A5

An auditor has been hired to report on a nonissuer's IC over financial reporting. Which of the following best describes a reporting option in this scenario?
A. if management fails to provide a written representation letter acknowledging its responsibility for the effectiveness of IC, the auditor will generally issue an unmodified opinion with additional explanatory language
B. when a material weakness exists, the auditor should issue an adverse opinion
C. when a significant deficiency exists, the auditor may issue either a qualified or adverse opinion
D. if management fails to provide a written representation letter acknowledging its responsibility for the effectiveness of IC, the auditor will generally issue either a qualified or adverse opinion
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An auditor has been hired to report on a nonissuer's IC over financial reporting. Which of the following best describes a reporting option in this scenario?
A. if management fails to provide a written representation letter acknowledging its responsibility for the effectiveness of IC, the auditor will generally issue an unmodified opinion with additional explanatory language
B. when a material weakness exists, the auditor should issue an adverse opinion
C. when a significant deficiency exists, the auditor may issue either a qualified or adverse opinion
D. if management fails to provide a written representation letter acknowledging its responsibility for the effectiveness of IC, the auditor will generally issue either a qualified or adverse opinion
B.
an adverse opinion should be issued if there is a material weakness
Compliance audit work papers will include all of the following documentation except:
A. risk assessment procedures performed including those related to gaining an understanding of the IC over compliance
B. responses to the assessed risk of noncompliance including tests of compliance and TOC
C. materiality levels
D. final basis for the opinion on the effectiveness of IC over compliance
D. documentation of this would not be appropriate
An accountant may accept an engagement to apply agreed-upon-procedures to prospective F/S provided that:
A the accountant is independent from the responsible party
B. the prospective F/S are also examined
C. responsibility for the adequacy of the procedures performed is taken by the accountant
D. negative assurance is expressed on the prospective F/S taken as a whole
A.
required to be independent
An auditor conducting a compliance audit will design and perform additional audit procedures in response to the assessed risk of material noncompliance. These procedures will include TOC if:
A. the auditor has determined a deficiency in the design of IC over compliance
B. the auditor's expectation of the operating effectiveness of controls over compliance is otherwise unknown
C. TOC are required by the governmental audit requirement
D. the auditor has been engaged to perform an organization-wide audit
C.
tests of operating effectiveness of controls may be required if
- the risk assessment includes an explanation of operating effectiveness of controls over compliance
- substantive procedures do not provide enough evidence to support a conclusion
- TOC are required by the applicable governmental audit requirements
If an auditor performing an integrated audit identifies one or more material weaknesses in a nonissuer's internal control, the auditor should:
A. expand the audit of IC to identify deficiencies less severe than material weaknesses
B. conclude that the F/S are materially misstated because of the material weakness in IC
C. disclaim an opinion on IC
D. express an adverse opinion on the entity's IC
D.
Which of the following is a documentation requirement that an auditor should follow when auditing in accordance with government auditing standards?
A. audit documentation contain sufficient info so supplementary oral explanations are not required
B. the auditor should obtain written representations from management acknowledging responsibility for correcting instances of fraud, abuse and waste
C. the auditor should document the procedures that assure discovery of all illegal acts and contingent liabilities resulting from noncompliance
D. audit documentation should contain a caveat that all instances of material errors and fraud may not be identified
A.
After performing a compliance audit of an entity that received federal funds, what conclusion would the auditor draw if the entity does not have adequate documentation to support $5 million in operating expenses paid from federal funds?
A. the entity spent $5 million in operating expenses that were not approved
B. questioned costs of $5 million for operating expenses have been identified
C. the entity spent $5 million of government funds for services that were not required
D. the entity submitted unauthorized invoices for expenses
B.
would appear on the schedule of findings and questioned costs for federal awards
The auditors' purpose in establishing materiality levels in a compliance audit include all of the following, except;
A. determining the nature and extent of risk assessment procedures
B. determining the NET of additional audit procedures
C. evaluate whether the entity has compiled with applicable requirements
D. establish the basis for the opinion on effectiveness of IC over compliance
D.
no opinion for the effectiveness of IC over compliance
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?
A. recommending a separate engagement to determine whether fraud has occurred
B. extend audit procedures as necessary to determine whether fraud has occurred
C. refer investigation of the potential fraud to the party with oversight responsibility
D. communicate the potential fraud with management
B.
do procedures first and if there is still suspected fraud, communicate with management
In which case might an auditor of an issuer render a qualified opinion on IC?
I. when there is a scope limitation
II. when there is a material weakness in IC
A. II only
B. I only
C. Both I and II
D. Neither I nor II
D.
scope limitation requires a disclaimer or withdrawal; material weakness in IC requires a adverse opinion
Bc of the pervasive effects of laws and regulations on the F/S of governmental units, an auditor should obtain written management representations acknowledging that management has A. responsibility for understanding and complying with compliance requirements B. implemented IC designed to detect all illegal acts C. expressed both positive and negative assurance to the auditor that the entity complied with all laws and regulationsA. need to be in writingAn accountant has been engaged to examine pro forma adjustments that show the effects on previously audited historical F/S due to a proposed disposition of a significant portion of an entity's business. Other than the procedures previously applied to the historical F/S, the accountant is required to: I. reevaluate the entity's IC over financial reporting II. determine that the computations of the pro forma adjustments are mathematically correct A. both are required B. I is required C. II is required D. neither are requiredC. no need to go over the IC again, just make sure the calculations are OKWhich of the following statements should be included in a practitioner's report on the application of agreed-upon-procedures A. a statement of scope limitation that will qualify the practitioner's opinion B. a statement that the practitioner performed an examination of prospective F/S C. a statement referring to standards established by the AICPA D. statement of negative assurance based on procedure performedC. agreed-upon procedures do not provide an opinion, assurance and state that the practitioner did not conduct an examinationIn which of the following situations will a practitioner disclaim an opinion on an examination of prospective F/S A. the practitioner was not able to perform certain procedures deemed necessary B. prospective F/S depart from AICPA presentation guidelines C. prospective F/S fail to disclose significant assumptions D. significant assumptions do not provide a reasonable basis for the statementsA. the inability to perform procedures deemed necessary would mean a scope limitation, leading to the auditor disclaiming the opinionAn accountant who accepts an engagement to compile financial projection most likely would make the client aware that the: A. accountant's responsibility to update the projection for future events and circumstances is limited to one year B. projection may not be included in a document with audited historical F/S C. projection omits all hypothetical assumptions and presents the most likely future financial position D. engagement does not include an evaluation of the support for the assumptions underlying the projectionD. compilation is limited in scope, does not include an opinion or assurance on the projected F/SWhich of the following procedures should an accountant perform during an engagement to compile prospective F/S? A. make inquiries to the date of the report about possible future transactions that may impact the forecast once the report is issued B. test the entity's IC to determine if adequate controls exist so that financial projections can be reasonably achieved C. make inquiries about the accounting principles used in the preparation of the prospective F/S D. compare the prospective F/S with the entity's historical results for the prior yearC.A practitioner may perform an agreed-upon procedure engagement on projected F/S provided that which of the following is met? A. practitioner sets the criteria to be used in the determination of findings B. use of the agreed-upon-procedures report is for general use C. client agrees that the practitioner will decide appropriate procedures to be performed D. projected F/S include a summary of significant assumptionsD. must have a summary of significant assumptions if you are going to perform agreed-upon-procedures on projected F/SWhich of the following components is appropriate in a practitioner's report on the results of applying agreed-upon-procedures? A. description of procedure performed, related findings, description of any specific materiality thresholds established for reporting exceptions B. statement the management is responsible for expressing an opinion C. a title that includes the phrase "independent audit" D. statement that the practitioner acknowledged that the procedure performed are appropriate for their specific purposeA.An accountant may accept an engagement to apply agreed-upon-procedures to prospective F/S provided the: A. accountant also examines the prospective F/S B. provisions of SSARS are followed C. accountant and engaging party agree, or will be able to agree, on the criteria to be used in the determination of the findings D. accountant take responsibility for the adequacy of the procedures performedC. both the accountant and engaging party set the criteria to be used in the determination of the findingsA CPA is required to comply with the provisions of SSAE when engaged to: A. provide assurance on investment performance statistics prepared by an investment company on established criteria B. issue a letter for an underwriter, also known as a comfort letter, to a broker or dealer of securities C. compile F/S in conformity with a comprehensive basis of accounting other than GAAP D. communicate with an audit committee regarding management's consultations with another CPAA. SSAE provides guidance on engagements other than reporting on historical F/SWhich of the following is a conceptual similarity between GAAS and the attestation standards? A. both sets of standards require the CPA to report on the adequacy of disclosure in the F/S B. all of the standards in GAAS are included in the attestation standards C. requirement that the CPA is independent is included in both sets of standards D. both sets of standards are applicable to engagements regarding financial forecasts and projectionsC. CPA MUST be independent in both sets of standardsWhen a CPA examines a client's projected financial statements, the CPA's report should: A. explain the principal difference between historical and projected F/S B. state that the CPA performed procedures to evaluate management's assumptions C. refer to the CPA's auditor's report on the historical F/S D. include the CPA's opinion on the client's ability to continue as a going concernB. the standard report includes a statement that the examination "...included such procedures as we consider necessary to evaluate both the assumptions used by management and the preparation and presentation of the projection"J is auditing the F/S of S Company, an issuer. Which of the following is true? A. J is not required to audit IC, but should report any significant deficiencies or material weaknesses noted B. S is required to obtain an audit of its IC, but a professional other than J may be hired for this purpose C. J is required to audit and report on S's IC D. if J provides an adverse opinion on the F/S , the audit of S's IC is not permittedC. PCAOB standards require J perform an integrated audit which includes audits of the F/S and effectiveness of ICWhich of the following is not a role of the risk assessment of an integrated audit A. concluding on the effectiveness of a given control B. selecting control tests C. determining significant accounts and relevant assertions D. determining evidence necessary to conclude on the effectiveness of a given controlA. concluding on the effectiveness of a given control is done after the risk assessment processAlthough the scope of audits of recipients of federal financial assistance in accordance with federal audit regulations varies, these audits generally have which of the following elements in common? A. auditor is to determine whether the federal financial assistance has been administered in accordance with applicable laws and regulations B. materiality levels are lower and determined by the government entities that provided the federal financial assistance to the recipient C. auditor should obtain written management representations that the recipients IAs will report their finding objectively D. auditor is required to express both positive and negative assurance that illegal acts could have a more material effect on the recipient's F/S are disclosed to the inspector generalA. audits of federal financial assistance (single audit act) to determine if the auditee has complied with laws, regulations, and provisions of the contracts or grantsWhich of the following is least likely to be included in a practitioner's report on agreed-upon procedures? A. practitioner is required to be independent B. report has provided limited assurance C. subject matter is the responsibility of the responsible party D. adequacy of the procedures performed was acknowledged by the engaging partyB. AUP provides no assurance and the practitioner should be independent (reviews have limited)In an examination of an entity's compliance with specific requirements, the practitioner must document which of the following? A. rationale for materiality levels expressed in quantifiable monetary terms B. statement that the practitioner provides absolute assurance that no material noncompliance exists C. assessed risk of material noncompliance including procedures performed and documentation of IC D. recommendations to management on controls over compliance with specified requirementsC. practitioner must include documentation on the -assessed risk of material noncompliance -responses to the risk assessment -basis or rationale for materiality levels -compliance with supplemental requirements in an examinationA service org provides processing services for a client's sales orders. Which of the following info is relevant when gathering data for the report on the service org's IC A. client's sales manager reviews AR balances B. client's data entry clerk used the sales manager's password to make unauthorized changes to customer prices C. credit limits are established and updated by the client's credit dept. D. service org's system calculates AR balancesD. question asks about the service org's report on IC. So using the services org's system to calculate these balances would test those ICsWhich of the following professional services would be considered an attest engagement covered by the SSAEs? A. management consulting engagement to provide EDP advice to a client B. engagement to report on MD&A C. income tax engagement to prepare fed and state tax returns D. compilation of F/S from a client's accepting recordsA. accountant is issuing an examination or review on another party's assertion (the others are either a SSARS engagement (D) or not an attest engagement)When an accountant compiles projected F/S, the accountant's report should include a statement that: A. disclaims any form of assurance on the historical F/S B. express limited assurance that the results will be within the projected range C. describes the limitations of the usefulness of the projection D. evaluates the hypothetical assumptions used to prepare the projectionC. compilations describe limitations of usefulness of the projection and disclaims any form of assurance on the projectionsM, an issuer as defined under the SOX, believes that it has eliminated a material weakness previously noted in its assessment of IC, and has hired CPA to attest to the improvements in IC. Which of the following is true of this engagement? A. required by PCAOB Standards B. only required if M elects to have an audit in accordance with the PCAOB C. M's management must provide a written report to accompany H's report D. required by GAASC. a written report from M MUST accompany H's reportObtaining a SOC 1 Type 2 report would assist the user in all of the following except A. allowing the user auditor to pass on any substantive testing over balances related to the areas of accounting impacted by the service org B. allowing the reduction in the assessed CR below maximum for controls related to areas of accounting impacted by the service org C. aiding the user auditor in obtaining a better understanding of the controls related to areas of accounting impacted by the service org D. providing the user auditor with assurance of the operating effectiveness of controls related to areas of accounting impacted by the service orgA. a SOC 1 report is the one piece of evidence that must be considered in conjunction with other info when planning audit procedures such as passing on any sub testingIn an integrated audit of a nonissuer, an auditor should issue an adverse opinion on the effectiveness of an entity's IC in which of the following situations? A. F/S are misstated B. material weakness exist C. entity may not continue as a going concern D. auditor was asked by the client to provide the report to another practitionerB. an adverse opinion should be issued if there is a material weakness (GAAP issue). A. could also be a qualified opinion and C. and D. do not effect the auditor's opinion on ICWhich of the following is a conceptual difference between the attestation standards and GAAS? A. attestation standards provide a framework for the attest function beyond historical F/S B. requirement that the practitioner be independent is omitted from the attestation standards C. attestation standards do not permit an attest engagement to be part of a business acquisition study or a feasibility study D. GAAS allows the auditor to use another auditor's work while attestation standards do not allow the use of another practitioner's workA. attestation provides the framework for the attest function beyond the historical F/SD engaged a CPA to audit its F/S in accordance with GAGAS (yellow book) because of the provisions of government grant funding agreements. Under these circumstances, the CPA is required to report on D's ICs either in the report on the F/S or in: A. report on the performance audit B. notes to the F/S C. letter to the government funding agency D. a separate reportD. report on the audit of the F/S would describe the scope of the auditor's testing of compliance with laws and regulations and IC over financial reporting; could either be a report on the F/S or in a separate reportIn an integrated audit of a nonissuer, which of the following is the responsibility of an auditor with regard to testing controls at a company with multiple business units? A. testing controls over only certain specific risks at all business units of the company B. testing controls over all risks at all business units of the company C. testing controls over all risks at business units that are material to the company's consolidated F/S D. testing controls over specific risks at business units that are material to the company's consolidated F/SD. if there are multiple business units, the integrated audit should test the controls over specific risks at business units that are material to the company's consolidated F/SWhich of the following conditions is necessary for an auditor to accept an engagement to audit and report in a nonissuer's IC over financial reporting? A. auditor anticipates relying on the entity's IC in a F/S audit B. management presents its written assessment about the effectiveness of IC C. auditor is a continuing auditor who previously has audited the entity's F/S D. management agrees not to present the auditor's report in a general-use doc to stockholdersB. in order for an auditor to audit and report on a nonissuer's IC, management must present its written assessment about the effectiveness of ICHow do the scope, procedures, and purpose of TOC in an audit of the IC of a nonissuer compared to those for obtaining an understanding of IC and assessing CR as part of a F/S audit of a nonissuer for the following Scope; Procedures; Purpose A. similar, different, similar B. different, similar, similar C. different, different, different D. different, similar, differentC. for IC- the scope and procedures are more extensive and the purpose is directed more towards a IC report audit- scope is less extensive, purpose is determined by the NET & procedures are more extensiveThe GAO stds of reporting for governmental financial audits incorporate the AICPA stds of reporting and prescribe supplemental stds to satisfy the unique needs of governmental audits. Which of the following is a supplemental reporting std for governmental financial audits? A. auditors should report the scope of their testing of compliance w/ laws and regulations and of IC B. material indications of illegal acts should be reported in a doc distributed only to the entity's senior officials C. all changes in the audit program from the PY should be reported to the entity's audit program D. any privileged or confidential info discovered should be reported to the org that arranged the auditA. the auditor's report on compliance and on IC over financial recording (based on an audit) must include the scope of testing of compliance and ICA practitioner has examined a client's compliance w/ debt covenants associated with a bank loan and is ready to issue a report. Which of the following stds apply to the report? A. IC stds B. Compliance attestation stds C. AUP stds D. auditing stds of field workB. compliance attestation stds apply for an exam of a client's complianceAn independent auditor is issuing an audit report for a governmental entity and plans to issue separate reports on IC over financial reporting and compliance w/ laws and regulations. The auditor should do which of the following? A. report to the governing authority that separate reports will be issued B. issue the same opinion in each report C. state in the audit report that separate reports will be issued D. obtain permission from the audit committee to issue separate reportsC. if a separate report is issued, must state so in the auditor's report; it would appear in a paragraph called "other reporting required by gov auditing stds"A compliance audit is based on management's assumption of responsibility for all of the following, except: A. identification of the government's programs and understanding and fulfilling compliance requirements B. maintaining effective controls that provide absolute assurance that the entity administers programs in compliance with related requirements C. ongoing eval and monitoring of the entity's compliance w/ program requirements D. taking appropriate corrective actions on audit findingsB. management takes responsibility for reasonable, not absolute assuranceWhile conducting an audit in accordance w/ gov auditing stds, an auditor determines that fraud has been committed in one of the client's government contracts. The auditor reports the fraud to the client's audit committee, which take no action to report the fraud to appropriate parties. To which of the following entities is the auditor required to report this situation? A. the counter-party to the contract B. the association of certified fraud examiners C. client's CEO D. client's BODA. auditor has additional responsibility to communicate fraud to individuals contracting for or requesting the auditMGT's written representation to the auditor in connection with a gov audit would most likely include: A. stmt that MGT has identified and disclosed all material gov programs to the auditor B. rep that all known noncompliance has been reported or negative assurance that other noncompliance likely does not exist C. neg assurance that the gov has complied w/ compliance requirements D. identification of MGT interpretation of compliance that are subject to different interpretationsD. MGT letter will include identification of MGT's interpretation of compliance requirements that are subject to different interpretationsWhen a service org provides services that affect the initiation, execution, processing, or reporting of a user company's transactions, those services are: A. considered to be part of the user company's info system B. considered to be part of the user company's control environment C. considered to be part of the user company's control activities D. not considered to be part of the user company's ICA. those services are considered a part of the user company's info systemIn auditing a not-for-profit entity that receives governmental financial assistance, the auditor has a responsibility to: A. render an opinion concerning the entity's continued eligibility for the governmental financial assistance B. notify the governmental agency providing the financial assistance that the audit is not assigned to provide any assurance of detecting errors and fraud C. assess whether management has identified laws and regulations that have a direct and material effect on the entity's F/S D. issue a separate report that describes the expected benefits and related costs of the auditor's suggested changes to the entity's ICC. auditor must assess whether management has identified laws and regulations that have a direct and material effect on the determination of amounts in an entity's F/S and obtain an understanding of the possible effects on the F/S of such laws and regulationsIn auditing compliance with requirements governing major fed financial assistance programs under the single audit act, the auditor's consideration of materiality differs from materiality under GAAS. Under the single audit act, the materiality is: A. calculated in relation to the F/S taken as a whole B. ignored, because all account balances, regardless of size, are fully tested C. decided in conjunction with the auditor's risk assessment D. determined separately for each major fed financial assistance programD. under the single audit act, materiality is determined separately for each major fed financial assistance programThe scope of audits of recipients of federal financial assistance in accordance with federal audit regulations varies. Which of the following elements do these audits have in common? A. the accounts should be 100% verified by substantive tests because certain statistical sampling techniques are not permitted B. the auditor is required to document an understanding of IC established to provide reasonable assurance of compliance with the applicable laws and regs C. materiality levels are higher and are determined by the government entities that provide the fed financial assistance to the recipients D. the auditor is required to disclose all situations and transactions that could be indicative of fraud, abuse, and illegal acts to the fed inspector generalB. audit engaged to perform audits of fed financial assistance must perform procedures to obtain an understanding of IC pertaining to compliance & should doc this understanding.If an auditor performing an integrated audit identifies one or more material weaknesses in a nonissuer's internal control, the auditor should: A. conclude that the F/S are materially misstated because of the material weakness in IC B. disclaim the opinion on IC C. expand the audit of IC to identify deficiencies less severe that material weaknesses D. express and adverse opinion on ICD. an auditor would express an adverse opinion on the entity's IC if there are one or more material weaknessesWhich of the following conditions is necessary for an auditor to accept an engagement to audit and report on a nonissuer's ICFR A. auditor anticipates relying on the entity's IC in a F/S audit B. auditor is a continuing auditor who previously has audited the entity's F/S C. management agrees not to present the auditor's report in a general-use document to stockholders D. management presents its written assessment about the effectiveness of ICD. in order for an auditor to audit and report on a nonissuer's IC, management must present its written assessment about the effectiveness of ICIn an audit of an issuer: i. Management must assess and report on internal control. ii. The auditor must assess and report on internal control. A. ii only B. i only C. either i or ii D. both i or iiD. management's responsibility to assess and report on IC but the auditor is required to assess and report on ICWhich of the following factors is an auditor least likely to consider when reporting on compliance with aspects of contractual agreement in connection with audited F/S in accordance with SAS? A. opinion is rendered on the audited F/S B. appropriate opinion to render in the report on compliance with aspects on the contractual agreement C. whether the applicable covenants have been subjected to audit procedures as part of the F/S audit D. the users of the auditor's report on complianceB. negative assurance, not an opinion, may be rendered in an engagement in which the auditor is reporting on compliance with aspects of contractual agreement in connection with the audited F/S