CPA Auditing and Attestation (AUD) : CPA Auditing and Attestation (AUD)
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #1 : Ethics Gao And Dol
The GAO professional framework includes
Setting financial policy
Setting audit standards
Setting budgetary standards
Applying safeguards
Applying safeguards
The GAO professional framework includes the application of appropriate safeguards. As stated under Governmental Accounting Standards section 3.08, “Auditors should apply the conceptual framework at the audit organization, audit, and individual auditor levels to apply safeguards as necessary to eliminate the threats or reduce them to an acceptable level.”
Example Question #2 : Ethics Gao And Dol
A member is serving as an engagement partner. He invests heavily and has a portfolio of government bonds of a government client. This is an example of a:
Familiarity Threat
Bias Threat
Financial threat
Structural Threat
Financial threat
The partner's investment in government bonds of a governmental client creates a financial threat. This threat falls under the self-interest threat as expressed in the GAO Conceptual Framework Standards: “Self-interest threat - the threat that a financial or other interest will inappropriately influence an auditor’s judgment or behavior.”
Example Question #3 : Ethics Gao And Dol
Internal auditors are considered independent for internal reporting purposes:
If they are accountable to the government entity head
If employed by the audit firm
If they are an agency head
never
If they are accountable to the government entity head
Internal auditors that are accountable to the government agency head are considered independent for internal reporting purposes. Under section 3.31 of GAGAS; “Certain entities employ auditors to work for entity management. These auditors may be subject to administrative direction from persons involved in the entity management process. Such audit organizations are internal audit functions and are encouraged to use the Institute of Internal Auditors (IIA) International Standards for the Professional Practice of Internal Auditing in conjunction with GAGAS. In accordance with GAGAS, internal auditors who work under the direction of the audited entity’s management are considered independent.”
Example Question #4 : Ethics Gao And Dol
GAGAS specifically include all of the following ethics principles except:
Fraud detection
Integrity
Proper use of government information
Serving the public interest
Fraud detection
GAGAS ethics do not include specific references to fraud detection. Ethics covers the public interest, integrity, and proper usage of information.
Example Question #5 : Ethics Gao And Dol
The GAGAS framework for independence identifies inappropriate influence on auditor judgment or behavior caused by a financial or other interest as a:
Self review threat
Bias threat
Self interest threat
Management participation threat
Self interest threat
The self-interest threat is that a financial or other interest will influence an auditor's judgment or behavior inappropriately.
Example Question #6 : Ethics Gao And Dol
Of the following threats to independence identified by GAGAS related to a threat of external influence?
Familiarity threat
Self-interest threat
Structural threat
Undue influence threat
Undue influence threat
The undue influence threat relates to how an external factor can impact an auditor's independence.
Example Question #1 : Integrated Audits & Attestation Engagements
One of the general conditions for SSARS engagements contains the phrase “presumptively mandatory requirements”. Under this definition:
Auditors must comply with requirements
Noncompliance is allowed it the procedure is deemed ineffective
Auditor judgement prevails
Auditors must comply except where it is not cost efficient to do so
Auditors must comply with requirements
The concept of presumptive mandatory requirements assumes that in the absence of persuasive evidence, the auditor must comply with the pronouncement.
Example Question #2 : Integrated Audits & Attestation Engagements
Auditors should not accept and engagement under SSARS if they question:
Managements integrity
Independence requirements will not be satisfied
Information needed may not be available
All of the answer choices are correct
All of the answer choices are correct
Under SSARS guidance an auditor should not accept an engagement if they are concerned about management integrity or the availability of information. An engagement should also not be accepted if independence requirements are impaired.
Example Question #3 : Integrated Audits & Attestation Engagements
Jim Jones, CPA has been engaged by management to assist them in the preparation of financial statements. This engagement qualifies as a:
Compilation
Attestation
Review
Audit
Compilation
A compilation engagement is one in which the accounting firm assists management with the preparation of its financial statements.
Example Question #4 : Integrated Audits & Attestation Engagements
A CPA auditor has determined that a client which had received a federal grant, fraudulently reported information to the federal government. Management of the client refuses to recognize the fraud. Of the following parties, which should the auditor contact first?
The state attorney general's office
The recipiencts of the client services
The agency that provided the grant
The state board of accountancy
The agency that provided the grant
First, the auditor should attempt to reach the agency that provided the grant in reporting the fraud. The others listed are not required to contact.
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