AUD 6

Question 1

when there is a change in accounting principle, the auditor should evaluate whether all of the following criteria have been met, EXCEPT for whether

Answer 1

the change has been authorized by those charged with governance

Question 2

an auditor should ordinarily add an explanatory paragraph to the auditor’s report to identify a material matter related to

Answer 2

a change in accounting principle caused by the issuance of a new authoritative accounting standard that rendered the principle previously used no longer generally accepted

Question 3

when audited financial statements are presented in a client’s document containing other information, the auditor should

Answer 3

read the other information to determine that it is consistent with the audited financial statements

Question 4

investment and property schedules are presented for purposes of additional analysis in an auditor-submitted document. the schedules are not required parts of the basic financial statements, but accompany the financial statements. when reporting on such supplementary information in relation to the financial statements as a whole, the measurement of materiality is the

Answer 4

same as that used in forming an opinion on the basic financial statements taken as a whole

Question 5

when an accountant compiles a client’s financial statements accompanied by supplemental information, which of the following is a required element of the accountant’s separate report on the supplemental information?

Answer 5

a statement that the information has been compiled from information that is the representation of management without audit or review

Question 6

if management declines to present supplementary information required by the GASB, the auditor should issue a(n)

Answer 6

unmodified opinion with an other-matter paragraph

Question 7

the auditor’s report on supplemental information under PCAOB auditing standard should include a statement about each of the following EXCEPT for

Answer 7

a statement that the methods of measurement and presentation haven’t changed from those in the prior period

Question 8

the definition of “supplemental information” under PCAOB auditing standards includes all of the following except for

Answer 8

a public company’s sustainability report consisting of a variety of financial and non financial measure of performance, which is made available to readers on the entity’s web site

Question 9

an auditor may report on condensed financial statements that are derived from complete audited financial statements if the

Answer 9

auditor indicates whether the information in the condensed financial statements is consistent in all material respects

Question 10

which of the following procedures ordinarily should be performed when an independent accountant conducts a review of interim financial information under AICPA professional standards

Answer 10

read the minutes of meeting of those charged with governance

Question 11

when planning a review of an audit client’s interim financial statements, which of the following procedures should the accountant perform to update the accountant’s knowledge about the entity’s business and its internal control?

Answer 11

consider the results of audit procedures performed with respect to the current year’s financial statements.

Question 12

Delta Life Insurance co. prepares its finanical statements on an accounting basis insurance companies use pursuant to the rules of a state insurance commission. If Wall, CPA, Delta’s auditor, discovers that the statements are not suitably titled, Wall should:

Answer 12

disclose any reservations in an explanatory paragraph and qualify the opinion

Question 13

comfort letters ordinarily are

Answer 13

addressed to the entity’s underwriter of securities and signed by the entity’s independent auditor

Question 14

If prior period compiled f/s have been restated and the predecessor accounting firm decides not to reissue its report, the successor accounting firm

Answer 14

may be engaged to reissue the prior-period report

Question 15

when compiling the financial statements of a nonpublic entity, an accountant should

Answer 15

understand the accounting principles and practices of the entity’s industry

Question 16

when an accountant is engaged to compile a nonpublic entity’s financial statements that omit substantially all disclosures required by GAAP, the accountant should indicate in the compilation report that the financial statements are

Answer 16

not designed for those who are uninformed about the omitted disclosures

Question 17

Inquiry and analytical procedures ordinarily performed during a review of a nonpublic entity’s financial statements include

Answer 17

inquiries concerning actions taken at meetings of the owners and those charged with governance

Question 18

the auditor can best verify a client’s bond sinking fund transactions and year-end balance by

Answer 18

confirmation with bond trustee. this is because the bond trustee is an independent party and accordingly can provide valid evidence.

Question 19

in establishing the existence and ownership of long-term investments in the form of publicly traded stock, an auditor most likely would inspect the securities or

Answer 19

confirm the number of shares owned that are held by an independent custodian

Question 20

in which circumstance is the confirmation of receivables on 10/31 most likely for client with a 12/31 year end?

Answer 20

appropriate audit tests indicate that control risk for receivables is low. when control risk is low the auditor ma be more likely to confirm receivables at an interim date.