Becker- Audit CPA Exam Questions All
Solved Correctly Updated.
Situations when audit documentation must be provided to a 3rd party without the permission
of the client - Answer 1) Subpoenaed by a court
2) For investigation by the state board of accountancy
3)
Management's responsibility - Answer An indication that management is responsible for the
fair presentation of the financial statements
Auditor's responsibility - Answer A description of the auditor's responsibility for expressing an
opinion on the financial statements.
Employee access to systems and records being password-protected is what type of example? -
Answer Internal Control - this control may help prevent fraud because employee opportunity
is limited.
The Sarbanes_Oxley Act of 2002 provides that the accounting firm of an issuer reported directly
to who? - Answer Audit committee
In a REVIEW, what are required procedures for reviewing the interim financial information of a
publicly held entity? - Answer 1) Accountant is required to inquire of management about its
knowledge of fraud, suspected fraud, or allegations of fraud.
2) Accountant is required to compare disaggregated revenue data for the current interim period
with that of comparable prior periods.
3) Accountant is required to obtain evidence that the interim financial information reconciles
with the accounting records.
*not requirement: obtain corroborating evidence regarding the entity's ability's to continue as a
going concern in an interim review engagement
Activities of a CPA firm's quality-control system to be considered in establishing quality-control
policies and procedures - Answer 1) deciding whether to accept or continue a client
relationship
2) selecting personnel for advancement who have the necessary qualifications
3) monitoring the effectiveness of professional development activities
*not an element: accessing a client's ability to establish effective internal controls
,Situations to use a Disclaimer of Opinion most appropriate - Answer 1) The auditor is unable
to obtain the audited financial statements of a significant subsidiary.
*a scope of limitation exists, assuming that the effect is material and pervasive, the auditor
would issue a disclaimer of opinion
2) Th external auditor lacks independence
A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the
auditor is unable to count the securities at the balance sheet date, the auditor most likely will: -
Answer Request the client to have the bank seal the safe deposit box until the auditor can
count the securities at a subsequent date.
Wrong answers:
1) Request the bank to confirm to the auditor the contents of the safe deposit box at the B/S
date (bank employees are not present when items are put into or taken from safety deposit box
and do not keep records of safety deposit box contents)
"We disclosed to you all known instances of non-compliance or suspected non-compliance with
laws and regulations whose effects should be considered when preparing financial statements."
The foregoing passage is most likely from a: - Answer Management representation letter
As of August 13, a CPA had obtained sufficient appropriate audit evidence with respect to
fieldwork on an engagement to audit financial statements for the year ended June 30. On
August 27, an event came to the CPA's attention that should be disclosed in the notes to the
financial statements. The event was properly disclosed by the entity, but the CPA decided not to
dual date the auditor's report and dated the report August 27. Under these circumstances, the
CPA was taking responsibility for:
a. Only the subsequent events that occurred through August 13
b. Only the specific subsequent event disclosed by the entity
c. All subsequent events that occurred through August 13 and the specific subsequent event
disclosed by the entity.
d. All subsequent events that occurred through August 27 - Answer d. All subsequent events
that occurred through August 27
*if the auditor chooses to use the later date for the report, this extends the auditor's
responsibility for all subsequent events to this later date.
,**the date on the audit report represents the date the auditor obtained sufficient appropriate
audit evidence, including the auditor taking responsibility for all subsequent events to that date.
In order to use a SOC 1 Type 2 report as audit evidence (that the controls of the service
organization are operating effectively and therefore reduce the assessed level of control risk for
certain areas of the audit of the user entity, the user auditor must be satisfied regarding: -
Answer 1) ensure the Test of Controls performed by the service auditor are relevant to the
assertions in the user entity's financial statements.
2) ensure the service auditor is both COMPETENT and INDEPENDENT
3) obtain an understanding of the DESIGN and OPERATING EFFECTIVENESS of any relevant
COMPLEMENTARY CONTROLS
Most likely auditor procedure for auditing the Statement of Cash Flows? - Answer d. Reconcile
the amounts included in the statement of cash flows to the other financial statements'
amounts.
*Confirming cash amounts with the entity's financial institution is a procedure used to audit the
cash balance
**reconciling the cutoff bank statement to the proof of cash to verify the accuracy of the year-
end cash balance is a procedure used to audit the cash balance
***Vouching a sample of cash receipts and disbursements is a procedure used to audit the cash
balance
According to the PCAOB standards, what items of information should be included as
documentation of an Engagement Quality Review? - Answer 1) identification of the
documents reviewed by the engagement quality reviewer and others who assisted the reviewer.
2) the date on which the engagement quality reviewer provided concurring approval of issuance
3) identification of the engagement quality reviewer and others who assisted the reviewer.
*not required to provide assessment of instances of fraud identified by the audit team
A CPA has decided to reduce control risk. What is the impact on substantive testing sample size
if all other factors remain constant? - Answer The sample size would be lower.
*Control risk has a direct relationship with substantive testing sample size (reduction in control
risk results in decrease in sample size)
An auditor may draft an entity's financial statements based on information from management's
accounting system.
, What type of engagement is this? - Answer Compilation Engagement
If comparative information is presented in a nonissuer's financial statements and the audit
client asks the auditor to express an opinion on all periods presented, then the auditor should
FIRST: - Answer Consider whether the information included for the prior period contains
sufficient detail to constitute a fair presentation in accordance with the applicable financial
reporting framework.
*Auditor's first step would be to consider whether the comparative information for the prior
period MEETS THE REQUIREMENTS (in compliance) of the APPLICABLE FINANCIAL REPORTING
FRAMEWORK. If the auditor determines that the info does meet the requirements of the
framework, then the auditor may consider the procedures that they must perform to opine on
all periods.
What section of the auditor's report for a nonissuer does an auditor communicate the nature of
the engagement and the specific financial statements covered by the audit? - Answer Opinion
section
*the auditor's Opinion section indicates the nature of the engagement (i.e., the audit), the
financial statements covered in the (audit) engagement, the name of the entity whose financial
statements have been audited, and the dates covered by each financial statement.
An auditor's responsibility to express an opinion on the financial statements of a nonissuer
under U.S. auditing standards is:
a. Explicitly represented in the Basis of Opinion paragraph of the auditor's report
b. Explicitly represented in an Emphasis-of-Matter paragraph of the auditor's report
c. Implicitly represented in the auditor's report.
d. Explicitly represented in the Auditor's Responsibility paragraph - Answer d. The auditor's
responsibility to express an opinion on the F/S under US auditing standards is explicitly
represented in the first sentence of the Auditor's Responsibility section of the nonissuer audit
report.
"Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion."
What part of the auditor's report is explicitly stated in an unmodified opinion?
Solved Correctly Updated.
Situations when audit documentation must be provided to a 3rd party without the permission
of the client - Answer 1) Subpoenaed by a court
2) For investigation by the state board of accountancy
3)
Management's responsibility - Answer An indication that management is responsible for the
fair presentation of the financial statements
Auditor's responsibility - Answer A description of the auditor's responsibility for expressing an
opinion on the financial statements.
Employee access to systems and records being password-protected is what type of example? -
Answer Internal Control - this control may help prevent fraud because employee opportunity
is limited.
The Sarbanes_Oxley Act of 2002 provides that the accounting firm of an issuer reported directly
to who? - Answer Audit committee
In a REVIEW, what are required procedures for reviewing the interim financial information of a
publicly held entity? - Answer 1) Accountant is required to inquire of management about its
knowledge of fraud, suspected fraud, or allegations of fraud.
2) Accountant is required to compare disaggregated revenue data for the current interim period
with that of comparable prior periods.
3) Accountant is required to obtain evidence that the interim financial information reconciles
with the accounting records.
*not requirement: obtain corroborating evidence regarding the entity's ability's to continue as a
going concern in an interim review engagement
Activities of a CPA firm's quality-control system to be considered in establishing quality-control
policies and procedures - Answer 1) deciding whether to accept or continue a client
relationship
2) selecting personnel for advancement who have the necessary qualifications
3) monitoring the effectiveness of professional development activities
*not an element: accessing a client's ability to establish effective internal controls
,Situations to use a Disclaimer of Opinion most appropriate - Answer 1) The auditor is unable
to obtain the audited financial statements of a significant subsidiary.
*a scope of limitation exists, assuming that the effect is material and pervasive, the auditor
would issue a disclaimer of opinion
2) Th external auditor lacks independence
A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the
auditor is unable to count the securities at the balance sheet date, the auditor most likely will: -
Answer Request the client to have the bank seal the safe deposit box until the auditor can
count the securities at a subsequent date.
Wrong answers:
1) Request the bank to confirm to the auditor the contents of the safe deposit box at the B/S
date (bank employees are not present when items are put into or taken from safety deposit box
and do not keep records of safety deposit box contents)
"We disclosed to you all known instances of non-compliance or suspected non-compliance with
laws and regulations whose effects should be considered when preparing financial statements."
The foregoing passage is most likely from a: - Answer Management representation letter
As of August 13, a CPA had obtained sufficient appropriate audit evidence with respect to
fieldwork on an engagement to audit financial statements for the year ended June 30. On
August 27, an event came to the CPA's attention that should be disclosed in the notes to the
financial statements. The event was properly disclosed by the entity, but the CPA decided not to
dual date the auditor's report and dated the report August 27. Under these circumstances, the
CPA was taking responsibility for:
a. Only the subsequent events that occurred through August 13
b. Only the specific subsequent event disclosed by the entity
c. All subsequent events that occurred through August 13 and the specific subsequent event
disclosed by the entity.
d. All subsequent events that occurred through August 27 - Answer d. All subsequent events
that occurred through August 27
*if the auditor chooses to use the later date for the report, this extends the auditor's
responsibility for all subsequent events to this later date.
,**the date on the audit report represents the date the auditor obtained sufficient appropriate
audit evidence, including the auditor taking responsibility for all subsequent events to that date.
In order to use a SOC 1 Type 2 report as audit evidence (that the controls of the service
organization are operating effectively and therefore reduce the assessed level of control risk for
certain areas of the audit of the user entity, the user auditor must be satisfied regarding: -
Answer 1) ensure the Test of Controls performed by the service auditor are relevant to the
assertions in the user entity's financial statements.
2) ensure the service auditor is both COMPETENT and INDEPENDENT
3) obtain an understanding of the DESIGN and OPERATING EFFECTIVENESS of any relevant
COMPLEMENTARY CONTROLS
Most likely auditor procedure for auditing the Statement of Cash Flows? - Answer d. Reconcile
the amounts included in the statement of cash flows to the other financial statements'
amounts.
*Confirming cash amounts with the entity's financial institution is a procedure used to audit the
cash balance
**reconciling the cutoff bank statement to the proof of cash to verify the accuracy of the year-
end cash balance is a procedure used to audit the cash balance
***Vouching a sample of cash receipts and disbursements is a procedure used to audit the cash
balance
According to the PCAOB standards, what items of information should be included as
documentation of an Engagement Quality Review? - Answer 1) identification of the
documents reviewed by the engagement quality reviewer and others who assisted the reviewer.
2) the date on which the engagement quality reviewer provided concurring approval of issuance
3) identification of the engagement quality reviewer and others who assisted the reviewer.
*not required to provide assessment of instances of fraud identified by the audit team
A CPA has decided to reduce control risk. What is the impact on substantive testing sample size
if all other factors remain constant? - Answer The sample size would be lower.
*Control risk has a direct relationship with substantive testing sample size (reduction in control
risk results in decrease in sample size)
An auditor may draft an entity's financial statements based on information from management's
accounting system.
, What type of engagement is this? - Answer Compilation Engagement
If comparative information is presented in a nonissuer's financial statements and the audit
client asks the auditor to express an opinion on all periods presented, then the auditor should
FIRST: - Answer Consider whether the information included for the prior period contains
sufficient detail to constitute a fair presentation in accordance with the applicable financial
reporting framework.
*Auditor's first step would be to consider whether the comparative information for the prior
period MEETS THE REQUIREMENTS (in compliance) of the APPLICABLE FINANCIAL REPORTING
FRAMEWORK. If the auditor determines that the info does meet the requirements of the
framework, then the auditor may consider the procedures that they must perform to opine on
all periods.
What section of the auditor's report for a nonissuer does an auditor communicate the nature of
the engagement and the specific financial statements covered by the audit? - Answer Opinion
section
*the auditor's Opinion section indicates the nature of the engagement (i.e., the audit), the
financial statements covered in the (audit) engagement, the name of the entity whose financial
statements have been audited, and the dates covered by each financial statement.
An auditor's responsibility to express an opinion on the financial statements of a nonissuer
under U.S. auditing standards is:
a. Explicitly represented in the Basis of Opinion paragraph of the auditor's report
b. Explicitly represented in an Emphasis-of-Matter paragraph of the auditor's report
c. Implicitly represented in the auditor's report.
d. Explicitly represented in the Auditor's Responsibility paragraph - Answer d. The auditor's
responsibility to express an opinion on the F/S under US auditing standards is explicitly
represented in the first sentence of the Auditor's Responsibility section of the nonissuer audit
report.
"Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion."
What part of the auditor's report is explicitly stated in an unmodified opinion?
