BUS-A 439 Advanced Auditing
BUS-A 439 - ADVANCED AUDITING | EXAM QUESTIONS AND
CORRECT ANSWERS | LATEST VERSION
BUS-A 439 Advanced Auditing
1. Under the AICPA conceptual framework for independence, the threat that
a member will not appropriately evaluate the results of a service the member
previously performed is the:
A. Advocacy threat
B. Adverse interest threat
C. Familiarity threat
D. Self-review threat
CORRECT ANSWER : D. Self-review threat
Self-review arises when the member must evaluate work that the member, or
the firm, produced earlier.
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, BUS-A 439 Advanced Auditing
2. Under SEC independence rules, the lead and concurring audit partners on
an issuer engagement must rotate off after:
A. Three consecutive years, followed by a three-year time-out
B. Seven consecutive years, followed by a two-year time-out
C. Five consecutive years, followed by a five-year time-out
D. Ten consecutive years, followed by a five-year time-out
CORRECT ANSWER : C. Five consecutive years, followed by a five-
year time-out
Lead and concurring partners serve a maximum of five years and then sit out
for five years.
3. Which of the following services is prohibited by Section 201 of the
Sarbanes-Oxley Act when performed for an issuer audit client?
A. Tax compliance services pre-approved by the audit committee
B. Reviews of interim financial information
C. Comfort letters issued in connection with a registration statement
D. Internal audit outsourcing services
CORRECT ANSWER : D. Internal audit outsourcing services
Internal audit outsourcing is on the list of prohibited nonaudit services for
issuer audit clients.
4. Before the auditor of an issuer performs permissible tax services for that
issuer, the auditor must obtain:
A. Written approval from the issuer's chief financial officer
B. Pre-approval from the issuer's audit committee
C. Approval from the PCAOB inspection staff
D. Written consent from the SEC's Office of the Chief Accountant
CORRECT ANSWER : B. Pre-approval from the issuer's audit
committee
SOX requires the audit committee to pre-approve all audit and permissible
nonaudit services.
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, BUS-A 439 Advanced Auditing
5. PCAOB Rule 3523 provides that a registered firm is not independent if it
provides tax services during the audit period to:
A. Any rank-and-file employee of the issuer
B. A shareholder owning more than 5% of the issuer's stock
C. An independent member of the issuer's board of directors
D. A person in a financial reporting oversight role at the issuer
CORRECT ANSWER : D. A person in a financial reporting oversight
role at the issuer
Tax services to individuals in financial reporting oversight roles impair
independence under Rule 3523.
6. The Sarbanes-Oxley cooling-off provision is violated if the issuer's CEO,
CFO, or controller was employed by the audit firm and participated in the
audit during the:
A. One-year period preceding initiation of the audit
B. Three-year period preceding initiation of the audit
C. Two-year period preceding initiation of the audit
D. Five-year period preceding initiation of the audit
CORRECT ANSWER : A. One-year period preceding initiation of the
audit
SOX imposes a one-year cooling-off period before audit team members may
take such roles.
7. For a client to whom the member provides no attest services, a contingent
fee is prohibited for:
A. A consulting engagement where the fee is fixed by a court
B. Preparing a refund claim based on a tax issue already in a test case
involving a different taxpayer
C. Representing the client in an IRS examination of a return
D. Preparing an original or amended income tax return
CORRECT ANSWER : D. Preparing an original or amended income tax
return
Contingent fees are prohibited for preparing original or amended tax returns
or refund claims, subject to narrow exceptions.
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, BUS-A 439 Advanced Auditing
8. Under the AICPA Code of Professional Conduct, a covered member's
direct financial interest in an attest client impairs independence:
A. Only when the interest is material to the covered member
B. Only when the interest is held by a partner
C. Regardless of materiality
D. Only when the interest exceeds 5% of the client's equity
CORRECT ANSWER : C. Regardless of materiality
Any direct financial interest held by a covered member impairs independence,
whatever its size.
9. An indirect financial interest in an attest client held by a covered member
impairs independence when the interest is:
A. Material to the covered member
B. Held through any mutual fund
C. Acquired before the period of the professional engagement
D. Held in a diversified retirement account
CORRECT ANSWER : A. Material to the covered member
Indirect interests impair independence only when material to the covered
member.
10. Which of the following individuals is a covered member under the AICPA
independence rules?
A. Any administrative staff member of the firm
B. The spouse of any employee of the firm
C. An individual on the attest engagement team
D. A client employee who prepares the trial balance
CORRECT ANSWER : C. An individual on the attest engagement team
Attest engagement team members are covered members by definition.
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BUS-A 439 - ADVANCED AUDITING | EXAM QUESTIONS AND
CORRECT ANSWERS | LATEST VERSION
BUS-A 439 Advanced Auditing
1. Under the AICPA conceptual framework for independence, the threat that
a member will not appropriately evaluate the results of a service the member
previously performed is the:
A. Advocacy threat
B. Adverse interest threat
C. Familiarity threat
D. Self-review threat
CORRECT ANSWER : D. Self-review threat
Self-review arises when the member must evaluate work that the member, or
the firm, produced earlier.
Page 1 of 63
, BUS-A 439 Advanced Auditing
2. Under SEC independence rules, the lead and concurring audit partners on
an issuer engagement must rotate off after:
A. Three consecutive years, followed by a three-year time-out
B. Seven consecutive years, followed by a two-year time-out
C. Five consecutive years, followed by a five-year time-out
D. Ten consecutive years, followed by a five-year time-out
CORRECT ANSWER : C. Five consecutive years, followed by a five-
year time-out
Lead and concurring partners serve a maximum of five years and then sit out
for five years.
3. Which of the following services is prohibited by Section 201 of the
Sarbanes-Oxley Act when performed for an issuer audit client?
A. Tax compliance services pre-approved by the audit committee
B. Reviews of interim financial information
C. Comfort letters issued in connection with a registration statement
D. Internal audit outsourcing services
CORRECT ANSWER : D. Internal audit outsourcing services
Internal audit outsourcing is on the list of prohibited nonaudit services for
issuer audit clients.
4. Before the auditor of an issuer performs permissible tax services for that
issuer, the auditor must obtain:
A. Written approval from the issuer's chief financial officer
B. Pre-approval from the issuer's audit committee
C. Approval from the PCAOB inspection staff
D. Written consent from the SEC's Office of the Chief Accountant
CORRECT ANSWER : B. Pre-approval from the issuer's audit
committee
SOX requires the audit committee to pre-approve all audit and permissible
nonaudit services.
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, BUS-A 439 Advanced Auditing
5. PCAOB Rule 3523 provides that a registered firm is not independent if it
provides tax services during the audit period to:
A. Any rank-and-file employee of the issuer
B. A shareholder owning more than 5% of the issuer's stock
C. An independent member of the issuer's board of directors
D. A person in a financial reporting oversight role at the issuer
CORRECT ANSWER : D. A person in a financial reporting oversight
role at the issuer
Tax services to individuals in financial reporting oversight roles impair
independence under Rule 3523.
6. The Sarbanes-Oxley cooling-off provision is violated if the issuer's CEO,
CFO, or controller was employed by the audit firm and participated in the
audit during the:
A. One-year period preceding initiation of the audit
B. Three-year period preceding initiation of the audit
C. Two-year period preceding initiation of the audit
D. Five-year period preceding initiation of the audit
CORRECT ANSWER : A. One-year period preceding initiation of the
audit
SOX imposes a one-year cooling-off period before audit team members may
take such roles.
7. For a client to whom the member provides no attest services, a contingent
fee is prohibited for:
A. A consulting engagement where the fee is fixed by a court
B. Preparing a refund claim based on a tax issue already in a test case
involving a different taxpayer
C. Representing the client in an IRS examination of a return
D. Preparing an original or amended income tax return
CORRECT ANSWER : D. Preparing an original or amended income tax
return
Contingent fees are prohibited for preparing original or amended tax returns
or refund claims, subject to narrow exceptions.
Page 3 of 63
, BUS-A 439 Advanced Auditing
8. Under the AICPA Code of Professional Conduct, a covered member's
direct financial interest in an attest client impairs independence:
A. Only when the interest is material to the covered member
B. Only when the interest is held by a partner
C. Regardless of materiality
D. Only when the interest exceeds 5% of the client's equity
CORRECT ANSWER : C. Regardless of materiality
Any direct financial interest held by a covered member impairs independence,
whatever its size.
9. An indirect financial interest in an attest client held by a covered member
impairs independence when the interest is:
A. Material to the covered member
B. Held through any mutual fund
C. Acquired before the period of the professional engagement
D. Held in a diversified retirement account
CORRECT ANSWER : A. Material to the covered member
Indirect interests impair independence only when material to the covered
member.
10. Which of the following individuals is a covered member under the AICPA
independence rules?
A. Any administrative staff member of the firm
B. The spouse of any employee of the firm
C. An individual on the attest engagement team
D. A client employee who prepares the trial balance
CORRECT ANSWER : C. An individual on the attest engagement team
Attest engagement team members are covered members by definition.
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