AUD MODERATE 2019

Question 1

If a statement from the SSAE provides that a procedure or action is one that the practitioner “should consider,” then which of the following interpretations is correct?

Answer 1

The consideration of the procedure is presumptively required, whereas carrying out the procedure is not required.

Question 2

Bingham, a CPA, has been asked to join a local bank’s board of directors. In which of the following scenarios would such a position be acceptable for Bingham?

Answer 2

Several of Binghan’s clients have savings accounts at the bank.

Question 3

Which of the following communications between the auditor with final responsibility for an engagement and the audit engagement team regarding the susceptibility of a client’s financial statements to material misstatements due to error or fraud is required by auditing standards?

Answer 3

Discussing the need to maintain a questioning mind and to exercise professional skepticism throughout the audit.

Question 4

While planning an engagement to issue a report on the
application of the requirements of an applicable financial reporting framework to a specific transaction of a nonissuer, a reporting accountant should obtain an understanding of the

Answer 4

Form and substance of the specific transaction.

Question 5

Risks relevant to financial reporting can arise due to which of the following circumstances?

Answer 5

Rapid growth in the entity’s operations.

Question 6

A nonissuer uses a service organization whose services are part of the nonissuer’s system of internal control. In the integrated audit, how does an auditor evaluate whether the service auditor’s report on controls provides sufficient appropriate evidence to support an opinion on internal controls over financial reporting?

Answer 6

By assessing the results of the tests of controls and the service auditor’s opinion on the operating effectiveness of the controls.

Question 7

A company has an internal audit function and is in a
regulated industry. Which of the following groups should the auditor approach to inquire about the risks of fraud within the entity?

Answer 7

Management, internal audit, and audit committee.

Question 8

An auditor who identifies a potential fraud that is significant within the context of the audit under generally accepted government auditing standards would most appropriately respond first in which of the following manners?

Answer 8

Extend audit procedures as necessary to determine whether fraud has occurred.

Question 9

An auditor randomly samples 50 out of 1,000 items and

discovers an overstatement of $3,000. What is the projected misstatement for the entire population?

Answer 9

$60,000

Question 10

After receiving responses to accounts receivable
confirmations, the auditor determined that the evidence was not sufficient to form a conclusion regarding the accounts receivable balance. Which of the following actions should the auditor take next concerning the accounts receivable
balance?

Answer 10

Request additional confirmations and perform alternative procedures.

Question 11

Which of the following sources of corroborating information would most likely increase the assurance that an auditor of a nonissuer obtains from management’s representations?

Answer 11

A confirmation received from the entity’s bank.

Question 12

A successor auditor discovers a possible misstatement in a client’s financial statements reported on by a predecessor auditor. Which of the following actions should the successor auditor take next?

Answer 12

Ask the client to arrange a meeting of the predecessor auditor, management, and the successor auditor to discuss the matter.

Question 13

Which of the following statements is correct with regard to management use of a broker’s quotation to support a fair value estimate?

Answer 13

If the quotation is from the broker who initially sold the instrument, the evidence might be less objective and might need supplementation.

Question 14

Which of the following is the auditor’s primary means of
obtaining corroboration of information furnished by
management concerning litigation, claims, and
assessments?

Answer 14

A letter of audit inquiry to the client’s lawyer.

Question 15

After the balance sheet date, an auditor’s client suffers a
material loss from a decline in value of marketable securities. Which of the following actions should the auditor advise the client to take?

Answer 15

Disclose the material loss in the financial statements to assure that the financial statements are not misleading.

Question 16

Which of the following factors should most influence an

auditor’s decision to modify the audit opinion of an issuer’s financial statements?

Answer 16

The effect of a misstatement on the financial statements taken as a whole.

Question 17

What information should a practitioner include in the

standard report on an examination of prospective financial statements?

Answer 17

The prospective results might not be achieved.

Question 18

Which of the following situations precludes an accountant from preparing financial statements that omit substantially all disclosures required by the selected financial reporting framework?

Answer 18

The accountant becomes aware that the omission was undertaken with the intention of misleading users of the financial statements.

Question 19

What is a service auditor’s responsibility, if any, with regard to other information presented in a document containing management’s description of its system and the service auditor’s report?

Answer 19

To read the other information in order to identify material inconsistencies or misstatements.

Question 20

In order to respond to the increased risks that could be

present in the initial audit of an entity, an external auditor should consider the assignment of

Answer 20

External audit personnel with appropriate levels of capabilities and competence.

Question 21

In order to respond to the increased risks that could be present in the initial audit of an entity, an external auditor should consider the assignment of:

Answer 21

External audit personnel with appropriate levels of capabilities and competence.