AICPA Exam CPA-Auditing Topic 2 Question 50 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 50
Topic #: 2

In performing an audit in accordance with Generally Accepted Government Auditing Standards (the "Yellow Book"), the auditor:

AAccepts less responsibility in conducting fieldwork than is accepted in a GAAS audit, since the specific requirements of the Generally Accepted Government Auditing Standards reduce required professional judgment.

BAccepts shared responsibility with Federal Inspectors General, who are equally responsible for compliance evaluation, control, and reporting.

CAccepts greater reporting responsibilities than accepted under a GAAS audit, since the auditor must report on compliance with laws, rules, and regulations, violations of which may affect financial statement amounts, and on the organization's internal control over financial reporting.

DAccepts equal reporting responsibilities with that accepted under GAAS audits, since compliance evaluation and reporting have implied financial statement implications and require expanded treatment as a material contingency.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. An auditor's reporting requirements under Generally Accepted Government Auditing Standards (GAGAS or the Yellow Book) are expanded to include reports on the audited entity's compliance with laws, rules, and regulations that have a material impact on the financial statements and on internal controls over financial reporting.

Rule: Reporting responsibilities under GAGAS are expanded to include:

1. Reports on compliance with laws, rules, and regulations, violations of which may affect financial statement amounts, and

2. Reports on internal control over financial reporting.

Choice 'a' is incorrect. Specific reporting requirements and other expanded audit standards associated with Yellow Book audits do not reduce professional judgment.

Choice 'b' is incorrect. Federal Inspectors General do not split their responsibilities with independent public accountants performing Yellow Book Audits.

Choice 'd' is incorrect. Although Yellow Book requirements represent logical extensions of generally accepted auditing standards, the specific responsibilities undertaken in an audit that requires application of the Yellow Book would not surface as a result of an audit under generally accepted auditing standards.

by Jose at May 06, 2022, 08:56 AM

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