CPA AUD Practice Exam 4 Welcome to your CPA AUD Practice Exam 4 This test is designed to prepare you mentally for the actual CPA AUD Exam with the same number of (72 questions) and the same time allowed (90 minutes) as the actual exam. The CPA AUD Exam is breakdown into four (4) Parts. Here are the Four (4) Domains of the CPA AUD Exam with the weightage and number of questions in this practice exam: 1. Ethics, Professional Responsibilities, and General Principles [14 Questions] - 15-25% 2. Assessing Risk and Developing a Planned Response [22 Questions] - 25-35% 3. Performing Further Procedures and Obtaining Evidence [25 Questions] - 30-40% 4. Forming Conclusions and Reporting [11 Questions] - 10-20% Please click NEXT to start your Free CPA AUD Practice Exam right away. Best of Luck! 1. An independent auditor must have which of the following? A pre-existing and well-informed point of view with respect to the audit. Technical training that is adequate to meet the requirements of a professional. A background in many different disciplines. Experience in taxation that is sufficient to comply with generally accepted auditing standards None 2. Which of the following is an example of an inherent risk that an auditor should consider? Technological developments that may render inventory obsolete. Posting of unauthorized journal entries. An incorrect formula in a worksheet used to calculate a LIFO inventory reserve. Inaccurate physical inventory count. None 3. Which of the following factors most likely would cause a CPA to reject a new audit engagement? The prospective client's unwillingness to permit inquiry of its legal counsel. The inability to review the predecessor auditor's working papers. The CPA's lack of understanding of the prospective client's operations and industry. The indications that management has not investigated employees in key positions before hiring them. None 4. Regarding a nonissuer's compliance with laws and regulations, an auditor performing an audit of the entity's financial statements is responsible for Obtaining a general understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework. Preventing noncompliance with existing applicable laws and regulations that determine reported amounts and disclosures in the entity's financial statements. Determining whether an act performed by the entity being audited constitutes noncompliance with existing applicable laws and regulations. Ensuring that the entity's operations are conducted in accordance with the provisions of laws and regulations relevant to the entity's financial statements. None 5. Which of the following factors most likely would cause a CPA to decline to accept a new audit engagement? The CPA does not understand the entity's operations and industry. Management acknowledges that the entity has had recurring operating losses. The CPA is unable to review the predecessor auditor's working papers. Management is unwilling to permit inquiry of its legal counsel. None 6. Which of the following statements is correct regarding the auditor's consideration of the possibility of noncompliance (illegal acts) by clients? The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance that no noncompliance (illegal acts) have been committed by clients. The auditor's training, experience, and understanding of the client should be used to provide a basis for the determination as to whether noncompliance (illegal acts) has occurred. If specific information concerning noncompliance (illegal acts) comes to the auditor's attention, the auditor should apply audit procedures specifically directed to ascertaining whether an illegal act has occurred. If an illegal act has occurred, the auditor should express a qualified opinion or an adverse opinion on the financial statements taken as a whole. None 7. Prior to, or in conjunction with, the information-gathering procedures for an audit, audit team members should discuss the potential for material misstatement due to fraud. Which of the following best characterizes the mind-set that the audit team should maintain during this discussion? Presumptive. Judgmental. Criticizing. Questioning. None 8. The spouse of a covered member of an accounting firm is in a permitted employment situation at an attest client and participates in the client's employee stock ownership plan. According to the AICPA Code of Professional Conduct, which of the following actions is required of the spouse when beneficial financial interests are distributed? The spouse must dispose of the shares as soon as practicable, but at most 30 days after the right to dispose is obtained. The spouse must hold the shares for a minimum of 30 days after the right to dispose is obtained. The spouse must serve as a trustee for the share-based compensation arrangement to receive put options as part of the compensation arrangement. The spouse must not exercise any put option to require the employer to repurchase the beneficial financial interests until after 30 days from receipt. None 9. Which of the following acts by a CPA is a violation of professional standards regarding the confidentiality of client information? Releasing financial information to a local bank with the approval of the client's mail clerk. Allowing a review of professional practice without client authorization. Responding to an enforceable subpoena. Faxing a tax return to a loan officer at the request of the client. None 10. When a former partner of a registered public accounting firm who left the firm two years ago accepts a financial reporting oversight role at an issuer audit client, the independence of the registered public accounting firm is considered impaired unless which of the following is true? The former partner discloses the relationship to the issuer audit client's board of directors. The former partner was employed by the registered public accounting firm for a period of 2 years or less. The former partner has no remaining capital balance in the registered public accounting firm. The former partner exerts only limited influence over the registered public accounting firm's operations and financial policies. None 11. According to the AICPA Code of Professional Conduct, which of the following disclosures of client information by a member CPA to an outside party would normally require client consent? Disclosure of confidential client information to a third-party service provider when the member does not enter into a confidentiality agreement with the provider. Disclosure to a potential client of the name of a client for whom the member or member's firm performed professional services. Disclosure of confidential client information to the member's liability insurance carrier in response to a potential claim. Disclosure of confidential client information to a court or in documents in connection with a subpoena. None 12. Which of the following is a conceptual similarity between generally accepted auditing standards and the attestation standards? Both sets of standards require the CPA to report on the adequacy of disclosure in the financial statements. All of the elements of reporting in generally accepted auditing standards are included in the attestation standards. The requirement that the CPA be independent in mental attitude is included in both sets of standards. Both sets of standards are applicable to engagements regarding financial forecasts and projections. None 13. An issuer may hire an employee of a registered public accounting firm who served on the audit engagement team within the previous year for which of the following positions? Controller. CFO. CEO. Staff accountant. None 14. According to the Sarbanes-Oxley Act of 2002, which of the following nonaudit services is a registered public accounting firm allowed to perform for an audit client when preapproved to do so by the audit committee? Post client-approved journal entries. Appraise an asset belonging to the client. Perform internal audit services. Prepare the client's tax return. None 15. When would management philosophy and operating style most likely have a significant influence on an entity's control environment? When the internal auditor reports directly to management. When management is dominated by one individual. When accurate management job descriptions delineate specific duties. When the audit committee actively oversees the financial reporting process. None 16. Which organization developed the framework most commonly used by the auditing profession for benchmarking internal controls of nonissuers? The Committee of Sponsoring Organizations The Public Company Accounting Oversight Board The Financial Reporting Council The AICPA None 17. Computer Services Company (CSC) processes payroll transactions for schools. A CPA is engaged to report on CSC's policies and procedures placed in operation as of a specific date. The policies and procedures are relevant to the schools' internal control, so the CPA's report will be useful in providing the schools' independent auditors with information necessary to plan their audits. The CPA's report expressing an opinion on CSC's policies and procedures placed in operation as of a specific date should include a Description of the scope and nature of the CPA's procedures. Statement that CSC's management has disclosed all known design deficiencies. Person to contact if the schools' auditors wish to test CSC's internal controls. Paragraph indicating the basis for the CPA's assessment of control risk None 18. A company's electronic data interchange system uses electronic funds transfers (EFT) to make payments to vendors. The system requires the approval of only one user, verified by the user's password. To maintain effective segregation of duties, who should be authorized to make the transfer? Purchasing manager. Accounts payable supervisor. Accounts receivable supervisor. Treasurer. None 19. If a service auditor is unable to obtain a written assertion from the service organization's management regarding its system and the suitability of the design and operating effectiveness of controls, it would be most appropriate for the auditor to Increase the substantive testing of the service organization's controls. Withdraw from the engagement unless prohibited by law. Assess a higher level of detection risk for the engagement. Report management's action in the auditor's communication to those charged with governance. None 20. Sample tests of internal control structure procedures are intended to provide a basis for an auditor to conclude whether The control procedures are operating effectively. The financial statements are materially misstated. The acceptable level of detection risk is too high. The financial statements comply with GAAP. None 21. Which of the following sets of duties would be performed by a single individual in a company with the most effective segregation of duties in place? Receiving customer checks and recording the amounts against customer receivables. Having custody of signed checks yet to be mailed and maintaining depreciation schedules. Approving sales returns on customers' accounts and depositing customers' checks in the bank. Ordering goods from suppliers and recording the received goods in the inventory system. None 22. A company's payroll process relies entirely on IT systems to manage current employee pay information, calculate payroll, pay employees, and record payroll expense in the general ledger. Based on information obtained through discussions with client personnel and payroll system documentation reviews, the auditor created a payroll system flowchart that reflects effective internal controls over financial reporting. The flowchart Identifies key financial internal controls only and is not used to determine substantive testing. Provides evidence of compliance with audit standards only and is not used to determine substantive testing. Guides financial internal control testing and is used to determine the extent of substantive testing. Is used to determine the specific substantive test steps needed to support an audit opinion. None 23. A financial statement audit is being performed for a company that uses a service organization to process its payroll. The service organization's financial statements are audited by a CPA who also issued a report on the organization's internal control design regarding the processing of client transactions. In considering whether the service organization CPA's report is satisfactory for the client auditor's purposes, the client auditor should Make inquiries concerning the service organization CPA's professional reputation. Assess the client's control risk at the maximum level. Review the audit programs followed by the service organization's CPA. Perform tests of controls at the service organization. None 24. Which of the following statements is correct regarding internal control? A well-designed internal control environment ensures the achievement of an entity's control objectives. An inherent limitation to internal control is the fact that controls can be circumvented by management override. A well-designed and operated internal control environment should detect collusion perpetrated by two people. Internal control is a necessary business function and should be designed and operated to detect all errors and fraud. None 25. Which of the following procedures represents a weakness in internal controls for payroll? The payroll clerk distributes signed payroll checks. Undistributed checks are returned to the payroll department. The accounting department wire transfers funds to the payroll bank account. The transfer is based on totals from the payroll department summary. The payroll department prepares checks using a signature plate. The treasurer supervises the process before payroll checks are distributed. The payroll department prepares checks. The chief financial officer signs the payroll checks. None 26. A company is concerned that it does not have enough employees to ensure adequate segregation of duties in its revenue cycle. Which of the following may be performed by the same individual? Approving sales and delivering the inventory from the storage area to the shipping area. Opening the mail and delivering inventory from the storage area to the shipping area. Opening the mail and recording entries in the sales journal. Approving sales and recording entries in the sales journal. None 27. When an auditor is to conduct an audit of a service organization, what considerations should the auditor make in planning regarding internal controls of the organization? The auditor should assess the control risk before obtaining an understanding of internal controls. The auditor should obtain an understanding of the entity's internal controls after performing substantive procedures. The auditor should obtain an understanding of the effect of the user organization upon the service organization. The auditor should be engaged to perform agreed-upon procedures. None 28. A company has a significant investment in inventory. This inventory is managed using IT systems, from issuing a purchase order to requesting inventory items, recording shipments of inventory to the customer, and recording the transaction in the general ledger. Given the materiality of the inventory, the auditor must identify key internal controls. How might the auditor initially go about identifying such key internal controls? Identify unpaid purchase orders and confirm they are recorded in accounts payable. Look for changes to edits in the computer code used by the systems. Compare systems documentation to information from interviews with employees who work with the systems. Perform physical inventory counts and compare this information with what is contained in the general ledger. None 29. What is the most likely course of action that an auditor would take after determining that performing substantive tests on inventory will take less time than performing tests of controls? Assess control risk at the minimum level. Perform both tests of controls and substantive tests on inventory. Perform only substantive tests on inventory. Perform only tests of controls on inventory. None 30. The letter issued by the auditor addressing internal control–related matters observed during a nonissuer financial statement audit should include a Restriction on the distribution of the letter. Description of tests performed to search for material weaknesses. Statement of compliance with applicable laws and regulations. Paragraph describing management's evaluation of the effectiveness of internal controls. None 31. When reporting on a nonissuer's internal control over financial reporting in a separate report, a practitioner should include a paragraph that describes the Documentary evidence regarding the control environment factors. Changes in the internal control structure since the prior report. The practitioner's responsibility to detect material misstatements in account balances. The criteria against which the internal control was measured. None 32. In an integrated audit of a nonissuer, if an auditor concludes that a material weakness exists as of the date specified in management's assertion, the auditor should take which of the following actions? Obtain written representations from management relating to such matters. Communicate, in writing, to the entity's outside legal counsel that the material weakness exists. Issue an adverse opinion. Disclaim an opinion None 33. In a nonissuer integrated audit engagement, the measure of materiality used to test the effectiveness of internal control Has no relationship to the measure of materiality set for financial statement testing. Must be the same measure of materiality used for financial statement testing. Will never be stricter, and may be less strict, than the measure of materiality used for financial statement testing. Will never be less strict, and may be stricter, than the measure of materiality used for financial statement testing None 34. A CPA has been asked to express an opinion on the operating effectiveness of a corporation's internal controls. In the prior year, the CPA audited and issued an unqualified opinion on the corporation's financial statements. Which of the following is correct regarding the new engagement? The CPA must perform more extensive testing of internal controls this year in conjunction with the financial audit. The CPA can perform the internal control engagement, but another CPA must perform the client's financial statement audit. The CPA's level of internal control testing during the prior year financial statement audit is sufficient for the internal control engagement as well. The CPA may rely on the testing performed during the client's prior year financial statement audit because an unqualified opinion was issued. None 35. Which of the following elements must be included in the auditor's report of an issuer's internal controls? Sections that indicate the auditor's opinion, the basis for the opinion, and descriptions of any significant deficiencies identified. Sections that indicate the company's name, the auditor's opinion, and the auditor's city, state, and contact information. Sections that indicate the auditor's opinion, define internal control, and explain the inherent limitations of internal control. Sections that indicate the auditor's opinion, list the individuals who performed the audit, and provide contact information. None 36. In an integrated audit of a nonissuer, an auditor should issue an adverse opinion on the effectiveness of an entity's internal control in which of the following situations? The financial statements are misstated. A material weakness exists. The entity may not continue as a going concern. The auditor was asked by the client to provide the report to another practitioner. None 37. Which of the following activities is an analytical procedure an auditor would perform in the final overall review stage of an audit to ensure that the financial statements are free from material misstatement? Reading the minutes of the board of directors' meetings for the year under audit Obtaining a letter concerning potential liabilities from the client's attorney. Comparing the current year's financial statements with those of the prior year. Ensuring that a representation letter signed by management is in the file. None 38. Which of the following situations most likely represents the highest risk of a misstatement arising from misappropriations of assets? A large number of bearer bonds on hand. A large number of inventory items with low sales prices. A large number of transactions processed in a short period of time. A large number of fixed assets with easily identifiable serial numbers None 39. When evaluating the impact of potential litigation, an auditor of a nonissuer should obtain audit evidence about each of the following, except The period in which the underlying cause for legal action occurred. The probability of an unfavorable outcome. The probability that the matter will require a trial in court. The amount or range of potential loss. None 40. 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 working paper review. This second review usually focuses on The fair presentation of the financial statements in conformity with GAAP. Irregularities involving the client’s management and its employees. The materiality of the adjusting entries proposed by the audit staff. The communication of internal control weaknesses to the client’s audit committee. None 41. Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance? The entity has rights to the inventory. Inventory is properly valued. Inventory is properly presented in the financial statements Inventory is complete. None 42. If management refuses to provide written representations in the form of a management letter, the auditor should: Discuss the matter with management. Disclaim an opinion or withdraw from the engagement. Reevaluate management's integrity and the effect it has on the reliability of evidence obtained. Consider modifying the auditor's opinion to indicate items affected. None 43. An auditor discovered that a client's accounts receivable turnover is substantially lower for the current year than for the prior year. This may indicate that Obsolete inventory has not yet been reduced to fair market value. There was an improper cutoff of sales at the end of the year. An unusually large receivable was written off near the end of the year. The aging of accounts receivable was improperly performed in both years. None 44. An accountant is auditing the financial statements of Nugget Corporation. As part of the audit, the accountant will send a letter of inquiry to Nugget's attorney related to several pending lawsuits. Which of the following statements is most likely to appear in the letter? Management acknowledges and understands that it has responsibility for the preparation and fair presentation of the financial statements. During our audit, we discovered issues of noncompliance with applicable laws and regulations. In connection with an audit of our financial statements, management has prepared, and furnished to our auditors, a description and evaluation of certain contingencies. We are not aware of any pending or threatened litigation, claims, and assessments whose effects should be considered when preparing the financial statements. None 45. Which of the following factors would most likely influence an auditor's consideration of the reliability of data when performing analytical procedures? Whether the data were developed in a computerized or a manual accounting system. Whether the data were prepared on the cash basis or in conformity with GAAP. Whether the data were developed under a system with adequate controls. Whether the data were processed in an online system or a batch entry system. None 46. Which of the following most likely would cause an auditor to consider whether a client's financial statements contain material misstatements? Management did not disclose to the auditor that it consulted with other accountants about significant accounting matters. Audit trails of computer-generated transactions exist only for a short time. The results of an analytical procedure disclose unexpected differences. The chief financial officer will not sign the management representation letter until the last day of the auditor's field work. None 47. In planning an audit, an auditor established materiality at $40,000. The auditor received an attorney's letter indicating that it was probable that each of three lawsuits would be settled for $30,000. Which of the following actions should the auditor take? Add a separate paragraph to the audit report disclosing the contingencies and their amounts. Ask the client to disclose the contingencies in the notes to the financial statements. Ask the client to record the liability for the three contingencies. Add a paragraph to the auditor's opinion disclosing a scope limitation. None 48. Audit data analytics is the process of transforming large amounts of raw data into useful information for the purpose of identifying patterns and irregularities in the audit. Audit data analytics would be least useful in Planning the audit for a new client. Performing substantive procedures when the reliability of internal data is questionable. Performing risk assessment procedures when inherent risks are high. Forming a conclusion on the audit of a client that operates in a volatile industry. None 49. During a recent audit of the revenue cycle, a CPA found the client had $1 million in accounts receivable recorded for fictitious customers. Which of the following tests most likely facilitated identification of the fraud? Reviewing the segregation of duties for staff who had responsibility for sales, shipping, and invoicing. Reviewing the support for open sales orders not yet shipped at December 31. Sending positive confirmations to all of the client's customers with balances on December 31. Examining the reconciliation between the subsidiary ledger and the general ledger control account. None 50. When a client engages in transactions involving derivatives, the auditor should Develop an understanding of the economic substance of each derivative. Confirm with the client's broker whether the derivatives are for trading purposes. Notify the audit committee about the risks involved in derivative transactions. None 51. Which of the following procedures most likely would assist an auditor to identify litigation, claims, and assessments? Inspect checks included with the client's cutoff bank statement. Obtain a letter of representations from the client's underwriter of securities. Apply ratio analysis on the current-year's liability accounts. Read the file of correspondence from taxing authorities. None 52. An auditor usually tests the reasonableness of dividend income from investments in publicly held companies by calculating the amounts that should have been received based on Dividend information produced by investment advisory services. Stock market reports. Independent registrars' stock ownership ledgers. Annual audited financial statements issued by the investee companies. None 53. Which of the following procedures would be appropriate to test the existence assertion during an audit of accounts receivable? Trace transactions from the subsidiary ledger to the general ledger. Send confirmations to customers. Trace a sample of invoices to recording in the general ledger. Determine that all shipments before year end are recorded as sales. None 54. The primary purpose of sending a standard confirmation request to financial institutions with which the client has done business during the year is to Detect kiting activities that may otherwise not be discovered. Corroborate information regarding deposit and loan balances. Provide the data necessary to prepare a proof of cash. Request information about contingent liabilities and secured transactions. None 55. Which of the following procedures would the auditor likely perform when auditing bonds payable? Send confirmations to bondholders. Trace assets purchased with bond proceeds to documentation for evidence of liens. Evaluate reasonableness of interest expense in relation to bonds payable balances. Perform analytical procedures relative to bond discount or premium. None 56. Which of the following procedures would an auditor most likely perform in searching for unrecorded payables? Reconcile receiving reports with related cash payments made just prior to the year end. Review the responses of accounts receivable confirmations for indications of disputes with customers. Compare cash payments made after the balance sheet date with the accounts payable trial balance. Examine a sample of creditor balances to supporting invoices, receiving reports, and purchase orders. None 57. Which of the following is the primary objective of probability proportional to sample size? To identify overstatement errors. To increase the proportion of smaller-value items in the sample. To identify items where controls were not properly applied. To identify zero and negative balances. None 58. "Overstating assets or understating liabilities is generally done to improve an entity's financial position. Overstatements tend to be performed in large amounts and understatements in smaller amounts. For example, overstating a $2,000 asset transaction may be recorded as $20,000, whereas an understated liability for the same amount could be recorded as $20. Probability proportional to size (PPS) is a sample selection method in which items are chosen based on their dollar value; therefore, larger (not smaller) values have a greater chance of selection (Choice B). An advantage of this method is that it helps to identify overstatement errors. (Choice C) PPS sampling is a variables sampling method used to reach conclusions about reasonableness of dollar amounts. In contrast, control testing is normally performed using attribute sampling, which is used to reach conclusions about the rate of occurrence for a specific qualitative characteristic (eg, properly signing checks). (Choice D) Classical variables sampling treats individual items as a sampling unit, regardless of dollar amount. Because dollar amount is not factored into the method, it can be easily applied to identify zero and negative balances, which is useful to test for understatements. Things to remember: Probability proportional to size (PPS) is a sample selection method in which items are chosen based on their dollar value. Because larger values have a greater chance of selection, PPS is used to test for overstatements. In contrast, classical variables sampling treats individual items as a sampling unit, regardless of dollar amount, which is useful to test for understatements." Invoices 1, 2, 3, and 4. Invoices 1, 3, and 4 only. Invoices 2 and 3 only. Invoices 2, 3, and 4 only. None 59. As a result of control testing, a CPA has decided to increase control risk. What is the impact on substantive testing sample size if all other factors remain constant? The sample size would be irrelevant. The sample size would be higher. The sample size would be lower. The sample size would be unaffected. None 60. As a result of tests of controls, an auditor assesses control risk too high. This incorrect assessment most likely occurred because Control risk based on the auditor's sample is less than the true operating effectiveness of the client's control activity. The auditor believes that the control activity relates to the client's assertions when, in fact, it does not. The auditor believes that the control activity will reduce the extent of substantive testing when, in fact, it will not. Control risk based on the auditor's sample is greater than the true operating effectiveness of the client's control activity. None 61. In a probability-proportional-to-size sample with a sampling interval of $5,000, an auditor discovered that a selected account receivable with a recorded amount of $3,000 had an audit amount of $2,700. If this were the only error discovered by the auditor, the projected error of this sample would be $300 $500 $800 $2,300 None 62. Which of the following events occurring after the issuance of the auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements? The auditor discovers that the entity intends to present comparative financial statements in subsequent years. Litigation that had been disclosed in the financial statements is resolved. A subsidiary that accounts for 30% of the entity's consolidated net revenue is sold. New information regarding significant unrecorded transactions from the year under audit is discovered. None 63. An auditor should consider which of the following when evaluating the ability of a company to continue as a going concern? Audit fees. Future assurance services. Management's plans for disposal of assets. A lawsuit for which judgment is not anticipated for 18 months. None 64. In response to which of the following events would an auditor most likely issue a report that includes an emphasis-of-matter paragraph? A properly disclosed change in accounting principle. A properly disclosed change in the useful life used to calculate depreciation expense for an asset. A change in auditors from the prior year. An undisclosed change in accounting principle. None 65. An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that the entity being reported upon had significant transactions with related parties. The inclusion of this separate paragraph Is appropriate and would not negate the unmodified opinion. Is considered an "except for" qualification of the opinion. Violates generally accepted auditing standards if this information is already disclosed in footnotes to the financial statements. Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation." None 66. Which of the following procedures is usually the first step in reviewing the financial statements of a nonpublic entity? Communicate with the predecessor accountant. Obtain a general understanding of the entity's products or services. Request management representation letter. Understand the entity's internal controls. None 67. Moore, CPA, has been asked to issue a review report on the balance sheet of Dover Co., a nonpublic entity. Moore will not be reporting on Dover's statements of income, retained earnings, and cash flows. Moore may issue the review report provided the Balance sheet is presented in a prescribed form of an industry trade association. Scope of the inquiry and analytical procedures has not been restricted. Balance sheet is not to be used to obtain credit or distributed to creditors. Specialized accounting principles and practices of Dover's industry are disclosed. None 68. Which of the following matters should an accountant include when establishing an understanding with a client regarding the services to be performed for a compilation engagement? The effect that independence impairments, if present, will have on the expected form of the accountant's report. The dates on which the accountant will be present to observe the taking of the physical inventory. The assistance that the accountant will receive from internal auditors in performing account analyses. The accountant's responsibility for the preparation and fair presentation of the financial statements. None 69. Hart, CPA, is engaged to review the year 2 financial statements of Kell Co., a nonissuer. Previously, Hart audited Kell's year 1 financial statements and expressed a qualified opinion due to a scope limitation. Hart decides to include a separate paragraph in the year 2 review report because comparative financial statements are being presented for year 2 and year 1. This separate paragraph should indicate the Substantive reasons for the prior year's qualified opinion. Reason for changing the level of service from an audit to a review. Consistency of application of accounting principles between year 2 and year 1. Restriction on the distribution of the report for internal use only. None 70. Which of the following conditions is necessary for a practitioner to accept an attestation engagement to examine and report on an entity's internal control structure over financial reporting? The practitioner anticipates relying on the entity's internal control structure in a financial statement audit. Management presents its written assertion about the effectiveness of the internal control structure. The practitioner is a continuing auditor who has previously audited the entity's financial statements. Management agrees not to present the practitioner's report in a general-use document to stockholders. None 71. An auditor determines that the entity is presenting certain supplementary financial disclosures of pension information that are required by the GASB. Under these circumstances, the auditor should Issue a qualified opinion with a basis for qualified opinion paragraph that refers to the required supplementary information. State that the audit is not being performed in accordance with generally accepted auditing standards. Document in the working papers that the required supplementary information is presented, but should not apply any procedures to the information. Compare the required supplementary information for consistency with the audited financial statements. None 72. Which of the following services is an attest engagement? A review of prospective financial information. A preparation engagement. A compilation engagement where the accountant lacks independence. An examination of internal controls. None 1 out of 72 Time is Up! Time's upTime is Up!
