CPA Auditing and Attestation (AUD) : Letters for Underwriters
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #1 : Letters For Underwriters
The auditor should state in the comfort letter that:
The auditor is independent
negative assurances are provided
The auditor is using generally accepted auditing standards
The auditor is not independent
The auditor is using generally accepted auditing standards
AU 920 requires that the auditors state their independence in the comfort letter. As directed in paragraph .35 “The auditor should state in the comfort letter that the auditor is independent, or the date through which the auditor was independent, with respect to the entity, and identify the applicable independence rules.”
Example Question #2 : Letters For Underwriters
Before agreeing on the scope of services, the auditor should
Clearly communicate no assurance will be provided
Ask to meet with the requesting party
All of the answer choices are correct
Obtain an understanding regarding the specific matters
All of the answer choices are correct
Under AU 920 before agreeing on the scope of services the auditor must obtain certain assurances and perform certain procedures. These procedures include obtaining an understanding regarding specific matters, meeting with the requesting party, and providing clear communication stating no assurance will be provided.
Example Question #1 : Accounting & Review Service Engagements & Interim Reviews
In the comfort letter, the auditor should
Make reference to the audit
State an opinion
Repeat the audit
None of the answer choices are correct
Make reference to the audit
AU 920 indicates that the auditor should make reference to the audit. Section .28 states that “The auditor should, in the comfort letter, make reference to, but not repeat, the report on the audited financial statements included in the securities offering. (Ref: par. .A28)”.
Example Question #2 : Accounting & Review Service Engagements & Interim Reviews
Ordinarily, comfort letters are addressed to:
The SEC
The client audit committee
The underwriters of securities
Creditor financial institutions
The underwriters of securities
Comfort letters are addressed to underwriters of securities ordinarily and most likely convey negative assurance on financial information.
Example Question #1 : Letters For Underwriters
Comfort letters are usually addressed to the client's underwriter of securities and signed by the client's:
Staff accountants
Internal auditor
Independent auditor
Management
Staff accountants
A comfort letter is a letter from the independent auditor to the named underwriter just before the registration of the client's securities.
Example Question #6 : Letters For Underwriters
Positive assurance is provided with respect to:
The financial statements
Comfort letter
A CPA's independence
None of the answer choices are correct
A CPA's independence
Positive assurance is provided with respect to a CPA's independence.
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