Cisco®
CompTIA
Checkpoint
ISC
EC-Council
EXIN
Fortinet
ITIL®
Juniper
Microsoft
VMware
Avaya
SAP
Google
Salesforce
Amazon
Palo Alto Networks
ISC2
All Vendors
  2. Home
  3. Exams
  4. AICPA
  5. CPA-Auditing

Free AICPA CPA-Auditing Exam Questions (page: 13)

Page 13 of 130
PDF with 1026 Questions

Which of the following procedures would an auditor most likely perform in obtaining evidence about subsequent events?

  1. Determine that changes in employee pay rates after year-end were properly authorized.
  2. Recompute depreciation charges for plant assets sold after year-end.
  3. Inquire about payroll checks that were recorded before year-end but cashed after year-end.
  4. Investigate changes in long-term debt occurring after year-end.

Answer(s): D

Explanation:

Choice "d" is correct. In obtaining evidence about subsequent events, an auditor would investigate changes in long-term debt occurring after year-end to determine if there was an unrecorded liability as of the end of the year. In addition, subsequent sales of LT debt require footnote disclosure. Choice "a" is incorrect. Changes in employee pay rates occurring after year-end would have no effect on the year under audit.
Choice "b" is incorrect. Plant assets sold after the end of the year (that were not related to a current year transaction such as a discontinued operation) have no impact on the current year's financial statements.
Choice "c" is incorrect.
Following up on payroll checks that were cashed after year-end is generally not the most effective way to audit accrued payroll and would provide little evidence about subsequent events.



An auditor is considering whether the omission of a substantive procedure considered necessary at the time of an audit may impair the auditor's present ability to support the previously expressed opinion. The auditor need not apply the omitted procedure if the:

  1. Financial statements and auditor's report were not distributed beyond management and the board of directors.
  2. Auditor's previously expressed opinion was qualified because of a departure from GAAP.
  3. Results of other procedures that were applied tend to compensate for the procedure omitted.
  4. Omission is due to unreasonable delays by client personnel in providing data on a timely basis.

Answer(s): C

Explanation:

Choice "c" is correct.
When the auditor concludes that an auditing procedure considered necessary at the time of the audit was omitted, the auditor should assess the importance of the procedure to the present ability to support the previously issued opinion. The results of other procedures that were applied may tend to compensate for the one omitted or make its omission less important. Choice "a" is incorrect. If a procedure has been omitted, the auditor must consider whether other parties may be relying on the financial statements, even if the audit report had limited distribution. Choice "b" is incorrect. The fact that the previous opinion was qualified does not negate the need to apply the omitted procedure.
Choice "d" is incorrect. Delays by client personnel may extend audit work, but do not provide a reason for omitting a procedure.



Subsequent to the issuance of an auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next:

  1. Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information.
  2. Request that management disclose the newly discovered information by issuing revised financial statements.
  3. Issue revised pro forma financial statements taking into consideration the newly discovered information.
  4. Give public notice that the auditor is no longer associated with financial statements.

Answer(s): A

Explanation:

Choice "a" is correct.
When subsequently discovered information is found both to be reliable and to have existed at the date of the auditor's report, the auditor should determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information.
Choice "b" is incorrect. The auditor would request that management disclose the newly discovered information only after determining whether there are persons relying on the information. Choice "c" is incorrect. Management, not the auditor, may issue revised financial statements. Choice "d" is incorrect. The auditor would give public notice that he/she is no longer associated with the FS only after determining that there are persons relying on the information and only if the client refuses to issue revised FS.



On March 15, X4, Kent, CPA, issued an unqualified opinion on a client's audited financial statements for the year ended December 31, X3. On May 4, X4, Kent's internal inspection program disclosed that engagement personnel failed to observe the client's physical inventory. Omission of this procedure impairs Kent's present ability to support the unqualified opinion. If the stockholders are currently relying on the opinion, Kent should first:

  1. Advise management to disclose to the stockholders that Kent's unqualified opinion should not be relied on.
  2. Undertake to apply alternative procedures that would provide a satisfactory basis for the unqualified opinion.
  3. Reissue the auditor's report and add an explanatory paragraph describing the departure from generally accepted auditing standards.
  4. Compensate for the omitted procedure by performing tests of controls to reduce audit risk to a sufficiently low level.

Answer(s): B

Explanation:

Choice "b" is correct. In the event of omitted audit procedures, the auditor should first attempt to perform alternative procedures in order to ascertain whether the original opinion can be relied upon. Choice "a" is incorrect. The auditor would only advise the client to notify all stockholders and other financial statement users that the unqualified opinion cannot be relied upon if the auditor cannot satisfy himself (with alternative procedures) as to the propriety of the original opinion. Choice "c" is incorrect. The auditor may need to reissue the audit report if the auditor is unable to satisfy himself using alternative procedures; the opinion issued should be qualified or disclaimed, due to the scope limitation.
Choice "d" is incorrect. Tests of controls are not appropriate alternative procedures.



Which of the following events occurring after the issuance of an auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

  1. A technological development that could affect the entity's future ability to continue as a going concern.
  2. The discovery of information regarding a contingency that existed before the financial statements were issued.
  3. The entity's sale of a subsidiary that accounts for 30% of the entity's consolidated sales.
  4. The final resolution of a lawsuit explained in a separate paragraph of the auditor's report.

Answer(s): B

Explanation:

Choice "b" is correct. With respect to events occurring after the issuance of an auditor's report, the auditor is only responsible for information that existed at the audit report date. Choice "a" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.
Choice "c" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.
Choice "d" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.



Wilson, CPA, obtained sufficient appropriate audit evidence to render an opinion on Abco's December 31, X1, financial statements on March 6, X2. A subsequent event requiring adjustment to the X1 financial statements occurred on April 10, X2, and came to Wilson's attention on April 24, X2. If the adjustment is made without disclosure of the event, Wilson's report ordinarily should be dated:

  1. March 6, X2.
  2. April 10, X2.
  3. April 24, X2.
  4. Using dual dating.

Answer(s): A

Explanation:

Choice "a" is correct. Since the financial statements were adjusted without disclosure of the event in the footnotes, Wilson's report should be dated as of March 6, X2, the date on which sufficient appropriate audit evidence was obtained.
Choice "b" is incorrect. An April 10, X2 report date would be used only if the event were disclosed and Wilson wanted to extend the responsibility for all significant events through April 10, X2. Choice "c" is incorrect. An April 24, X2 report date would be used only if the event were disclosed and Wilson wanted to extend the responsibility for all significant events through April 24, X2. Choice "d" is incorrect. Dual dating would only be used if the event were disclosed in the notes to the financial statements.



An auditor concludes that a substantive auditing procedure considered necessary during the prior period's audit was omitted.
Which of the following factors would most likely cause the auditor promptly to apply the omitted procedure?

  1. There are no alternative procedures available to provide the same evidence as the omitted procedure.
  2. The omission of the procedure impairs the auditor's present ability to support the previously expressed opinion.
  3. The source documents needed to perform the omitted procedure are still available.
  4. The auditor's opinion on the prior period's financial statements was unqualified.

Answer(s): B

Explanation:

Choice "b" is correct. The factor most likely to cause the auditor to promptly apply the omitted procedure would be if the omission impairs the auditor's present ability to support the previously expressed opinion.
Choice "a" is incorrect. The auditor would first need to determine whether the omission of the procedure impairs the ability to support the previously expressed opinion. It is possible that other procedures already performed tended to compensate for the omitted procedure, and therefore no further action would be necessary.
Choice "c" is incorrect. The availability of the source documents needed to perform the procedure has little bearing on whether the auditor determines that it is necessary to perform the procedure. Choice "d" is incorrect. The rendering of a clean opinion has little importance. The issue is "support of the previously expressed opinion," not what the opinion was.



After issuing a report, an auditor has no obligation to make continuing inquiries or perform other procedures concerning the audited financial statements, unless:

  1. Information, which existed at the report date and may affect the report, comes to the auditor's attention.
  2. Management of the entity requests the auditor to reissue the auditor's report.
  3. Information about an event that occurred after the date of the auditor's report comes to the auditor's attention.
  4. Final determinations or resolutions are made of contingencies that had been disclosed in the financial statements.

Answer(s): A

Explanation:

Choice "a" is correct. After issuing a report, an auditor has no obligation to make continuing inquiries or perform other procedures concerning the audited financial statements, unless information, which existed at the report date and may affect the report, comes to the auditor's attention. In this case the auditor would perform procedures to determine if the information affects the report and is important to the external users.
Choice "b" is incorrect. The auditor has no obligation to perform other procedures if management of the entity requests the auditor to reissue the auditor's report (if no significant changes have occurred since the report date).
Choice "c" is incorrect. The auditor has no obligation to perform other procedures if information about an event that occurred after the date of the auditor's report comes to the auditor's attention (and the auditor has not been asked to reissue the report). Choice "d" is incorrect. Most contingencies are eventually resolved; however, such resolution does not require the auditor to perform other procedures.



Viewing page 13 of 130
Viewing questions 97 - 104 out of 1026 questions



Post your Comments and Discuss AICPA CPA-Auditing exam prep with other Community members:

CPA-Auditing Exam Discussions & Posts