Describe the scope of the auditors tests of compliance with laws and regulations.
b.
Provide positive assurance that the entitys audit committee is adequately informed about the
effects of any illegal acts.
c.
Present the results of the auditors tests of economy and efficiency regarding the use of the entitys
resources.
d.
Provide negative assurance that the auditor discovered no transactions that were indicative of
illegal acts.
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Evaluate the reasonableness of managements accounting estimates that are subject to bias.
b.
c.
Review the minutes of the meetings of the board of directors and its committees.
d.
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b.
c.
d.
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b.
c.
d.
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A statement that the accountant is not aware of material modifications that should be made to the
financial statements for them to be in conformity with GAAP.
b.
c.
A statement that the accountant does not express an opinion on the financial statements.
d.
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If financial statement amounts are material and the degree of subjectivity in evaluating the audit
evidence is high.
b.
If the internal auditors have concluded that the risk of material misstatement at the overall financial
level is negligible.
c.
For financial statement amounts judged by the auditor to require little or no subjectively evaluated
audit evidence.
d.
For financial statement amounts determined largely or entirely on the basis of estimates made by
management.
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A representation letter can be used in place of specific, previously identified audit procedures.
b.
A representation letter encompasses a different set of assertions from those inherent in the
financial statements.
c.
The date of the representation letter should typically be the same as the audit report.
d.
The representations made apply until the date of a clients financial statements.
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b.
Risk assessment.
c.
Control environment.
d.
Control activities.
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b.
c.
d.
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b.
c.
d.
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b.
c.
d.
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b.
c.
d.
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The client.
b.
c.
d.
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b.
c.
d.
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b.
Obtaining adequate conclusive evidence in support of the fairness of the financial statements.
c.
d.
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b.
c.
d.
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Fraudulent activity.
b.
Abusive activity.
c.
Misappropriation of assets.
d.
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b.
c.
d.
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The auditor does not presume that client management has committed fraud.
b.
c.
d.
The auditor does not intend to rely on the operating effectiveness of controls.
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Modify the scope of the engagement to include an analysis of the budget for the new product line
and consider the new risk in conjunction with other risks after the budget items have been
analyzed.
b.
Analyze the newly identified risk in conjunction with economic circumstances related exclusively to
the new product line and consider whether there is an immediate consequence for the risk of
material misstatement for affected classes of transactions.
c.
Modify the financial statement disclosures to include the newly identified risk if it is likely that the
new product line will have an adverse effect on the companys profitability.
d.
Analyze the newly identified risk in conjunction with other known business risks and consider
whether there is an immediate consequence for the risk of material misstatement at various levels
of the audit.
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b.
Tests of details of activity during the period since the interim testing date.
c.
d.
Substantive analytical procedures of the period since the interim testing date.
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Whether the audit committee will be able to provide further information and explanations that the
auditor may require while performing the audit.
b.
c.
Managements preference.
d.
Regulatory requirements related to audit communications with those charged with governance.
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b.
Process, review, and approve the registration of public accounting firms that audit issuers.
c.
Inspect and review selected audit engagements of registered public accounting firms.
d.
Establish auditing, quality control, and independence standards for audits of issuers.
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The contingent fee arrangement does not impair independence if it is consistent with the registered
public accounting firms quality control policies.
b.
c.
The contingent fee arrangement does not impair independence unless more than half of the fee is
subject to contingencies.
d.
The contingent fee arrangement impairs independence unless approved by the clients audit
committee.
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By obtaining the most recent letter of credit from the entitys primary financial institution.
b.
By consulting AICPA guides, industry publications, or individuals knowledgeable about the industry.
c.
By researching the entitys Internet site and searching for current press releases.
d.
By reviewing the predecessor accountants workpapers without the knowledge of the entity.
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b.
c.
d.
A high, but not absolute, level of assurance to allow an auditor to detect a material misstatement.
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b.
c.
The client agrees that the practitioner will decide appropriate procedures to be performed.
d.
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Review the risk assessment of the opening balances of the financial statements.
b.
c.
d.
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b.
c.
d.
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b.
The philosophy and operating style of management to promote effective internal control over
financial reporting.
c.
The classes of transactions in the issuers operations that are significant to the issuers financial
statements.
d.
The oversight responsibility over financial reporting and internal control by the board or audit
committee.
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b.
c.
d.
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b.
A bank teller embezzles several hundred dollars from the cash drawer.
c.
d.
A movie theater cashier sells reduced-price tickets to full-paying customers and pockets the
difference.
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b.
Perform tests of controls on a sample of the clients transactions with the trust department.
c.
Rely on the trust departments audit report on internal controls placed in operation and their
operating effectiveness.
d.
Ask management of the trust department to complete a questionnaire about internal controls and
provide flowcharts for related processes.
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Financial statements.
b.
Disclosures.
c.
Classes of transactions.
d.
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Procedures performed to assess independence and the ability to perform the engagement.
b.
The understanding of the terms of the engagement, including scope, fees, and resource allocation.
c.
Other audit procedures to be performed to comply with generally accepted auditing standards.
d.
Issues with management integrity that could affect the decision to continue the audit engagement.
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Review the clients control procedures over the safeguarding of inventory, and perform a physical
inventory count on the last day of the current year.
b.
Review the clients control procedures over the safeguarding of inventory, incorporate the use of
substantive analytical procedures, and develop an expectation.
c.
Review the clients control procedures over the safeguarding of inventory, but do not modify
substantive procedures over inventory.
d.
Review the clients control procedures over the safeguarding of inventory, and perform physical
inventory counts throughout the current year.
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b.
c.
The type of available evidential matter pertaining to the effectiveness of the entitys internal control.
d.
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b.
Negative confirmations provide more persuasive audit evidence than positive confirmations.
c.
Negative confirmations should be used only if a very high exception rate is expected.
d.
A factor for an auditor to consider when designing confirmation requests is the assertion being
tested.
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The entity spent $5 million in operating expenses that were not approved.
b.
c.
The entity spent $5 million of government funds for services that were not required.
d.
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Changes the companys operating results from a net loss to a net income.
b.
Arises from a transaction cycle with controls that were determined to be operating effectively.
c.
Is the first time a misstatement has arisen from the relevant transaction cycle.
d.
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30 days
b.
45 days
c.
60 days
d.
75 days
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b.
Communicate, in writing, to the entity3s outside legal counsel that the material weakness exists.
c.
d.
Disclaim an opinion.
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The accountant should issue the review report without mentioning the change in engagement.
b.
The accountant should include in the review report a disclaimer of an audit opinion.
c.
The accountant should include in the review report the circumstances that resulted in the change in
engagement.
d.
The accountant should include in the review report a reference to the original engagement but not
the reason for the change.
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Confirming the year-end outstanding note payable balance with the lender.
b.
c.
d.
Documenting control procedures for payment calculations of the notes principal and interest.
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Managements justification for its decision to elect to omit substantially all the disclosures.
b.
No modification of the standard compilation report because compilations do not require disclosures
that are required for audited financial statements.
c.
Information alerting readers about omission of the disclosures and notification that the omission
may influence the users conclusions about the financial statements.
d.
A separate paragraph in the compilation report stating that the financial statements are misleading
due to the lack of disclosures by management.
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Accountant is not aware of any material modifications that should be made to the financial
statements for them to be in accordance with GAAP.
b.
Accountant does not express an opinion or any other form of assurance on the entitys internal
control system.
c.
Accountant has no responsibility to update the report for circumstances occurring after the date of
the report.
d.
Financial statements present fairly the entitys financial position and the results of its operations and
cash flows in conformity with GAAP.
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A CPA solicits recent Uniform CPA Examination questions without written authorization from the
AICPA.
b.
A CPA signs a document containing immaterial false and misleading information, or permits or
directs another CPA to do so.
c.
A CPA who is engaged to perform a government audit neglects to follow certain government
auditing requirements and discloses in the audit report the fact that such requirements were not
followed and the reasons for it.
d.
A CPA fails to give a client copies of the CPAs workpapers related to a completed and issued work
product upon the clients request because the client has not paid fees payable to the CPA for the
work product.
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b.
c.
The CEO.
d.
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Materiality.
b.
Integrity.
c.
d.
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The fiscal year following the period covered by the financial statements.
b.
c.
The calendar years that include any part of the period covered by the financial statements.
d.
The two years prior to the period covered by the financial statements.
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AUDITING
2015 AICPA Newly
Released Sims
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Question 2
analyzed
audited
examined
reviewed
tested
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Question 4
assessment
attestation
examination
inspection
review
audit
evaluation
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Question 6
Legitimate
Logical
Reasonable
Reliable
Sufficient
Valid
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Question 8
Cost considerations
Design limitations
Distinct limitations
Inherent limitations
Operational considerations
Unique conditions
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Draft Report
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Questions 1&2
Questions 3&4
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Question or request
Are there compensating balances or other
restrictions on the availability of funds?
Has there been a proper cutoff of sales
transactions?
Were consignments in or out considered in taking
a physical inventory count?
What are the company's capitalization policies,
and have those policies been consistently and
appropriately applied?
Have all liabilities been appropriately accrued?
Are there assets that have been pledged as
collateral?
This question may be answered by process of elimination. Many answer choices relate to control or
substantive procedures, which are performed in an audit but not in a review. (Examples of control
procedures and substantive procedures are provided in A4.)
Question #1 (CashAre there compensating balances or other restrictions on the availability of funds?)
and Question #2 (Accounts receivableHas there been a proper cutoff of sales transactions?)
The following answer choices are unlikely inquiries to be made in a review and may be eliminated as
answer choices. These answer choices are asking for management to provide additional corroborating
evidence. Generally, in a review, the accountant merely inquires of management and does not need
additional detailed evidence to substantiate management's responses.
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Question #5 (Accounts payableHave all liabilities been appropriately accrued?) and Question #6
(DebtAre there assets that have been pledged as collateral?)
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Note: AT 601.23 is an incorrect response because it relates to subsequent noncompliance in an agreedupon procedures engagement.
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