Auditing CPA Test Prep Questions Top-Tier
Questions with Detailed Solutions Customized for
Top Academic Performance Diverse Questions with
Correct Solutions
2. Results in a written conclusion about subject matter or a written assertion of another
party. - CORRECT ANSWER- -Attestation services. The result of an attestation engagement
is a written conclusion about subject matter or a written assertion of another party.
3. The CPA is independent and the level of assurance can be explicit or implicit. - CORRECT
ANSWER- -Assurance and advisory services. The definition of assurance and advisory
services includes a provision that the CPA be independent of the client. Also, assurance
services provide flexible levels of assurance.
4. Obtained by the client for the purposes of making better decisions. - CORRECT
ANSWER- -Assurance and advisory services. The objective of assurance and advisory
services is better decision making.
5. The CPA makes recommendations based on management's objectives. - CORRECT
ANSWER- -Consulting services. In a consulting engagement, the CPA recommends actions
to management based on their objectives in order to achieve better outcomes.
Audit - CORRECT ANSWER- -Positive assurance. Positive assurance is provided by the
opinion in an audit.
Compilation - CORRECT ANSWER- -No assurance. No assurance is provided. A
compilation report contains a disclaimer of opinion.
Agreed-upon procedures - CORRECT ANSWER- -No assurance. Agreed-upon procedures
engagements provide the results of the procedures but offer no assurance.
,Review - CORRECT ANSWER- -.Limited assurance. A review provides limited assurance but
offers no opinion.
Examination - CORRECT ANSWER- -Positive assurance. An examination, like an audit,
provides positive assurance expressed as an opinion.
Preparation - CORRECT ANSWER- -No assurance. No assurance is provided, and no report
is presented.
1. Recorded transactions and events actually took place. - CORRECT ANSWER- -
Occurrence. Occurrence relates to the representation that transactions and events
actually took place.
2. Amounts and other data were recorded appropriately. - CORRECT ANSWER- -Accuracy.
Accuracy relates to the representation that amounts and other data were recorded
appropriately.
3. All assets, liabilities, and equity interests that should have been recorded were recorded.
- CORRECT ANSWER- -Completeness. Completeness relates to the representation that all
valid transactions were recorded.
4. Financial information is appropriately presented and described, and disclosures are
clearly expressed. - CORRECT ANSWER- -Classification and understandability.
Classification and understandability relates to the representation that items have been
properly described and disclosed in the financial statements.
5. Transactions and events were recorded in the proper period. - CORRECT ANSWER- -
Cutoff. Cutoff relates to the representation that transactions and events were recorded in
the proper period.
, 6. Assets, liabilities, and equity interest are included at appropriate amounts and
adjustments are appropriately recorded. - CORRECT ANSWER- -Valuation and allocation.
Valuation and allocation relates to the representation that balance sheet items are
recorded at the properly valued amounts and adjustments to the balances are
appropriately determined and recorded.
7. The entity owns the assets, and liabilities are its obligations. - CORRECT ANSWER- -
Rights and obligations. The rights and obligations assertion relates to the representation
that assets are owned and liabilities are owed.
8. Assets, liabilities, and equity interests are bona fide. - CORRECT ANSWER- -Existence.
Existence relates to the representation that balance sheet items are real.
During the audit of a nonissuer, the engagement team discovers that the accounts payable
clerk was writing checks to fictitious vendors. Which paragraph in the professional
standards establishes the requirement(s) the auditor should follow when considering
whether to continue the engagement?
Enter your response in the answer fields below. Guidance on correctly structuring your
response appears above and below the answer fields. - CORRECT ANSWER- -Answer: AU-
C 240.38
AU-C Section 240 -- Consideration of Fraud in a Financial Statement Audit
Auditor Unable to Continue the Engagement
.38 If, as a result of identified fraud or suspected fraud, the auditor encounters
circumstances that bring into question the auditor's ability to continue performing the
audit, the auditor should
Questions with Detailed Solutions Customized for
Top Academic Performance Diverse Questions with
Correct Solutions
2. Results in a written conclusion about subject matter or a written assertion of another
party. - CORRECT ANSWER- -Attestation services. The result of an attestation engagement
is a written conclusion about subject matter or a written assertion of another party.
3. The CPA is independent and the level of assurance can be explicit or implicit. - CORRECT
ANSWER- -Assurance and advisory services. The definition of assurance and advisory
services includes a provision that the CPA be independent of the client. Also, assurance
services provide flexible levels of assurance.
4. Obtained by the client for the purposes of making better decisions. - CORRECT
ANSWER- -Assurance and advisory services. The objective of assurance and advisory
services is better decision making.
5. The CPA makes recommendations based on management's objectives. - CORRECT
ANSWER- -Consulting services. In a consulting engagement, the CPA recommends actions
to management based on their objectives in order to achieve better outcomes.
Audit - CORRECT ANSWER- -Positive assurance. Positive assurance is provided by the
opinion in an audit.
Compilation - CORRECT ANSWER- -No assurance. No assurance is provided. A
compilation report contains a disclaimer of opinion.
Agreed-upon procedures - CORRECT ANSWER- -No assurance. Agreed-upon procedures
engagements provide the results of the procedures but offer no assurance.
,Review - CORRECT ANSWER- -.Limited assurance. A review provides limited assurance but
offers no opinion.
Examination - CORRECT ANSWER- -Positive assurance. An examination, like an audit,
provides positive assurance expressed as an opinion.
Preparation - CORRECT ANSWER- -No assurance. No assurance is provided, and no report
is presented.
1. Recorded transactions and events actually took place. - CORRECT ANSWER- -
Occurrence. Occurrence relates to the representation that transactions and events
actually took place.
2. Amounts and other data were recorded appropriately. - CORRECT ANSWER- -Accuracy.
Accuracy relates to the representation that amounts and other data were recorded
appropriately.
3. All assets, liabilities, and equity interests that should have been recorded were recorded.
- CORRECT ANSWER- -Completeness. Completeness relates to the representation that all
valid transactions were recorded.
4. Financial information is appropriately presented and described, and disclosures are
clearly expressed. - CORRECT ANSWER- -Classification and understandability.
Classification and understandability relates to the representation that items have been
properly described and disclosed in the financial statements.
5. Transactions and events were recorded in the proper period. - CORRECT ANSWER- -
Cutoff. Cutoff relates to the representation that transactions and events were recorded in
the proper period.
, 6. Assets, liabilities, and equity interest are included at appropriate amounts and
adjustments are appropriately recorded. - CORRECT ANSWER- -Valuation and allocation.
Valuation and allocation relates to the representation that balance sheet items are
recorded at the properly valued amounts and adjustments to the balances are
appropriately determined and recorded.
7. The entity owns the assets, and liabilities are its obligations. - CORRECT ANSWER- -
Rights and obligations. The rights and obligations assertion relates to the representation
that assets are owned and liabilities are owed.
8. Assets, liabilities, and equity interests are bona fide. - CORRECT ANSWER- -Existence.
Existence relates to the representation that balance sheet items are real.
During the audit of a nonissuer, the engagement team discovers that the accounts payable
clerk was writing checks to fictitious vendors. Which paragraph in the professional
standards establishes the requirement(s) the auditor should follow when considering
whether to continue the engagement?
Enter your response in the answer fields below. Guidance on correctly structuring your
response appears above and below the answer fields. - CORRECT ANSWER- -Answer: AU-
C 240.38
AU-C Section 240 -- Consideration of Fraud in a Financial Statement Audit
Auditor Unable to Continue the Engagement
.38 If, as a result of identified fraud or suspected fraud, the auditor encounters
circumstances that bring into question the auditor's ability to continue performing the
audit, the auditor should
