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2025 Audit CPA Exam Questions & Answers Auditing & Attestation (AUD)
AICPA-Aligned Becker-Based Full Coverage Ethics, Risk, Evidence, Internal
Control Graded A+
Existence |Assertion |- |answersAssets/revenues: |whether |the |account |actually |exists |& |they |are |not | overstated Completeness |Assertion |- |answersLiabilities/expenses: |whether |the |items |were |actually |recorded |& | the |accounts |are |not |understated Confirmations |- |answers-provide |evidence |of |existence -2 |forms |of |confirmation: |positive |& |negative |(blank) -electronic |confirmations |must |be |verified |& |non-responses |must |be |followed |up |or |alt |procedures |(if | not |GAAP |problem) Revenue |cycle |- |answerssales, |accounts |receivable, |and |cash |receipts Expenditure |cycle |- |answerspurchases, |accounts |payable, |and |cash |disbursements Purchasing |department |- |answersThis |department |enters/approves |Purchase |Order |and |participates |in |vendor |selection Receiving |department |- |answersaccepts |goods |for |approved |purchases, |counts |and |inspects |goods, | and |prepares |a |receiving |report. Accounts |payable |department |- |answersrecords |the |payable |and |approves |the |invoice Treasurer |department |- |answers- |should |make |the |payment
- |once |signed, |the |check |should |be |mailed |to |the |payee |by |the |check |signer |or |an |employee | operating |under |the |supervision |of |the |check |signer |to |prevent |defalcations |of |checks. Cash |cycle |- |answerscash |receipts |and |disbursements What |is |Lapping? How |Can |Lapping |be |deterred? What |are |the |auditing |procedures |for |Lapping? |- |answers- |a |defalcation |in |which |a |cash |shortage |is | concealed |by |applying |later |customer |remittances |to |a |receivable |account |from |which |money |was | stolen
- |can |be |deterred |by |appropriate |segregation |of |duties |between |receiving |cash |and |posting |to |the | accounts |receivable |ledger. |This |makes |it |more |difficult |for |the |employee |who |is |stealing |the |cash |to | cover |it |up |through |inappropriate |remittance |credits.
- |an |auditor |would |compare |the |date |the |checks |are |deposited |per |bank |statements |with |the |date | remittance |credits |are |recorded |(not |by |reviewing |bank |transfers) What |is |Kiting? What |does |frequent |Kiting |result |in? How |does |an |auditor |detect |Kiting? |- |answers- |concealing |a |cash |shortage |by |depositing |in |one |bank | an |unrecorded |check |of |another |disbursement |bank, |effectively |recording |the |same |funds |in |both | bank |accounts
- |Frequent |kiting |may |result |in |a |high |level |of |deposits |coupled |with |a |low |average |balance. -An |auditor |would |most |likely |detect |kiting |by |reviewing |the |bank |transfer |schedule |and |following-up | on |all |transfers |for |which |the |receipt |date |per |bank |is |recorded |in |the |accounting |period |before |the | disbursement |date. Relevant |assertions |for |auditing |cash |- |answerscompleteness, |valuation |and |allocation, |and |existence Inventory |cycle |- |answerspurchases |and |sales |of |inv Investment |cycle |- |answerspurchases |and |sales |of |stocks, |bonds, |and |derivative |instruments Auditing |procedures |for |investments |- |answers-confirmation -examination |of |securities |on |hand -cutoff |testing -review |of |board |minutes -recalculation Investments |should |be |measured |at |- |answersfair |value Other |transaction |cycles: |PPE |- |answers-includes |all |tangible |assets |used |in |the |operation |of |a | business |and |not |acquired |for |resale -includes |purchases, |R&M, |depreciation, |disposal, |and |leasing Other |transaction |cycles: |Payroll |and |personnel |cycle |- |answersrecord |keeping |of |employees |and | calculation |and |authorization |of |payroll |disbursements Completeness |assertion |for |PPE |- |answersselect |a |sample |of |fixed |asset |purchase |requisitions |and | trace |to |receiving |reports |and |the |fixed |asset |subsidiary |ledger Segregation |of |duties |for |payroll |- |answers-authorization: |operating |managers |and |personnel -record |keeping: |payroll -custody: |treasurer Financing |cycle |- |answersincludes |all |debt |and |equity |transactions
Which |of |the |following |entity-level |controls |is |specifically |identified |in |the |professional |standards |as |a | control |of |importance |that |should |be |evaluated? |- |answersperiod |end |financial |reporting |process | controls GAS |requires |- |answersa |description |of |the |scope |of |the |auditor's |testing |of |compliance |and |of | internal |control. |(not |required |under |gaas) Under |US |GAAS |the |group |engagement |partner |makes |reference |in |the |audit |report |to |the |work |of | the |component |auditor |when |- |answersthe |group |engagement |partner |is |unable |to |review |the | component |auditor's |engagement |documentation Cost |of |correcting |the |weaknesses |would |exceed |the |benefits |- |answersauditor |should |disclaim |an | opinion Advantage |in |using |classical |variables |sampling |- |answersinclusion |of |zero |and |negative |balances | generally |doesn't |require |special |design |considerations Employee |payroll |fraud |scheme |- |answerssignificant |unexplained |variances |between |standard |and | actual |labor |cost During |consideration |of |IC |in |a |FS |audit, |an |auditor |is |not |obligated |to |- |answerssearch |for |all |SD |in | the |operation |of |IC Client |agrees |to |adjust |its |fs |- |answersthe |company |should |receive |an |UM |opinion IC |questionnaire |concerning |completeness |assertion |for |purchases? |- |answersAre |PO, |receiving | reports, |and |vouchers |prenumbered |and |periodically |accounted |for? No |independence |is |impaired |when |- |answersmembership |in |a |social |club |in |which |membership | requirements |involve |acquisition |of |a |pro |rata |share |of |equity |is |not |considered |to |be |a |direct | financial |interest Identify |unusual |sales |transactions |- |answersperform |a |trend |analysis |of |quarterly |sales The |risk |of |assessing |CR |too |high |- |answersis |the |risk |that |assessed |level |of |CR |based |on |the |sample |is |greater |than |the |true |risk |based |on |the |actual |operating |effective |of |the |control Any |report |issued |on |significant |deficiencies |noted |during |an |audit |should |- |answers1) |indicate |that | the |purpose |of |the |audit |was |to |report |on |the |fs |and |not |to |provide |assurance |on |IC
- |include |definition |of |SD
- |include |a |restriction |on |the |use |of |the |report The |audit |work |performed |by |each |assistant |should |be |reviewed |to |determine |whether |- |answersit | was |adequately |performed |and |to |evaluate |whether |the |results |are |consistent |with |the |conclusions | to |be |presented |in |the |auditors |report An |audit |may |reasonably |issue |an |"except |for" |qualified |opinion |for |a |- |answersscope |limitation |and | an |unjustified |acctg |change
An |auditor |should |consider |both |GAAS |and |GAS |when |- |answersauditing |a |municipality |that |received | federal |financial |assistance |and |that |required |a |single |audit |for |compliance |with |terms |of |the |financial |assistance When |performing |a |FS |audit, |an |auditor |is |not |responsible |for |communicating |to |those |charged |with | governance |- |answersthat |the |audit |is |designed |to |provide |absolute |assurance |about |whether |the |fs | are |free |from |material |misstatement |(designed |to |provide |reasonable |rather |than |absolute) A |written |client |representation |letter |most |likely |would |be |an |auditors |best |source |of |corroborative | information |of |a |client's |plans |to |- |answersdiscontinue |a |line |of |business An |auditor |usually |determines |whether |dividend |income |from |publicly |held |investments |is |reasonable |by |computing |the |amounts |that |should |have |been |received |by |referring |to |- |answersrecords | produced |by |investment |services |such |as |"moody's" |dividend |record |- |these |books |state |that |the | dividend |that |was |declared |and |paid |by |the |investee the |user |auditor |should |NOT |make |reference |to.... |- |answersthe |report |of |the |service |auditor |as |a | basis, |in |part, |for |his |or |her |own |opinion |on |the |user |organizations |fs |when |issuing |an |UM |opinion Proper |authorization |of |write-offs |of |uncollectible |accounts |should |be |approved |in |which |of |the | following |departments? |- |answerstreasurer Recording |revenue |on |"trial |sales" |after |consignment |period |to |the |customer |expires |is |NOT |- | answersa |fraud |risk Preparing |a |bank |transfer |is |not |an |effective |means |to |- |answersdetect |lapping |(effective |to |detect | kiting) Projected |error |in |PPS |sampling |- |answersrecorded |amount |minus |audit |amount In |planning |an |audit |of |a |new |client, |an |auditor |would |most |likely |consider |the |methods |used |to | process |accounting |information |- |answersbecause |such |methods |influence |the |design |of |IC Verify |managements |assertion |of |completeness |- |answerscompare |a |sample |of |shipping |docs |to | related |sales |invoices |(all |goods |shipped |were |properly |recorded) In |designing |written |audit |programs, |an |auditor |should |establish |specific |audit |objectives |that |are | based |on |- |answersfinancial |statement |assertions MD&A |should |comply |with |- |answersSSAE If |an |auditor |wishes |to |perform |a |TOC |over |a |procedure |that |leaves |no |audit |trial |then |the |auditor | must |use |- |answersobservation |and |inquiry |to |test |the |control As |part |of |the |process |of |observing |a |client's |physical |inventories, |an |auditor |should |be |alert |to |- | answersthe |inclusion |of |any |obsolete |or |damaged |goods An |accountant |is |not |required |to |assess |- |answersCR |as |part |of |a |review |engagement |(CR |would |be | appropriate |for |an |audit |engagement)
When |an |auditor |expresses |an |adverse |opinion |on |the |fs, |the |auditor |should |issue |a |report |on | compliance |only |if |- |answersthe |auditor |identifies |instances |of |non-compliance |(neg. |assurance |is |not | provided |in |this |report) Compiled |FS |that |omit |substantially |all |GAAP |disclosures |are: |- |answers- |not |comparable |to |fs | including |such |disclosures
- |the |accountant |should |not |issue |a |report |in |this |situation In |relation |to |the |five |components |of |IC, |the |auditor |is |not |required |to |- |answersclassify |relevant | controls |into |one |of |the | 5 |component |categories A |control |cannot |be |relied |on |- |answerswhen |sample |deviation |rate |plus |allowance |for |sampling |risk | is |greater |than |tolerable |deviation |rate the |objective |in |an |audit |of |IC |- |answersis |to |express |an |opinion |on |the |effectiveness |of |the |entity's |IC |over |FR Scope |of |audit |is |restricted |- |answerswithdraw |or |disclaimer |of |opinion SS&E |- |answers- |AUP
- |financial |forecast/projection
- |pro |forma |fs
- |compliance |attestations
- |MD&A
- |reporting |on |controls |at |a |service |organization (CAPE |CORP) Inherent |Risk |- |answersthe |susceptibility |of |a |set |of |accounts |or |transactions |to |significant |control | problems |in |the |absence |of |internal |control Control |risk |- |answersthe |likelihood |that |the |client's |internal |control |policies |and |procedures |fail |to | prevent |or |detect |a |material |misstatement Detection |Risk |- |answersrisk |that |auditor |concludes |no |material |misstatement |exists |when |there | actually |is |one Examination |- |answers- |Positive |opinion
- |High |level |of |assurance Review |- |answers- |negative |opinion
- |reasonable/moderate |level |of |assurance AUP |- |answers- |no |assurance
- |procedures |and |findings |are |listed
prospective |fs |- |answers1. |Financial |forecast: |expected |results -general |use -possible |limited |use
- |Financial |projection: |Hypothetical: |what |if -limited |use *Preparation |("no |assurance |provided"), |compilation, |examination, |agreed |upon |procedures *includes |caution |about |achievability CANNOT |REVIEW |PROSPECTIVE |FS. Compliance |in |connection |with |FS |audit |- |answersonly |issue |negative |assurance *included |with |fs |= |audit |report |restricted *separate |report |on |compliance |= |only |report |on |compliance |needs |to |be |restricted |to |use Unconditional |requirements |- |answersmust |comply |with Presumptively |Mandatory |Requirements |- |answersshould |comply
- |reason |for |departing |must |be |documented GAGAS |defines | 3 |type |of |gov |engagements |- |answers- |financial |audits
- |attestation |engagements
- |performance |audits Single |audit |applicable |to |entities |- |answersthat |spend |equal |to |or |in |excess |of |$750k |of |federal | financial |assistance |in |a |year (provide |a |schedule |of |findings |and |questioned |costs) An |auditor |that |is |testing |controls |at |a |company |with |multiple |business |units |should |test |controls | over |- |answersspecific |risks |at |business |units |that |are |material |to |the |company's |consolidated | financial |statements top |down |approach |- |answersbegins |by |understanding |the |overall |risks |to |internal |control |over | financial |reporting |at |the |financial |statement |level In |an |audit |of |an |issuer, |the |auditor |must |provide |an |opinion |on |which |of |the |following? |- |answers1. | FS
- |definition |and |inherent |limitation |of |IC |over |FR: |because |of |its |inherent |limitations |IC |over |FR |many | not |prevent, |or |detect, |and |correct |misstatements In |reporting |on |a |nonissuer's |internal |control |over |financial |reporting, |the |auditor's |report |should | include |a |paragraph |stating |- |answersthe |inherent |limitations |of |any |IC Compilations |of |prospective |financial |statements |are |governed |by |- |answersStatements |on |Standards | for |Accounting |and |Review |Services |(SSARS) Statements |on |Standards |for |Attestation |Engagements |do |not |address |services |- |answersinvolving | advocating |for |a |client, |such |as |testifying |as |an |expert |witness The |consistency |assertion |in |an |MD&A |presentation |addresses |whether |- |answersnonfinancial |data | has |been |accurately |derived |from |related |records Attestation |standards |provide |a |framework |for |the |attest |function |beyond |- |answershistorical |fs | (unlike |GAAS) Review |of |Pro |Forma |Financial |Information |- |answersStatements |on |Standards |for |Attestation | Engagements |(SSAE) Results |of |performing |a |review |of |management's |assertion |- |answersnegative |assurance Examination |of |a |financial |projection |- |answersrestricted A |report |on |agreed-upon |procedures |should |include |- |answersa |disclaimer |of |responsibility |for |the | sufficiency |of |the |procedures (no |assurance |is |expressed |in |AUP |engagements) "An |indication |that |had |the |accountant |performed |additional |procedures, |other |matters |might |have | come |to |their |attention |that |would |have |been |reported" |is |included |in |an |- |answersAUP |report The |accountant's |report |on |a |review |of |pro |forma |financial |information |should |include |a |- | answersreference |to |the |financial |statements |from |which |the |historical |information |is |derived |and |a | statement |as |to |whether |such |financial |statements |were |audited |or |reviewed SOC | 1 |Type | 1 |Report |- |answersshould |include |management's |description |of |the |service |organization's | system SOC | 1 |Type | 2 |Report |- |answersopinion |on |operating |effectiveness |of |service |center's |IC SOC | 1 |Report |- |answersis |a |report |on |the |internal |controls |over |financial |reporting |at |a |service | organization SOC | 2 |Report |- |answersis |a |report |on |internal |controls |related |to |one |or |more |of |the |Trust |Services | Criteria When |a |service |organization |provides |services |that |affect |the |initiation, |execution, |processing, |or | reporting |of |a |user |company's |transactions, |those |services |are |considered |to |be |part |of |the |user | company's |- |answersinformation |system
Compliance |report |issued |in |connection |with |audited |financial |statements |- |answersnegative | assurance The |purpose |of |examination |procedures |applied |to |compliance |requirements |is |for |the |practitioner |to |accumulate |sufficient |evidence |regarding |an |entity's |compliance |with |specified |requirements |to |allow |for |the |practitioner |to |- |answersissue |an |opinion |with |reasonable |assurance Tests |of |the |operating |effectiveness |of |controls |may |be |required |if |any |one |of |the |following |exist: |- | answers-The |risk |assessment |includes |an |explanation |of |the |operating |effectiveness |of |controls |over | compliance -Substantive |procedures |do |not |provide |enough |evidence |to |support |a |conclusion -Tests |of |controls |are |required |by |the |applicable |governmental |audit |requirements. In |an |examination |of |an |entity's |compliance |with |specified |requirements, |the |practitioner |must | document |which |of |the |following? |- |answersthe |assessed |risk |of |material |noncompliance |including | procedures |performed |and |documentation |of |internal |controls Effectiveness |of |IC |over |compliance |- |answersauditor |does |not |express |an |opinion When |auditing |an |entity's |FS |in |accordance |with |GAS, |an |auditor |should |prepare |a |written |report |on | the |auditor's |- |answersunderstanding |of |internal |control |and |assessment |of |control |risk Basic |elements |of |a |report |on |compliance |include |- |answers- |a |statement |that |the |audit |should |be | planned |to |obtain |reasonable |assurance |about |whether |noncompliance |could |have |a |material |effect | on |the |programs |audited (*The |report |should |specifically |state |that |a |compliance |audit |does |not |provide |a |legal |determination | of |the |entity's |compliance) The |auditor's |report |on |compliance |and |on |internal |control |over |financial |recording |(based |on |an | audit) |must |include |- |answersthe |scope |of |testing |of |compliance |and |internal |control 2 |CFR | 200 |single |audit |expands |the |auditor's |responsibilities |to |include |- |answersprocedures |designed |to |test |and |report |on |compliance |matters |having |a |direct |and |material |effect |on |major |federal |award |programs The |risk-based |approach |of |the |Single |Audit |Act |is |designed |to |focus |the |auditor's |tests |of |federal | financial |assistance |on |the |programs |with |- |answersthe |highest |risk 2 |CFR | 200 |single |audit |allows |auditors |to |use |- |answersa |risk-based |approach |to |determine |major | grants If |material |instances |of |noncompliance |are |identified, |the |auditor |should |express |either |- |answersa | qualified |or |adverse |opinion |on |compliance
Bearer |Bonds |- |answersrepresent |the |highest |risk |of |misappropriation |of |assets |by |an |entity |because | they |are |unregistered |with |no |records |kept |of |the |owner(s) |or |transactions |involving |ownership What |is |the |auditor's |responsibility |for |detecting |errors |and |fraud? |- |answersan |auditor |should |design |the |audit |to |provide |reasonable |assurance |of |detecting |errors |and |fraud |that |are |material |to |the |fs Control |risk |should |be |assessed |in |terms |of |- |answersFinancial |statement |assertions The |acceptable |level |of |detection |risk |is |inversely |related |to |- |answersthe |assurance |provided |by | substantive |tests Inherent |risks |examples |- |answers- |technological |errors
- |derivative |transactions An |appropriate |response |to |an |increase |in |RMM |- |answersperform |testing |at |YE The |ultimate |purpose |of |assessing |CR |is |to |contribute |to |the |auditor's |evaluation |of |risk |that: |- | answersmaterial |misstatements |may |exist |in |the |fs Before |performing |substantive |tests |at |an |interim |date, |an |auditor |should |- |answersconsider |whether | the |amounts |of |the |year-end |balances |selected |for |interim |testing |are |reasonably |predictable |with | respect |to |amount, |relative |significance |and |composition Tests |of |controls |used |in |assessing |control |risk |ordinarily |include |procedures |such |as |- |answers- | inquiry |
- |inspection
- |observation
- |reperformance An |auditor |of |a |nonissuer |should |design |tests |of |details |to |ensure |that |- |answerssufficient |audit | evidence |supports |the |planned |level |of |assurance |at |the |relevant |assertion |level Which |of |the |following |levels |would |most |likely |address |the |RMM |by |the |auditor's |consideration |of | an |entity's |control |environment? |- |answersFinancial |statements Which |procedure |most |likely |would |assist |an |auditor |in |determining |whether |mgnmt |has |identified |all |acctg |estimates |that |could |be |material |to |the |fs? |- |answersreview |the |lawyers |letter |for |information | about |litigation Which |procedure |most |likely |would |assist |an |auditor |in |identifying |RPT? |- |answersreviewing | confirmations |of |compensating |balance |arrangements Regression |Analysis |- |answers- |provides |direct |and |quantitative |measures |of |the |precision |of | expectation
- |advanced |statistical |technique |that |often |requires |the |use |of |software Analytical |procedures |performed |during |the |overall |final |review |stage |generally |include |- |answersa | review |of |the |current |and |prior |year's |financial |statements
Which |of |the |following |ratios |would |an |engagement |partner |most |likely |consider |in |the |overall |review |stage |of |an |audit? |- |answersCOGS/Avg |Inv |(inventory |turnover) Ending |Inventory |- |answersBeginning |Inventory |+ |Purchases |- |COGS Descriptive |analytics |- |answersdescribes |what |happened |within |the |data Diagnostic |analytics |- |answersexplains |why |something |happened Predictive |analytics |- |answersprovide |expected |or |predicted |outcomes |based |on |historical |data Prescriptive |analytics |- |answersprescribe |or |recommend |actions |to |be |taken |based |on |advanced | analytics |to |reach |a |desired |goal Structured |data |- |answersorganized |and |easily |searchable (NOT |social |media |posts) Trend |Analysis |- |answersLine |chart |is |the |best |visualization Regression |Analysis |(visualization) |- |answersScatter |plots |are |the |best |visualization Sampling |Risk |- |answersarises |from |the |possibility |that, |when |a |substantive |test |is |restricted |to |a | sample, |conclusions |might |be |different |than |if |the |auditor |had |tested |each |item |in |the |population. Non |Sampling |Risk |- |answers- |includes |all |aspects |of |audit |risk |that |are |not |due |to |sampling
- |It |is |always |present |and |cannot |be |measured; |the |auditor |can |only |attempt |to |reduce |this |risk |to |a | very |low |level |through |adequate |planning |and |supervision |of |the |audit |and |quality |control |of |all |firm | practices. |
- |can |arise |because |an |auditor |failed |to |recognize |misstatements |in |documents |examined. Audit |Risk |- |answersuncertainty |in |applying |audit |procedures |to |specific |risks Sample |size |and |expected |error |rate |- |answersdirect |relationship Sample |size |and |tolerable |error |- |answersinverse |relationship A |principal |advantage |of |statistical |methods |of |attribute |sampling |over |nonstatistical |methods |is |that | they |provide |a |scientific |basis |for |planning |the |- |answerssample |size Which |of |the |following |factors |does |an |auditor |explicitly |consider |when |determining |sample |size |in |an |attribute |sample |for |TOC? |- |answers- |tolerable |deviation |rate
- |an |acceptable |level |of |risk |of |overreliance |(risk |of |assessing |CR |too |low)
- |expected |population |deviation |rate (*tolerable |misstatement |is |considered |when |determining |sample |size |in |variable |sampling) Stratified |Sampling |used |in |conjunction |with |- |answers- |with |variables |sampling |and |is |therefore |used | in |substantive |testing, |not |in |tests |of |controls
- |independence |is |not |required |(however, |the |last |paragraph |of |the |report |should |disclose |this |lack |of |independence) In |compilation |and |review |engagements |(accountant's |consideration |of |fraud/non-compliance) |- | answersthe |accountant |is |not |required |to |specifically |assess |fraud |risk |or |to |perform |procedures | designed |to |detect |material |misstatements |due |to |fraud |or |noncompliance |with |laws |and |regulations Standard |Review |Report |- |answers- |states |that |a |review |includes |primarily |applying |analytical | procedures |to |management's |financial |data |and |making |inquiries |of |company |management
- |management |is |responsible |for |the |preparation |and |fair |presentation |of |the |financial |statements
- |written |representations |from |the |current |management |are |required |for |all |periods |being |reported | on
- |the |CPA |is |not |aware |of |any |material |modifications |that |should |be |made |to |the |financial |statements
- |Modifications |are |made |to |the |standard |review |report |only |when |there |is |a |departure |from | generally |accepted |accounting |principles
- |The |accountant |is |required |to |obtain |a |representation |letter |from |management |(if |not |withdraw) When |unaudited |financial |statements |are |presented |in |comparative |form |with |audited |financial | statements |in |documents |filed |with |the |SEC, |such |statements |should |be |- |answersclearly |marked |as |"unaudited," |but |should |not |be |referred |to |in |the |auditor's |report. |The |statements |need |not |be | withheld |until |audited. When |the |prior |period |has |been |audited, |the |accountant |should |issue |the |current |period |compilation | or |review |report, |and |any |additional |paragraph |should |indicate: |- |answers- |That |prior |period | statements |were |audited;
- |The |date |of |the |previous |report(s);
- |The |opinions |expressed, |and, |if |other |than |unmodified, |the |reasons |for |the |modification; |and
- |That |no |auditing |procedures |have |been |performed |since |the |previous |report |date Unaudited |financial |statements |for |the |prior |year |presented |in |comparative |form |with |audited | financial |statements |for |the |current |year |should |be |clearly |marked |to |indicate |their |status | ("unaudited"), |and |- |answerseither |the |report |on |the |prior |period |should |be |reissued |or |the |report |on |the |current |period |should |include |a |separate |explanatory |paragraph |describing |the |responsibility | assumed |for |the |prior |period's |financial |statements. OM/EOM |paragraph |difference |(review |report) |- |answersOM: |An |accountant |should |add |an |other- matter |paragraph |in |the |review |report |when |the |accountant |considers |it |necessary |to |communicate |a |matter |that |is |not |presented |or |disclosed |in |the |financial |statements
EOM: |An |accountant |should |add |an |emphasis-of-matter |paragraph |in |the |review |report |when |the | accountant |considers |it |necessary |to |communicate |a |matter |that |is |presented |or |disclosed |in |the | financial |statements When |audited |financial |statements |are |presented |in |comparative |form |with |compiled |financial | statements |from |a |prior |year, |the |auditor |should |- |answerseither |reissue |his |or |her |report |on |the | compiled |statements |or |include |a |separate |paragraph |in |the |current |year |report |describing |the | responsibility |assumed |for |the |compiled |statements What |statement |would |normally |not |be |found |in |a |mgnmt |rep |letter |for |a |review |of |interim |financial | information? |- |answersWe |understand |that |a |review |consists |principally |of |performing |analytical | procedures |and |making |inquiries |about |the |interim |financial |information When |an |independent |accountant's |report |based |on |a |review |of |interim |financial |information |is | presented |in |a |registration |statement, |the |prospectus |should |include |a |statement |clarifying |- | answersthat |the |accountant's |review |report |is |not |a |"part" |of |the |registration |statement |within |the | meaning |of |the |Securities |Act |of | 1933 An |accountant |may |issue |a |review |report |on |one |financial |statement, |such |as |a |balance |sheet, |and | not |on |other |related |financial |statements, |if |- |answersthe |scope |of |the |accountant's |inquiry |and | analytical |procedures |has |not |been |restricted. The |objective |of |a |review |of |interim |financial |information |is |to |provide |the |accountant |- |answerswith | a |basis |for |reporting |whether |material |modifications |should |be |made |to |such |information |to |conform | with |GAAP The |accountant |is |not |required |to |obtain |corroborating |evidence |regarding |the |entity's |ability |- | answersto |continue |as |a |going |concern |in |an |interim |review |engagement The |AICPA |Code |of |Professional |Conduct's |general |standards |include |- |answersprofessional | competence, |due |professional |care, |planning |and |supervision, |and |sufficient |relevant |data Not |considered |to |be |a |direct |client |financial |interest |- |answersAn |investment |held |through |a | nonclient |regulated |mutual |fund Effect |of |a |contingent |fee |- |answerscontingent |fee |arrangement |impairs |independence SEC's |partner |rotation |rules |- |answers- |the |lead |and |concurring |partner |must |rotate |off |the | engagement |after |five |years |and |other |audit |partners |must |rotate |after |seven |years
- |the |lead |and |concurring |partners |are |subject |to |a |five-year |time-out |period |before |they |can |return | to |an |engagement. |Other |audit |partners |are |subject |to |a |two-year |time-out |period. Entitys |control |environment |factors |include |(but |not |limited |to) |- |answers- |participation |of |those | charged |with |governance
- |integrity -ethical |values
- |organizational |structure
Parallel |simulation |testing |- |answersan |audit |testing |approach |that |involves |the |auditor's |use |of |audit | software, |either |purchased |or |programmed |by |the |auditor, |to |replicate |some |part |of |a |client's | application |system Internal |control |component |- |answersCRIME Control |activities Risk |Assessment |- |mgnmt's |analysis |of |risk Information |& |communication Monitoring |- |assessing |quality |of |IC |structure Control |environment |- |sets |tone |of |organization Audit |documentation |for |non-issuers |must |be |retained |for |- |answers5 |years |(7 |years |for |issuers) Primary |objective |of |using |stratification |as |a |sampling |method |in |auditing? |- |answersto |decrease |the | effect |of |variance |in |the |total |population Which |of |the |following |may |justify |departures |from |GAAP? |- |answers1) |new |legislation
- |evolution |of |a |new |form |of |business |transaction (conflicting |industry |practices |and |unusual |degree |of |materiality |would |NOT |justify |a |departure) Negative |confirmations |- |answers- |do |not |provide |explicit |evidence; |rather |it |is |assumed |that |a |non- response |means |the |recipient |agrees |with |the |stated |balance (alt |procedures |are |generally |not |performed |on |unreturned |neg |confirmations)
