AUD - CPA Exam - Reporting
An entity's comparative financial statements include the financial statements of the prior year
that were audited by a predecessor auditor whose report is not presented. If the predecessor's
report was qualified, the successor should
A) Issue an updated comparative audit report indicating the division of responsibility.
B) Explain to the client that comparative financial statements may not be presented under these
circumstances.
C) Express an opinion only on the current year's financial statements and make no reference to
the prior year's statements.
D) Indicate the substantive reasons for the qualification in the predecessor auditor's opinion. -
Answer: D) Indicate the substantive reasons for the qualification in the predecessor auditor's
opinion.
A modification of the CPA's report on a review of the interim financial statements of a publicly
held company would be necessitated by which of the following?
A) An uncertainty.
B) Lack of consistency.
C) Reference to another accountant.
D) Inadequate disclosure. - Answer: D) Inadequate disclosure.
Which of the following statements is least likely to be included in a practitioner's report on
agreed-upon procedures?
A) The use of the report is subject to specified restrictions.
B) The report has provided limited assurance.
C) The subject matter is the responsibility of the responsible party.
D) The procedures performed were agreed to by the specified parties. - Answer: B) The report
has provided limited assurance.
,AUD - CPA Exam - Reporting
Which of the following uses what is considered a special purpose financial reporting
framework?
A) Interim financial information reviewed to determine whether material modifications should
be made to conform with GAAP.
B) Feasibility studies presented to illustrate an entity's results of operations.
C) Financial statements following a state's insurance statutory basis.
D) Pro forma financial presentations designed to demonstrate the effects of hypothetical
transactions. - Answer: C) Financial statements following a state's insurance statutory basis.
A group engagement partner (principal auditor) decides not to refer to the audit of a
component (other) auditor who audited a subsidiary of the consolidated financial statements.
After making inquiries about the component auditor's professional reputation and
independence, the group engagement partner most likely would
A) Document in the engagement letter that the principal auditor assumes no responsibility for
the other CPA's work.
B) Obtain written permission from the other CPA to omit the reference in the principal auditor's
report.
C) Consider the significance of the component and design audit procedures accordingly.
D) Add an emphasis-of-matter paragraph to the auditor's report indicating that the subsidiary's
financial statements are not material to the consolidated financial statements. - Answer: C)
Consider the significance of the component and design audit procedures accordingly.
An auditor believes there is substantial doubt about an entity's ability to continue as a going
concern for a reasonable period of time. In evaluating the entity's plans for dealing with the
adverse effects of future conditions and events, the auditor most likely would consider, as a
mitigating factor, the entity's plans to
,AUD - CPA Exam - Reporting
A) Purchase production facilities currently being leased from a third party.
B) Postpone expenditures to upgrade its information technology system.
C) Pay cash dividends that are in arrears to the preferred stockholders.
D) Increase the useful lives of plant assets for depreciation purposes. - Answer: B) Postpone
expenditures to upgrade its information technology system.
When an auditor has substantial doubt about an entity's ability to continue as a going concern
because of the probable discontinuance of operations, the auditor most likely would express a
qualified opinion if
A) The effects of the adverse financial conditions likely will cause a bankruptcy filing.
B) Information about the entity's ability to continue as a going concern is not disclosed.
C) Management has no plans to reduce or delay future expenditures.
D) Negative trends and recurring operating losses appear to be irreversible. - Answer: B)
Information about the entity's ability to continue as a going concern is not disclosed.
An accountant has been engaged to compile pro forma financial statements. During the
accountant's acceptance procedures, it is discovered that the accountant is not independent
with respect to the company. What action should the accountant take with regard to
compilation?
A) The accountant should discuss the lack of independence with legal counsel to determine
whether it is appropriate to accept the engagement.
B) The accountant should disclose the lack of independence in the accountant's compilation
report.
C) The accountant should withdraw from the engagement.
, AUD - CPA Exam - Reporting
D) The accountant should compile the pro forma statements but should not provide a
compilation report. - Answer: B) The accountant should disclose the lack of independence in the
accountant's compilation report.
Which of the following items should be included in an auditor's report for financial statements
prepared in conformity with a special-purpose financial reporting framework?
A) A sentence stating that the auditor is responsible for the financial statements.
B) A title that includes the word "independent."
C) The signature of the company controller.
D) A paragraph stating that the audit was conducted in accordance with the special-purpose
financial reporting framework. - Answer: B) A title that includes the word "independent."
In which of the following ways may suitable criteria appropriately be made available?
A) Publicly available
B) Included with subject matter
C) Both
D) Neither - Answer: C) Both
When an adverse opinion is expressed, the opinion paragraph should include a direct reference
to
A) A footnote to the financial statements which discusses the basis for the opinion.
B) The scope paragraph which discusses the basis for the opinion rendered.
C) A separate paragraph which discusses the basis for the opinion rendered.
An entity's comparative financial statements include the financial statements of the prior year
that were audited by a predecessor auditor whose report is not presented. If the predecessor's
report was qualified, the successor should
A) Issue an updated comparative audit report indicating the division of responsibility.
B) Explain to the client that comparative financial statements may not be presented under these
circumstances.
C) Express an opinion only on the current year's financial statements and make no reference to
the prior year's statements.
D) Indicate the substantive reasons for the qualification in the predecessor auditor's opinion. -
Answer: D) Indicate the substantive reasons for the qualification in the predecessor auditor's
opinion.
A modification of the CPA's report on a review of the interim financial statements of a publicly
held company would be necessitated by which of the following?
A) An uncertainty.
B) Lack of consistency.
C) Reference to another accountant.
D) Inadequate disclosure. - Answer: D) Inadequate disclosure.
Which of the following statements is least likely to be included in a practitioner's report on
agreed-upon procedures?
A) The use of the report is subject to specified restrictions.
B) The report has provided limited assurance.
C) The subject matter is the responsibility of the responsible party.
D) The procedures performed were agreed to by the specified parties. - Answer: B) The report
has provided limited assurance.
,AUD - CPA Exam - Reporting
Which of the following uses what is considered a special purpose financial reporting
framework?
A) Interim financial information reviewed to determine whether material modifications should
be made to conform with GAAP.
B) Feasibility studies presented to illustrate an entity's results of operations.
C) Financial statements following a state's insurance statutory basis.
D) Pro forma financial presentations designed to demonstrate the effects of hypothetical
transactions. - Answer: C) Financial statements following a state's insurance statutory basis.
A group engagement partner (principal auditor) decides not to refer to the audit of a
component (other) auditor who audited a subsidiary of the consolidated financial statements.
After making inquiries about the component auditor's professional reputation and
independence, the group engagement partner most likely would
A) Document in the engagement letter that the principal auditor assumes no responsibility for
the other CPA's work.
B) Obtain written permission from the other CPA to omit the reference in the principal auditor's
report.
C) Consider the significance of the component and design audit procedures accordingly.
D) Add an emphasis-of-matter paragraph to the auditor's report indicating that the subsidiary's
financial statements are not material to the consolidated financial statements. - Answer: C)
Consider the significance of the component and design audit procedures accordingly.
An auditor believes there is substantial doubt about an entity's ability to continue as a going
concern for a reasonable period of time. In evaluating the entity's plans for dealing with the
adverse effects of future conditions and events, the auditor most likely would consider, as a
mitigating factor, the entity's plans to
,AUD - CPA Exam - Reporting
A) Purchase production facilities currently being leased from a third party.
B) Postpone expenditures to upgrade its information technology system.
C) Pay cash dividends that are in arrears to the preferred stockholders.
D) Increase the useful lives of plant assets for depreciation purposes. - Answer: B) Postpone
expenditures to upgrade its information technology system.
When an auditor has substantial doubt about an entity's ability to continue as a going concern
because of the probable discontinuance of operations, the auditor most likely would express a
qualified opinion if
A) The effects of the adverse financial conditions likely will cause a bankruptcy filing.
B) Information about the entity's ability to continue as a going concern is not disclosed.
C) Management has no plans to reduce or delay future expenditures.
D) Negative trends and recurring operating losses appear to be irreversible. - Answer: B)
Information about the entity's ability to continue as a going concern is not disclosed.
An accountant has been engaged to compile pro forma financial statements. During the
accountant's acceptance procedures, it is discovered that the accountant is not independent
with respect to the company. What action should the accountant take with regard to
compilation?
A) The accountant should discuss the lack of independence with legal counsel to determine
whether it is appropriate to accept the engagement.
B) The accountant should disclose the lack of independence in the accountant's compilation
report.
C) The accountant should withdraw from the engagement.
, AUD - CPA Exam - Reporting
D) The accountant should compile the pro forma statements but should not provide a
compilation report. - Answer: B) The accountant should disclose the lack of independence in the
accountant's compilation report.
Which of the following items should be included in an auditor's report for financial statements
prepared in conformity with a special-purpose financial reporting framework?
A) A sentence stating that the auditor is responsible for the financial statements.
B) A title that includes the word "independent."
C) The signature of the company controller.
D) A paragraph stating that the audit was conducted in accordance with the special-purpose
financial reporting framework. - Answer: B) A title that includes the word "independent."
In which of the following ways may suitable criteria appropriately be made available?
A) Publicly available
B) Included with subject matter
C) Both
D) Neither - Answer: C) Both
When an adverse opinion is expressed, the opinion paragraph should include a direct reference
to
A) A footnote to the financial statements which discusses the basis for the opinion.
B) The scope paragraph which discusses the basis for the opinion rendered.
C) A separate paragraph which discusses the basis for the opinion rendered.
