AUD - CPA Exam || error-free answers 100%.
When the dependent daughter of a partner in a CPA firm owns ten shares of stock in an audit
client, which rule of the Code of Professional Conduct is most directly relevant?
A) Acts discreditable.
B) Commissions and referral fees.
C) Compliance with standards.
D) Independence. correct answers D) Independence.
Which of the following is a control that would prevent a paid disbursement voucher from being
presented for payment a second time?
A) Vouchers should be prepared by individuals who are responsible for signing disbursement
checks
B) Disbursement vouchers should be approved by at least two responsible management officials.
C) The date on a disbursement voucher should be within a few days of the date the voucher is
presented for payment.
D) The official signing the check should compare the check with the voucher and should deface
the voucher documents. correct answers D) The official signing the check should compare the
check with the voucher and should deface the voucher documents.
Zag Co. issues financial statements that present financial position and results of operations but
Zag omits the related statement of cash flows. Zag would like to engage Brown, CPA, to audit its
financial statements without the statement of cash flows although Brown's access to all of the
information underlying the basic financial statements will not be limited. Under these
circumstances, Brown most likely would:
A) Add an emphasis-of-matter paragraph to the standard auditor's report that justifies the reason
for the omission.
,B) Refuse to accept the engagement as proposed because of the client-imposed scope limitation.
C) Explain to Zag that the omission requires a qualification of the auditor's opinion.
D) Prepare the statement of cash flows as an accommodation to Zag and express an unmodiified
opinion. correct answers C) Explain to Zag that the omission requires a qualification of the
auditor's opinion.
Which of the following is least likely to be included in an engagement letter for a financial
statement preparation engagement?
A) The accountant has a responsibility to verify only material information included in the
financial statements.
B) The accountant's objective is to prepare financial statements in accordance with accounting
principles generally accepted in the United States of America.
C) Management has a responsibility to provide the accountant with accurate and complete
records, documents, explanations and other information.
D) Fees for the service. correct answers A) The accountant has a responsibility to verify only
material information included in the financial statements.
An audit technique which involves actual analysis of the logic of a computer program's
processing routines is referred to as
A) Code review.
B) Comparison review.
C) Extended records.
D) Test data. correct answers A) Code review.
The auditor notices significant fluctuations in key elements of the company's financial
statements. If management is unable to provide an acceptable explanation, the auditor should
A) Consider the matter a scope limitation.
, B) Perform additional audit procedures to investigate the matter further.
C) Intensify the examination with the expectation of detecting management fraud.
D) Withdraw from the engagement. correct answers B) Perform additional audit procedures to
investigate the matter further.
Which of the following circumstances requires modification of the accountant's report on a
review of interim financial information of a publicly held entity?
A) Inconsistent accounting principles application
B) Inadequate disclosure
C) Both
D) Neither correct answers B) Inadequate disclosure
Performing inquiry and analytical procedures is the primary basis for an accountant to issue a
A) Report on compliance with requirements governing major federal assistance programs in
accordance with the Single Audit Act.
B) Review report on prospective financial statements that present an entity's expected financial
position, given one or more hypothetical assumptions.
C) Management advisory report prepared at the request of a client's audit committee.
D) Review report on comparative financial statements for a nonpublic entity in its second year of
operations. correct answers D) Review report on comparative financial statements for a
nonpublic entity in its second year of operations.
As the acceptable level of detection risk decreases, the assurance directly provided from
A) Substantive procedures should increase.
B) Substantive procedures should decrease.
C) Tests of controls should increase.
When the dependent daughter of a partner in a CPA firm owns ten shares of stock in an audit
client, which rule of the Code of Professional Conduct is most directly relevant?
A) Acts discreditable.
B) Commissions and referral fees.
C) Compliance with standards.
D) Independence. correct answers D) Independence.
Which of the following is a control that would prevent a paid disbursement voucher from being
presented for payment a second time?
A) Vouchers should be prepared by individuals who are responsible for signing disbursement
checks
B) Disbursement vouchers should be approved by at least two responsible management officials.
C) The date on a disbursement voucher should be within a few days of the date the voucher is
presented for payment.
D) The official signing the check should compare the check with the voucher and should deface
the voucher documents. correct answers D) The official signing the check should compare the
check with the voucher and should deface the voucher documents.
Zag Co. issues financial statements that present financial position and results of operations but
Zag omits the related statement of cash flows. Zag would like to engage Brown, CPA, to audit its
financial statements without the statement of cash flows although Brown's access to all of the
information underlying the basic financial statements will not be limited. Under these
circumstances, Brown most likely would:
A) Add an emphasis-of-matter paragraph to the standard auditor's report that justifies the reason
for the omission.
,B) Refuse to accept the engagement as proposed because of the client-imposed scope limitation.
C) Explain to Zag that the omission requires a qualification of the auditor's opinion.
D) Prepare the statement of cash flows as an accommodation to Zag and express an unmodiified
opinion. correct answers C) Explain to Zag that the omission requires a qualification of the
auditor's opinion.
Which of the following is least likely to be included in an engagement letter for a financial
statement preparation engagement?
A) The accountant has a responsibility to verify only material information included in the
financial statements.
B) The accountant's objective is to prepare financial statements in accordance with accounting
principles generally accepted in the United States of America.
C) Management has a responsibility to provide the accountant with accurate and complete
records, documents, explanations and other information.
D) Fees for the service. correct answers A) The accountant has a responsibility to verify only
material information included in the financial statements.
An audit technique which involves actual analysis of the logic of a computer program's
processing routines is referred to as
A) Code review.
B) Comparison review.
C) Extended records.
D) Test data. correct answers A) Code review.
The auditor notices significant fluctuations in key elements of the company's financial
statements. If management is unable to provide an acceptable explanation, the auditor should
A) Consider the matter a scope limitation.
, B) Perform additional audit procedures to investigate the matter further.
C) Intensify the examination with the expectation of detecting management fraud.
D) Withdraw from the engagement. correct answers B) Perform additional audit procedures to
investigate the matter further.
Which of the following circumstances requires modification of the accountant's report on a
review of interim financial information of a publicly held entity?
A) Inconsistent accounting principles application
B) Inadequate disclosure
C) Both
D) Neither correct answers B) Inadequate disclosure
Performing inquiry and analytical procedures is the primary basis for an accountant to issue a
A) Report on compliance with requirements governing major federal assistance programs in
accordance with the Single Audit Act.
B) Review report on prospective financial statements that present an entity's expected financial
position, given one or more hypothetical assumptions.
C) Management advisory report prepared at the request of a client's audit committee.
D) Review report on comparative financial statements for a nonpublic entity in its second year of
operations. correct answers D) Review report on comparative financial statements for a
nonpublic entity in its second year of operations.
As the acceptable level of detection risk decreases, the assurance directly provided from
A) Substantive procedures should increase.
B) Substantive procedures should decrease.
C) Tests of controls should increase.
