CPA Auditing and Attestation

CPA Auditing and Attestation practice questions, page 37 of 41, with answer review and explanations.

Question 181

A CPA firm evaluates its personnel advancement experience to ascertain whether individuals meeting stated criteria are assigned increased degrees of responsibility. This is evidence of the firm's adherence to which of the following prescribed standards:

  1. Professional ethics.
  2. Supervision and review.
  3. Accounting and review services.
  4. Quality control.

Question 182

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

  1. Minimize the likelihood of association with clients whose management lacks integrity.
  2. Monitor significant deficiencies in the design and operation of the client's internal control.
  3. Identify noncompliance with aspects of contractual agreements that affect the financial statements.
  4. Provide reasonable assurance that personnel will be adequately trained to fulfill their assigned responsibilities.

Question 183

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 184

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 185

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. B