CPA Auditing and Attestation (AUD) : Letters for Underwriters

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Example Questions

Example Question #1 : Letters For Underwriters

The auditor should state in the comfort letter that:

 

Possible Answers:

The auditor is independent

negative assurances are provided

The auditor is using generally accepted auditing standards

The auditor is not independent

Correct answer:

The auditor is using generally accepted auditing standards

Explanation:

AU 920 requires that the auditors state their independence in the comfort letter.  As directed in paragraph .35 “The auditor should state in the comfort letter that the auditor is independent, or the date through which the auditor was independent, with respect to the entity, and identify the applicable independence rules.”

Example Question #2 : Letters For Underwriters

Before agreeing on the scope of services, the auditor should

Possible Answers:

Clearly communicate no assurance will be provided

Ask to meet with the requesting party

All of the answer choices are correct

Obtain an understanding regarding the specific matters

Correct answer:

All of the answer choices are correct

Explanation:

Under AU 920 before agreeing on the scope of services the auditor must obtain certain assurances and perform certain procedures.  These procedures include obtaining an understanding regarding specific matters, meeting with the requesting party, and providing clear communication stating no assurance will be provided.

Example Question #1 : Accounting & Review Service Engagements & Interim Reviews

In the comfort letter, the auditor should

Possible Answers:

Make reference to the audit

State an opinion

Repeat the audit

None of the answer choices are correct

Correct answer:

Make reference to the audit

Explanation:

AU 920 indicates that the auditor should make reference to the audit.  Section .28 states that “The auditor should, in the comfort letter, make reference to, but not repeat, the report on the audited financial statements included in the securities offering. (Ref: par. .A28)”.

Example Question #2 : Accounting & Review Service Engagements & Interim Reviews

Ordinarily, comfort letters are addressed to:

Possible Answers:

The SEC

The client audit committee

The underwriters of securities

Creditor financial institutions

Correct answer:

The underwriters of securities

Explanation:

Comfort letters are addressed to underwriters of securities ordinarily and most likely convey negative assurance on financial information.

Example Question #1 : Letters For Underwriters

Comfort letters are usually addressed to the client's underwriter of securities and signed by the client's:

Possible Answers:

Staff accountants

Internal auditor

Independent auditor

Management

Correct answer:

Staff accountants

Explanation:

A comfort letter is a letter from the independent auditor to the named underwriter just before the registration of the client's securities.

Example Question #6 : Letters For Underwriters

Positive assurance is provided with respect to:

Possible Answers:

The financial statements

Comfort letter

A CPA's independence

None of the answer choices are correct

Correct answer:

A CPA's independence

Explanation:

Positive assurance is provided with respect to a CPA's independence.

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