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 : Audit Sampling
Judgments about materiality are:
are irrelevant to the size of the misstatement
are not affected by the size or the nature of the misstatement
are made regardless of the size of the misstatement
are affected by the size or nature of the misstatement
are affected by the size or nature of the misstatement
The definition of materiality is one that will influence the decision of the reader. Therefore, the size and nature of the decision will impact materiality
Example Question #2 : Materiality
In terms of materiality
the auditor’s judgment sets the standard
the AICPA sets the standard
The SEC sets the standard
IFRS sets the standard
the auditor’s judgment sets the standard
The auditor's judgment determines the materiality level that the auditor is willing to accept.
Example Question #4 : Audit Sampling
In planning the audit, materiality provides a basis for:
The time necessary to perform the audit
The auditor's fee
Communication with the audit committee
Nature and extent of risk assessment procedures
Nature and extent of risk assessment procedures
Materiality is the basis for determining the nature and extent of risk. This is examined during the planning stages. The sample size and testing are developed based on the level of materiality.
Example Question #5 : Audit Sampling
If new info becomes available that could require a reevaluation of the quantitative level of materiality applied during an audit of an issuer, then the auditor should:
Raise the materiality level but not lower it
Raise or lower the materiality level as appropriate to the situation
Lower the materiality level but not raise it
Not change the materiality level once it has been established
Raise or lower the materiality level as appropriate to the situation
If new information becomes available that could require a reevaluation of the quantitative level of materiality applied during an audit of an issuer, then the auditor should raise or lower the materiality level as appropriate to the situation.
Example Question #1 : Materiality
Of the following, which best describes the concept of materiality?
Information that directly impacts the income statement
Information that is likely to be viewed by a reasonable investor as altering the mix of available information
Information that meets strict thresholds predetermined
Information that is not likely to influence the decision making of an investor
Information that is likely to be viewed by a reasonable investor as altering the mix of available information
According to the US Supreme Court, information is material if there is a substantial likelihood that the information would be viewed by a reasonable investor as having significantly altered the total mix of available information.
Example Question #6 : Materiality
Of the following, which benchmark would be utilized when considering the materiality of a single cash transaction?
Deminimis
Overall materiality
Performance materiality
None of the answer choices are correct
Deminimis
All of the answer choices are different thresholds, determined by experienced auditors. Analyzing a single transaction compared to a whole balance sheet account should use proper benchmarks.
Example Question #1 : Sampling
“Non-sampling risk” is:
The sample size is too large
The auditor will choose an incorrect sample
The sample size is too small
Errors caused that are unrelated to the sample
Errors caused that are unrelated to the sample
Non-sampling risk is unrelated to the sample itself. Typically, a non-sampling risk would involve the misapplication of audit procedures. This would be unrelated to the sample
Example Question #2 : Sampling
In the case of sampling risk:
controls are more effective than they actually are
controls are less effective than they actually are
Neither a or b
Both a and b
Both a and b
Both a and b are correct. This risk could be that controls are more effective than they actually are causing oversampling or less than they actually are causing under-sampling.
Example Question #3 : Sampling
Stratification is defined as:
Increasing the amount of the sample size
Dividing a population into sub populations
Multiplying a population into alternate populations
Reducing the amount of the sample size
Dividing a population into sub populations
In the concept of stratification, populations are divided into subsets. A probability sample is drawn from each group.
Example Question #61 : Cpa Auditing And Attestation (Aud)
For which of the following audit tests would an auditor most likely use attribute sampling?
Inspecting employee time cards for proper approval by supervisors
Making an independent estimate of the amount of a LIFO inventory
Selecting accounts receivable for confirmation of account balances
Examining invoices in support of the valuation of fixed asset additions
Inspecting employee time cards for proper approval by supervisors
Attribute sampling is used to test controls. Inspecting employee time cards for proper approval by supervisors is a test of controls. Controls often relate to authorization, validity, completeness, accuracy, classification, and proper period.
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