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 : 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.
Example Question #1 : Audit Engagements Auditors
The six traits of professional skepticism include
minimum judgement
prejudging outcomes
an open mind
suspension of judgment
an open mind
One of the six traits of professional skepticism requires maintaining an “open mind”. This is also commonly referred to as a “questioning mind”. The avoidance of prejudging outcomes is inherent in the qualitative factors of an “open mind”.
Example Question #1 : Audit Engagements Auditors
A registered CPA auditing firm would be reasonably assured of meeting its responsibility to provide services that conform with professional standards by:
Abiding by GAAS
Joining professional societies that enforce ethical conduct
Having an attitude of independence with regard to engagements
Maintaining an appropriate system of quality control
Maintaining an appropriate system of quality control
Quality control standards relate to the conduct of a firm's audit practice. They set forth standards for establishing policies and procedures to provide reasonable assurance in conforming with standards.
Example Question #3 : Audit Engagements Auditors
Of the following elements, which is not an element of a CPA firm's quality control policies and procedures?
Monitoring
Compensation checkpoints
Leadership responsibilities
Human resources
Compensation checkpoints
In addition to HR, leadership responsibilities and monitoring, Engagement Acceptance and Continuance, Performance of the Engagement, and Ethical requirements are included as quality control elements.
Example Question #3 : Audit Engagements Auditors
In the process of evaluating whether or not an accounting change by a company is acceptable, an auditor should consider if:
The shareholders of the company are in favor of the change
The new accounting principle obeys the proper financial reporting framework
The company's employees are in favor of the change
The company CEO is in favor of the change
The new accounting principle obeys the proper financial reporting framework
If there is an accounting principle change by a company, it should be justifiable, for a reason, and it should obey any laws and reporting regulations.
Example Question #31 : Cpa Auditing And Attestation (Aud)
James Jones is the bookkeeper of Prestige Yachts, a Yacht builder for high net worth individuals. The company owner decides to “do more with less” and requires James to record the accounts receivables and maintain the bank reconciliation. James decides to cash checks for outstanding accounts and will replace them as soon as he gets the money. He expects this to happen soon. Using the fraud triangle, this is an example of:
Opportunity
Rationalization
Determination
Justification
Opportunity
This is an example of an opportunity. The firm has inappropriate segregation of duties creating an opportunity for the employee to both defraud the firm and cover up the act.
Example Question #2 : The Fraud Triangle
James Jones is the bookkeeper of Prestige Yachts, a Yacht builder for high net worth individuals. James sees the owner continually overcharging on options and giving himself raises. James hasn’t had a raise in years. James decides to cash checks for outstanding accounts and will replace them as soon as he gets the money. Using the fraud triangle, this is an example of
determination
means
justification
motive
motive
This is an example of a motive. The employee witnesses the employer overcharging customers and having not had a raise to justify the fraud based on motive.
Example Question #3 : The Fraud Triangle
The auditors rely on the fraud triangle as one's means of developing
a risk assessment
a list of potential employees that might commit fraud
as evidence in a lawsuit
a criticism of management to the audit committed
a risk assessment
The fraud triangle is used in the planning stage of the audit to assess risk. Risk is assessed in terms of each area of the fraud triangle and the auditor designs tests of the internal control system based on these areas.
Example Question #4 : The Fraud Triangle
Of the following statements about the fraud triangle, which is true?
The CPA should determine whether and to what extent the factors are present as a part of the final review stage of the audit
Nonobservation of all three factors indicates no fraud
The fraud risk factors should be discussed by engagement personnel during planning
The existence of all three factors indicates that fraud has occurred
The fraud risk factors should be discussed by engagement personnel during planning
During the planning stage of an audit, the engagement team must discuss the potential for misstatement due to fraud as well as the three factors.
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