Auditing and Assurance services CPA practice questions

1) Spinner, CPA, had audited Lasco Corp.'s financial statements for the past several years. Prior to the current year's engagement, a disagreement arose that caused Lasco to change auditing firms. Lasco has demanded that Spinner provide Lasco with Spinner's working papers so that Lasco may show them to prospective auditors to help them prepare their bids for Lasco's audit engagement. Spinner refused and Lasco commenced litigation. Under the ethical standards of the profession, will Spinner be successful in refusing to turn over the working papers? A. Yes, because Spinner is the owner of the working papers B. Yes, because Lasco is required to direct prospective auditors to contact Spinner to make arrangements to view the working papers in Spinner's office C. No, because Lasco has a legitimate business reason for demanding that Spinner surrender the working papers D. No, because it was Lasco's financial statements tha - correct answer A. Yes, because Spinner is the owner of the working papers 2) Which of the following acts by a CPA is a violation of professional standards regarding the confidentiality of client information? A. Releasing financial information to a local bank with the approval of the client's mail clerk B. Allowing a review of professional practice without client authorization C. Responding to an enforceable subpoena D. Faxing a tax return to a loan officer at the request of the client - correct answer A. Releasing financial information to a local bank with the approval of the client's mail clerk 3) In order for a firm to designate itself as "Members of the AICPA": A all CPA owners must be members of the AICPA. B. all owners, not just CPA owners, must be members of the AICPA. C. the majority of CPA owners must be members of the AICPA. D. the majority of all owners, not just CPA owners, must be members of the AICPA. - correct answer A all CPA owners must be members of the AICPA. 4) In performing an attestation engagement, a CPA typically: A. supplies litigation support services. B. assesses control risk at a low level. C. expresses a conclusion about an assertion. D. provides management consulting advice. - correct answer C. expresses a conclusion about an assertion. 5) A CPA who is not in public practice is obligated to follow which of the following rules of conduct? A. Independence B. Integrity and objectivity C. Contingent fees D. Commissions - correct answer B. Integrity and objectivity 6) Nile, CPA, on completing an audit, was asked by the client to provide technical assistance in integrating a new IT system. The set of pronouncements designed to guide Nile in this engagement is the Statement(s) on: A. Quality Control Standards. B. Auditing Standards. C. Standards for Accountants' IT Services. D. Standards for Consulting Services. - correct answer D. Standards for Consulting Services. 7) An accountant is required to comply with the provisions of the Statements on Standards for Accounting and Review Services (SSARS) when performing which of the following tasks? A. Preparing monthly journal entries B. Providing the client with software to generate financial statements C. Preparing financial statements of a nonissuer D. Providing a blank financial statement format or template - correct answer C. Preparing financial statements of a nonissuer 8) In an audit of a nonprofit organization under the Uniform Guidance rules, an auditor must comply with all of the following, except: A. plan the testing of internal control over major programs to achieve a low assessed level of control risk for the assertions relevant to the compliance requirements for each major program. B. compliance testing shall include tests of transactions and such other auditing procedures necessary to provide the auditor sufficient evidence to support an opinion on compliance for each major program. C. correspond with all individuals or entities that have received or made use of the federal award funds and determine the appropriateness of such distributions. D. follow up on prior audit findings. - correct answer C. correspond with all individuals or entities that have received or made use of the federal award funds and determine the appropriateness of such distributions. 9) The phrase "generally accepted accounting principles" is an accounting term that: A. includes broad guidelines of general application but not detailed practices and procedures. B. encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. provides a measure of conventions, rules, and procedures governed by the AICPA. D. is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS). - correct answer B. encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. 10) A CPA is permitted to disclose confidential client information without the consent of the client to: I. another CPA who has purchased the CPA's tax practice. II. another CPA firm if the information concerns suspected tax return irregularities. III. a state CPA society voluntary quality control review board. A. I and III only B. II and III only C. II only D. III only - correct answer D. III only 11) What is the definition of fraud in an audit of financial statements? A. An intentional act that results in a material misstatement in financial statements that are the subject of an audit B. The unintentional misapplication of accounting principles relating to amounts, classification, manner of presentation, or disclosure C. An intentional act that results in a material weakness in financial statements that are the subject of an audit D. Management's inability to design and implement programs and controls to prevent, deter, and detect material misstatements - correct answer A. An intentional act that results in a material misstatement in financial statements that are the subject of an audit 12) A practitioner is engaged to express an opinion on management's assertion that the square footage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer to which of the following sources for professional guidance? A. Statements on Auditing Standards B. Statements on Standards for Attestation Engagements C. Statements on Standards for Accounting and Review Services D. Statements on Standards for Consulting Services - correct answer B. Statements on Standards for Attestation Engagements 13) According to the standards of the profession, which of the following activities may be required in exercising due care? A. Consulting with experts B. Obtaining specialty accreditation C. Both consulting with experts and obtaining specialty accreditation D. Neither consulting with experts nor obtaining specialty accreditation - correct answer A. Consulting with experts 14) Which of the following is the authoritative body designated to promulgate attestation standards? A. Auditing Standards Board B. Governmental Accounting Standards Board C. Financial Accounting Standards Board D. Government Accountability Office - correct answer A. Auditing Standards Board 15) Which of the following is true? A. A review is an assurance engagement, as well as an attest engagement. B. A compilation is an assurance engagement, but not an attest engagement. C. A review is an attest engagement, but not an assurance engagement. D. A compilation is an assurance engagement, as well as an attest engagement. - correct answer A. A review is an assurance engagement, as well as an attest engagement. 16) Which of the following situations would not impair objectivity, integrity, or independence with respect to an audit client? A. An auditor takes the client's audit committee to Las Vegas for the weekend. B. An out-of-town client takes the audit engagement team out to dinner at a renowned local restaurant. C. An auditor provides client management with box seats for the season at a major league baseball franchise. D. A client takes the audit engagement team on a two-day ski trip after the audit team worked for two consecutive weekends. - correct answer B. An out-of-town client takes the audit engagement team out to dinner at a renowned local restaurant. 17) Smith, CPA, is a partner of Johnson Accounting Firm. Johnson audited the books of Hometown Bank. Smith's independence would be impaired under which of the following circumstances? A. Smith is a director of Hometown Bank. B. Smith has a collateralized automobile loan with Hometown Bank. C. Smith had an account with Hometown Bank two years ago. D. Smith and a Hometown Bank board member belong to the same church. - correct answer A. Smith is a director of Hometown Bank. 18) Which of the following procedures most likely would not be included in a review engagement of a nonpublic entity? A. Obtaining a management representation letter B. Considering whether the financial statements conform with GAAP C. Assessing control risk D. Inquiring about subsequent events - correct answer C. Assessing control risk 19) According to the profession's ethical standards, which of the following events may justify a departure from a FASB Accounting Standard (FASB ASC)? A. New legislation B. Evolution of a new form of business transaction C. Both new legislation and evolution of a new form of business transaction D.