CPA Auditing and Attestation (AUD) : Quality Control, Engagement Acceptance, Planning, & Internal Control
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #1 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Auditors document the terms of engagement in:
Engagement Letter
Auditors Planning Letter
Comfort Letter
Management Representation Letter
Engagement Letter
An engagement letter outlines the terms of the engagement including management's expected responsibilities and the responsibilities of the auditor.
Example Question #2 : Quality Control, Engagement Acceptance, Planning, & Internal Control
A properly developed engagement letter should include:
The auditors’ responsibilities
Management responsibilities
Discussion of inherent limitations in the audit
All of the above
All of the above
A properly constructed engagement letter should discuss the responsibilities of the auditors, management as well as the risks and limitations of the audit engagement.
Example Question #1 : The Audit Process Documentation
Preplanning audit documentation includes
Results of substantive tests
Overall audit strategy
Confirmation letters
Internal control assessment
Overall audit strategy
A preplanning audit document will discuss the overall audit strategy. Planning an audit will include an internal control assessment, but not in the preplanning stage. Confirmation letters and substantive testing are part of the audit process.
Example Question #2 : The Audit Process Documentation
An audit supervisor reviewed the work performed by the staff to determine if the audit was adequately performed. The supervisor accomplished this by primarily reviewing which of the following?
Checklists
Analytical procedures
Financial statements
Working papers
Working papers
Audit documentation, or working papers, comprises the principal record of audit procedures performed, evidence obtained, and conclusions reached. Reviewing the working papers allows a supervisor to understand the work performed and the evidence obtained, and to evaluate whether the audit was adequately performed.
Example Question #3 : The Audit Process Documentation
At the completion of an audit, which of the following entities has ownership of the audit working papers?
The client
The client's stockholders
The CPA firm that performed the audit
The client's audit committee
The CPA firm that performed the audit
The CPA firm that performed the audit has ownership of the audit working papers. These work papers provide support for the audit opinion and contain information detailing the audit work performed.
Example Question #1 : The Audit Process Documentation
A ______ is specifically someone who performs work on an engagement of a component's financial information that will be used as audit evidence of a group audit.
Third-party auditor
Component auditor
External auditor
Independent auditor
Component auditor
A component auditor rightfully conducts audit procedures of a component of a larger group audit.
Example Question #6 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Auditors communication with predecessor auditor must be
neither a or b
either a or b
Written
Verbal
either a or b
Among the items communicated with predecessor auditors are any disagreements with management. The purpose of this communication is to disclose any attempt to circumvent the applications of GAAP.
Example Question #7 : Quality Control, Engagement Acceptance, Planning, & Internal Control
The engagement letter specifically mentions
The responsibility of the AICPA
The responsibility of PCAOB
The auditor’s responsibility
The responsibility of SEC
The auditor’s responsibility
Auditors' communication with predecessor auditor may be either oral or in written form. The preferred standard however is written.
Example Question #1 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Communication with predecessor auditor should include:
Predecessors agreement with the change in auditors
An assessment of management performance
Disagreements with management related to accounting or auditing issues
Information regarding appropriate fees
Disagreements with management related to accounting or auditing issues
In developing an audit plan, the engagement partner should identify the scope of the audit. Management is not involved in determining what opinion may be given by the auditors.
Example Question #2 : Quality Control, Engagement Acceptance, Planning, & Internal Control
At a minimum, an understanding with a client should include:
The auditor's opinion regarding whether the financial statements are free of material misstatement
The assessed level of the risk of material misstatement
The objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor
The specific audit procedures the auditor plans to perform
The objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor
At a minimum, an understanding with a client should include the objectives and limitations of the engagement, as well as the responsibilities of management and of the auditor.
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