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    2016 Newly Released AUD MCQs

    Uploaded by

    Steve Son

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    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 50
    2016 AICPA Newly Released Questions—Auditing 2016 AICPA Auditing Newly Released MCQs—Medium (Moderate) Rating 1. CPA-04288 / AICPA Released 2016 Which of the following procedures is an accountant required to perform before issuing a compilation report under Statements on Standards for Accounting and Review Services (SSARS)? a. Make inquiries of third parties regarding liabilities that appear in the financial statements. b. Read the financial statements and consider whether such financial statements appear to be free from obvious material errors. ° Obiain a letter supporting management representations in the financial statements. 2 Review account balances for material changes subsequent to the year end. EDITOR ANSWER SECTION BELOW: 2016 Mapping Lecture to be assigned to: A2 Topic to be assigned to: Topic 2 Page reference: 34 ANSWER: Choice "b" is correct. An accountant is required to read the financial statements and consider whether such financial statements appear to be free from obvious material errors before issuing a compilation report under SSARS, Choice "a" is incorrect. Inquiry of third parties is required in an audit, not compilation, engagement. Choice “c*is incorrect. Obtaining a management representation letter is required in a review and an audit, but is not required for a compilation engagement. Choice “d" is incorrect. Reviewing account balances for material changes subsequent to the year end is performed in an audit, not compilation, engagement. Page 1 of 50 2016 AICPA Newly Released Questions—Auditing 2. CPA-04289 / AICPA Released 2016 (Adapted) Which of the following engagements may an accountant or practitioner perform when there is a lack of independence? a. Compilation. b. Agreed-upon procedures. Review. d. Examination. EDITOR ANSWER SECTION BELOW: 2016 Mapping Lecture to be assigned to: A2 Topic to be assigned to: Topic 2 Page reference: 38 ANSWER: Choice “a” is correct. An accountant or practitioner may perform a compilation engagement when there is a lack of independence as long as the accountant or practitioner discloses the lack of independence. A ‘compilation is not an assurance engagement, but itis an attest engagement. Although independence is Not required, a determination of whether the accountant is independent of the entity is required. Choice "b" Is incorrect. Attest engagements are defined as those in which a practitioner (CPA) is engaged to issue or does issue an examination, a review, a compilation, or an agreed-upon procedures report on subject matter, or on an assertion about the subject matter, that is the responsibilty of another party (usually management). Statements on Standards for Attestation Engagements (SSAE} established by the AICPA provide information addressing agreed-upon procedures, and independence of the practitioner is included as a requirement to perform an agreed-upon procedure. Choice "c”is incorrect. A review is both an assurance engagement and an attest engagement, thus independence is required. Choice “d" is incorrect. An examination is an assurance engagement, thus independence is required. Page 2 of 50 2016 AICPA Newly Released Questions—Auditing 3. CPA-04290 / AICPA Released 2016 Which of the following ultimately determines the sufficiency and appropriateness of audit evidence to support the auditor's conclusions? a. Professional requirements. b. Professional standards. c, _Professional experience. d. Professional judgment. EDITOR ANSWER SECTION BELOW: 2016 Mapping Lecture to be assigned to: AS Topic to be assigned to: Topic 8 Page reference: 75 ANSWER: Choice “d" is correct. The auditor uses their professional judgment to evaluate the sufficiency and appropriateness of audit evidence. Choice "a" is incorrect. Professional requirements inform the auditor of their minimum responsibilities in the audit. Because each audit engagement is different, the professional requirements leave the ultimate determination of appropriateness and sufficiency of audit evidence to the auditor's professional judgment. Choice “b's incorrect. Professional standards include the professional requirements. Unfortunately, a bright line of what is considered sufficient and appropriate is not provided in the professional standards, Each audit engagement varies and, therefore, the determination of appropriateness and sufficiency of audit evidence is based on the auditor's professional judgment. Choice "c” is incorrect. The auditor ultimately uses their professional judgment to evaluate the sufficiency and appropriateness of audit evidence. This judgment is based on a variety of factors, including but not limited to, their experience gained during previous audits, understanding of the entity and its environment, significant and likelinood of potential misstatements and the results of audit procedures performed. Page 3 of 50 2016 AICPA Newly Released Questions—Auditing 4, CPA-04291 / AICPA Released 2016 (Adapted) Which of the following management assertion is most closely related to the aucit objective that verifies all sales have been recorded? a. Completeness. b. Occurrence Accuracy. d. Cutoff EDITOR ANSWER SECTION BELOW: 2016 Mapping Lecture to be assigned to: Aa Topic to be assigned to: Topic 2 Page reference: 23 ANSWER: Choice "a" is correct. The completeness assertion is most closely related to the completeness aucit objective that verifies all sales have been recorded. Choice "b" is incorrect. The occurrence assertion is most closely related to the occurrence audit objective that verifies sales are valid Choice °c" is incorrect. The acouracy assertion is most closely related to the accuracy audit objective that verifies sales are properly valued. Choice “d” is incorrect. The cutoff assertion is most closely related to the timing audit objective that verifies sales are recorded in the correct accounting period. Page 4 of 50 2016 AICPA Newly Released Questions—Auditing 5. CPA-04292 / AICPA Released 2016 Which of the following best identifies the effect of an increase in the risk of material misstatement on detection risk and the extent of substantive procedures? a. The acceptable level of detection risk decreases, and the extent of substantive procedures increases. b. The acceptable level of detection risk increases, and the extent of substantive procedures increases. c. The acceptable level of detection risk decreases, and the extent of substantive procedures decreases. d. The acceptable level of detection risk increases, and the extent of substantive procedures decreases. EDITOR ANSWER SECTION BELOW: 2016 Mapping Lecture to be assigned to: A3 Topic to be assigned to: Topic 3 Page reference: a ANSWER: Choice "a" is correct. An increase in the risk of material misstatement will result in a decrease in

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