AUDIT COMPREHENSIVE EXAM STUDY
GUIDE WITH COMPLETE SOLUTIONS
●● A report on a nonissuer's internal control based on an audit of
internal control should include a statement indicating that:
Answer: Because there are inherent limitations in internal control,
misstatements may occur and not be detected
Projections of the evaluation of internal control to future periods are
subject to the risk that the internal control may become inadequate.
●● The accountant may report on agreed-upon procedures applied to
specified elements, accounts, or items of financial statements:
Answer: But must be independent of the client company and give no
opinion or any other form of assurance on the sufficiency of the agreed-
upon procedures applied
●● Standards that a CPA should apply in a review of MD&A
Answer: Statement on standards for attestation engagements (SSAE)
●● A financial forecast (based on expected results) and a financial
projection (based on the hypothetical release of a new product) are both
_______________
Answer: appropriate for limited use
,●● An auditor provides positive assurance in all of the following reports
EXCEPT
Answer: A report on compliance with contractual or regulatory
requirements related to audited financial statements
Negative assurance is provided on compliance with contractual or
regulatory requirements related to audited financial statements
●● Robbins company uses an outside service organization called payroll
plus to process its payroll. Matthews, CPA is the auditor or Payroll Plus,
and Stevens, CPA is Robbins' auditor. Stevens' assessment of the risk of
material misstatement may be based on the effective operation of
controls surrounding payroll if:
Answer: Matthews provides a report on controls placed in operation and
tests of operating effectiveness.
Stevens may assume controls are operating effectively if Matthews
provides a report on controls placed in operation and tests of operating
effectiveness, and if this report supports a reduction in the assessed level
of control risk. A SOC 1 type 2 report provides the user auditor with
assurance about the design, implementation, and operating effectiveness
of the service organization's internal controls
, ●● Entities that ______ more than $750,000 in federal financial
assistance are required to receive an audit that complies with the
provisions of the Single Audit Act
Answer: Expend
●● Which of the following services require the accountant to comply
with Statements on Standards for Accounting and Review Services
(SSARS)
Answer: Preparing financial statements prior to audit or review by
another accountant
Preparation of financial statements prior to audit or review by another
accountant is an engagement that should be conducted in accordance
with SSARS
●● Management's written representation to the auditor in connection
with a governmental audit would most likely include:
Answer: A statement that management has disclosed any
communications from grantors concerning possible noncompliance
●● An accountants standard report issued after compiling the financial
statements of a nonissuer should state that:
Answer: The accountant was not required to perform any procedures to
verify the accuracy or completeness of the information provided by
management
GUIDE WITH COMPLETE SOLUTIONS
●● A report on a nonissuer's internal control based on an audit of
internal control should include a statement indicating that:
Answer: Because there are inherent limitations in internal control,
misstatements may occur and not be detected
Projections of the evaluation of internal control to future periods are
subject to the risk that the internal control may become inadequate.
●● The accountant may report on agreed-upon procedures applied to
specified elements, accounts, or items of financial statements:
Answer: But must be independent of the client company and give no
opinion or any other form of assurance on the sufficiency of the agreed-
upon procedures applied
●● Standards that a CPA should apply in a review of MD&A
Answer: Statement on standards for attestation engagements (SSAE)
●● A financial forecast (based on expected results) and a financial
projection (based on the hypothetical release of a new product) are both
_______________
Answer: appropriate for limited use
,●● An auditor provides positive assurance in all of the following reports
EXCEPT
Answer: A report on compliance with contractual or regulatory
requirements related to audited financial statements
Negative assurance is provided on compliance with contractual or
regulatory requirements related to audited financial statements
●● Robbins company uses an outside service organization called payroll
plus to process its payroll. Matthews, CPA is the auditor or Payroll Plus,
and Stevens, CPA is Robbins' auditor. Stevens' assessment of the risk of
material misstatement may be based on the effective operation of
controls surrounding payroll if:
Answer: Matthews provides a report on controls placed in operation and
tests of operating effectiveness.
Stevens may assume controls are operating effectively if Matthews
provides a report on controls placed in operation and tests of operating
effectiveness, and if this report supports a reduction in the assessed level
of control risk. A SOC 1 type 2 report provides the user auditor with
assurance about the design, implementation, and operating effectiveness
of the service organization's internal controls
, ●● Entities that ______ more than $750,000 in federal financial
assistance are required to receive an audit that complies with the
provisions of the Single Audit Act
Answer: Expend
●● Which of the following services require the accountant to comply
with Statements on Standards for Accounting and Review Services
(SSARS)
Answer: Preparing financial statements prior to audit or review by
another accountant
Preparation of financial statements prior to audit or review by another
accountant is an engagement that should be conducted in accordance
with SSARS
●● Management's written representation to the auditor in connection
with a governmental audit would most likely include:
Answer: A statement that management has disclosed any
communications from grantors concerning possible noncompliance
●● An accountants standard report issued after compiling the financial
statements of a nonissuer should state that:
Answer: The accountant was not required to perform any procedures to
verify the accuracy or completeness of the information provided by
management
