AUDIT CPA FINAL EXAM -
COMPLETE QUESTIONS AND DETAILED SOLUTIONS
LATEST UPDATE THIS YEAR JUST RELEASED
Question 1: Independence is not required for this service.
Answer:
Consulting. Independence is not required to provide consulting services.
Independence is required by attestation standards and is included in the
definition of assurance services.
Question 2: This service results in a written conclusion about
subject matter.
Answer:
Attestation. Attestation results in a written conclusion about subject
matter or a written assertion of another party. Its objective is to provide
reliable information.
Question 3: This service improves the quality of information, or its
context, for decision makers.
Answer:
Assurance and advisory. Assurance and advisory services provide
better information for decision makers, which leads to better decision
making.
Question 4: This service provides recommendations based on the
objectives of the engagement.
Answer:
,Consulting. Consulting services provide recommendations based on the
objectives of the engagement. The goal is to provide better outcomes.
Question 5: This service provides for a level of assurance based on
an examination.
Answer:
Attestation. Attestation services can provide assurance based on an
examination, a review, or the results of agreed-upon procedures.
Question 6: Requires accounting firms to appropriately consider
the risk of providing services
Answer:
SQCSs. Statements on Quality Control Standards list six elements of a
quality control system. The third element, acceptance and continuance
of client relationships and specific engagements, requires firms to
appropriately consider the risk of performing services.
Question 7: Issued by the AICPA to set guidelines for performing a
compilation
Answer:
SSARS. Statements on Standards for Accounting and Review Services
apply to compilations.
Question 8: Mandates that a second partner review and approve
audit reports
Answer:
SOX. Sarbanes-Oxley was created, in part, to improve the quality control
of audits. One of its provisions is to require a second review and
approval by another partner in the auditing firm.
,Question 9: Defines the process of undertaking an audit
engagement for nonissuers
Answer:
GAAS. GAAS (SASs) are issued by the ASB, the senior technical
committee of the AICPA designated to issue standards on auditing
matters for nonissuers. The Compliance with Standards Rule of the
Code of Professional Conduct requires an AICPA member who audits a
nonissuer to comply with GAAS.
Question 10: Requires the accountant to have reason to believe
that the assertion is measurable in terms that are suitable to the
users of the assertion
Answer:
SSAEs. A practitioner must have reason to believe that the subject
matter is capable of evaluation against criteria that are suitable and
available to users.
Question 11: Describes six elements the CPA firms must consider
Answer:
SQCSs. Statements on Quality Control Standards list six elements of a
quality control system.
Question 12: Defines audit requirements for issuers
Answer:
SOX. Sarbanes-Oxley is federal legislation that requires issuers to be
audited by registered public accountants.
Question 13: The accountant makes recommendations based on
the objectives of the engagement
, Answer:
SSCSs. Statements on Standards for Consulting Services describe
responsibilities of a practitioner who develops findings, conclusions, and
recommendations based solely on the agreement with the client. The
work ordinarily is only for the use and benefit of the client.
Question 14: Issued by the AICPA to set guidelines to offer limited
assurance on historical financial statements
Answer:
SSARS. Statements on Standards for Accounting and Review Services
apply to reviews of historical financial statements. Reviews offer limited
assurance.
Question 15: The subject of the AICPA's clarity project for audits
Answer:
GAAS. A new Codification of Statements on Auditing Standards was
adopted to clarify GAAS.
Question 16: Compilation
Answer:
Column A: Independence not required; Column B: No assurance
provided. The accountant provides no assurance and is not required to
be independent. But the accountant must (a) determine whether (s)he is
independent and (b) issue a report.
Question 17: Preparation
Answer:
Column A: Independence not required; Column B: No assurance
provided. The accountant provides no assurance. Moreover, the
COMPLETE QUESTIONS AND DETAILED SOLUTIONS
LATEST UPDATE THIS YEAR JUST RELEASED
Question 1: Independence is not required for this service.
Answer:
Consulting. Independence is not required to provide consulting services.
Independence is required by attestation standards and is included in the
definition of assurance services.
Question 2: This service results in a written conclusion about
subject matter.
Answer:
Attestation. Attestation results in a written conclusion about subject
matter or a written assertion of another party. Its objective is to provide
reliable information.
Question 3: This service improves the quality of information, or its
context, for decision makers.
Answer:
Assurance and advisory. Assurance and advisory services provide
better information for decision makers, which leads to better decision
making.
Question 4: This service provides recommendations based on the
objectives of the engagement.
Answer:
,Consulting. Consulting services provide recommendations based on the
objectives of the engagement. The goal is to provide better outcomes.
Question 5: This service provides for a level of assurance based on
an examination.
Answer:
Attestation. Attestation services can provide assurance based on an
examination, a review, or the results of agreed-upon procedures.
Question 6: Requires accounting firms to appropriately consider
the risk of providing services
Answer:
SQCSs. Statements on Quality Control Standards list six elements of a
quality control system. The third element, acceptance and continuance
of client relationships and specific engagements, requires firms to
appropriately consider the risk of performing services.
Question 7: Issued by the AICPA to set guidelines for performing a
compilation
Answer:
SSARS. Statements on Standards for Accounting and Review Services
apply to compilations.
Question 8: Mandates that a second partner review and approve
audit reports
Answer:
SOX. Sarbanes-Oxley was created, in part, to improve the quality control
of audits. One of its provisions is to require a second review and
approval by another partner in the auditing firm.
,Question 9: Defines the process of undertaking an audit
engagement for nonissuers
Answer:
GAAS. GAAS (SASs) are issued by the ASB, the senior technical
committee of the AICPA designated to issue standards on auditing
matters for nonissuers. The Compliance with Standards Rule of the
Code of Professional Conduct requires an AICPA member who audits a
nonissuer to comply with GAAS.
Question 10: Requires the accountant to have reason to believe
that the assertion is measurable in terms that are suitable to the
users of the assertion
Answer:
SSAEs. A practitioner must have reason to believe that the subject
matter is capable of evaluation against criteria that are suitable and
available to users.
Question 11: Describes six elements the CPA firms must consider
Answer:
SQCSs. Statements on Quality Control Standards list six elements of a
quality control system.
Question 12: Defines audit requirements for issuers
Answer:
SOX. Sarbanes-Oxley is federal legislation that requires issuers to be
audited by registered public accountants.
Question 13: The accountant makes recommendations based on
the objectives of the engagement
, Answer:
SSCSs. Statements on Standards for Consulting Services describe
responsibilities of a practitioner who develops findings, conclusions, and
recommendations based solely on the agreement with the client. The
work ordinarily is only for the use and benefit of the client.
Question 14: Issued by the AICPA to set guidelines to offer limited
assurance on historical financial statements
Answer:
SSARS. Statements on Standards for Accounting and Review Services
apply to reviews of historical financial statements. Reviews offer limited
assurance.
Question 15: The subject of the AICPA's clarity project for audits
Answer:
GAAS. A new Codification of Statements on Auditing Standards was
adopted to clarify GAAS.
Question 16: Compilation
Answer:
Column A: Independence not required; Column B: No assurance
provided. The accountant provides no assurance and is not required to
be independent. But the accountant must (a) determine whether (s)he is
independent and (b) issue a report.
Question 17: Preparation
Answer:
Column A: Independence not required; Column B: No assurance
provided. The accountant provides no assurance. Moreover, the
