AUD - CPA EXAM LATEST
What matters are typically addressed in an engagement letter? -
ANSWERS-1. The objective and scope of the audit
2. The auditor's responsibilities
3. Management's responsibilities
4. A statement about the inherent limitations of an audit
5. A statement identifying the applicable financial reporting framework
6. Reference to the expected content of any reports to be issued
7. Other matters, as warranted (e.g., fees, etc.)
What is meant by the term "initial audit"? - ANSWERS-The prior year's
financial statements have been audited by a predecessor auditor.
A successor auditor's inquiries of the predecessor auditor should include
questions regarding
A. The predecessor's evaluation of audit risk and judgment about
materiality.
B. Subsequent events that occurred since the predecessor's audit report
was issued.
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, AUD - CPA EXAM LATEST
C. The predecessor's understanding as to the reasons for the change in
auditors.
D. The predecessor's knowledge of accounting matters of continuing
significance. - ANSWERS-C. The predecessor's understanding as to the
reasons for the change in auditors.
An auditor's engagement letter most likely would include a statement
that
A. Lists potential significant deficiencies discovered during the prior-
year's audit.
B. Explains the analytical procedures that the auditor expects to apply.
C. Describes the auditor's responsibility to evaluate going-concern
issues.
D. Limits the auditor's responsibility to detect errors and fraud. -
ANSWERS-D. Limits the auditor's responsibility to detect errors and
fraud.
Which of the following factors most likely would cause a CPA to not
accept a new audit engagement?
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, AUD - CPA EXAM LATEST
A. The prospective client has already completed its physical inventory
count.
B. The CPA lacks an understanding of the prospective client's operations
and industry.
C. The CPA is unable to review the predecessor auditor's
documentation.
D. The prospective client is unwilling to make all financial records
available to the CPA. - ANSWERS-D. The prospective client is
unwilling to make all financial records available to the CPA.
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. - 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?
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, AUD - CPA EXAM LATEST
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. - 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.
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What matters are typically addressed in an engagement letter? -
ANSWERS-1. The objective and scope of the audit
2. The auditor's responsibilities
3. Management's responsibilities
4. A statement about the inherent limitations of an audit
5. A statement identifying the applicable financial reporting framework
6. Reference to the expected content of any reports to be issued
7. Other matters, as warranted (e.g., fees, etc.)
What is meant by the term "initial audit"? - ANSWERS-The prior year's
financial statements have been audited by a predecessor auditor.
A successor auditor's inquiries of the predecessor auditor should include
questions regarding
A. The predecessor's evaluation of audit risk and judgment about
materiality.
B. Subsequent events that occurred since the predecessor's audit report
was issued.
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PAGE
1
, AUD - CPA EXAM LATEST
C. The predecessor's understanding as to the reasons for the change in
auditors.
D. The predecessor's knowledge of accounting matters of continuing
significance. - ANSWERS-C. The predecessor's understanding as to the
reasons for the change in auditors.
An auditor's engagement letter most likely would include a statement
that
A. Lists potential significant deficiencies discovered during the prior-
year's audit.
B. Explains the analytical procedures that the auditor expects to apply.
C. Describes the auditor's responsibility to evaluate going-concern
issues.
D. Limits the auditor's responsibility to detect errors and fraud. -
ANSWERS-D. Limits the auditor's responsibility to detect errors and
fraud.
Which of the following factors most likely would cause a CPA to not
accept a new audit engagement?
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PAGE
2
, AUD - CPA EXAM LATEST
A. The prospective client has already completed its physical inventory
count.
B. The CPA lacks an understanding of the prospective client's operations
and industry.
C. The CPA is unable to review the predecessor auditor's
documentation.
D. The prospective client is unwilling to make all financial records
available to the CPA. - ANSWERS-D. The prospective client is
unwilling to make all financial records available to the CPA.
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. - 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?
END OF
PAGE
3
, AUD - CPA EXAM LATEST
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. - 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.
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PAGE
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