2017 AICPA newly released questions—auditing

Unit & Module to be Assigned To: A-3, M-2 Skill Level Must be R&U or Application Only: Application Choice "b" is incorrect.. Unit & Module to be Assigned To: A-2, M-7 Skill Level Must

Trang 1

Registered to David Lewis (#813712)

Page 1 of 50

AUDITING

2017 AICPA Newly Released MCQs

Trang 2

a The sample size would be irrelevant

b The sample size would be higher

c The sample size would be lower

d The sample size would be unaffected

Unit & Module to be Assigned To: A-3, M-2

Skill Level (Must be R&U or Application Only): Application

Choice "b" is incorrect A reduction in control risk would result in a lower, not higher, substantive testing sample size

Choice "d" is incorrect Sample size would be affected Control risk has a direct relationship with

substantive testing sample size (i.e., a reduction in control risk results in a decrease in sample size)

Trang 3

Page 3 of 50

2 CPA-06191

An auditor who performed analytical procedures that compared current-year financial information to the comparable prior period noted a significant increase in net income Given this result, which of the

following expectations of recorded amounts would be unreasonable?

a A decrease in costs of goods sold as a percentage of sales

b A decrease in accounts payable

c A decrease in retained earnings

d A decrease in notes payable

Choice "b" is incorrect A decrease in accounts payable would be a reasonable expectation for the

increase in net income because accounts payable may have decreased as a result of decreases in expenses A decrease in expenses results in an increase in net income

Choice "d" is incorrect A decrease in notes payable would be a reasonable expectation for the increase

in net income as the decrease in notes payable may result in less interest expense A decrease in interest expense would result in an increase in net income

Trang 4

Page 4 of 50

3 CPA-06192

Which of the following procedures would an auditor most likely use to identify unusual year-end

transactions?

a Obtaining a client representation letter

b Obtaining a legal inquiry letter

c Performing analytical procedures

d Testing arithmetic accuracy of the accounting records

Skill Level (Must be R&U or Application Only): R&U

Choice "a" is incorrect The client representation letter is unlikely to help the auditor identify unusual end transactions This letter does not describe specific transactions

year-Choice "b" is incorrect Obtaining a legal inquiry letter is helpful in identifying contingencies, but is unlikely

to help identify unusual year-end transactions

Choice "d" is incorrect Testing the arithmetic accuracy of accounting records is likely to help discover mathematical errors, but is unlikely to help identify unusual year-end transactions

Trang 5

b Management plans to expand into international operations during the next few years

c Management believes the financial statements are accurately stated in accordance with generally accepted auditing standards (GAAS)

d Management believes the company is the premier company in its industry regarding service to customers

Choice "d" is incorrect The auditor is unlikely to require management to comment on their service to customers in the management representation letter

Trang 6

b The representation letter needs to address only the most current year covered in the report

c The representation letter needs to address only the two most recent years covered in the report

d The representation letter needs to address all of the years being covered in the report

Trang 7

Page 7 of 50

6 CPA-06195

Which of the following could indicate source document fraud?

a The same customer purchase order number appears on different customer invoices

b The same item code appears on different invoices

c The same invoice number appears on different invoices

d The same invoice date appears on different invoices

Choice "a" is incorrect The same purchase order number may appear on different invoices For example,

a purchase order may be issued for two items If one of the items is on back order, the entity may issue

an invoice for the shipped item and then issue another invoice for the back-ordered item once it ships Both invoices would refer to the same purchase order

Choice "b" is incorrect The same item code may appear on different invoices For example, different customers may have ordered the same item, so the same item code would appear on different invoices Choice "d" is incorrect The same invoice date may appear on different invoices, especially if multiple sales occurred on the same day

Trang 8

Page 8 of 50

7 CPA-06196

A client uses a service organization to process its payroll Which of the following statements is correct regarding the user auditor's use of the service auditor's report on internal controls placed in operation?

a The client's auditor can use the service auditor's report to jointly determine the materiality level

b The client's auditor can use the service auditor's report without inquiring about the service auditor's reputation

c The service auditor's report should be referred to in the report of the client's auditor

d The client's auditor can use the service auditor's report as audit evidence for the client's internal controls

Choice "b" is incorrect In considering whether the service auditor's report is satisfactory for his or her purposes, the user auditor should make inquiries concerning the service auditor's professional reputation Choice "c" is incorrect The client's auditor should not make reference to the service auditor's report when issuing an unmodified opinion The client’s auditor is permitted, but is not required, to make reference to the work of a service auditor to explain a modification of the user auditor’s opinion

Trang 9

Page 9 of 50

8 CPA-06197

During the course of an audit, an auditor finds evidence that an officer has entered fraudulent

transactions in the financial statements The fraudulent transactions can be adjusted so the statements are not materially misstated What should the auditor do?

a Report the matters to regulatory authorities

b Consider the fraud a scope limitation and disclaim an opinion

c Communicate the matter to those charged with governance

d Immediately withdraw from the engagement

Choice "b" is incorrect This situation does not represent a scope limitation The auditor was able to gather enough evidence to know the amount of the fraud

Choice "d" is incorrect The auditor does not need to immediately withdraw Instead, the auditor should first notify those charged with governance If those charged with governance do not take appropriate action, then the auditor should consider withdrawing

Trang 10

Page 10 of 50

9 CPA-06198

Which of the following control objectives is achieved by reviewing and testing control procedures over physical inventory count?

a Validation of purchase transactions

b Verification of existence of inventory

c Authorization of the manufacturing orders

d Posting and summarization of inventory transactions

Choice "a" is incorrect The control objective of validation of the purchase transaction objective would not

be achieved by reviewing and testing control procedures related to the physical inventory count

Purchase (and sale) transactions do not typically occur during a physical inventory count, and therefore are unlikely to be part of the control procedures and testing for the physical inventory count

Choice "c" is incorrect The control objective of authorization of manufacturing orders would not be

achieved by reviewing and testing control procedures related to the physical inventory count The testing

of proper authorization of manufacturing orders would occur as a separate test, not during the physical inventory count

Choice "d" is incorrect The control objective of posting and summarization of inventory transactions would not be met by reviewing and testing control procedures related to the physical inventory count Generally, no inventory transactions (i.e., purchases or sales) occur during the physical count

Trang 11

Page 11 of 50

10 CPA-06199

Which of the following procedures is performed first for unreturned positive confirmations of accounts receivable?

a Comparing current sales with budgeted sales

b Sending second requests for confirmation of accounts receivable

c Performing subsequent procedures

d Asking the client to obtain additional correspondence from the customers

unreturned positive confirmations, which require more detailed evidence

Choice "c" is incorrect An auditor will generally perform subsequent procedures, such as reviewing subsequent cash receipts or inspecting shipping documents after the auditor has not received responses

to the second (and sometimes third) confirmation requests

Choice "d" is incorrect The auditor may ask the client to contact the customer; however, this is usually requested after second confirmation requests do not yield a response

Trang 12

Page 12 of 50

11 CPA-06200

Which of the following audit procedures most likely will involve sampling?

a Risk assessment procedures performed to obtain an understanding of internal control

b Tests of automated application controls when effective information technology general controls are present

c Analyses of controls to determine the appropriate segregation of duties

d Testing of process for approval of credit to customers for sales on account

Choice "a" is incorrect An auditor generally does not use sampling when performing risk assessment procedures to obtain an understanding of internal control The primary goal of risk assessment

procedures is to gain an understanding of the accounting system or other relevant parts of the internal

control, rather than to evaluate a characteristic of all transactions processed

Choice "b" is incorrect Sampling generally does not apply to tests of automated application controls when effective information technology general controls are present When IT general controls are tested and determined to be effective, a single test of an automated control may be sufficient to place reliance on the control As such, testing of these controls generally do not rely on the concepts of risk and tolerable deviation as applied in other sampling procedures

Choice "c" is incorrect Sampling generally does not apply to controls that do not provide documentary evidence of performance, such as controls to determine the appropriate segregation of duties

Trang 13

Trang 14

Choice "a" is incorrect A review provides limited assurance, which is higher than no assurance

Choice "b" is incorrect An audit provides reasonable assurance, which is higher than limited assurance and no assurance

Choice "d" is incorrect Attestation services include examinations (reasonable assurance), reviews

(limited assurance) and agreed-upon procedures (no assurance) Although attestation services do include agreed-upon procedures, which provide no assurance, attestation services also include examinations and reviews, which provide a higher level of assurance than a compilation Therefore, the best response is

"compilation," because it always provides no assurance

Trang 15

Page 15 of 50

14 CPA-06203

Under which of the following circumstances would an auditor be considered to be using the work of a specialist?

a The auditor engages a lawyer to interpret the provisions of a complex contract

b The auditor makes inquiries of the client's lawyer regarding pending litigation

c A tax expert employed by the auditor's CPA firm reviews the client's tax accruals

d The client engages an outside computer service organization to prepare its payroll

ANSWER:

Choice "a" is correct An auditor engaging a lawyer to interpret the provisions of a complex contract would

be considered to be using the work of a specialist GAAS defines a specialist as a person or firm with special skills in a field other than accounting or auditing (e.g., actuaries, appraisers, attorneys, or

Trang 16

Page 16 of 50

15 CPA-06204

What is the definition of fraud in an audit of financial statements?

a An intentional act that results in a material misstatement in financial statements that are the subject

Choice "d" is incorrect Management's inability to design and implement programs and controls to

prevent, deter, and detect material misstatements is not the definition of fraud However, this situation most likely would increase the auditor's assessment of risk of material misstatement

Trang 17

Page 17 of 50

16 CPA-06205

A practitioner's report on agreed-upon procedures should contain which of the following statements?

a The procedures performed were those agreed to by the specified parties identified in the report

b Sufficiency of procedures is the responsibility of the practitioner

c All classification codes appeared to comply with such performance documents

d Nothing came to my attention as a result of applying the procedures

Choice "c" is incorrect A practitioner's report on agreed-upon procedures should not include the

statement that all classification codes appeared to comply with such performance documents The agreed upon procedures engagement may relate to a subject matter unrelated to classification of codes, and an agreed-upon procedures report does not include any form of assurance

Choice "d" is incorrect A practitioner's report on agreed-upon procedures contains a disclaimer of opinion

on the subject matter Limited assurance is not provided in an agreed-upon procedures engagement

Trang 18

Choice "c" is incorrect Internal auditors are not a subgroup of the board of directors The internal audit function may report to the audit committee or the board of the directors, but they are not a subgroup of the board of directors

Choice "d" is incorrect Senior management assists the board of directors with the day to day activities of the business Senior management reports to the board of directors but is not considered a subgroup of the board of directors

Trang 19

Page 19 of 50

18 CPA-06207

In which of the following situations will a practitioner disclaim an opinion on an examination of prospective financial statements?

a The prospective financial statements depart from AICPA presentation guidelines

b The practitioner was not able to perform certain procedures deemed necessary

c The prospective financial statements fail to disclose significant assumptions

d The significant assumptions do not provide a reasonable basis for the statements

Choice "a" is incorrect A practitioner would issue a qualified or adverse opinion if the prospective

financial statements departed from AICPA guidelines

Choice "c" is incorrect A practitioner would issue an adverse opinion if the prospective financial

statements failed to disclose significant assumptions

Choice "d" is incorrect A practitioner would issue an adverse opinion if the significant assumptions did not provide a reasonable basis for the statements

Trang 20

Page 20 of 50

19 CPA-06208

While conducting an audit of a new nonissuer client, an auditor discovers that accounting policies applied

in relation to the financial statement opening balances are inconsistent with accounting policies applied during the period under audit In this scenario, what should the auditor do?

a Obtain sufficient appropriate evidence about whether changes in the accounting policies have been appropriately accounted for and adequately presented and disclosed in accordance with the

applicable financial reporting framework

b Refrain from placing any reliance on information obtained from the review of the predecessor auditor's audit documentation of the prior period

c Request that management inform the predecessor auditor that the prior-period audited financial statements require revision

d Express a qualified or adverse opinion

predecessor auditor's work

Choice "c" is incorrect The successor auditor does not need to request that management inform the predecessor auditor that the prior-period audited financial statements require revision Accounting policies may change year to year The successor auditor should ensure that the accounting policies are

appropriately accounted for and adequately presented and disclosed in accordance with the applicable financial reporting framework

Choice "d" is incorrect A change in accounting policy does not necessarily mean that the company is not following GAAP The auditor may still be able to express an unqualified opinion

Trang 21

a Appropriate for the environment in which the entity operates

b Consistently applied from prior periods

c Evaluated and appropriately applied based on generally accepted accounting principles

d Appropriate for the debt security being valued

Choice "a" is incorrect The auditor would evaluate whether the valuation model is appropriate for the environment in which the entity operates

Choice "c" is incorrect The auditor would evaluate whether the valuation model is appropriately applied based on generally accepted accounting principles

Choice "d" is incorrect The auditor would evaluate whether the valuation model is appropriate for the debt security being valued

Trang 22

Page 22 of 50

21 CPA-06210

Management's responses to inquiries can be corroborated by each of the following, except:

a Visits to the entity's premises and plant facilities

b Inspection of documents and internal control manuals

c Preparation of the summary of unadjusted differences

d Observation of entity activities and operations

Choice "a" is incorrect Management's responses to inquiries can be corroborated by visiting the entity's premises and plant facilities

Choice "b" is incorrect Management's responses to inquiries can be corroborated by inspecting

documents and internal control manuals

Choice "d" is incorrect Management's responses to inquiries can be corroborated by observing the entity activities and operations

Trang 23

Page 23 of 50

22 CPA-06211

Which of the following statements concerning a compilation of specific elements, accounts, or items of a financial statement is correct?

a The accountant performing the compilation must be independent with regard to the client

b The compilation cannot be relied upon to disclose errors, fraud, or illegal acts

c The compilation involves compiling financial statements for different subsidiaries of the company

d The compilation must be performed in conformance with an accounting basis consistent with GAAP

ANSWER:

Choice "b" is correct A compilation cannot be relied upon to disclose errors, fraud, or illegal acts

Because a compilation is not an assurance engagement, a compilation engagement does not require the accountant to verify the accuracy or completeness of the information provided by management or otherwise gather evidence to express an opinion or conclusion on the financial statements

Choice "a" is incorrect An accountant who is not independent with respect to an entity may compile financial statements for the entity and issue a compilation report The accountant would simply need to disclose the lack of independence in the compilation report

Choice "c" is incorrect A compilation of a specific element, accounts, or items of a financial statement means the accountant is compiling information for a certain aspect of the financial statements (e.g., accounts receivable) It does not mean that the compilation involves compiling financial statements for different subsidiaries within the company

Choice "d" is incorrect A compilation may be performed in conformance with an accounting basis other than GAAP (e.g., cash basis, IFRS)

Trang 24

Page 24 of 50

23 CPA-06212

An independent auditor is issuing an audit report for a governmental entity and plans to issue separate reports on internal control over financial reporting and compliance with laws and regulations The auditor should do which of the following?

a Report to the governing authority that separate reports will be issued

b Issue the same opinion in each report

c State in the audit report that separate reports will be issued

d Obtain permission from the audit committee to issue separate reports

"Other Reporting Required by Government Auditing Standards" in the auditor's report

Choice "a" is incorrect An auditor does not need to notify the governing authority when the auditor decides to issue separate reports rather than a combined report on internal control over financial

reporting and compliance with laws and regulations

Choice "b" is incorrect The reports on internal control over financial reporting and compliance with laws and regulations may, but are not required by GAGAS to, contain an opinion If they do contain an opinion, that opinion may be different from the financial statement opinion

Choice "d" is incorrect The auditor does not need permission from the audit committee to issue separate reports on internal control over financial reporting and compliance with laws and regulations

Trang 25

Page 25 of 50

24 CPA-06213

During a review of financial statements, an accountant decides to emphasize a matter in the review report Which of the following is an example of a matter that the accountant would most likely want to emphasize?

a Other entities in the same industry have recently changed from LIFO to FIFO

b The IRS has notified the entity that it intends to audit income tax returns for prior years

c The entity has had significant transactions with related parties

d The entity has had significant tax expenses as a result of a new tax law

Trang 26

Page 26 of 50

25 CPA-06214

Before issuing an unmodified report on a compliance audit, an auditor becomes aware of an instance of

material noncompliance occurring after the period covered by the audit The least appropriate response

by the auditor would be to:

a Discuss the matter with management and, if appropriate, those charged with governance

b Issue a qualified compliance report describing the subsequent noncompliance

c Determine whether the noncompliance relates to conditions that existed as of period end or arose subsequent to the reporting period

d Modify the standard compliance report to include a paragraph describing the nature of the

subsequent noncompliance

ANSWER:

Choice "b" is correct The least appropriate response if an auditor discovers an instance of material

noncompliance that occurred after the period covered by the audit is to issue a qualified compliance

report describing the subsequent noncompliance The opinion issued (i.e., unmodified) should relate to compliance during the period covered by the auditor's report However, if the auditor determines that it is

of such nature and significance that its disclosure is needed to prevent report users from being misled, the auditor may add an other-matter paragraph in the report to describe the nature of the noncompliance Choice "a" is incorrect An appropriate response is to discuss the matter with management and, if

appropriate, those charged with governance

Choice "c" is incorrect An appropriate response is to determine whether the noncompliance relates to conditions that existed as of period end or arose subsequent to the reporting period

Choice "d" is incorrect An appropriate response is to modify the standard compliance report to include an other-matter paragraph describing the nature of the subsequent noncompliance

Trang 27

a Examine all data in an accounts payable file

b Review approval of dividends

c Verify unrecorded legal liabilities

d Assess compliance with policies and procedures related to information security

Choice "b" is incorrect A manual technique, rather than use of CAATs, is best to use when reviewing approval of dividends This is often performed by reviewing the board of director meeting minutes for proper approval of the dividends

Choice "c" is incorrect A manual technique, rather than use of CAATs, is best to use when verifying unrecorded legal liabilities This is often performed by reviewing the response from the lawyer to the letter

Trang 28

Page 28 of 50

27 CPA-06216

Which of the following events that occurred after a client's calendar-year end, but before the audit report

date, would require disclosure in the notes to the financial statements, but no adjustment in the financial

statements?

a New convertible bonds are issued to expand the company's product line

b A loss is reported on uncollectible accounts of an acknowledged distressed customer

c A fixed asset used in operations is sold at a substantial profit

d Negotiations have resulted in compensation adjustments for union employees retroactive to the fourth quarter

ANSWER:

Choice "a" is correct This transaction does not relate to the year under audit, so no adjustment is needed

to the financial statements, but it is considered a significant event that should be disclosed This

information would most likely appear in the subsequent events footnote

Choice "b" is incorrect A loss reported on uncollectible accounts is considered a recognized subsequent event that would require adjustment to the financial statement amounts This event provides us with additional information that should be used to adjust the estimate for allowance for doubtful accounts This event probably would not be disclosed in the financial statements

Choice "c" is incorrect The sale of a fixed asset is a nonrecognized subsequent event that would not require disclosure or adjustment in the financial statements

Choice "d" is incorrect Negotiations that require compensation adjustments retroactive to the year under audit would be considered a recognized subsequent event that would require adjustment to the financial statement amounts This information should be used to adjust accounts related to compensation for union employees

Trang 29

Page 29 of 50

28 CPA-06217

As part of a fraud audit, a CPA wishes to identify employees with invalid Social Security numbers in the client's payroll-transaction data Which of the following audit tests of controls using computer-assisted audit techniques would best meet the objective?

a Obtaining statistics on the population of the payroll file to identify unusual pay amounts to

d Comparing the payroll transaction file to the employee master file to extract payments to employees

who are not in the employee master file

ANSWER:

Choice "b" is correct Comparing Social Security numbers in the payroll transaction file to a file of

government-authorized Social Security numbers would help identify invalid Social Security numbers Choice "a" is incorrect This audit technique would not help the auditor identify invalid Social Security numbers However, this procedure may help the auditor identify unusual pay amounts

Choice "c" is incorrect Randomly selecting 25 payments from the payroll report and comparing the results to employee Social Security cards in the human resources records appears to be a manual rather than computer-assisted audit technique (especially because the sample size is relatively low) In addition, comparing Social Security numbers in the payroll transaction file to a file of government-authorized Social Security numbers would be the best way to identify invalid Social Security numbers

Choice "d" is incorrect Comparing the payroll transaction file to the employee master file would not provide information about invalid Social Security numbers However, this procedure may help the auditor test the completeness of the master file

Trang 30

Page 30 of 50

29 CPA-06218

What is the primary purpose of reviewing conflict-of-interest statements signed by members of

management?

a To obtain an understanding of business processes

b To identify transactions with related parties

c To assess control risk

d To consider limitations of internal control

ANSWER:

Choice "b" is correct The primary purpose of reviewing conflict-of-interest statements signed by members

of management is to help identify transactions with related parties Conflict-of-interest statements require management to disclose any relationships with related organizations that do business with the entity (For example, the conflict-of-interest statement may have the manager disclose whether he or she has

ownership in a business that does business with the entity.)

Choice "a" is incorrect A conflict-of-interest statement is unlikely to help the auditor obtain an

understanding of the business process Other procedures are more likely to aid the auditor in

understanding the business process, such as reviewing the entity's policies and procedures or performing walk-throughs

Choice "c" is incorrect The primary purpose of reviewing conflict-of-interest statements signed by

members of management is to help identify transactions with related parties Review of these documents may also help the auditor assess control risk related to the entity's identification and disclosure of related party relationships, but this is not the primary objective of reviewing those documents

Choice "d" is incorrect Reviewing conflict-of-interest statements most likely would not assist the auditor in considering limitations of internal control

Trang 31

Page 31 of 50

30 CPA-06219

A CPA was engaged to audit the financial statements of a municipality that received federal financial assistance and that required a Single Audit for compliance with the terms of the financial assistance Which of the following guidelines should the CPA consider?

Generally Accepted Government

Auditing Standards Auditing Standards

ANSWER:

Choice "a" is correct An auditor should consider both generally accepted auditing standards and

government auditing standards when auditing the financial statements of a municipality that received federal financial assistance and that required a Single Audit for compliance with the terms of the financial assistance Government auditing standards include generally accepted auditing standards

Choices "b", "c", and "d" are incorrect, per the above explanation

Tiêu đề	2017 AICPA Newly Released Questions—Auditing
Chuyên ngành	Auditing
Thể loại	Exam
Năm xuất bản	2017

Định dạng
Số trang	62
Dung lượng	895,01 KB