AUD CPA Exam || all accurately answered.
Kent anticipates sales revenue will grow by 5% during the coming year based on historical, but
believes there is a slight chance for 10% growth if new product currently being developed
launched during the year. management has prepared two sets of FS, one on 5% growth and the
other on 10% growth, Giacomo, CPA, has been hired to examine both sets of FS. Which is true
regarding Giacomo's reports?
A.
Both the report on the 10% growth financial statements and the report on the 5% growth
financial statements are appropriate for limited use.
B.
Neither the report on the 10% growth financial statements nor the report on the 5% growth
financial statements should provide positive assurance.
C.
The 5% growth financial statements would include a restriction on the use of the report, whereas
the 10% growth financial statements would not include such a restriction.
D.
The report on the 10% growth financial statements would correct answers Note that the 5%
growth financial statements are a financial forecast (based on expected results) whereas the 10%
growth financial statements are a financial projection (based on the hypothetical release of the
new product).
Choice "A" is correct.
OCBOA correct answers Other Comprehensive Basis of Accounting
Inaccurate disclosure of a material item or event results in: correct answers a qualified/adverse
opinion
Add to opinion section with Qualified Opinion due to Scope Limitations correct answers "Except
for possible effects of the matter described in the basis for qualified opinion section."
,Required when FS are prepared in accordance with special framework: correct answers
Emphasis-of-matter paragraph
A change in accounting estimate that can't be separated from change in accounting principle
should be: correct answers described in Emphasis-of-matter paragraph
When use of audit report is restricted correct answers other-matter paragraph
When should group auditor determine type of work to be performed on the financial information
of the components? correct answers When assuming responsibility for the work of component
auditor
When presenting comparative FS and the prior audit opinion is revised: correct answers use
other-matter paragraph
Is the audit opinion of the component auditor states explicitly or implicitly? correct answers
implicitly
When is auditor responsible for investigating effects of any omitted audit procedures? correct
answers before and AFTER the report has been submitted
When prepared under what basis of accounting should an auditor include a restricted use
paragraph? correct answers contractual basis of accounting; also alert readers that it is prepared
in accordance with a special framework
T/F: Adopting a system of quality control improves audit efficiency always. correct answers
False, it does not necessarily mean increased audit efficiency
Requirements of Quality Control Standards for CPA Firms: correct answers HR functions
,1. recruitment and hiring
2. determining capabilities and competencies
3. performance evaluation, compensation, and advancements
4. assigning personnel to engagements
5. professional development
When may workpapers be released to 3rd party? correct answers If client consents or in response
to judicial order
Components of COSO Internal Control Framework correct answers "CRIME"
Control environment
Risk assessment
Info and communication
Monitoring
Existing Control Activities
Sequence of Review using COSO Internal Control Framework correct answers Overall
assessment -> Component evaluation -> Principle evaluation -> Summary of Internal Control
Deficiencies
What should an audit strategy include? correct answers preliminary assessments of materiality
and scope outline
T/F: An auditor can NOT divide responsibility with a specialist. correct answers True, they
CAN'T divide responsibility with a specialist
When should an auditor refer to a specialist in the audit report? correct answers If the auditor's
opinion was modified due to specialist's findings
, What type of transactions increase RMM? correct answers Transactions outside normal course of
business, barter transactions, transactions with related parties.
Regardless of the industry in which the firm operates, the firm will maximize profits by
producing where: correct answers Marginal Revenue = Marginal Cost
MR=MC
IT Risks correct answers - unauthorized access to confidential data
- security and identity management
-insufficient data storage
Combined Approach involves: correct answers Identifying specific controls relevant to specific
assertions
Process for sending Attorney letter correct answers Letter should be prepared by the client and
sent by auditor to legal counsel.
When must analytical procedures be used? correct answers Planning and final review phase of
the audit
Completeness Direction correct answers Source to Record
Examining open vouchers to search for unrecorded liabilities correct answers Substantive
Procedure
Confirmations of AR correct answers Substantive Tests
Kent anticipates sales revenue will grow by 5% during the coming year based on historical, but
believes there is a slight chance for 10% growth if new product currently being developed
launched during the year. management has prepared two sets of FS, one on 5% growth and the
other on 10% growth, Giacomo, CPA, has been hired to examine both sets of FS. Which is true
regarding Giacomo's reports?
A.
Both the report on the 10% growth financial statements and the report on the 5% growth
financial statements are appropriate for limited use.
B.
Neither the report on the 10% growth financial statements nor the report on the 5% growth
financial statements should provide positive assurance.
C.
The 5% growth financial statements would include a restriction on the use of the report, whereas
the 10% growth financial statements would not include such a restriction.
D.
The report on the 10% growth financial statements would correct answers Note that the 5%
growth financial statements are a financial forecast (based on expected results) whereas the 10%
growth financial statements are a financial projection (based on the hypothetical release of the
new product).
Choice "A" is correct.
OCBOA correct answers Other Comprehensive Basis of Accounting
Inaccurate disclosure of a material item or event results in: correct answers a qualified/adverse
opinion
Add to opinion section with Qualified Opinion due to Scope Limitations correct answers "Except
for possible effects of the matter described in the basis for qualified opinion section."
,Required when FS are prepared in accordance with special framework: correct answers
Emphasis-of-matter paragraph
A change in accounting estimate that can't be separated from change in accounting principle
should be: correct answers described in Emphasis-of-matter paragraph
When use of audit report is restricted correct answers other-matter paragraph
When should group auditor determine type of work to be performed on the financial information
of the components? correct answers When assuming responsibility for the work of component
auditor
When presenting comparative FS and the prior audit opinion is revised: correct answers use
other-matter paragraph
Is the audit opinion of the component auditor states explicitly or implicitly? correct answers
implicitly
When is auditor responsible for investigating effects of any omitted audit procedures? correct
answers before and AFTER the report has been submitted
When prepared under what basis of accounting should an auditor include a restricted use
paragraph? correct answers contractual basis of accounting; also alert readers that it is prepared
in accordance with a special framework
T/F: Adopting a system of quality control improves audit efficiency always. correct answers
False, it does not necessarily mean increased audit efficiency
Requirements of Quality Control Standards for CPA Firms: correct answers HR functions
,1. recruitment and hiring
2. determining capabilities and competencies
3. performance evaluation, compensation, and advancements
4. assigning personnel to engagements
5. professional development
When may workpapers be released to 3rd party? correct answers If client consents or in response
to judicial order
Components of COSO Internal Control Framework correct answers "CRIME"
Control environment
Risk assessment
Info and communication
Monitoring
Existing Control Activities
Sequence of Review using COSO Internal Control Framework correct answers Overall
assessment -> Component evaluation -> Principle evaluation -> Summary of Internal Control
Deficiencies
What should an audit strategy include? correct answers preliminary assessments of materiality
and scope outline
T/F: An auditor can NOT divide responsibility with a specialist. correct answers True, they
CAN'T divide responsibility with a specialist
When should an auditor refer to a specialist in the audit report? correct answers If the auditor's
opinion was modified due to specialist's findings
, What type of transactions increase RMM? correct answers Transactions outside normal course of
business, barter transactions, transactions with related parties.
Regardless of the industry in which the firm operates, the firm will maximize profits by
producing where: correct answers Marginal Revenue = Marginal Cost
MR=MC
IT Risks correct answers - unauthorized access to confidential data
- security and identity management
-insufficient data storage
Combined Approach involves: correct answers Identifying specific controls relevant to specific
assertions
Process for sending Attorney letter correct answers Letter should be prepared by the client and
sent by auditor to legal counsel.
When must analytical procedures be used? correct answers Planning and final review phase of
the audit
Completeness Direction correct answers Source to Record
Examining open vouchers to search for unrecorded liabilities correct answers Substantive
Procedure
Confirmations of AR correct answers Substantive Tests
