AUD

AUD practice questions, page 37 of 41, with answer review and explanations.

Question 181

Jackson & Company, CPAs, plan to audit the financial statements of Perigee Technologies, an issuer as defined under the Sarbanes-Oxley Act of 2002. Which of the following situations would impair Jackson's independence?

  1. Provision of personal tax services to Johnson, the accounts payable manager of Perigee.
  2. Preparation of Perigee's routine annual tax return, where Jackson's fee will be calculated as a percentage of the tax refund obtained.
  3. An audit of Perigee's internal control is performed contemporaneously with the annual financial statement audit.
  4. Discovering that Lowe, the chief financial officer of Perigee, started his accounting career ten years earlier as a staff accountant for Jackson & Company, and continues to maintain ties with current partners at the firm.

Question 182

Which of the following are true regarding communication requirements an auditor must follow when providing tax services to an audit client who is an issuer under the Sarbanes-Oxley Act of 2002? I. The auditor must communicate to the audit committee, in writing, regarding the proposed tax services and related fees. II. The auditor must communicate to the audit committee, in writing, when the proposed tax services involve contingent fee arrangements. III. The auditor must discuss with the audit committee the potential effects of the proposed tax services on the firm's independence.

  1. I and II only.
  2. I, II, and III.
  3. I and III only.
  4. II and III only.

Question 183

Financial information is presented in a printed form that prescribes the wording of the independent auditor's report. The form is not acceptable to the auditor because the form calls for statements that are inconsistent with the auditor's responsibility. Under these circumstances, the auditor most likely would:

  1. Withdraw from the engagement.
  2. Reword the form or attach a separate report.
  3. Express a qualified opinion with an Explanation.
  4. Restrict use of the report to the party who designed the form.

Question 184

Field is an employee of Gold Enterprises. Hardy, CPA, is asked to express an opinion on Field's profit participation in Gold's net income. Hardy may accept this engagement only if:

  1. Hardy also audits Gold's complete financial statements.
  2. Gold's financial statements are prepared in conformity with GAAP.
  3. Hardy's report is available for distribution to Gold's other employees.
  4. Field owns controlling interest in Gold.

Question 185

Due to a scope limitation, an auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor's report included a statement that the current asset portion of the entity's balance sheet was fairly stated. The inclusion of this statement is:

  1. Not appropriate because it may tend to overshadow the auditor's disclaimer of opinion.
  2. Not appropriate because the auditor is prohibited from reporting on only one basic financial statement.
  3. Appropriate provided the auditor's scope paragraph adequately describes the scope limitation.
  4. Appropriate provided the statement is in a separate paragraph preceding the disclaimer of opinion paragraph.