AICPA CPA-Auditing Exam Questions

Choice 'd' is correct. When obtaining an understanding of an entity's internal control in a financial statement audit, an auditor is not obligated to search for significant deficiencies in the operation of internal control.

Choice 'a' is incorrect. In order to determine the nature, timing and extent of tests to be performed, an auditor must determine whether the control activities have been implemented.

Choice 'b' is incorrect. An auditor is required to perform procedures to confirm his/her understanding of the internal control systems' design, and to determine whether relevant controls have been implemented.

Choice 'c' is incorrect. An auditor is required to document his or her understanding of the entity's internal control components, even if he or she intends to use a substantive approach.

Choice 'c' is correct. Management's refusal to furnish a written representation letter constitutes a limitation on the scope sufficient to preclude an unqualified opinion.

Choice 'a' is incorrect. Engaging the auditor after the year-end physical count is completed need not preclude an unqualified opinion if the auditor can apply satisfactory alternative audit procedures.

Choice 'b' is incorrect. Failure to correct a material internal accounting control weakness that had been identified during the prior year's audit need not preclude an unqualified opinion, although it may require the auditor to apply extended auditing procedures.

Choice 'd' is incorrect. Inability to review the predecessor's prior year audit documentation may cause the successor auditor more work but need not preclude an unqualified opinion in the current year.

Choice 'b' is correct. Any report issued on significant deficiencies should indicate that providing assurance on internal control was not the purpose of the audit.

Choice 'a' is incorrect. The auditor should communicate significant deficiencies to management and those charged with governance, but is not required to request a meeting with management one level above the source of the reportable conditions, to discuss suggestions for remedial action.

Choice 'c' is incorrect. Significant deficiencies discovered and communicated at an interim date do not need to be reexamined with tests of controls before completing the engagement.

Choice 'd' is incorrect. Suggestions concerning administration efficiencies and business strategies may be communicated in the same report with significant deficiencies (the significant deficiencies must be separately identified, however).

Choice 'a' is correct. An auditor is required to communicate certain matters to those charged with governance, including disagreements with management about significant audit adjustments, whether or not satisfactorily resolved.

Choice 'b' is incorrect. Written communications should include a limitation on the use of the communication.

Choice 'c' is incorrect. The auditor is not required to distribute the report to management, especially since certain matters might be inappropriate for discussion with management.

Choice 'd' is incorrect. The auditor is not required to make the communication before the auditor's report on the financial statements is finalized, as long as the communication occurs on a timely basis. (Note, however, that for audits of issuers, the communication must be made before the auditor's report is filled with the SEC.)

Choice 'a' is correct. When determining the sample size for a test of controls, the auditor should consider the expected deviation rate (which is the auditor's best estimate of the deviation rate in the population before the sampling plan is executed), the tolerable deviation rate, and the allowable risk of assessing control risk too low.

Choice 'b' is incorrect. The upper deviation rate is used to evaluate a balance after a sampling plan has been performed, not to determine the sample size for a test of controls.

Choices 'c' and 'd' are incorrect. The risk of incorrect acceptance and risk of incorrect rejection are considered in direct tests of balances (i.e., substantive tests), not in tests of controls.