CPA Auditing and Attestation (AUD) : The Audit Process - Quality Control

Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)

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Example Questions

Example Question #1 : The Audit Process Quality Control

Sufficient evidence refers to:

Possible Answers:

Quality of evidence

Amount of evidence

Approved evidence

Type of evidence

Correct answer:

Amount of evidence

Explanation:

Sufficient evidence refers to the amount of evidence.  It is sufficient in quantity to enable the auditor to express a reasonable judgment.

Example Question #1 : The Audit Process Quality Control

John Anderson CPA is in the process of auditing a client. In terms of “reliability of evidence”, evidence pertaining to cash records should be obtained through:

Possible Answers:

The cashier

The bank statements

The general ledger

The controller

Correct answer:

The bank statements

Explanation:

In the hierarch of evidence, evidence from independent sources is deemed most appropriate. In this scenario, the independent source of evidence is the bank statements as this document comes from an outside source (the bank).

Example Question #3 : The Audit Process Quality Control

An “assertion” in terms of the financial statement includes:

Possible Answers:

Cost effectiveness

Reasonableness

Completeness

Agreeableness

Correct answer:

Completeness

Explanation:

An “assertion” in terms of the financial statement includes the completeness, existence, valuation, rights and obligations, and presentation and disclosure.

Example Question #2 : The Audit Process Quality Control

After fieldwork audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second or wrap up review of the audit documentation. This second review usually focuses on:

Possible Answers:

Evaluation of the significant judgements made by the engagement team and the related conclusions reached in forming the overall conclusion

The materiality of the adjusting entries proposed by the audit staff

Fraud involving the client's management and its employees

The communication of internal control weaknesses to those charged with governance

Correct answer:

Evaluation of the significant judgements made by the engagement team and the related conclusions reached in forming the overall conclusion

Explanation:

The primary purpose of a second partner review is to evaluate the significant judgments made by the engagement team and the related conclusions reached in forming the overall conclusion.

Example Question #3 : The Audit Process Quality Control

The purpose of establishing quality control policies and procedures for deciding whether to accept or continue a client relationship is to:

Possible Answers:

Provide reassurance that personnel are adequately trained to fulfill their responsibilities

Minimize the likelihood of associating with clients whose management lacks integrity

Enhance the auditor's understanding of the client's business and its industry

Document the matters that are required to be communicated to the audit committee

Correct answer:

Minimize the likelihood of associating with clients whose management lacks integrity

Explanation:

The purpose of establishing quality control policies and procedures for deciding whether to accept or continue a client relationship is to minimize the likelihood of associating with clients whose management lacks integrity.

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