Auditing - C240 - CPA Prep Questions EXAMS FROM
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In performing an attestation engagement, a CPA typically
a. Supplies litigation support services.
b. Assesses control risk at a low level.
c. Expresses a conclusion about the assertion on the subject matter.
d. Provides management consulting advice. - CORRECT ANSWER- -Option "c" is correct
because, when performing an attest engagement, a CPA expresses a conclusion about the
assertion on the subject matter.
Auditors may be engaged to attest to a company's compliance with laws, regulations or
contracts or forward-looking financial information such as pro-forma financial statements
and so forth. Attest services are a form of consulting where a Certified Public Accountant
(CPA) provides a written report providing assurance regarding a subject matter that is the
responsibility of someone else
According to standards outlining attest services, the "subject matter" of the service can
include many items, including the following (see AT Section 101.07):
Historical or prospective performance or condition (for example, historical or prospective
financial information, performance measurements, and backlog data)
Physical characteristics (for example, narrative descriptions, square footage of facilities)
Historical events (for example, the price of a market basket of goods on a certain date)
,Analyses (for example, break-even analyses)
Systems and processes (for example, internal control)
Behavior (for example, corporate governance, compliance with laws and regulations, and
human resource practices)
When making a review of interim financial information the auditor's work consists primarily
of
a. Studying and evaluating limited amounts of documentation supporting the interim
financial information.
b. Scanning and reviewing client-prepared, internal financial statements.
c. Making inquiries and performing analytical procedures concerning significant
accounting matters.
d. Confirming and verifying significant account balances at the interim date. - CORRECT
ANSWER- -Option "c" is correct because a review of interim financial information consists
primarily of inquiries and analytical procedures concerning significant accounting matters
relating to the financial data being reported.
In an accountant's review of interim financial information, the accountant typically
performs each of the following, except
a. Reading the available minutes of the latest stockholders' meeting.
b. Applying financial ratios to the interim financial information.
c. Inquiring of the accounting department's management.
d. Obtaining corroborating external evidence. - CORRECT ANSWER- -Option "d" is correct
because reviews consist largely of inquiries of management and analytical procedures and
not corroborating external evidence.
,Reviews of financial statements are services in which the CPA performs an abbreviated set
of procedures to provide "limited assurance that there are no material modifications that
should be made to the financial statements in order for the statements to be in conformity
with the applicable financial reporting framework" (AR Section 90). The most common
basic procedures performed as part of a review include inquiring of management regarding
material matters and performing high-level analysis of reported financial information. In a
review engagement, the auditor provides limited assurance (described in greater detail in
Topic 15) regarding the financial statements because the scope of the work performed
does not generate sufficient appropriate evidence required to provide reasonable
assurance regarding the fairness of the financial statements.
Which of the following professional services would be considered an attest engagement?
a. A management consulting engagement to provide computerized advice to a client.
b. An engagement to report on compliance with statutory requirements.
c. An income tax engagement to prepare federal and state tax returns.
d. An engagement to prepare the tax returns of the company's CEO. - CORRECT ANSWER- -
Option "b" is correct because a report on compliance with statutory requirements might be
structured as an attest engagement in which the required "written assertion" relates to
such compliance.
According to standards outlining attest services, the "subject matter" of the service can
include many items, including the following (see AT Section 101.07):
Historical or prospective performance or condition (for example, historical or prospective
financial information, performance measurements, and backlog data)
Physical characteristics (for example, narrative descriptions, square footage of facilities)
Historical events (for example, the price of a market basket of goods on a certain date)
Analyses (for example, break-even analyses)
Systems and processes (for example, internal control)
Behavior (for example, corporate governance, compliance with laws and regulations, and
human resource practices)
, Which of the following activities would most likely be considered an attestation
engagement?
a. Consulting with management representatives of a firm to provide advice.
b. Issuing a report about a firm's compliance with laws and regulations.
c. Advocating a client's position on tax matters that are being reviewed by the IRS.
d. Preparing a client's tax returns - CORRECT ANSWER- -Option "b" is correct because the
attest standards provide for issuance of a report about a firm's compliance with laws and
regulations.
According to standards outlining attest services, the "subject matter" of the service can
include many items, including the following (see AT Section 101.07):
Historical or prospective performance or condition (for example, historical or prospective
financial information, performance measurements, and backlog data)
Physical characteristics (for example, narrative descriptions, square footage of facilities)
Historical events (for example, the price of a market basket of goods on a certain date)
Analyses (for example, break-even analyses)
Systems and processes (for example, internal control)
Behavior (for example, corporate governance, compliance with laws and regulations, and
human resource practices)
Which of the following types of services is most directly designed to improve the quality of
information, or its context, for decision makers?
a. Assurance services
b. Attestation services
c. Audit services
d. Consulting services - CORRECT ANSWER- -Option "a" is correct because the Special
Committee on Assurance Services (the Elliott Committee), defined assurance services as
independent professional services that improve quality of information, or its context, for
decision makers.
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In performing an attestation engagement, a CPA typically
a. Supplies litigation support services.
b. Assesses control risk at a low level.
c. Expresses a conclusion about the assertion on the subject matter.
d. Provides management consulting advice. - CORRECT ANSWER- -Option "c" is correct
because, when performing an attest engagement, a CPA expresses a conclusion about the
assertion on the subject matter.
Auditors may be engaged to attest to a company's compliance with laws, regulations or
contracts or forward-looking financial information such as pro-forma financial statements
and so forth. Attest services are a form of consulting where a Certified Public Accountant
(CPA) provides a written report providing assurance regarding a subject matter that is the
responsibility of someone else
According to standards outlining attest services, the "subject matter" of the service can
include many items, including the following (see AT Section 101.07):
Historical or prospective performance or condition (for example, historical or prospective
financial information, performance measurements, and backlog data)
Physical characteristics (for example, narrative descriptions, square footage of facilities)
Historical events (for example, the price of a market basket of goods on a certain date)
,Analyses (for example, break-even analyses)
Systems and processes (for example, internal control)
Behavior (for example, corporate governance, compliance with laws and regulations, and
human resource practices)
When making a review of interim financial information the auditor's work consists primarily
of
a. Studying and evaluating limited amounts of documentation supporting the interim
financial information.
b. Scanning and reviewing client-prepared, internal financial statements.
c. Making inquiries and performing analytical procedures concerning significant
accounting matters.
d. Confirming and verifying significant account balances at the interim date. - CORRECT
ANSWER- -Option "c" is correct because a review of interim financial information consists
primarily of inquiries and analytical procedures concerning significant accounting matters
relating to the financial data being reported.
In an accountant's review of interim financial information, the accountant typically
performs each of the following, except
a. Reading the available minutes of the latest stockholders' meeting.
b. Applying financial ratios to the interim financial information.
c. Inquiring of the accounting department's management.
d. Obtaining corroborating external evidence. - CORRECT ANSWER- -Option "d" is correct
because reviews consist largely of inquiries of management and analytical procedures and
not corroborating external evidence.
,Reviews of financial statements are services in which the CPA performs an abbreviated set
of procedures to provide "limited assurance that there are no material modifications that
should be made to the financial statements in order for the statements to be in conformity
with the applicable financial reporting framework" (AR Section 90). The most common
basic procedures performed as part of a review include inquiring of management regarding
material matters and performing high-level analysis of reported financial information. In a
review engagement, the auditor provides limited assurance (described in greater detail in
Topic 15) regarding the financial statements because the scope of the work performed
does not generate sufficient appropriate evidence required to provide reasonable
assurance regarding the fairness of the financial statements.
Which of the following professional services would be considered an attest engagement?
a. A management consulting engagement to provide computerized advice to a client.
b. An engagement to report on compliance with statutory requirements.
c. An income tax engagement to prepare federal and state tax returns.
d. An engagement to prepare the tax returns of the company's CEO. - CORRECT ANSWER- -
Option "b" is correct because a report on compliance with statutory requirements might be
structured as an attest engagement in which the required "written assertion" relates to
such compliance.
According to standards outlining attest services, the "subject matter" of the service can
include many items, including the following (see AT Section 101.07):
Historical or prospective performance or condition (for example, historical or prospective
financial information, performance measurements, and backlog data)
Physical characteristics (for example, narrative descriptions, square footage of facilities)
Historical events (for example, the price of a market basket of goods on a certain date)
Analyses (for example, break-even analyses)
Systems and processes (for example, internal control)
Behavior (for example, corporate governance, compliance with laws and regulations, and
human resource practices)
, Which of the following activities would most likely be considered an attestation
engagement?
a. Consulting with management representatives of a firm to provide advice.
b. Issuing a report about a firm's compliance with laws and regulations.
c. Advocating a client's position on tax matters that are being reviewed by the IRS.
d. Preparing a client's tax returns - CORRECT ANSWER- -Option "b" is correct because the
attest standards provide for issuance of a report about a firm's compliance with laws and
regulations.
According to standards outlining attest services, the "subject matter" of the service can
include many items, including the following (see AT Section 101.07):
Historical or prospective performance or condition (for example, historical or prospective
financial information, performance measurements, and backlog data)
Physical characteristics (for example, narrative descriptions, square footage of facilities)
Historical events (for example, the price of a market basket of goods on a certain date)
Analyses (for example, break-even analyses)
Systems and processes (for example, internal control)
Behavior (for example, corporate governance, compliance with laws and regulations, and
human resource practices)
Which of the following types of services is most directly designed to improve the quality of
information, or its context, for decision makers?
a. Assurance services
b. Attestation services
c. Audit services
d. Consulting services - CORRECT ANSWER- -Option "a" is correct because the Special
Committee on Assurance Services (the Elliott Committee), defined assurance services as
independent professional services that improve quality of information, or its context, for
decision makers.
