2013 AICPA AUD MCQs

2013 AICPA Newly Released Questions – Auditing Following are multiple choice questions recently released by the AICPA These questions were released by the AICPA with letter answers only Our editorial board is currently working on providing detailed explanations for these questions, so please check back to the Becker Knowledgebase soon for the updated file Please note that the AICPA generally releases questions that it does NOT intend to use again These questions and content may or may not be representative of questions you may see on any upcoming exams Click here to view 2013 AICPA Released Simulations © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing AICPA QUESTIONS RATED MODERATE DIFFICULTY CPAWhich of the following types of audit evidence provides the least assurance of reliability? a b c d Receivable confirmations received from the client's customers Prenumbered receiving reports completed by the client's employees Prior months' bank statements obtained from the client Municipal property tax bills prepared in the client's name Explanation Choice "b" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAAn auditor is considering whether the omission of the confirmation of investments impairs the auditor's ability to support a previously expressed unmodified opinion The auditor need not perform this omitted procedure if: a b c d The results of alternative procedures that were performed compensate for the omission The auditor's assessed level of detection risk is low The omission is documented in a communication with the audit committee No individual investment is material to the financial statements taken as a whole Explanation Choice "a" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAWhich of the following explanations most likely would satisfy an auditor who questions management about significant debits to accumulated depreciation accounts in the current year? a b c d Prior years' depreciation expenses were erroneously understated Current year's depreciation expense was erroneously understated The estimated remaining useful lives of plant assets were revised upward Plant assets were retired during the current year Explanation Choice "d" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAAn auditor has substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time because of negative cash flows and working capital deficiencies Under these circumstances, the auditor would be most concerned about the: a b c d Control environment factors that affect the organizational structure Correlation of detection risk and inherent risk Effectiveness of the entity's internal control activities Possible effects on the entity's financial statements Explanation Choice "d" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPASubsequent to issuing a report on audited financial statements, a CPA discovers that the accounts receivable confirmation process omitted a number of accounts that are material, in the aggregate Which of the following actions should the CPA take immediately? a b c d Bring the matter to the attention of the board of directors or audit committee Withdraw the auditor's report from those persons currently relying on it Perform alternative procedures to verify account balances Discuss the potential financial statement adjustments with client management Explanation Choice "c" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAAn entity engaged an accountant to review its financial statements in accordance with Statements on Standards for Accounting and Review Services The accountant determined that the entity maintained its accounts on a comprehensive basis of accounting other than generally accepted accounting principles (GAAP) In this situation, the accountant most likely would have taken which of the following actions? a Withdrawn from the engagement because the entity has not been following GAAP b Advised management to make the adjustments necessary for the account balances to conform with GAAP c Modified the review report to reflect the fact that the financial statements were presented on another comprehensive basis of accounting d Requested that management justify the use of the other comprehensive basis of accounting in the management representation letter Explanation Choice "c" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAWhich of the following factors should an external auditor obtain updated information about when assessing an internal auditor's competence? a b c d The reporting status of the internal auditor within the organization The educational level and professional experiences of the internal auditor Whether policies prohibit the internal auditor from auditing areas where relatives are employed Whether the board of directors, audit committee, or owner-manager oversees employment decisions related to the internal auditor Explanation Choice "b" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAAn auditor traces the serial numbers on equipment to a nonissuer's sub-ledger Which of the following management assertions is supported by this test? a b c d Valuation and allocation Completeness Rights and obligations Presentation and disclosure Explanation Choice "b" is correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAWhich of the following should a practitioner perform as part of an engagement for agreed-upon procedures in accordance with Statements on Standards for Attestation Engagements? a b c d Issue a report on findings based on specified procedures performed Assess whether the procedures meet the needs of the parties Express negative assurance on findings of work performed Report the differences between agreed-upon and audit procedures Explanation Choice "a" is correct 10 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 36 CPAWhich of the following procedures should a user auditor include in the audit plan to create the most efficient audit when an audit client uses a service organization for several processes? a Review the service auditor's report on controls placed in operation b Review the service auditor's report and outline the accounting system in a memo to the working papers c Audit the service organization's controls, assess risk, and prepare the audit plan d Audit the service organization’s controls to test the work of the service auditor Explanation Choice "a" is correct 37 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 37 CPAWhich of the following is a management assertion regarding account balances at the period end? a b c d Transactions and events that have been recorded have occurred and pertain to the entity Transactions and events have been recorded in the proper accounts The entity holds or controls the rights to assets, and liabilities are obligations of the entity Amounts and other data related to transactions and events have been recorded appropriately Explanation Choice "c" is correct 38 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 38 CPAWhile performing interim audit procedures of accounts receivable, numerous unexpected errors are found resulting in a change of risk assessment Which of the following audit responses would be most appropriate? a Move detailed analytical procedures from year end to interim b Increase the dollar threshold of vouching customer invoices c Send negative accounts receivable confirmations instead of positive accounts receivable confirmations d Use more experienced audit team members to perform year-end testing Explanation Choice "d" is correct 39 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 39 CPAWhich of the following types of risk increases when an auditor performs substantive analytical audit procedures for financial statement accounts at an interim date? a b c d Inherent Control Detection Sampling Explanation Choice "c" is correct 40 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 40 CPAWhich of the following matters relating to an entity's operations would an auditor most likely consider as an inherent risk factor in planning an audit? a b c d The entity's fiscal year ends on June 30 The entity enters into derivative transactions as hedges The entity's financial statements are generated at an outside service center The entity's financial data are available only in computer-readable form Explanation Choice "b" is correct 41 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 41 CPAWhich of the following is a factor in the control environment? a b c d Segregation of duties Information processing Performance reviews Management's philosophy and operating style Explanation Choice "d" is correct 42 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 42 CPAWhich of the following statements about audit sampling risks is correct for a nonissuer? a Nonsampling risk arises from the possibility that, when a substantive test is restricted to a sample, conclusions might be different than if the auditor had tested each item in the population b Nonsampling risk can arise because an auditor failed to recognize misstatements c Sampling risk is derived from the uncertainty in applying audit procedures to specific risks d Sampling risk includes the possibility of selecting audit procedures that are not appropriate to achieve the specific objective Explanation Choice "b" is correct 43 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 43 CPAAn auditor of a nonissuer should design tests of details to ensure that sufficient audit evidence supports which of the following? a b c d The planned level of control risk Management's assertions that internal controls exist and are operating efficiently The effectiveness of internal controls The planned level of assurance at the relevant assertion level Explanation Choice "d" is correct 44 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 44 CPAProviding more supervision during an audit of a nonissuer in response to assessed risks of material misstatement at the financial statement level is an example of: a b c d A substantive response Further audit procedures Tests of controls An overall response Explanation Choice "d" is correct 45 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 45 CPAThe Public Company Accounting Oversight Board was established by which of the following? a b c d The Financial Accounting Standards Board The American Institute of Certified Public Accountants The Sarbanes-Oxley Act of 2002 The International Accounting Standards Board Explanation Choice "c" is correct 46 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 46 CPAWhich of the following applies to an accountant conducting a review of interim financial information? a The accountant must indicate in the report those circumstances in which generally accepted accounting principles have not been consistently observed in the current period in relation to the preceding period b The accountant must express an opinion on the financial statements taken as a whole c The accountant must maintain independence in mental attitude in all matters relating to the engagement d The accountant must obtain sufficient appropriate evidence by performing procedures to afford a reasonable basis for an opinion Explanation Choice "c" is correct 47 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 47 CPAWhich of the following circumstances would be inappropriate for the auditor to communicate to those charged with governance? a b c d A material misstatement was noted by the auditor and corrected by management No significant deficiencies in internal control exist that would affect the financial statements The auditor is requesting representations regarding the financial statements from management Management has consulted with other accountants about accounting and auditing matters during the period under audit Explanation Choice "b" is correct 48 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 48 CPAAn auditor may provide an issuer client any of the following non-audit services without impairing independence and without obtaining the preapproval of the audit committee, except: a Non-audit services with revenues in aggregate of less than 5% of the total revenues paid by the issuer to the auditor during the fiscal year in which the non-audit services are provided b Non-audit services that were promptly brought to the attention of, and approved by, the audit committee prior to the completion of the audit c Non-audit services to perform financial information systems design and implementation d Services that the issuer did not recognize as non-audit services at the time of the engagement Explanation Choice "c" is correct 49 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 49 CPAAn accountant compiles the financial statements of a nonissuer and issues the standard compilation report Although not specifically stated in this report, it is implied that: a b c d The accountant has not audited or reviewed the financial statements Substantially all disclosures required by GAAP are included in the financial statements The financial statements should not be used to obtain credit The compilation is limited to presenting information that is the representation of management Explanation Choice "b" is correct 50 © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 50 CPAAccording to the Sarbanes-Oxley Act of 2002, what is the maximum number of years an audit partner can perform audit services for an issuer before the auditor rotation is required? a b c d years years years years Explanation Choice "d" is correct 51 © 2013 DeVry/Becker Educational Development Corp All rights reserved ... rights reserved 2013 AICPA Newly Released Questions – Auditing 21 CPAWhen a PCAOB auditing standard indicates that an auditor "could" perform a specific procedure, how should the auditor decide... 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing 35 CPAWhich of the following would a successor auditor ask the predecessor auditor... correct © 2013 DeVry/Becker Educational Development Corp All rights reserved 2013 AICPA Newly Released Questions – Auditing CPAWhich of the following explanations most likely would satisfy an auditor