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Exam 1: CPA Auditing and Attestation Exam

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Question 381

Multiple Choice

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Davis, CPA, accepted an engagement to audit the financial statements of Tech Resources, a nonissuer. Before the completion of the audit, Tech requested Davis to change the engagement to a compilation of financial statements. Before Davis agrees to change the engagement, Davis is required to consider the:

A) Option A
B) Option B
C) Option C
D) Option D

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Question 382

Multiple Choice

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Which of the following auditor concerns most likely could be so serious that the auditor concludes that a financial statement audit cannot be performed?

A) Management fails to modify prescribed internal controls for changes in information technology.
B) Internal control activities requiring segregation of duties are rarely monitored by management.
C) Management is dominated by one person who is also the majority stockholder.
D) There is a substantial risk of intentional misapplication of accounting principles.

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Question 383

Multiple Choice

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Which of the following are elements of a CPA firm's quality control that should be considered in establishing its quality control policies and procedures?

Management of Edington Industries plans to disclose an uncertainty as follows: The Company is a defendant in a lawsuit alleging infringement of certain patent rights and claiming damages. Discovery proceedings are in progress. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon adjudication has been made in the accompanying financial statements. The auditor is satisfied that sufficient audit evidence supports management's assertions about the nature and disclosure of the uncertainty. What type of opinion should the auditor express under these circumstances?

In evaluating the reasonableness of an accounting estimate, an auditor most likely would concentrate on key factors and assumptions that are:

In analyzing a company's financial statements, which financial statement would a potential investor primarily use to assess the company's liquidity and financial flexibility?

In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of accounting principles to a specific transaction. The accountant's report should include a statement that:

An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management's assertions about:

Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?

The confirmation of customers' accounts receivable rarely provides reliable evidence about the completeness assertion because:

Which of the following controls is least likely to be relevant to a financial statement audit?

What effect would the sale of a company's trading securities at their carrying amounts for cash have on each of the following ratios?

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the:

Which of the following statements is correct concerning an auditor's use of the work of a specialist?

An auditor wishes to perform tests of controls on a client's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:

Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle. Which of the following should the auditor consider the most authoritative?

Grant Company's financial statements adequately disclose uncertainties that concern future events, the outcome of which are not susceptible of reasonable estimation. The auditor's report should include a (an) :

In testing long-term investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the:

An accountant is required to comply with the provisions of Statements on Standards for Accounting and Review Services when:

Jackson & Company, CPAs, plan to audit the financial statements of Perigee Technologies, an issuer as defined under the Sarbanes-Oxley Act of 2002. Which of the following situations would impair Jackson's independence?