CPA AUD UPDATED ACTUAL Exam
Questions and CORRECT Answers
Which of the following standards-setting bodies has the authority to issue auditing standards for
financial statement audits - CORRECT ANSWER - Auditing and standards board not the
PCOB
Whenever an independent expert is brought in to examine financial statements with the hopes of
adding credibility that engagement and reporting process id known as an - CORRECT
ANSWER - Attestation NOT an Audit nothing in the question refers to an audit
A CPA performed the following engagements in February of year 3. which is considered an
attestation engagement - CORRECT ANSWER - Audit of year 2 and examination of year
4
After an audit the financial statements are the responsibility of - CORRECT ANSWER -
the management of the reporting company
According to the generally accepted auditing reporting standards which of the following must be
expressed in a standard auditor's report - CORRECT ANSWER - in a standard report the
fact that the client disclosures and footnotes are adequate need not to be reported and the
consistent accounting principles does not apply
Laura is a covered member in an audit engagement which of the following cannot work in any
capacity for a company being audited by Laura - CORRECT ANSWER - spouse and
dependent childe of the covered member can work for the company as long as there is no
influence on the financial statements
regarding a covered member of an audit engagement - CORRECT ANSWER - would not
be allowed if a dependent child owns stock in the audit client even if the child was under the age
of five. no financial holding is allowed unless it is indirect like a mutual fund
, a violation of the profession's independence standards most likely would have occurred when -
CORRECT ANSWER - CPA issued a second year audit without collecting the first year's
payment
In an audit of financial statements of a non-issuer in accordance Generally accepted auditing
standards an auditor is required to - CORRECT ANSWER - Document the auditors
understanding of the entity's internal control structure. NOT preform test of controls to evaluate
effectiveness of the entity;s accounting system(only need for Publicly traded companies)
the following attestation engagements does a CPA gather evidence and then provide an opinion
regarding fair presentation of financial information - CORRECT ANSWER - examination
of forward-looking financial information and audits of historic financial information
the following should be considered by a CPA prior to acceptance of an audit engagement of a
non issuer - CORRECT ANSWER - The quality of the accounting records and the future
plans of the company
Inquires of the predecessor auditor prior to acceptance of the engagement should include specific
questions regarding - CORRECT ANSWER - the integrity of management and
disagreements with management
CPA should decide not to accept a new client for an audit engagement if - CORRECT
ANSWER - neither 1. the CPA lacks understanding of the client's industry and 2. the
clients management had unusually high turnover
this procedure an auditor likely perform in the planning stage of a financial statement audit -
CORRECT ANSWER - obtaining a sign engagement letter from the client's management.
examining documents is done in the investigation stage
the proceedures are likely to be performed in the planning stage of an audit - CORRECT
ANSWER - determining the extent of involvement of specialists and internal auditors
Questions and CORRECT Answers
Which of the following standards-setting bodies has the authority to issue auditing standards for
financial statement audits - CORRECT ANSWER - Auditing and standards board not the
PCOB
Whenever an independent expert is brought in to examine financial statements with the hopes of
adding credibility that engagement and reporting process id known as an - CORRECT
ANSWER - Attestation NOT an Audit nothing in the question refers to an audit
A CPA performed the following engagements in February of year 3. which is considered an
attestation engagement - CORRECT ANSWER - Audit of year 2 and examination of year
4
After an audit the financial statements are the responsibility of - CORRECT ANSWER -
the management of the reporting company
According to the generally accepted auditing reporting standards which of the following must be
expressed in a standard auditor's report - CORRECT ANSWER - in a standard report the
fact that the client disclosures and footnotes are adequate need not to be reported and the
consistent accounting principles does not apply
Laura is a covered member in an audit engagement which of the following cannot work in any
capacity for a company being audited by Laura - CORRECT ANSWER - spouse and
dependent childe of the covered member can work for the company as long as there is no
influence on the financial statements
regarding a covered member of an audit engagement - CORRECT ANSWER - would not
be allowed if a dependent child owns stock in the audit client even if the child was under the age
of five. no financial holding is allowed unless it is indirect like a mutual fund
, a violation of the profession's independence standards most likely would have occurred when -
CORRECT ANSWER - CPA issued a second year audit without collecting the first year's
payment
In an audit of financial statements of a non-issuer in accordance Generally accepted auditing
standards an auditor is required to - CORRECT ANSWER - Document the auditors
understanding of the entity's internal control structure. NOT preform test of controls to evaluate
effectiveness of the entity;s accounting system(only need for Publicly traded companies)
the following attestation engagements does a CPA gather evidence and then provide an opinion
regarding fair presentation of financial information - CORRECT ANSWER - examination
of forward-looking financial information and audits of historic financial information
the following should be considered by a CPA prior to acceptance of an audit engagement of a
non issuer - CORRECT ANSWER - The quality of the accounting records and the future
plans of the company
Inquires of the predecessor auditor prior to acceptance of the engagement should include specific
questions regarding - CORRECT ANSWER - the integrity of management and
disagreements with management
CPA should decide not to accept a new client for an audit engagement if - CORRECT
ANSWER - neither 1. the CPA lacks understanding of the client's industry and 2. the
clients management had unusually high turnover
this procedure an auditor likely perform in the planning stage of a financial statement audit -
CORRECT ANSWER - obtaining a sign engagement letter from the client's management.
examining documents is done in the investigation stage
the proceedures are likely to be performed in the planning stage of an audit - CORRECT
ANSWER - determining the extent of involvement of specialists and internal auditors
