AUD — Auditing & Attestation

A CPA firm is auditing a large public company. The audit partner's spouse has just been promoted to a new role at the audit client. Under which of the following scenarios would the firm's independence be considered IMPAIRED according to AICPA and PCAOB independence rules?

During the acceptance phase of a new audit engagement for a private company, the successor auditor requests permission to make inquiries of the predecessor auditor. The potential client refuses to grant permission. What is the most appropriate course of action for the successor auditor?

A CPA firm is designing its system of quality control. Which of the following policies would most likely satisfy the element of 'Engagement Performance' regarding consultation?

An auditor is establishing an understanding with a client regarding the services to be performed for a non-issuer. Which of the following must be included in the engagement letter?

Under the AICPA Code of Professional Conduct, which of the following fee arrangements is prohibited for an audit client?

An auditor is documenting the results of an audit engagement. According to auditing standards, which of the following is the primary requirement regarding the completion of audit documentation?

Which of the following situations most likely represents a violation of the AICPA Code of Professional Conduct regarding 'Acts Discreditable'?

In an audit of a non-issuer, the auditor discovers a material weakness in internal control. The auditor is not engaged to perform an audit of internal control over financial reporting. Which of the following is the auditor's responsibility regarding communication?

Which of the following statements best describes the concept of 'Professional Skepticism' as defined in auditing standards?

A CPA firm is subject to the independence rules of the Government Accountability Office (GAO) because it audits a government entity. Which of the following non-audit services would most likely impair independence under the GAO 'Yellow Book' standards?

According to the AICPA Code of Professional Conduct, which of the following actions by a CPA would be considered a violation of the 'Integrity and Objectivity' rule?

An auditor is determining the appropriate materiality for a new audit client. Which of the following factors would most likely lead the auditor to select a LOWER percentage for determining performance materiality?

An auditor uses the Audit Risk Model (AR = IR x CR x DR) to plan the audit. If the auditor assesses Inherent Risk (IR) as High and Control Risk (CR) as High, how must the auditor manipulate Detection Risk (DR) to maintain a low overall Audit Risk?

Which of the following factors would most likely increase Inherent Risk for the valuation assertion of the inventory account?

An auditor is assessing control risk for the sales cycle. The auditor observes that the software automatically prevents the processing of a sales order if the customer's credit limit is exceeded. This is an example of:

While understanding the entity and its environment, the auditor learns that the industry is experiencing a significant downturn and price war. Which component of the fraud triangle does this most directly affect?

Which of the following scenarios represents the greatest segregation of duties conflict in the revenue cycle?

An auditor is performing analytical procedures during the planning stage. The auditor notes that the company's gross margin has increased significantly while sales volume has remained flat. Which of the following is a plausible explanation for this relationship?

In the context of the COSO Internal Control framework, which of the following best describes the 'Monitoring' component?

An auditor decides to use the work of an internal auditor to assist in the audit of accounts payable. Which of the following steps is the external auditor REQUIRED to perform?

During the risk assessment of a manufacturing client, the auditor identifies that the company has complex derivative instruments used for hedging. The audit team lacks experience with these specific instruments. What is the most appropriate response?

Which of the following would be considered a 'General Control' in an IT environment?

An auditor is reviewing a client's use of a service organization for payroll processing. The auditor receives a Type 2 SOC 1 report. What does this report provide that a Type 1 report does not?

When planning an audit, the auditor should consider the concept of 'materiality' for the financial statements as a whole. Which of the following is the primary benchmark generally used for a profit-oriented entity?

An auditor identifies a risk of material misstatement due to fraud related to management override of controls. Which of the following procedures is REQUIRED to address this specific risk?

Which of the following statements correctly describes the relationship between 'Significant Risks' and internal control testing?

An auditor is planning the audit of a new client. Which of the following procedures is required to be performed regarding the client's opening balances?

Which of the following is a 'Control Activity' component of internal control?

An auditor is calculating the sample size for a test of controls using attribute sampling. Which of the following changes would result in a DECREASE in the required sample size?

In performing a search for unrecorded liabilities, which of the following procedures would be most effective?