2015 auditing AICPA released questions difficult

A practitioner may perform an agreed-upon procedures engagement on prospective financial statements provided that which of the following is met?. The oversight responsibility over financ

AUD 2015 AICPA Released Questions 

Testlet Level: Difficult 

Please Note: These questions are released to the CPA Review providers

with the letter answer only (i.e no explanation given)

This document contains copyrighted material from the American Institute of Certified Public Accountants and is licensed to NINJA CPA Review for use

by its customers only

Answers are on page 14

1 Which of the following statements correctly defines the term reasonable

2 A practitioner may perform an agreed-upon procedures engagement on

prospective financial statements provided that which of the following is met?

Use of the agreed-upon procedures report is not restricted

The practitioner sets the criteria to be used in the determination of

3 If the predecessor auditor refuses to give the current auditor of a

nonissuer access to the documentation, what should the current auditor do?

Review the risk assessment of the opening balances of the financial statements

Withdraw from the engagement

Disclaim an opinion due to a scope limitation

Discuss the matter with the client's legal counsel

4 Analytical procedures used in planning an audit should focus on:

Identifying material weaknesses in internal control

Enhancing the auditor's understanding of the client's business

Testing individual account balances that depend on accounting

estimates

Evaluating the adequacy of the evidence gathered concerning unusual balances

5 If an auditor is obtaining an understanding of an issuer's information and

communication component of internal control, which of the following factors should the auditor assess?

The integrity and ethical values of top management

The philosophy and operating style of management to promote

effective internal control over financial reporting

The classes of transactions in the issuer's operations that are

significant to the issuer's financial statements

The oversight responsibility over financial reporting and internal control

by the board or audit committee

6 Which of the following is not a role of the risk assessment in an

integrated audit of a nonissuer?

Concluding on the effectiveness of a given control

Selecting controls to test

Determining significant accounts and relevant assertions

Determining evidence necessary to conclude on the effectiveness of a given control

7 Which of the following situations represents a limitation, rather than a

failure, of internal control?

A jewelry store employee steals a small necklace from a display

cabinet

A bank teller embezzles several hundred dollars from the cash drawer

A purchasing employee and an outside vendor participate in a kickback scheme

A movie theater cashier sells reduced-price tickets to full-paying

customers and pockets the difference

8 An audit client has substantial assets held in a trust that is managed by

the trust department of a bank Which of the following actions by the auditor

is the most efficient way to obtain information about the trust department's internal controls?

Perform a review or compilation of the trust department

Perform tests of controls on a sample of the client's transactions with the trust department

Rely on the trust department's audit report on internal controls placed in operation and their operating effectiveness

Ask management of the trust department to complete a questionnaire about internal controls and provide flowcharts for related processes

9 Which of the following levels would most likely address the risk of

material misstatement by the auditor's consideration of an entity's control environment?

10 In addition to descriptions of the nature, timing, and extent of planned

risk assessment procedures and planned further audit procedures, which of the following additional pieces of information should be documented in the audit plan?

Procedures performed to assess independence and the ability to

perform the engagement

The understanding of the terms of the engagement, including scope, fees, and resource allocation

Other audit procedures to be performed to comply with generally

accepted auditing standards

Issues with management integrity that could affect the decision to

continue the audit engagement

11 An audit team has concluded that inventory is highly susceptible to

misappropriation and that a potential misstatement would be material to the financial statements How should the audit team address the audit

procedures to the increased risk?

Review the client's control procedures over the safeguarding of

inventory, and perform a physical inventory count on the last day of the current year

Review the client's control procedures over the safeguarding of

inventory, incorporate the use of substantive analytical procedures, and develop an expectation

Review the client's control procedures over the safeguarding of

inventory, but do not modify substantive procedures over inventory

Review the client's control procedures over the safeguarding of

inventory, and perform physical inventory counts throughout the current year

12 When planning an engagement to examine the effectiveness of the

entity's internal control in an integrated audit of a nonissuer, a practitioner

would least likely consider which of the following factors?

Preliminary judgments about the effectiveness of internal control

The extent of recent changes in the entity and its operations

The type of available evidential matter pertaining to the effectiveness of the entity's internal control

The evaluation of the operating effectiveness of the controls

13 In the audit of a nonissuer, which of the following statements is correct

regarding the use of external confirmations to obtain audit evidence?

Management's refusal to allow an auditor to perform external

confirmation procedures is considered a departure from GAAP sufficient to qualify the opinion

Negative confirmations provide more persuasive audit evidence than positive confirmations

Negative confirmations should be used only if a very high exception rate is expected

A factor for an auditor to consider when designing confirmation

requests is the assertion being tested

14 After performing a compliance audit of an entity that received federal

funds, what conclusion would the auditor draw if the entity does not have

adequate documentation to support $5 million in operating expenses paid from federal program funds?

The entity spent $5 million in operating expenses that were not

The entity submitted unauthorized invoices for expenses

15 An auditor of a nonissuer is most likely to conclude that a misstatement

identified during an audit that is below the quantitative materiality limit is qualitatively material if it

Changes the company's operating results from a net loss to a net

16 What is the maximum number of days in which a nonissuer's auditor

should complete the assembly of the final audit file following the report release date?

30 days

45 days

60 days

75 days

17 In an integrated audit of a nonissuer, if an auditor concludes that a

material weakness exists as of the date specified in management's

assertion, the auditor should take which of the following actions?

Obtain written representations from management relating to such

18 A nonissuer requests that a CPA change an audit engagement to a

review engagement If the accountant agrees to the change, how, if at all, should the accountant's review report be modified?

The accountant should issue the review report without mentioning the change in engagement

The accountant should include in the review report a disclaimer of an audit opinion

The accountant should include in the review report the circumstances that resulted in the change in engagement

The accountant should include in the review report a reference to the

original engagement but not the reason for the change

19 Which of the following procedures regarding notes payable would an

accountant most likely perform during a nonissuer's review engagement?

Confirming the year-end outstanding note payable balance with the lender

Examining records indicating proper authorization of the notes payable

Making inquiries of management regarding maturities, interest rate, and collateral

Documenting control procedures for payment calculations of the notes' principal and interest

20 When financial statements that an accountant has compiled in

accordance with Statements on Standards for Accounting and Review Services omit substantially all disclosures required by generally accepted

accounting principles, the accountant's report should include

Management's justification for its decision to elect to omit substantially all the disclosures

No modification of the standard compilation report because

compilations do not require disclosures that are required for audited

financial statements

Information alerting readers about omission of the disclosures and notification that the omission may influence the user's conclusions about the financial statements

A separate paragraph in the compilation report stating that the financial statements are misleading due to the lack of disclosures by management

21 The standard accountant's report issued after reviewing the financial

statements of a nonissuer in accordance with SSARS should state that the

Accountant is not aware of any material modifications that should be made to the financial statements for them to be in conformity with GAAP

Accountant does not express an opinion or any other form of

assurance on the entity's internal control system

Accountant has no responsibility to update the report for circumstances

occurring after the date of the report

Financial statements present fairly the entity's financial position and the results of its operations and cash flows in conformity with GAAP

22 According to the AICPA Code of Professional Conduct, which of the

following activities results in an act discreditable to the profession?

A CPA solicits recent Uniform CPA Examination questions without written authorization from the AICPA

A CPA signs a document containing immaterial false and misleading information, or permits or directs another CPA to do so

A CPA who is engaged to perform a government audit neglects to

follow certain government auditing requirements and discloses in the audit

report the fact that such requirements were not followed and the reasons

for it

A CPA fails to give a client copies of the CPA's workpapers related to a completed and issued work product upon the client's request because the

client has not paid fees payable to the CPA for the work product

23 An issuer's auditor is prohibited from providing tax services to which of

the following individuals?

The chair of the board of directors

The chair of the audit committee

The CEO

The CFO of an affiliate of the issuer audited by another firm

24 Each of the following is an ethical principle that should guide the work

of auditors in the conduct of audits under government auditing standards,

except

Materiality

Integrity

The public interest

Proper use of government information

25 According to the IFAC Code of Ethics for Professional Accountants,

audit teams are required to be independent of the audit client during the engagement period and during which other period?

The fiscal year following the period covered by the financial statements The period covered by the financial statements

The calendar years that include any part of the period covered by the financial statements

The two years prior to the period covered by the financial statements

A high, but not absolute, level of assurance to allow an auditor to

detect a material misstatement

2 A practitioner may perform an agreed-upon procedures engagement on

prospective financial statements provided that which of the following is met?

Use of the agreed-upon procedures report is not restricted

The practitioner sets the criteria to be used in the determination of

3 If the predecessor auditor refuses to give the current auditor of a

nonissuer access to the documentation, what should the current auditor do?

Review the risk assessment of the opening balances of the

financial statements

Withdraw from the engagement

Disclaim an opinion due to a scope limitation

Discuss the matter with the client's legal counsel

4 Analytical procedures used in planning an audit should focus on:

Identifying material weaknesses in internal control

Enhancing the auditor's understanding of the client's business

Testing individual account balances that depend on accounting

estimates

Evaluating the adequacy of the evidence gathered concerning unusual balances

5 If an auditor is obtaining an understanding of an issuer's information and

communication component of internal control, which of the following factors should the auditor assess?

The integrity and ethical values of top management

The philosophy and operating style of management to promote

effective internal control over financial reporting

The classes of transactions in the issuer's operations that are

significant to the issuer's financial statements

The oversight responsibility over financial reporting and internal control

by the board or audit committee

6 Which of the following is not a role of the risk assessment in an

integrated audit of a nonissuer?

Concluding on the effectiveness of a given control

Selecting controls to test

Determining significant accounts and relevant assertions

Determining evidence necessary to conclude on the effectiveness of a given control

7 Which of the following situations represents a limitation, rather than a

failure, of internal control?

A jewelry store employee steals a small necklace from a display

cabinet

A bank teller embezzles several hundred dollars from the cash drawer

A purchasing employee and an outside vendor participate in a

kickback scheme

A movie theater cashier sells reduced-price tickets to full-paying

customers and pockets the difference

8 An audit client has substantial assets held in a trust that is managed by

the trust department of a bank Which of the following actions by the auditor

is the most efficient way to obtain information about the trust department's internal controls?

Perform a review or compilation of the trust department

Perform tests of controls on a sample of the client's transactions with the trust department

Rely on the trust department's audit report on internal controls

placed in operation and their operating effectiveness

Ask management of the trust department to complete a questionnaire about internal controls and provide flowcharts for related processes

9 Which of the following levels would most likely address the risk of

material misstatement by the auditor's consideration of an entity's control environment?