
All of the elements are included in the terms of the engagement. The engagement must express auditor independence, identify and address and include the identification of the engaging party.
Example Question #4 : Compliance, & Government Audits
Accepting an engagement to examine an entity's financial projection most likely would be appropriate if the projection were to be distributed to:
A bank with which the entity is negotiating for a loan
Potential shareholders who request a prospectus or a registration statement
All employees who work for the entity
All shareholders of record as of the report date
A bank with which the entity is negotiating for a loan
Financial projections are hypothetical prospective financial statements. Because the user may need to ask the responsible party questions about the underlying assumptions, financial projections are restricted use reports, whose use is restricted to the responsible party and those third parties with whom the responsible party is negotiating directly.
Example Question #5 : Compliance, & Government Audits
An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that:
Negative assurance is expressed on the prospective financial statements taken as a whole
The prospective financial statements are also examined
Use of the report is restricted to the specified parties
Responsibility for the adequacy of the procedures performed is taken by the accountant
Use of the report is restricted to the specified parties
An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that certain conditions are met, including that the use of the report is restricted to the specified parties.
Example Question #6 : Types Of Engagements Agreed Upon Procedures
Agreed-upon procedures can be performed as long as the following conditions are present:
Sufficient procedures
Party agreement
All of the answer choices are correct
Practitioner independence
All of the answer choices are correct
All of these factors must be present for an agreed-upon procedure engagement to be conducted.
Example Question #6 : Compliance, & Government Audits
An integrated audit
Is not required by privately held companies
Both A and B
Is only required by large public companies
Neither A and B
Both A and B
An integrated audit is not required by private corporations. The integrated audit is performed under PCAOB standards that govern public companies.
Example Question #7 : Compliance, & Government Audits
Integrated audits are regulated by the:
AICPA
IFRS
PCAOB
ASB
PCAOB
Integrated audits are regulated under PCAOB standard number 5.
Example Question #8 : Compliance, & Government Audits
As described by PCAOB auditing standard number 2, an effective internal control
Is not effective if there are more than two immaterial weaknesses
Is designed to uncover fraud
Is not effective if there is any material weakness
Will disclose all internal control weaknesses
Is not effective if there is any material weakness
According to PCAOB Accounting Standards: “Maintaining effective internal control over financial reporting means that no material weaknesses exist; therefore, the objective of the audit of internal control over financial reporting is to obtain reasonable assurance that no material weaknesses exist as of the date specified in management's assessment.”
Example Question #9 : Compliance, & Government Audits
Of the following, which is true regarding PCAOB standards surrounding internal control?
All auditors must follow PCAOB standards surrounding internal control
The PCAOB has not issued standards surrounding internal control
PCAOB standards surrounding internal control apply only to audits of issuers
PCAOB standards surrounding internal control apply only to audit of nonissuers
PCAOB standards surrounding internal control apply only to audits of issuers
PCAOB standards surrounding internal control apply only to audits of issuers.
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