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 #3 : The Audit Process Documentation
At the completion of an audit, which of the following entities has ownership of the audit working papers?
The client
The client's stockholders
The CPA firm that performed the audit
The client's audit committee
The CPA firm that performed the audit
The CPA firm that performed the audit has ownership of the audit working papers. These work papers provide support for the audit opinion and contain information detailing the audit work performed.
Example Question #1 : The Audit Process Documentation
A ______ is specifically someone who performs work on an engagement of a component's financial information that will be used as audit evidence of a group audit.
Third-party auditor
Component auditor
External auditor
Independent auditor
Component auditor
A component auditor rightfully conducts audit procedures of a component of a larger group audit.
Example Question #6 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Auditors communication with predecessor auditor must be
neither a or b
either a or b
Written
Verbal
either a or b
Among the items communicated with predecessor auditors are any disagreements with management. The purpose of this communication is to disclose any attempt to circumvent the applications of GAAP.
Example Question #7 : Quality Control, Engagement Acceptance, Planning, & Internal Control
The engagement letter specifically mentions
The responsibility of the AICPA
The responsibility of PCAOB
The auditor’s responsibility
The responsibility of SEC
The auditor’s responsibility
Auditors' communication with predecessor auditor may be either oral or in written form. The preferred standard however is written.
Example Question #1 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Communication with predecessor auditor should include:
Predecessors agreement with the change in auditors
An assessment of management performance
Disagreements with management related to accounting or auditing issues
Information regarding appropriate fees
Disagreements with management related to accounting or auditing issues
In developing an audit plan, the engagement partner should identify the scope of the audit. Management is not involved in determining what opinion may be given by the auditors.
Example Question #2 : Quality Control, Engagement Acceptance, Planning, & Internal Control
At a minimum, an understanding with a client should include:
The auditor's opinion regarding whether the financial statements are free of material misstatement
The assessed level of the risk of material misstatement
The objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor
The specific audit procedures the auditor plans to perform
The objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor
At a minimum, an understanding with a client should include the objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor.
Example Question #11 : Quality Control, Engagement Acceptance, Planning, & Internal Control
An auditor's engagement letter would most likely include a statement regarding:
Materialty matters that could modify the auditor's preliminary assessment of fraud risk
Internal control activities that would reduce the auditor's assessment of risk
Management's responsibility to provide certain written representations to the auditor
Conditions under which the auditor may modify the preliminary judgement about materiality
Management's responsibility to provide certain written representations to the auditor
The auditor is required to establish an understanding with the client, and this understanding should be documented in the form of an engagement letter. The understanding should encompass management's responsibilities which include providing the auditor with a representation letter at the conclusion of the engagement.
Example Question #12 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Of the following examples, which would dictate the need for an Other-Matter paragraph?
Material justified change in an accounting principle
Going concern issue
Reference to required supplementary information
Special purpose framework
Reference to required supplementary information
If there is a piece of information critically important to the understanding of financial statements, the auditor will point it out through an Other-Matter paragraph.
Example Question #13 : Quality Control, Engagement Acceptance, Planning, & Internal Control
In addressing materiality, the auditor should:
Discuss with partners any liability issues regarding materiality
decide whether any omission may change the judgement of any person relying on the information
Discuss with management the required materiality levels
Determine how much error they should let management get away with
decide whether any omission may change the judgement of any person relying on the information
In addressing materiality, the auditor should decide whether the omission or misstatement would change the judgment of the reader.
Example Question #161 : Cpa Auditing And Attestation (Aud)
“Performance Materiality” is defined as
The amount necessary to get management to perform the audit appropriately
The amount set above the overall materiality level
A level required to evaluate staff performance
The amount set below the overall materiality level
The amount set below the overall materiality level
Performance Materiality is defined as the amount that is less than the overall materiality level. Performance materiality is set to respond to smaller misstatements or omissions that in aggregate may affect the materiality level.
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