CPA AUD Practice Exam 3

A CPA firm is performing an audit of a nonissuer in accordance with GAO Government Auditing Standards (the Yellow Book). The auditor has been asked to perform a non-audit service: preparing the entity's indirect cost proposal for a federal grant. The auditor has determined that this service creates a self-review threat. Which of the following statements BEST describes the auditor's responsibility regarding independence?

During the audit of an issuer, the engagement partner learns that the firm's tax partner, who provides 15 hours of tax services to the audit client annually, has a spouse who just purchased 50 shares of the client's stock. The stock is held in a blind trust. Under PCAOB and SEC independence rules, which of the following conclusions is CORRECT?

An auditor is planning an audit of a nonissuer's financial statements. The auditor decides to use the work of the entity's internal audit function to obtain audit evidence. Which of the following factors would LEAST likely influence the auditor's determination of the extent to which to use the internal auditors' work?

An auditor is assessing control risk for a nonissuer's revenue cycle. The auditor identifies that the entity uses a complex IT system where sales orders are automatically processed, credit limits are checked via an algorithm, and invoices are generated without manual intervention. In this environment, which of the following strategies is MOST appropriate?

During the audit of a manufacturing company's inventory, the auditor utilizes a variables sampling plan to estimate the total value of inventory. The recorded book value is $5,000,000. The auditor's sample results indicate a projected misstatement of $150,000 (overstatement). The allowance for sampling risk is calculated at $75,000. Tolerable misstatement is $200,000. Which of the following conclusions is MOST appropriate?