CPA Exam AUD
Each of the following is a required characteristic of a review engagement of management's
discussion and analysis (MD&A), EXCEPT:
A) It consists principally of applying tests of details through inspection, observation, and
confirmation.
B) The practitioner applies analytical procedures.
C) An objective is to report if any information came to the practitioner's attention that the
MD&A is NOT reasonably presented.
D) The practitioner makes inquiries of individuals responsible for financial matters ✔✔A) It
consists principally of applying tests of details through inspection, observation, and
confirmation.
Banister, a CPA, is approached by Wagner, a client. Wagner requests that Banister return the
records provided to Banister by Wagner during an audit. Wagner still owes Banister the fees
associated with the audit. According to the AICPA Code of Professional Conduct, what should
Banister do?
A) Banister should return the records to Wagner.
B) Banister should return the records to Wagner only after the fee has been paid.
C) Banister should NOT return the records to Wagner because the records now belong to
Banister.
D) Banister should NOT return the records to Wagner without a court order. ✔✔A) Banister
should return the records to Wagner.
An accountant's working papers for an engagement to review the financial statements of a
nonpublic entity would be LEAST likely to include which of the following forms of
documentation?
A) Study and evaluation of internal control.
B) Explanation of analytical procedures performed.
C) A copy of the engagement letter.
D) Copies of representation letters from client management. ✔✔A) Study and evaluation of
internal control.
If differences of opinion arise between the engagement partner and the engagement quality
control reviewer, then the engagement partner should:
, A) Follow the firm's policies and procedures for resolving differences of opinion.
B) Issue a disclaimer of opinion and report the issue to the entity's audit committee.
C) Discuss the differences of opinion with the entity's management and issue a modified
auditor's report.
D) Withdraw from the engagement when permissible under law or regulation. ✔✔A) Follow
the firm's policies and procedures for resolving differences of opinion.
An accountant is reviewing the financial statements of a nonpublic entity in accordance with
Statements on Standards for Accounting and Review Services (SSARS). The accountant most
likely would perform which of the following procedures?
A) Obtain an understanding of the internal control structure.
B) Make inquiries about subsequent events.
C) Send bank account confirmations.
D) Perform limited tests of controls. ✔✔B) Make inquiries about subsequent events.
Which of the following factors would an auditor most likely consider in evaluating the control
environment for an audit client?
A) Monthly bank reconciliations with supervisor sign-offs.
B) The ethical values demonstrated by management.
C) Organizational structure used for tax purposes.
D) The number of employees in each department. ✔✔B) The ethical values demonstrated by
management.
Which of the following factors represents an inherent limitation of internal control?
A) Absence of segregation of duties.
B) Failure to perform required tasks.
C) Mistakes resulting from human error.
D) Inadequate provisions to safeguard assets. ✔✔C) Mistakes resulting from human error.
When conducting a review engagement of a non issuer, each of the following is considered an
analytical procedure, EXCEPT a comparison of the current-year's financial information to:
A) Expectations developed by the accountant.
B) Financial statements of a comparable prior period.
C) Supporting documentation.
D) Industry benchmarks. ✔✔C) Supporting documentation.
Each of the following is a required characteristic of a review engagement of management's
discussion and analysis (MD&A), EXCEPT:
A) It consists principally of applying tests of details through inspection, observation, and
confirmation.
B) The practitioner applies analytical procedures.
C) An objective is to report if any information came to the practitioner's attention that the
MD&A is NOT reasonably presented.
D) The practitioner makes inquiries of individuals responsible for financial matters ✔✔A) It
consists principally of applying tests of details through inspection, observation, and
confirmation.
Banister, a CPA, is approached by Wagner, a client. Wagner requests that Banister return the
records provided to Banister by Wagner during an audit. Wagner still owes Banister the fees
associated with the audit. According to the AICPA Code of Professional Conduct, what should
Banister do?
A) Banister should return the records to Wagner.
B) Banister should return the records to Wagner only after the fee has been paid.
C) Banister should NOT return the records to Wagner because the records now belong to
Banister.
D) Banister should NOT return the records to Wagner without a court order. ✔✔A) Banister
should return the records to Wagner.
An accountant's working papers for an engagement to review the financial statements of a
nonpublic entity would be LEAST likely to include which of the following forms of
documentation?
A) Study and evaluation of internal control.
B) Explanation of analytical procedures performed.
C) A copy of the engagement letter.
D) Copies of representation letters from client management. ✔✔A) Study and evaluation of
internal control.
If differences of opinion arise between the engagement partner and the engagement quality
control reviewer, then the engagement partner should:
, A) Follow the firm's policies and procedures for resolving differences of opinion.
B) Issue a disclaimer of opinion and report the issue to the entity's audit committee.
C) Discuss the differences of opinion with the entity's management and issue a modified
auditor's report.
D) Withdraw from the engagement when permissible under law or regulation. ✔✔A) Follow
the firm's policies and procedures for resolving differences of opinion.
An accountant is reviewing the financial statements of a nonpublic entity in accordance with
Statements on Standards for Accounting and Review Services (SSARS). The accountant most
likely would perform which of the following procedures?
A) Obtain an understanding of the internal control structure.
B) Make inquiries about subsequent events.
C) Send bank account confirmations.
D) Perform limited tests of controls. ✔✔B) Make inquiries about subsequent events.
Which of the following factors would an auditor most likely consider in evaluating the control
environment for an audit client?
A) Monthly bank reconciliations with supervisor sign-offs.
B) The ethical values demonstrated by management.
C) Organizational structure used for tax purposes.
D) The number of employees in each department. ✔✔B) The ethical values demonstrated by
management.
Which of the following factors represents an inherent limitation of internal control?
A) Absence of segregation of duties.
B) Failure to perform required tasks.
C) Mistakes resulting from human error.
D) Inadequate provisions to safeguard assets. ✔✔C) Mistakes resulting from human error.
When conducting a review engagement of a non issuer, each of the following is considered an
analytical procedure, EXCEPT a comparison of the current-year's financial information to:
A) Expectations developed by the accountant.
B) Financial statements of a comparable prior period.
C) Supporting documentation.
D) Industry benchmarks. ✔✔C) Supporting documentation.
