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Question 1

Report for Agreed Upon Procedures

Sections

Answer 1

Title - Independent Accountants Report on Applying Agreed-Upon Procedures
1st Par - We have performed procedures enumerated below…
2nd Par - Client has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of…
3rd- Findings
4th - We were engaged by client to perform this agreed-upon procedures engagement and conducted our engagement in accordance with federal and state standards
5-We are required to be independent
6- this report is intended for the information and use of management

Question 2

Auditor performing integrated audit identifies one or more material weaknesses in a nonissuers internal control, the auditor should

Answer 2

Express an adverse opinion on the entity’s internal control

Question 3

What is a true statement concerning use of negative confirmation requests

Answer 3

Unreturned negative confirmation requests rarely provide significant evidence

Question 4

An audit of internal control of a nonissuer will generally

Answer 4

Be more extensive in scope than the assessment of control risk made during FS audit

Question 5

What procedure most likely would provide evidence that an entity’s internal control activities are suitably designed to prevent or detect material misstatements

Answer 5

Observing the entity’s personnel applying the activities

Question 6

Unaudited FS for PY are presented with audited FS for CY. They should be clearly marked and

Answer 6

Either reissue PY report or include separate paragraph on CY report assuming responsibility

Question 7

Samples to test internal control are intended to provide a basis for an auditor to conclude whether

Answer 7

Control activities are operating effectively

Question 8

What would an accountant most likely perform when reviewing the FS of a nonissuer in accordance with SSARs

Answer 8

Ask management about the entity’s procedures for recording transactions

Question 9

After performing risk assessment procedures an auditor decided not to perform tests of controls. The auditor most likely decided that

Answer 9

It would be inefficient to perform tests of controls that would result in a reduction of substantive tests

Question 10

The auditors report is addressed to

Answer 10

The entity that engaged them.

Question 11

PY FS omitted substantially all disclosures required by GAAP. CY includes all GAAP disclosures. Can the auditor issue comparative FS

Answer 11

No. PY would need disclosures

Question 12

Auditing FS of nonissuer, required to communicate significant deficiencies to management

Answer 12

Always

Question 13

Auditing FS of nonissuer, required to communicate significant deficiencies to those charged with governance

Answer 13

Always

Question 14

Audit of nonissuer, report on significant deficiencies on internal control should be made available to stockholders

Answer 14

Never

Question 15

Audit of nonissuer, report on internal control matters noted during the audit should indicate that the purpose of the audit was to provide assurance on internal control

Answer 15

Never

Opinion/ assurance is for FS. Never for internal control

Question 16

Audit of nonissuer, report on internal control matters noted during the audit is a restricted use report

Answer 16

Always, intended solely for information and use of management.

Question 17

What would not be considered an attest engagement

• Examine financial forecast
• Examine management assertion about subject matter
• Review the financial statements of a nonpublic company
• Review pro forma financial statements

Answer 17

Review the financial statements of a nonpublic company

This is a SSARs engagement. The others are SSAE engagements

Question 18

What of the following most accurately describes the process of a walkthrough?

• Testing and documenting the results of tests of selected controls
• Inspection of selected documents, records and internal control documentation
• Following a transaction from its origination until it is reflected in the FS
• Observation of an entity’s activities and operations

Answer 18

Following a transaction from its origination until it is reflected in the financial statements

Question 19

An auditor would consider a cashier’s job description compatible with receiving mailroom remittances and preparing

• Daily deposit slips
• Remittance advices
• Prelist of individual checks
• Monthly bank reconciliation

Answer 19

Daily deposit slip

Question 20

The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form may

Answer 20

Be unaware of all the financial relationships that the bank has with the client.

Question 21

When an accountant compiles projected FS, the accountant should include a separate para that

Answer 21

Describes the limitations on the projection’s usefulness

Question 22

What would be a complete and accurate list of the walkthrough procedures usually performed in an issuer’s integrated audit

Answer 22

Inquiry, observation, inspection of documentation, reperformance of controls

Question 23

Auditor of a manufacturer would most likely question whether that client has committed acts of noncompliance with laws and regulations if the client has

Answer 23

Been forced to discontinue operations in a foreign country.

The key is “been forced to discontinue”

Question 24

For FS audits performed in accordance with GAS, auditors should report

• noncompliance with provisions of laws, regulations, contracts or grant agreements
• Significant deficiencies in internal control
• Significant changes in internal control policies
• All violations of private grant agreements, regardless of materiality

Answer 24

Significant deficiencies in internal control

Question 25

Which of the following factors most likely would cause a CPA to not accept a new audit engagement

• CPA lack of understand of client industry
• Indications that management has not investigated employees in key positions
• Inability to review the predecessor auditor working papers
• Prospective client’s unwillingness to permit inquiry of its legal counsel

Answer 25

Client unwillingness to permit inquiry of its legal counsel

It would likely result in a disclaimer of opinion.

Question 26

GAS define standards associated with what type of engagements

Answer 26

Financial audits, attest engagements, performance audits

Question 27

Which of the following factors most likely would cause a CPA to decline that accept a new audit engagement

• CPA is unable to review the predecessor auditor’s WP
• Management is unwilling to permit inquiry of its legal counsel
• Management acknowledges that the entity has had recurring operating losses
• CPA does not understand the entity’s operations and industry

Answer 27

Management unwilling to permit inquiry of its legal counsel

Question 28

After issuing report, and auditor has no obligation to make continuing inquiries or perform other procedures concerning the audited FS unless

Answer 28

Information, which existed at the report date and may affect the report, comes to the auditor’s attention.

Question 29

While testing a sample of an audit client’s bank reconciliation an audit notices that several immaterial deposits in transit did not clear the bank in a timely manner. The auditor suspects that there may be fraud. What would be the most appropriate response

Answer 29

Consider the implications for the integrity of management or employees and the possible effect on other aspects of the audit.

Question 30

CPA is auditing FS of a nonissuer. In auditing the LT investment account the CPA is unable to obtain audited FS for an investee located in a foreign country. How would this affect the auditor report

• effect is immaterial
• effect is moderate
• effect is high

Answer 30

Immaterial - Unmodified option, no changes to auditor’s responsibility, opinion or basis of opinion
Moderate - This would be a scope limitation. Issue a qualified opinion, which would modify the opinion and basis for opinion. No changes to auditor responsibility
High - This would be material effect thus the auditor should issue a disclaimer of opinion. This would modify the auditor’s responsibility, opinion and basis for opinion.