CPA Auditing and Attestation

CPA Auditing and Attestation practice questions, page 36 of 41, with answer review and explanations.

Question 176

This question presents independent factual situations an auditor might encounter in conducting an audit. List B represents the report modifications (if any) that would be necessary. Select as the best answer for each item, the action the auditor normally would take. The report modifications in List B may be selected once, more than once, or not at all. Assume: "¢ The auditor is independent. "¢ The auditor previously expressed an unqualified opinion on the prior year's financial statements. "¢ Only single-year (not comparative) statements are presented for the current year. "¢ The conditions for an unqualified opinion exist unless contradicted in the factual situations. "¢ The conditions stated in the factual situations are material. "¢ No report modifications are to be made except in response to the factual situation. Item to Be Answered - An entity discloses in the notes to the financial statements certain lease obligations. The auditor believes that the failure to capitalize these leases is a departure from generally accepted accounting principles. List B - Report Modifications -

  1. Describe the circumstances in an explanatory paragraph preceding the opinion paragraph without modifying the three standard paragraphs.
  2. Describe the circumstances in an explanatory paragraph following the opinion paragraph without modifying the three standard paragraphs.
  3. Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the opinion paragraph.
  4. Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the opinion paragraph.
  5. Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the scope and opinion paragraphs.
  6. Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the scope and opinion paragraphs.
  7. Describe the circumstances within the scope paragraph without adding an explanatory paragraph.
  8. Describe the circumstances within the opinion paragraph without adding an explanatory paragraph.
  9. Describe the circumstances within the scope and opinion paragraphs without adding an explanatory paragraph.
  10. Issue the standard auditor's report without modification. C

Question 177

The nature and extent of a CPA firm's quality control policies and procedures depend on:

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Question 178

Would the following factors ordinarily be considered in planning an audit engagement's personnel requirements?

  1. Option A
  2. Option B
  3. Option C
  4. Option D A

Question 179

After fieldwork audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second or wrap-up review of the audit documentation. This second review usually focuses on:

  1. The fair presentation of the financial statements in conformity with GAAP.
  2. Fraud involving the client's management and its employees.
  3. The materiality of the adjusting entries proposed by the audit staff.
  4. The communication of internal control weaknesses to those charged with governance.

Question 180

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to:

  1. Enable the CPA firm to attest to the reliability of the client.
  2. Satisfy the CPA firm's duty to the public concerning the acceptance of new clients.
  3. Minimize the likelihood of association with clients whose management lacks integrity.
  4. Anticipate before performing any fieldwork whether an unqualified opinion can be expressed.