CPA Exam AUD – Certified Public Accountant Audit Section (2025)
Complete Study Notes and Practice Questions
Management |is |responsible |for |- |answersFinancial |statements |- |the |preparation |and |fair |presentation
Internal |controls |- |design, |implementation |and |maintenance |relevant |to |the |FS
Providing |auditor |with |access |to |info |and |persons |needed |to |complete |the |audit
The |preparation |and |fair |presentation |of |the |FS |requires |- |answersidentification |of |the |applicable |
financial |reporting |framework
preparation |and |fair |presentation |in |accordance |with |framework
inclusion |of |adequate |description |of |the |framework
to |obtain |reasonable |assurance |- |answersplan |the |work |and |properly |supervise |the |assistants
determine |and |apply |appropriate |materiality |levels
identify |and |assess |risks |of |material |misstatement, |whether |due |to |error |or |fraud
and |obtain |sufficient |appropriate |audit |evidence
The |applicable |financial |reporting |framework |- |answersThe |financial |reporting |framework |that |is |
acceptable |in |view |of |the |nature |of |the |entity |and |the |objective |of |the |financial |statements
Includes |general |purpose: |designed |to |meet |needs |of |a |wide |range |of |users |(GAAP |& |IFRS)
and |special |purpose |frameworks
Fair |presentation |frameworks |- |answersAll |financial |reporting |frameworks |in |the |US |are |fair |
presentation |frameworks |
,Acknowledges |explicity |or |implicitly |that |to |achieve |fair |presentation |of |the |FS, |it |may |be |necessary |
for |management |to |provide |disclosures |beyond |those |specifically |required |
Acknowledges |explicitly |that |it |may |be |necessary |for |mgmt |(RARE) |to |depart |from |a |requirement |to |
achieve |fair |presentation
Auditing |standards |- |answers(GAAS) |Generally |accepted |auditing |standards |- |mandatory |on |all |audit |
engagements
(GAGAS) |Generally |accepted |government |auditing |standards |- |audits |of |government |organizations, |
programs |or |activities |that |receive |government |funds
(PCAOB) |- |established |pursuant |to |SOX |- |establish |auditing |standards |for |issuers
(ISA) |International |standards |of |auditing
The |term |"must" |or |"is |required" |- |answersindicates |an |unconditional |requirement
must |be |followed |in |all |cases
The |term |"should" |- |answerspresumptively |mandatory |requirement
must |be |followed |in |all |cases |where |the |requirement |is |relevant |but |allows |for |departures |in |rare |
circumstances |if |there |is |appropriate |justification
Conditions |that |indicate |possible |fraud |- |answersPressure
Opportunity
Rationalization
If |there |is |substantial |doubt |about |going |concern, |the |auditor |should: |- |answersconsider |the |adequacy
|of |the |disclosure |about |the |entity's |possible |inability |to |continue |as |a |going |concern
include |an |emphasis |of |matter |paragraph |in |the |auditors |report |to |reflect |this |conclusion
Going |concern |documentation |- |answersConditions |or |events |that |gave |rise |to |the |concern
Any |mitigating |factors |the |auditor |finds |significant
, Audit |work |performed |to |evaluate |mgmt |plans
Conclusion |about |whether |it |remains |or |is |alleviated
The |effect |on |the |financial |statements |and |disclosures
Mitigating |factors |- |answerswhen |an |auditors |believe |there |is |substantial |doubt |about |going |concern, |
the |auditor |is |required |to |consider |MANAGEMENTS |PLAN |FOR |DEALING |WITH |the |conditions |or |
events |that |led |to |the |auditors |belief
-Plan |to |borrow |money |or |restructure |debt |
-Plan |to |sell |assets
-Plan |to |delay |or |reduce |expenditures
-Plan |to |increase |ownership |equity
Must |have |BOTH |intent |and |ability
No |audit |work |can |be |done |- |answersNO |AUDIT |OPINION
not |even |a |bad |opinion
Subsequent |discovery |of |facts |after |report |release |date: |If |client |refuses |to |follow |procedures
"DAR" |them |to |fix |it |- |answersDisassociate |
Alert |regulatory |agencies
Relying |parties
If |there |is |a |material |inconsistency |in |documents |containing |audited |financial |statements |- |
answersThe |auditor |should |determine |whether |the |audited |financial |statements |or |the |other |info |
needs |to |be |revised
Complete Study Notes and Practice Questions
Management |is |responsible |for |- |answersFinancial |statements |- |the |preparation |and |fair |presentation
Internal |controls |- |design, |implementation |and |maintenance |relevant |to |the |FS
Providing |auditor |with |access |to |info |and |persons |needed |to |complete |the |audit
The |preparation |and |fair |presentation |of |the |FS |requires |- |answersidentification |of |the |applicable |
financial |reporting |framework
preparation |and |fair |presentation |in |accordance |with |framework
inclusion |of |adequate |description |of |the |framework
to |obtain |reasonable |assurance |- |answersplan |the |work |and |properly |supervise |the |assistants
determine |and |apply |appropriate |materiality |levels
identify |and |assess |risks |of |material |misstatement, |whether |due |to |error |or |fraud
and |obtain |sufficient |appropriate |audit |evidence
The |applicable |financial |reporting |framework |- |answersThe |financial |reporting |framework |that |is |
acceptable |in |view |of |the |nature |of |the |entity |and |the |objective |of |the |financial |statements
Includes |general |purpose: |designed |to |meet |needs |of |a |wide |range |of |users |(GAAP |& |IFRS)
and |special |purpose |frameworks
Fair |presentation |frameworks |- |answersAll |financial |reporting |frameworks |in |the |US |are |fair |
presentation |frameworks |
,Acknowledges |explicity |or |implicitly |that |to |achieve |fair |presentation |of |the |FS, |it |may |be |necessary |
for |management |to |provide |disclosures |beyond |those |specifically |required |
Acknowledges |explicitly |that |it |may |be |necessary |for |mgmt |(RARE) |to |depart |from |a |requirement |to |
achieve |fair |presentation
Auditing |standards |- |answers(GAAS) |Generally |accepted |auditing |standards |- |mandatory |on |all |audit |
engagements
(GAGAS) |Generally |accepted |government |auditing |standards |- |audits |of |government |organizations, |
programs |or |activities |that |receive |government |funds
(PCAOB) |- |established |pursuant |to |SOX |- |establish |auditing |standards |for |issuers
(ISA) |International |standards |of |auditing
The |term |"must" |or |"is |required" |- |answersindicates |an |unconditional |requirement
must |be |followed |in |all |cases
The |term |"should" |- |answerspresumptively |mandatory |requirement
must |be |followed |in |all |cases |where |the |requirement |is |relevant |but |allows |for |departures |in |rare |
circumstances |if |there |is |appropriate |justification
Conditions |that |indicate |possible |fraud |- |answersPressure
Opportunity
Rationalization
If |there |is |substantial |doubt |about |going |concern, |the |auditor |should: |- |answersconsider |the |adequacy
|of |the |disclosure |about |the |entity's |possible |inability |to |continue |as |a |going |concern
include |an |emphasis |of |matter |paragraph |in |the |auditors |report |to |reflect |this |conclusion
Going |concern |documentation |- |answersConditions |or |events |that |gave |rise |to |the |concern
Any |mitigating |factors |the |auditor |finds |significant
, Audit |work |performed |to |evaluate |mgmt |plans
Conclusion |about |whether |it |remains |or |is |alleviated
The |effect |on |the |financial |statements |and |disclosures
Mitigating |factors |- |answerswhen |an |auditors |believe |there |is |substantial |doubt |about |going |concern, |
the |auditor |is |required |to |consider |MANAGEMENTS |PLAN |FOR |DEALING |WITH |the |conditions |or |
events |that |led |to |the |auditors |belief
-Plan |to |borrow |money |or |restructure |debt |
-Plan |to |sell |assets
-Plan |to |delay |or |reduce |expenditures
-Plan |to |increase |ownership |equity
Must |have |BOTH |intent |and |ability
No |audit |work |can |be |done |- |answersNO |AUDIT |OPINION
not |even |a |bad |opinion
Subsequent |discovery |of |facts |after |report |release |date: |If |client |refuses |to |follow |procedures
"DAR" |them |to |fix |it |- |answersDisassociate |
Alert |regulatory |agencies
Relying |parties
If |there |is |a |material |inconsistency |in |documents |containing |audited |financial |statements |- |
answersThe |auditor |should |determine |whether |the |audited |financial |statements |or |the |other |info |
needs |to |be |revised
