Question 1

Which of the following factors would a CPA ordinarily consider in the planning stage of an audit

engagement?

I. Financial statement accounts likely to contain a misstatement.

II. Conditions that require extension of audit tests.

Options :

A : I only.

B : II only.

C : Both I and II.

D : Neitherl nor II.

Answer: C

Question 2

The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the:

Options :

A : Allowable risk of tolerable misstatement.

B : Preliminary estimates of materiality levels.

C : Efficiency of the audit.

D : Effectiveness of the audit

Answer: D

Question 3

In an attest engagement, use of the accountant's report should be restricted to specified parties in all of the following situations, except:

Options :

A :

When the criteria used to evaluate the subject matter are appropriate for only a limited number of parties.

B :

When reporting on an assertion about the subject matter instead of reporting directly on the subject matter.

C : When reporting directly on the subject matter and a written assertion has not been provided.

D : When reporting on an agreed-upon procedures engagement.

Answer: B

Question 4

Which of the following is true about management representations obtained during an engagement to review the financial statements of a nonissuer?

Options :

A : Written representations from the current management are required for all periods being reported on

B :

Written representations with respect to prior periods should not be provided by the current management if they were not present during those periods.

C :

Written representations should be addressed to members of management whom the accountant believes are responsible for and knowledgeable about the matters covered in the representation letter.

D : Written representations need not include information concerning subsequent events.

Answer: A

Question 5

The GAO standards of reporting for governmental financial audits incorporate the AICPA standards of reporting and prescribe supplemental standards to satisfy the unique needs of governmental audits. Which of the following is a supplemental reporting standard for governmental financial audits?

Options :

A :

Auditors should report the scope of their testing of compliance with laws and regulations and of internal controls.

B :

MateriaI indications of illegal acts should be reported in a document distributed only to the entity's senior officials.

C : All changes in the audit program from the prior year should be reported to the entity's audit committee.

D :

Any prMleged or confidential information discovered should be reported to the organization that arranged for the audit.

Answer: A