Beruflich Dokumente
Kultur Dokumente
The Elderly
The Elderly
A Family
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
Yes
Under no circumstances.
As long as Adams directorship was disclosed in the organizations financial
statements.
As long as Adams was not directly in charge of the audit.
As long as Adams does not perform or give advice on management functions of the
organization.
This answer is correct.
The member is independent if (1) the position is purely honorary, (2) it is identified as
such in all letterheads and externally circulated materials in which (s)he is named as a
director or trustee, and (3) (s)he does not vote or participate in management functions.
An auditor strives to achieve independence in appearance to
Practice of public accounting in the form of a professional corporation that uses a firm
name indicating specialization.
Use of the partnership name for a limited period by one of the partners in a public
accounting firm after the death or withdrawal of all other partners.
Failing to provide working papers to the client after a request has been made.
All of the answers are permitted by the AICPA Code of Professional Conduct.
This answer is correct.
No response states conduct prohibited by the Code.
Under which of the following circumstances may a CPA charge fees that are contingent upon finding a
specific result?
A contingent fee is established as part of an agreement under which the amount of the
fee is dependent upon the finding or result. Fees are not deemed to be contingent if
fixed by courts or other public authorities, or in tax matters, if they are based on the
results of judicial proceedings or the finding of governmental agencies.
According to the PCAOB, which of the following tax services may be provided jointly with the audit of an
issuers financial statements without impairing independence?
Planning and issuing an opinion in favor of the tax treatment of an aggressive tax
position.
Reviewing a proposed transaction and informing the client of the tax consequences.
This answer is correct.
When the client is an issuer, PCAOB and SEC independence standards apply. Under
these standards, tax compliance services preapproved by the audit committee are
permitted.
Providing consultations under a contingency fee arrangement.
Preparing tax returns for an individual in a financial oversight reporting role during the
audit period.
Which of the following is correct regarding the communication between successor and predecessor
auditors?
The successor and predecessor auditors should communicate with each other in writing
regarding potential problems.
The successor auditor should contact the predecessor auditor prior to proposing an
audit engagement.
The client should be present during the communications between the predecessor
auditor and the successor auditor.
The successor auditor should request permission from the prospective client to make an
inquiry of the predecessor auditor.
This answer is correct.
The auditor should communicate with the predecessor auditor before final acceptance
of the engagement. The predecessor is expected to respond promptly and, absent
unusual circumstances, fully.The auditor is responsible for initiating the
communication. The Code of Professional Conduct protects the confidentiality of client
information. Thus, the auditor and the predecessor auditor should obtain client
permission to have discussions about the integrity of management as well as pertinent
audit-related issues.
An auditor who discovers that a clients employees paid small bribes to municipal officials most likely
would withdraw from the engagement if
The payments violated the clients policies regarding the prevention of illegal acts.
The client receives financial assistance from a federal government agency.
Documentation that is necessary to prove that the bribes were paid does not exist.
Management fails to take the appropriate remedial action.
Board of directors.
This answer is correct.
In many organizations, governance is provided by the board of directors (and its related
audit committee). However, the communication may be made to individuals at an
equivalent level of authority and responsibility if the organization does not have a
board.
Director of internal auditing.
Chief financial officer.
Chief accounting officer.
Verify that extensions and footings on the entitys sales invoices and monthly customer
statements have been recomputed.
Inspect the entitys reports of prenumbered shipping documents that have not been
recorded in the sales journal.
This answer is correct.
The completeness assertion relates to whether all transactions that should have been
recorded in the accounting records were included. Thus, unrecorded shipping
documents would indicate that not all transactions are being properly recorded.
Compare the invoiced prices on prenumbered sales invoices to the entitys authorized
price list.
Inquire about the entitys credit granting policies and the consistent application of
credit checks.
Purchase cutoff procedures should be designed to test that merchandise is included in the inventory of
the client company if the company
Noncapitalizable expenditures for repairs and maintenance have been recorded in the
proper period.
Expenditures for property and equipment have been recorded in the proper period.
Noncapitalizable expenditures for repairs and maintenance have been properly charged
to expense.
Expenditures for property and equipment have not been charged to expense.
This answer is correct.
The auditor should vouch significant debits from the repairs and maintenance expense
account to determine whether any should have been capitalized.
Which of the following management roles would typically be acknowledged in a management
representation letter?
Management has the responsibility for the design of controls to detect fraud.
This answer is correct.
Management has the responsibility to design, implement, and maintain internal control
to prevent and detect fraud. The auditor is required to request that management
provide written representations acknowledging this responsibility and disclosing other
fraud-related matters (AU-C 580).
Management communicates its views on ethical behavior to its employees.
Managements knowledge of fraud is communicated to the audit committee.
Managements compensation is contingent upon operating results.
Kirk Keller, CPA, was about to express an unmodified opinion on the audit of Lupton Television
Broadcasting Company when he received a letter from Luptons independent counsel. The letter stated
that the Federal Communications Commission has notified Lupton that its broadcasting license will not be
renewed because of some alleged fraud in its broadcasting practices. Lupton cannot continue to operate
without this license. Keller has also learned that Lupton and its independent counsel plan to take all
necessary legal action to retain the license. The letter from the independent counsel, however, states that
a favorable outcome of any legal action is highly uncertain. Based on this information, Keller should
Express an unmodified opinion with disclosure of the event in a separate emphasis-ofmatter paragraph of his report.
This answer is correct.
According to AU-C 570, an evaluation should be made as to whether substantial doubt
exists about the entitys ability to continue as a going concern for a reasonable period
of time. For U.S. GAAP, the reasonable period is 1 year after the date that the financial
statements are issued or are available to be issued. If the auditor reaches this conclusion
after identifying conditions and events that create such doubt and after evaluating
managements plans to mitigate their effects, (s)he should consider the adequacy of
disclosure and include an emphasis-of-matter paragraph (after the opinion paragraph)
in the report. This paragraph should use the phrases substantial doubt and going
concern, but it should not contain conditional language. If the entitys disclosure is
inadequate, the material misstatement requires modification of the opinion. By itself,
however, the substantial doubt does not require a modified opinion or a disclaimer of
opinion. But AU-C 570 does not preclude issuing a disclaimer of opinion in cases
involving uncertainties.
Issue an unmodified report because the event happened after year end.
Express an adverse opinion on the financial statements and disclose all reasons
therefore.
Express a piecemeal opinion with full disclosure made of the license dispute in a note
to the financial statements.
The sample size of a test of controls varies inversely with
Expected Population
Tolerable Population
Deviation Rate
Deviation Rate
Yes
No
Yes
No
Yes
No
No
Yes
When Read in
Conjunction with
Note X
Explanation
Yes
No
No
Yes
Yes
Yes
No
No
Unmodified.
This answer is correct.
The Code of Professional Conduct prohibits expression of an opinion that financial
statements are in conformity with U.S. GAAP if they contain a material departure from
a principle. However, an exception is permitted when the auditor can demonstrate that,
because of unusual circumstances, the statements would otherwise have been
misleading. If no other basis for modifying the opinion exists, the CPA may express an
unmodified opinion provided that (s)he describes in an other-matter paragraph of the
report the departure, its effects, and the reasons compliance with U.S. GAAP would
have been misleading.
Qualified.
Adverse.
Qualified or adverse, depending on materiality and pervasiveness.
Delta Life Insurance Co. prepares its financial statements on an accounting basis insurance companies
use pursuant to the rules of a state insurance commission. If Wall, CPA, Deltas auditor, discovers that
the statements are not suitably titled, Wall should
Disclose any reservations in a basis for qualified opinion paragraph and qualify the
opinion.
This answer is correct.
Terms such as balance sheet, statement of income, or other unmodified titles are
Observing the safeguards over access to and use of assets and records.
This answer is correct.
A review does not require obtaining an understanding of internal control or assessing
The forecast should be read only in conjunction with the audited historical financial
statements.
The practitioner expresses only limited assurance on the forecasted statements and their
assumptions.
There will usually be differences between the forecasted and actual results.
This answer is correct.
The compilation report states that a compilation is limited in scope and does not enable
the practitioner to express an opinion or any other form of assurance. It adds that
forecasted and actual results usually differ.
The hypothetical assumptions used in the forecast are reasonable in the circumstances.
A practitioner accountant who accepts an engagement to compile a financial projection most likely would
make the client aware that the
Projection omits all hypothetical assumptions and presents the most likely future
financial position.
Engagement does not include an evaluation of the support for the assumptions
underlying the projection.
This answer is correct.
The standard report states that a compilation is limited in scope and does not enable the
practitioner to express an opinion or any other form of assurance on the projection or
the assumptions. It also states that a compilation does not include evaluation of the
support for the assumptions underlying the financial projection.
For financial audits, generally accepted government auditing standards (GAGAS) incorporate AICPA
standards. GAGAS prescribe additional requirements for reporting on
Laws, Regulations,
Contracts, and Grants
Yes
Reporting on
Internal Control
Yes
No
Yes
No