AUDIT CPA EXAM 3 QUESTIONS WITH
COMPLETE ANSWERS [GRADED A+]
Management is responsible for - ✔✔Financial statements - the preparation
and fair presentation
Internal controls - design, implementation and maintenance relevant to the
FS
Providing auditor with access to info and persons needed to complete the
audit
The preparation and fair presentation of the FS requires - ✔✔identification
of the applicable financial reporting framework
preparation and fair presentation in accordance with framework
©morren2026/2027.Year published 2026.
,inclusion of adequate description of the framework
to obtain reasonable assurance - ✔✔plan the work and properly supervise
the assistants
determine and apply appropriate materiality levels
identify and assess risks of material misstatement, whether due to error or
fraud
and obtain sufficient appropriate audit evidence
The applicable financial reporting framework - ✔✔The financial reporting
framework that is acceptable in view of the nature of the entity and the
objective of the financial statements
Includes general purpose: designed to meet needs of a wide range of users
(GAAP & IFRS)
and special purpose frameworks
©morren2026/2027.Year published 2026.
,Fair presentation frameworks - ✔✔All financial reporting frameworks in the
US are fair presentation frameworks
Acknowledges explicity or implicitly that to achieve fair presentation of the
FS, it may be necessary for management to provide disclosures beyond
those specifically required
Acknowledges explicitly that it may be necessary for mgmt (RARE) to
depart from a requirement to achieve fair presentation
Auditing standards - ✔✔(GAAS) Generally accepted auditing standards -
mandatory on all audit engagements
(GAGAS) Generally accepted government auditing standards - audits of
government organizations, programs or activities that receive government
funds
(PCAOB) - established pursuant to SOX - establish auditing standards for
issuers
©morren2026/2027.Year published 2026.
, (ISA) International standards of auditing
The term "must" or "is required" - ✔✔indicates an unconditional
requirement
must be followed in all cases
The term "should" - ✔✔presumptively mandatory requirement
must be followed in all cases where the requirement is relevant but allows
for departures in rare circumstances if there is appropriate justification
Conditions that indicate possible fraud - ✔✔Pressure
Opportunity
Rationalization
If there is substantial doubt about going concern, the auditor should: -
✔✔consider the adequacy of the disclosure about the entity's possible
inability to continue as a going concern
©morren2026/2027.Year published 2026.
COMPLETE ANSWERS [GRADED A+]
Management is responsible for - ✔✔Financial statements - the preparation
and fair presentation
Internal controls - design, implementation and maintenance relevant to the
FS
Providing auditor with access to info and persons needed to complete the
audit
The preparation and fair presentation of the FS requires - ✔✔identification
of the applicable financial reporting framework
preparation and fair presentation in accordance with framework
©morren2026/2027.Year published 2026.
,inclusion of adequate description of the framework
to obtain reasonable assurance - ✔✔plan the work and properly supervise
the assistants
determine and apply appropriate materiality levels
identify and assess risks of material misstatement, whether due to error or
fraud
and obtain sufficient appropriate audit evidence
The applicable financial reporting framework - ✔✔The financial reporting
framework that is acceptable in view of the nature of the entity and the
objective of the financial statements
Includes general purpose: designed to meet needs of a wide range of users
(GAAP & IFRS)
and special purpose frameworks
©morren2026/2027.Year published 2026.
,Fair presentation frameworks - ✔✔All financial reporting frameworks in the
US are fair presentation frameworks
Acknowledges explicity or implicitly that to achieve fair presentation of the
FS, it may be necessary for management to provide disclosures beyond
those specifically required
Acknowledges explicitly that it may be necessary for mgmt (RARE) to
depart from a requirement to achieve fair presentation
Auditing standards - ✔✔(GAAS) Generally accepted auditing standards -
mandatory on all audit engagements
(GAGAS) Generally accepted government auditing standards - audits of
government organizations, programs or activities that receive government
funds
(PCAOB) - established pursuant to SOX - establish auditing standards for
issuers
©morren2026/2027.Year published 2026.
, (ISA) International standards of auditing
The term "must" or "is required" - ✔✔indicates an unconditional
requirement
must be followed in all cases
The term "should" - ✔✔presumptively mandatory requirement
must be followed in all cases where the requirement is relevant but allows
for departures in rare circumstances if there is appropriate justification
Conditions that indicate possible fraud - ✔✔Pressure
Opportunity
Rationalization
If there is substantial doubt about going concern, the auditor should: -
✔✔consider the adequacy of the disclosure about the entity's possible
inability to continue as a going concern
©morren2026/2027.Year published 2026.
