CPA Exam Review Audit and Attestation
Section 2
A client uses a service organization to process its payroll. Which of the following
statements is correct regarding the user auditor's use of the service auditor's report on
internal controls placed in operation? - ANS-The client's auditor can use the service
auditor's report as audit evidence for the client's internal controls.
A practitioner reporting on pro forma financial information does not possess an
understanding of the client's business and the industry in which the client operates. The
practitioner should take which of the following actions? - ANS-Review industry trade
journals
A written audit plan is required to be prepared by an auditor for: - ANS-Every audit
After obtaining an understanding of the entity and its environment and assessing the
risk of material misstatement, an auditor decided to perform tests of controls. The
auditor most likely decided that: - ANS-it would be efficient to perform tests of controls
that would result in a reduction in planned substantive tests.
An accountant was asked by a potential client to perform a compilation of its financial
statements. The accountant is not familiar with the industry in which the client operates.
In this situation, which of the following actions is the accountant most likely to take? -
ANS-Accept the engagement and obtain an adequate level of knowledge about the
industry
An audit client failed to maintain copies of its procedures manuals and organizational
flowcharts. What should the auditor do in an audit of financial statements? - ANS-
Document the auditors understanding of internal controls
An auditor assesses control risk because it: - ANS-affects the level of detection risk that
the auditor may accept.
An auditor obtains knowledge about a new client's business and its industry to: - ANS-
understand the events and transactions that may have an effect on the client's financial
statements.
An auditor reviews a client's accounting policies and procedures when considering
which of the following planning matters? - ANS-Understanding the client's operations
and business
, An auditor should design the written audit plan so that: - ANS-the audit procedures
selected will achieve specific audit objectives.
An auditor suspects that a client's cashier is misappropriating cash receipts for personal
use by lapping customer checks received in the mail. In attempting to uncover this
embezzlement scheme, the auditor most likely would compare the: - ANS-dates checks
are deposited per bank statements with the dates remittance credits are recorded.
An auditor who performed analytical procedures that compared current-year financial
information to the comparable prior period noted a significant increase in net income.
Given this result, which of the following expectations of recorded amounts would be
unreasonable? - ANS-A decrease in retained earnings
An auditor who wishes to capture an entity's data as transactions are processed and
continuously test the entity's computerized information system most likely would use
which of the following techniques? - ANS-Embedded audit module
Application controls are classified as all of the following except:
process change controls.
process controls.
input controls.
output controls. - ANS-Process change controls
Audit evidence concerning segregation of duties ordinarily is best obtained by: - ANS-
Observing employees as they apply control procedures
Audit programs should be designed so that: - ANS-the audit evidence gathered
supports the auditor's conclusions.
Each of the following types of controls is considered to be an entity-level control, except
those: - ANS-regarding the company's annual stockholder meeting.
Equipment acquisitions that are misclassified as maintenance expense most likely
would be detected by an internal control procedure that provides for: - ANS-
investigation of variances within a formal budgeting system.
Section 2
A client uses a service organization to process its payroll. Which of the following
statements is correct regarding the user auditor's use of the service auditor's report on
internal controls placed in operation? - ANS-The client's auditor can use the service
auditor's report as audit evidence for the client's internal controls.
A practitioner reporting on pro forma financial information does not possess an
understanding of the client's business and the industry in which the client operates. The
practitioner should take which of the following actions? - ANS-Review industry trade
journals
A written audit plan is required to be prepared by an auditor for: - ANS-Every audit
After obtaining an understanding of the entity and its environment and assessing the
risk of material misstatement, an auditor decided to perform tests of controls. The
auditor most likely decided that: - ANS-it would be efficient to perform tests of controls
that would result in a reduction in planned substantive tests.
An accountant was asked by a potential client to perform a compilation of its financial
statements. The accountant is not familiar with the industry in which the client operates.
In this situation, which of the following actions is the accountant most likely to take? -
ANS-Accept the engagement and obtain an adequate level of knowledge about the
industry
An audit client failed to maintain copies of its procedures manuals and organizational
flowcharts. What should the auditor do in an audit of financial statements? - ANS-
Document the auditors understanding of internal controls
An auditor assesses control risk because it: - ANS-affects the level of detection risk that
the auditor may accept.
An auditor obtains knowledge about a new client's business and its industry to: - ANS-
understand the events and transactions that may have an effect on the client's financial
statements.
An auditor reviews a client's accounting policies and procedures when considering
which of the following planning matters? - ANS-Understanding the client's operations
and business
, An auditor should design the written audit plan so that: - ANS-the audit procedures
selected will achieve specific audit objectives.
An auditor suspects that a client's cashier is misappropriating cash receipts for personal
use by lapping customer checks received in the mail. In attempting to uncover this
embezzlement scheme, the auditor most likely would compare the: - ANS-dates checks
are deposited per bank statements with the dates remittance credits are recorded.
An auditor who performed analytical procedures that compared current-year financial
information to the comparable prior period noted a significant increase in net income.
Given this result, which of the following expectations of recorded amounts would be
unreasonable? - ANS-A decrease in retained earnings
An auditor who wishes to capture an entity's data as transactions are processed and
continuously test the entity's computerized information system most likely would use
which of the following techniques? - ANS-Embedded audit module
Application controls are classified as all of the following except:
process change controls.
process controls.
input controls.
output controls. - ANS-Process change controls
Audit evidence concerning segregation of duties ordinarily is best obtained by: - ANS-
Observing employees as they apply control procedures
Audit programs should be designed so that: - ANS-the audit evidence gathered
supports the auditor's conclusions.
Each of the following types of controls is considered to be an entity-level control, except
those: - ANS-regarding the company's annual stockholder meeting.
Equipment acquisitions that are misclassified as maintenance expense most likely
would be detected by an internal control procedure that provides for: - ANS-
investigation of variances within a formal budgeting system.
