Part 3
Question: ENPL2-0053
If, during an audit, the successor
auditor becomes aware of information that may indicate that financial
statements reported on by the predecessor auditor may require revision, the
successor auditor should
Answers
A: Ask the client to arrange a meeting among the three
parties to discuss the information and attempt to resolve the matter.
B: Notify the client and the predecessor auditor of the
matter and ask them to attempt to resolve it.
C: Notify the predecessor auditor who may be required to
revise the previously issued financial statements and auditor’s report.
D: Ask the predecessor auditor to arrange a meeting with the
client to discuss and resolve the matter.
Answer Explanations
A. Answer
A is correct because the auditor should not contact the predecessor auditor
directly due to the confidential relationship with the client.
B. Answer
B is incorrect because the auditor should not contact the predecessor auditor
without the client's permission.
C. Answer
C is incorrect because this communication should not occur without the client's
permission.
D. Answer
D is incorrect because the auditor should not communicate with the predecessor
auditor without the client's permission.
Hint
A confidential relationship exists
between a client and auditor.
Question: ENPL2-0054
A predecessor auditor
Answers
A: Must attempt communication with a successor auditor prior
to accepting the engagement.
B: Must attempt communication with a successor auditor after
the engagement has been accepted.
C: Must attempt communication with a successor auditor prior
to acceptance of the engagement and may choose to attempt communication after
the engagement has been accepted.
D: Is not required to attempt communication with a successor
since this is the successor’s responsibility.
Answer Explanations
A. Answer
A is incorrect because the successor auditor must attempt communication with a
predecessor prior to accepting the engagement.
B. Answer
B is incorrect because no communication is required after the engagement has
been accepted.
C. Answer
C is incorrect because no communication is required after the engagement has
been accepted.
D. Answer
D is correct because the successor auditor must attempt communication with the
predecessor auditor either prior to accepting the engagement, or after the
engagement has been accepted, or both. It is the successor's responsibility,
not the predecessor auditor's responsibility.
Hint
Determine who must attempt
communication between the predecessor and successor auditors.
Question: ENPL2-0055
The audit work performed by each
assistant should be reviewed to determine whether it was adequately performed
and to evaluate whether the
Answers
A: Audit has been performed by persons having adequate
technical training and proficiency as auditors.
B: Auditor’s system of quality control has been maintained at
a high level.
C: Results are consistent with the conclusions to be
presented in the auditor’s report.
D: Audit procedures performed are approved in the
professional standards.
Answer Explanations
A. Answer
A is incorrect because while determining that the audit has been performed by
persons having adequate technical training and proficiency as auditors is
important, this is accomplished by numerous procedures in addition to reviewing
audit work.
B. Answer
B is incorrect because CPA firms, not individual auditors within the firms,
have systems of quality control.
C. Answer
C is correct because AU 311 suggests that the work performed by each assistant
should be reviewed to determine whether it was adequately performed and to
evaluate whether the results are consistent with the conclusions to be
presented in the auditor's report.
D. Answer
D is incorrect because the professional standards do not in general approve
certain audit procedures.
Hint
Differences of opinion among audit
personnel must be resolved prior to the issuance of an opinion.
Question: ENPL2-0056
With respect to planning of a
year-end audit, which of the following statements is always true?
Answers
A: An engagement should not be accepted after the fiscal
year-end.
B: An inventory count must be observed at the balance sheet
date.
C: The client’s audit committee should not be told of the
specific audit procedures which will be performed.
D: It is an acceptable practice to carry out substantial
parts of the examination at interim dates.
Answer Explanations
A. Answer
A is incorrect because an audit may be accepted after the fiscal year-end.
However, the auditor should ascertain whether circumstances are likely to
permit an adequate audit and expression of an unqualified opinion.
B. Answer
B is incorrect because the inventory count need not be observed if it is
impracticable; however, the auditor must bear in mind that s/he has the burden
of justifying the use of alternate procedures. It is also incorrect because the
auditor's observation procedures may be performed either during or after the
end of the period under audit in cases of well-kept perpetual inventory
records.
C. Answer
C is incorrect because in certain circumstances the audit committee may be told
of specific audit procedures.
D. Answer
D is correct because it is an acceptable practice for the auditor to carry out
substantial parts of the examination at interim dates.
Hint
To lessen an auditor's seasonal
workload, procedures may be performed before the balance sheet date.
Question: ENPL2-0057
Which of the following is least likely to be included in the
auditor’s risk assessment process to identify and assess the risks of material
misstatement?
Answers
A: Identify risks.
B: Relate risks to what can go wrong at the relevant
assertion level.
C: Consider whether risks are of a magnitude that could
result in a misstatement that could be material.
D: Consider the likelihood that risks could result in
misstatements of an amount which is less than material.
Answer Explanations
A. Answer A is
incorrect. The risk assessment includes identification of risks.
B. Answer B is
incorrect. An auditor should relate risks to what can go wrong at the relevant
assertion level.
C. Answer C is
incorrect. An auditor should consider whether risks are of a magnitude that
could cause a material misstatement.
D. Answer D is
correct. An auditor must consider the likelihood of risks of material
misstatements, not misstatements less than material.
Hint
Find an inconsistency in the
replies.
Question: ENPL2-0058
Which of the following is most
likely to be considered a “further audit procedure?”
Answers
A: Communication with the predecessor auditor.
B: Preparation of an engagement letter.
C: Preparation of a flowchart of the sales function.
D: Performance of tests of controls.
Answer Explanations
A. Answer A is
incorrect. The communication with the predecessor auditor occurs while
establishing an understanding with the client, which is prior to the
performance of further audit procedures.
B. Answer B is
incorrect. The preparation of an engagement letter occurs during audit
planning, which is prior to the performance of further audit procedures.
C. Answer C is
incorrect. The preparation of a flowchart of the sales function relates most
directly to obtaining an understanding of the client, which is prior to the
performance of further audit procedures.
D. Answer D is
correct. Tests of controls and substantive procedures are further audit
procedures.
Hint
Further audit procedures are
performed after risk assessment.
Question: ENPL2-0059
In which circumstance is the
confirmation of receivables on October 31 most likely for a client with a
December 31 year-end?
Answers
A: Tests of controls have revealed that the disbursements
cycle is operating effectively.
B: The receivables balance is material.
C: Accounts were confirmed as of December 31 for the
preceding year’s audit.
D: Appropriate audit tests indicate that control risk for
receivables is low.
Answer Explanations
A. Answer
A is incorrect because auditors will ordinarily only confirm receivables prior
to year-end in circumstances where internal control over receivables, not
disbursements, is operating effectively.
B. Answer
B is incorrect because confirmation prior to year-end may be performed when
balances are material or immaterial.
C. Answer
C is incorrect because having confirmed receivables at year-end the preceding
year need not affect this year's decision.
D. Answer
D is correct because when control risk for receivables is low the auditor may
be more likely to confirm receivables at an interim date.
Hint
Identify the circumstance in which
the confirmation is most likely prior to year-end.
Question: ENPL2-0060
A CPA is required to comply with the
provisions of Statements on Standards for Accounting and Review Services when
|
Processing financial |
Consulting on accounting |
|
|
A. |
Yes |
Yes |
|
B. |
Yes |
No |
|
C. |
No |
Yes |
|
D. |
No |
No |
Answers
A: A.
B: B.
C: C.
D: D.
Answer Explanations
This answer is incorrect. Refer to
the correct answer explanation.
This answer is incorrect. Refer to
the correct answer explanation.
This answer is incorrect. Refer to
the correct answer explanation.
D. Answer
D is correct because the SSARS requirements do not apply to either the
processing of financial data for clients of other CPA firms or to consulting on
accounting matters. See AR 100 for these and additional services to which the
SSARS do not apply.
Hint
No tricks here.
Question: ENPL2-0061
Statements on Standards for
Accounting and Review Services establish standards and procedures for which of
the following engagements?
Answers
A: Assisting in adjusting the books of account for a
partnership.
B: Reviewing interim financial data required to be filed with
the SEC.
C: Processing financial data for clients of other accounting
firms.
D: Compiling an individual’s personal financial statement to
be used to obtain a mortgage.
Answer Explanations
A. Answer
A is incorrect. The SSARS do not apply when the CPA is assisting in adjusting
the books of account for a partnership or other organization.
B. Answer
B is incorrect. The SSARS only apply to nonpublic entities.
C. Answer
C is incorrect. The SSARS do not apply when processing the financial data for
clients of other accounting firms.
D. Answer
D is correct. The SSARS apply when a CPA either compiles or reviews the
financial statements of a nonpublic entity.
Hint
SSARS apply to nonpublic entities.
Question: ENPL2-0062
Blue Co., a privately held entity,
asked its tax accountant, Cook, a CPA in public practice, to reproduce Blue's
internally prepared interim financial statements on Cook's microcomputer when
Cook prepared Blue's quarterly tax return. Cook should not submit these
financial statements to Blue unless, as a minimum, Cook complies with the
provisions of
Answers
A: Statements on Responsibilities in Tax Practice.
B: Statements on Standards for Accounting and Review
Services.
C: Statements on Responsibilities in Unaudited Financial
Services.
D: Statements on Standards for Attestation Engagements.
Answer Explanations
A. Answer
A is incorrect because Statements on Responsibilities in Tax Practice do not
represent enforceable standards in this situation and also because they do not
directly address such interim financial statements (TX 102).
B. Answer
B is correct because Statements on Standards for Accounting and Review Services
apply (AR 100) and require that the CPA who wishes to submit such financial
statements to a client must, at a minimum, meet the compilation requirements.
C. Answer
C is incorrect because there are no statements referred to as "Statements
on Responsibilities in Unaudited Financial Services."
D. Answer
D is incorrect because no attest engagement is involved in this situation.
Hint
What is the minimum CPA service for
financial statements?
Question: ENPL2-0063
A CPA should not submit unaudited
financial statements of a nonpublic company to a client or others unless, as a
minimum, the CPA complies with the provisions applicable to
Answers
A: Compilation engagements.
B: Review engagements.
C: Statements on auditing standards.
D: Attestation standards.
Answer Explanations
A. Answer
A is correct. An accountant should not submit such information unless he has,
at a minimum, complied with the provisions applicable to a compilation
engagement.
B. Answer
B is incorrect. Reviews represent attestation services with procedures and
responsibilities in excess of the minimum provisions necessary.
C. Answer
C is incorrect. Statements on Auditing Standards relate primarily to audits and
represent procedures and responsibilities in excess of the minimum provisions
necessary.
D. Answer
D is incorrect. Attestation standards represent procedures and responsibilities
in excess of the minimum provisions necessary.
Hint
Which of the answers results in no
assurance?
Question: ENPL2-0064
An accountant who is not independent
of a client is precluded from issuing a
Answers
A: Compilation report on historical financial statements.
B: Compilation report on prospective financial statements.
C: Special report on compliance with contractual agreements.
D: Report on consulting services.
Answer Explanations
A. Answer
A is incorrect. Compilations are considered accounting services, not
attestation services and therefore do not preclude an accountant who is not
independent from issuing this type of report.
B. Answer
B is incorrect. Compilations are considered accounting services, not
attestation services and therefore do not preclude an accountant who is not
independent from issuing this type of report.
C. Answer
C is correct because providing special reports is an attestation service and
therefore requires the accountant to be independent.
D. Answer
D is incorrect because while objectivity is required when performing consulting
services, independence is not required.
Hint
An attestation service includes
special reports.
Question: ENPL2-0065
Which of the following replies does
not include a portion of the "Special Committee on Assurance
Services" definition of assurance services?
Answers
A: A consulting service.
B: Improve the quality of information.
C: Improve the context of information.
D: For decision makers.
Answer Explanations
A. Answer
A is correct because the Special Committee on Assurance Services, also referred
to as the Elliott Committee, defined assurance services as independent
professional services—not "a consulting service"—that improve the
quality of information, or its context, for decision makers.
This answer is incorrect. Refer to
the correct answer explanation.
This answer is incorrect. Refer to
the correct answer explanation.
This answer is incorrect. Refer to
the correct answer explanation.
Hint
Recall the broadness of the
Committee's definition.
Question: ENPL2-0066
In connection with the element of
inspection, a CPA firm's system of quality control should ordinarily provide
for the maintenance of
Answers
A: A file of minutes of staff meetings.
B: Updated personnel files.
C: Documentation to demonstrate compliance with its policies
and procedures.
D: Documentation to demonstrate compliance with peer review
directives.
Answer Explanations
This answer is incorrect. Refer to
the correct answer explanation.
This answer is incorrect. Refer to
the correct answer explanation.
C. Answer
C is correct. The requirement is to determine what inspection, an element of
quality control, should include. Answer C is the most accurate because it
provides for maintenance of documentation of the various quality control
policies and procedures. Thus, it is all encompassing. Answers A, B, and D,
while desirable, relate to more specific areas and are thus less complete than
C.
This answer is incorrect. Refer to
the correct answer explanation.
Hint
One answer is more complete than the
others.
Question: ENPL2-0067
Which of the following is not an
element of quality control for a CPA firm?
Answers
A: Independence, integrity and objectivity.
B: Acceptance and continuance of clients and engagements.
C: Engagement supervision.
D: Monitoring.
Answer Explanations
A. Answer
A is incorrect. Independence, integrity, and objectivity are elements of
quality control.
B. Answer
B is incorrect. Acceptance and continuance of clients and engagements is an
element of quality control.
C. Answer
C is correct. Engagement supervision is not an element of quality control. The
five elements of quality control are (1) independence, integrity, and
objectivity, (2) personnel management, (3) acceptance and continuance of
clients and engagements, (4) engagement performance, and (5) monitoring.
D. Answer
D is incorrect because Statements on Quality Control Standards provide guidance
for CPA firms in meeting their responsibility to provide professional services
that conform with professional standards.
Hint
Recall the quality control
standards.
Question: ENPL2-0068
As guidance for measuring the
quality of the performance of an auditor, the auditor should refer to
Answers
A: Statements of the Financial Accounting Standards Board.
B: Generally accepted auditing standards.
C: Interpretations of the Statements on Auditing Standards.
D: Statements on Quality Control Standards.
Answer Explanations
A. Answer
A is incorrect because Statements of the Financial Accounting Standards Board
deal with GAAP which are used to prepare financial statements, but do not
address the auditor's examination of the statements.
B. Answer
B is correct because auditors are responsible for compliance with generally
accepted auditing standards and comparison of their performance against these
standards is appropriate.
C. Answer
C is incorrect because while Interpretations of the Statements on Auditing
Standards provide timely guidance on the application of certain pronouncements
of the Auditing Standards Board, their coverage is less complete than the
standards.
D. Answer
D is incorrect because Statements on Quality Control Standards provide guidance
for CPA firms in meeting their responsibility to provide professional services
that conform with professional standards.
Hint
Which standards govern the work of
an auditor?
Question: ENPL2-0069
A basic objective of a CPA firm is
to provide professional services to conform with professional standards.
Reasonable assurance of achieving this basic objective is provided through
Answers
A: Continuing professional education.
B: A system of quality control.
C: Compliance with generally accepted reporting standards.
D: A system of peer review.
Answer Explanations
A. Answer
A is incorrect because a system of quality control is necessary to provide the
CPA firm with reasonable assurance that it is conforming to professional
standards. Continuing professional education is only a part of a firm's system
of quality control.
B. Answer
B is correct because a system of quality control is necessary to provide a CPA
firm with reasonable assurance that it is conforming to generally accepted
auditing standards.
C. Answer
C is incorrect because it relates only to reporting standards.
D. Answer
D is incorrect because a system of quality control is necessary to provide the
CPA firm with reasonable assurance that it is conforming to professional
standards. A system of peer review is only a part of a firm's system of quality
control.
Hint
Which of the answer choices has the
broadest focus?
Question: ENPL2-0070
Which of the following types of
services is most directly designed to improve the quality of information, or
its context, for decision makers?
Answers
A: Assurance services
B: Attestation services
C: Audit services
D: Consulting services
Answer Explanations
A. Answer
A is correct because the Special Committee on Assurance Services (the Elliott
Committee), defined assurance services as independent professional services
that improve quality of information, or its context, for decision makers.
B. Answer
B is incorrect because attestation services are defined as written conclusions
about the reliability of the written assertions of another party.
C. Answer
C is incorrect because audit services are defined as examinations of financial
statements that result in an opinion of those financial statements.
D. Answer
D is incorrect because consulting services are defined as recommendations based
on the objectives of the engagement.
Hint
Recall the Elliott Committee.
Question: ENPL2-0071
In performing an attestation
engagement, a CPA typically
Answers
A: Supplies litigation support services.
B: Assesses control risk at a low level.
C: Expresses a conclusion about the assertion on the subject
matter.
D: Provides management consulting advice.
Answer Explanations
A. Answer
A is incorrect because most litigation support services are not attest
engagements.
B. Answer
B is incorrect because control risk need not generally be assessed at a low
level on attestation engagements; also, control may not be of major importance
on some attest engagements.
C. Answer
C is correct because, when performing an attest engagement, a CPA expresses a
conclusion about the assertion on the subject matter.
D. Answer
D is incorrect because most management consulting engagements are not
attestation engagements.
Hint
Recall the definition of an
attestation engagement.
Question: ENPL2-0072
Which of the following professional
services would be considered an attest engagement?
Answers
A: A management consulting engagement to provide computerized
advice to a client.
B: An engagement to report on compliance with statutory
requirements.
C: An income tax engagement to prepare federal and state tax
returns.
D: The compilation of financial statements from a client’s
accounting records.
Answer Explanations
A. Answer
A is incorrect because management consulting engagements are not considered
attest engagements.
B. Answer
B is correct because a report on compliance with statutory requirements might
be structured as an attest engagement in which the required "written
assertion" relates to such compliance.
C. Answer
C is incorrect because tax returns preparations are not considered attest
engagements.
D. Answer
D is incorrect because compilations are considered nonattest engagements.
Hint
An attest engagement requires a
written assertion.
Question: ENPL2-0073
The technical standards that apply
to consulting services engagements require the practitioner to do all of the
following except
Answers
A: Maintain independence from the client.
B: Give support for and clearly identify as estimates any
quantifiable results that are based on estimates.
C: Obtain an understanding concerning the nature, scope, and
limitations of the consulting advisory services engagement to be performed.
D: Take no position which might impair the practitioner’s
objectivity.
Answer Explanations
A. Answer
A is correct because independence is not required.
B. Answer
B is incorrect because estimates are to be supported and clearly identified.
C. Answer
C is incorrect because an understanding of the nature of the engagement must be
obtained.
D. Answer
D is incorrect because an accountant is to maintain objectivity.
Hint
This differs from audit engagements.
Question: ENPL2-0074
A CPA firm's personnel partner
periodically studies the CPA firm's personnel advancement experience to
ascertain whether individuals increased degrees of responsibility. This is
evidence of the CPA firm's adherence to prescribed standards of
Answers
A: Quality control.
B: Due professional care.
C: Supervision and review.
D: Fieldwork.
Answer Explanations
A. Answer
A is correct because the seventh quality control standard requires that a firm
establish policies and procedures pertaining to personnel advancement.
B. Answer
B is incorrect because due professional care, the third general standard,
pertains to the performance of the examination and the preparation of the
report.
C. Answer
C is incorrect because proper supervision and review pertains to the first
standard of fieldwork which also focuses on the performance of audits.
D. Answer
D is incorrect because the three fieldwork standards pertain to planning and
supervision (AU 310), the auditor's study and evaluation of internal control
(AU 319), and the collection of evidential matter (AU 326).
Hint
There is a standard which requires
established policies and procedures pertaining to personnel advancement.
Question: ENPL2-0075
The objective of quality control
mandates that a public accounting firm should establish policies and procedures
for professional development which provide reasonable assurance that all
entry-level personnel
Answers
A: Prepare working papers which are standardized in form and
content.
B: Have the knowledge required to enable them to fulfill
responsibilities assigned.
C: Will advance within the organization.
D: Develop specialties in specific areas of public
accounting.
Answer Explanations
A. Answer
A is incorrect because preparing working papers which are standardized in form
and content is an objective which is more specific than those that are
contemplated in the elements of quality control.
B. Answer
B is correct because one of the quality control considerations for a firm of
independent auditors is that the policies and procedures for professional
development should be established to provide reasonable assurance that
personnel have the knowledge required to enable them to fulfill
responsibilities assigned.
C. Answer
C is incorrect because it is an objective which is more specific than those
that are contemplated in the elements of quality control.
D. Answer
D is incorrect because it is an objective which is more specific than those
that are contemplated in the elements of quality control.
Hint
Which of the answer choices would
most directly affect the quality of the auditor's work?
Question: ENPL2-0076
A CPA establishes quality control
policies and procedures for deciding whether to accept a new client or continue
to perform services for a current client. The primary purpose for establishing
such policies and procedures is
Answers
A: To enable the auditor to attest to the integrity or
reliability of a client.
B: To comply with the quality control standards established
by regulatory bodies.
C: To minimize the likelihood of association with clients
whose management lacks integrity.
D: To lessen the exposure to litigation resulting from
failure to detect irregularities in client financial statements.
Answer Explanations
A. Answer
A is incorrect because auditors attest to the fairness of financial statements,
not the integrity or reliability of a client.
B. Answer
B is incorrect because while quality control policies for acceptance of new
clients are required by quality control standards, the primary purpose is to
avoid clients whose management lacks integrity.
C. Answer
C is correct because policies and procedures should be established for deciding
whether to accept or continue a client in order to minimize the likelihood of
association with clients whose management lacks integrity.
D. Answer
D is incorrect because the primary and immediate purpose of quality control
policies over accepting new clients is to avoid clients who lack integrity,
which may indirectly lessen exposure to litigation.
Hint
Auditors must rely on the
representations of client management.
Question: ENPL2-0077
Within the context of quality
control, a primary purpose of personnel management activities is to enable a
CPA firm to provide personnel within the firm with
Answers
A: Technical training that assures proficiency as an auditor.
B: Professional education that is required in order to
perform with due professional care.
C: Knowledge required to fulfill assigned responsibilities
for consulting engagements.
D: Knowledge required in order to perform a peer review.
Answer Explanations
A. Answer
A is incorrect because quality control standards apply to all auditing,
accounting, and review services, not only auditing.
B. Answer
B is incorrect because while performing responsibilities with due professional
care is essential, personnel management policies relate more directly to
personnel hiring, assignment, professional development, and advancement
activities.
C. Answer
C is correct the quality control standards relate to a firm's accounting and
auditing practice.
D. Answer
D is incorrect because the emphasis of such education is not primarily on
obtaining peer review skills.
Hint
Continuing professional education
benefits both the individual and the CPA firm.
Question: ENPL2-0078
A CPA in public practice must be
independent in fact and appearance when providing which of the following
services?
|
Preparation tax return |
Compilation of forecast |
Compilation of personal |
|
|
A. |
Yes |
No |
No |
|
B. |
No |
Yes |
Yes |
|
C. |
No |
No |
Yes |
|
D. |
No |
No |
No |
Answers
A: A.
B: B.
C: C.
D: D.
Answer Explanations
A. Answer
A is incorrect. Preparing tax returns is not considered an attestation service,
therefore the CPA need not be independent
B. Answer
B is incorrect. Compiling forecasts is not considered an attestation service,
therefore the CPA need not be independent.
C. Answer
C is incorrect. Compiling financial statements is not considered an attestation
service, therefore the CPA need not be independent.
D. Answer
D is correct. An auditor need only be independent when providing attestation
services. Preparing tax returns and compiling forecasts or financial statements
are not considered attestation services, therefore the CPA need not be
independent.
Hint
Independence is required for audits
and reviews.
Question: ENPL2-0079
The first general standard requires
that the examination of financial statements is to be performed by a person or
persons having adequate technical training and
Answers
A: Independence with respect to the financial statements and
supplementary disclosures.
B: Exercising professional care as judged by peer reviewers.
C: Proficiency as an auditor which likely has been acquired
from previous experience.
D: Objectivity as an auditor as verified by proper
supervision.
Answer Explanations
A. Answer
A is incorrect because independence pertains to the second general standard.
B. Answer
B is incorrect because peer reviewers are not the primary judges of whether
professional care is being exercised.
C. Answer
C is correct because the first general standard requires that the examination
be performed by a person or persons having adequate technical training and
proficiency as an auditor which has been achieved by formal education and by
previous experience.
D. Answer
D is incorrect because objectivity relates more directly to the independence
standard.
Hint
No tricks here.
Question: ENPL2-0080
Rogers & Co., CPAs, policies
require that all members of the audit staff submit weekly time reports to the
audit manager, who then prepares a weekly summary work report regarding
variance from budget for Rogers' review. This provides written evidence of
Rogers & Co.'s professional concern regarding compliance with which of the
following generally accepted auditing standards?
Answers
A: Quality control.
B: Due professional care.
C: Adequate review.
D: Adequate planning.
Answer Explanations
A. Answer
A is incorrect because quality control is not an explicit part of generally
accepted auditing standards.
B. Answer
B is incorrect because due professional care, while certainly relevant to the
situation described is less complete than adequate planning.
C. Answer
C is incorrect because adequate review is not an explicit part of the generally
accepted auditing standards.
D. Answer
D is correct because the weekly time reports are being used to meet the first
standard of fieldwork. The work is to be adequately planned, and assistants, if
any, are to be properly supervised. Thus, the budget is prepared during the
planning stage of the audit and the analysis of variances from budget is used
as a part of the supervision process.
Hint
The budget is prepared during the
planning stage of the audit.
Question: ENPL2-0081
The third general standard states
that due care is to be exercised in the performance of the examination. This
standard means that a CPA who undertakes an engagement assumes a duty to
perform each audit
Answers
A: As a professional possessing the degree of skill commonly
possessed by others in the field.
B: In conformity with generally accepted accounting
principles.
C: With reasonable diligence and without fault or error.
D: To the satisfaction of governmental agencies and investors
who rely upon the audit.
Answer Explanations
A. Answer
A is correct because the level of skill necessary is that commonly possessed by
other professionals in the same employment.
B. Answer
B is incorrect because an audit is performed in conformity with generally
accepted auditing standards, not generally accepted accounting principles.
C. Answer
C is incorrect because no professional can guarantee performance without fault
or error.
D. Answer
D is incorrect because while various governmental and user groups should be
satisfied with the nature of audits, the CPA is to possess the requisite
skills.
Hint
There is a required level of skill
under the third general standard.
Question: ENPL2-0082
The exercise of due professional
care requires that an auditor
Answers
A: Examine all available corroborating evidence.
B: Critically review the judgment exercised at every level of
supervision.
C: Reduce control risk below the maximum.
D: Attain the proper balance of professional experience and
formal education.
Answer Explanations
A. Answer
A is incorrect because auditors generally sample from the available
corroborating evidence and do not examine all available corroborating evidence.
B. Answer
B is correct because the exercise of due professional care (the third general
standard) requires critical review at every level of supervision of the work
done and the judgment exercised by those assisting in the audit.
C. Answer
C is incorrect because control risk may be assessed at the maximum level.
D. Answer
D is incorrect because a proper balance of professional experience and formal
education relates more directly to the first general standard concerning
technical training and proficiency as an auditor.
Hint
A critical review is required in the
exercise of due professional care.
Question: ENPL2-0083
When an accountant is not
independent, the accountant is precluded from issuing a
Answers
A: Compilation report.
B: Review report.
C: Management advisory report.
D: Tax planning report.
Answer Explanations
A. Answer
A is incorrect because AR 100 states that an accountant who is not independent
may issue a compilation report.
B. Answer
B is correct because AR 100 requires the accountant who performs a review to be
independent (because it is an attestation service).
C. Answer
C is incorrect because Article IV of the Code of Professional Conduct states
that the appearance of independence is not required in the case of management
advisory services.
D. Answer
D is incorrect because Article IV of the Code of Professional Conduct states
that the appearance of independence is not required in the case of tax
practice.
Hint
An accountant must be independent
for attestation services.
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