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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 22 )

Updated On: 12-Feb-2026
Page 22 of 207
PDF with 1026 Questions

Before reporting on the financial statements of a U.S. entity that have been prepared in conformity with another country's accounting principles, an auditor practicing in the U.S. should:

  1. Understand the accounting principles generally accepted in the other country.
  2. Be certified by the appropriate auditing or accountancy board of the other country.
  3. Notify management that the auditor is required to disclaim an opinion on the financial statements.
  4. Receive a waiver from the auditor's state board of accountancy to perform the engagement.

Answer(s): A

Explanation:

Choice "a" is correct. Before reporting on the financial statements of a U.S. entity that have been prepared in conformity with another country's accounting principles, the auditor practicing in the U.S. should understand the accounting principles generally accepted in the other country. Choice "b" is incorrect. The auditor practicing in the U.S. would be able to report on the financial statements of the U.S. entity without obtaining certification in the other country. Choice "c" is incorrect. The auditor need not disclaim an opinion on the financial statements prepared in conformity with another country's accounting principles. Choice "d" is incorrect. A waiver to perform the engagement is not necessary.



In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of accounting principles to a specific transaction. The accountant's report should include a statement that:

  1. Any difference in the facts, circumstances, or assumptions presented may change the report.
  2. The engagement was performed in accordance with Statements on Standards for Consulting Services.
  3. The guidance provided is for management use only and may not be communicated to the prior or continuing auditors.
  4. Nothing came to the accountant's attention that caused the accountant to believe that the accounting principles violated GAAP.

Answer(s): A

Explanation:

Choice "a" is correct. The accountant's report on the application of accounting principles should include a statement that should any facts or circumstances differ from those presented to the accountant, the accountant's conclusions may change.
Choice "b" is incorrect. The report should state that the engagement was performed in accordance with "AICPA Standards," not statements on Standards for Consulting Services. Choice "c" is incorrect. The report's use is restricted to "specified parties," which may include parties other than management (e.g., the board of directors). Also, the preparers of the financial statements and the reporting accountant should consult with the entity's continuing accountant. Choice "d" is incorrect. The report does not provide negative assurance with respect to GAAP; rather, it may describe the appropriate accounting principles to be applied.



Blue, CPA, has been asked to render an opinion on the application of accounting principles to a specific transaction by an entity that is audited by another CP

  1. Blue may accept this engagement, but should:
  2. Consult with the continuing CPA to obtain information relevant to the transaction.
  3. Report the engagement's findings to the entity's audit committee, the continuing CPA, and management.
  4. Disclaim any opinion that the hypothetical application of accounting principles conforms with generally accepted accounting principles.
  5. Notify the entity that the report is for the general use of all interested parties.

Answer(s): A

Explanation:

Choice "a" is correct.
When rendering an opinion on the application of accounting principles to a specific transaction, the reporting CPA should consult with the continuing CPA to obtain information relevant to the transaction.
Choice "b" is incorrect. The reporting CPA has no obligation to report the engagement's findings to the continuing CPA. Generally, the report would be addressed to the requesting party (e.g., management, the board of directors, etc.).
Choice "c" is incorrect. There is no disclaimer in the report; however, the CPA does state that the preparers of the financial statements are responsible for proper accounting treatment. Choice "d" is incorrect. Use of the report is restricted to specified parties.



The financial statements of KCP America, a U.S. entity, are prepared for inclusion in the consolidated financial statements of its non-U.S. parent. These financial statements are prepared in conformity with the accounting principles generally accepted in the parent's country and are for use only in that country.
How may KCP America's auditor report on these financial statements?

I). A U.S.-style report (unmodified).
II). A U.S.-style report modified to report on the accounting principles of the parent's country.
III). The report form of the parent's country.

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): D

Explanation:

Choice "d" is correct. No - Yes - Yes.
When financial statements are prepared in conformity with the accounting principles generally accepted in the parent's country and are for use only in that country, the auditor may report using either a U.S.-style report modified to report on the accounting principles of the parent's country or the report form of the parent's country. Choices "a", "b", and "c" are incorrect, per the above Explanation.



Which of the following is true regarding the auditor's responsibility to report on information accompanying the basic financial statements in a client-prepared document?

  1. The auditor may report on information accompanying the basic financial statements in a clientprepared document only if he or she has been specifically engaged to do so.
  2. The auditor is required to express an opinion on whether information accompanying the basic financial statements in a client-prepared document is fairly stated in all material respects in relation to the financial statements taken as a whole.
  3. If an auditor chooses to report on information accompanying the basic financial statements in a clientprepared document, the report should include a description of the character of the audit work performed.
  4. If an auditor chooses to report on information accompanying the basic financial statements in a clientprepared document, the report should include an opinion on the information but should not describe the character of the audit work performed.

Answer(s): C

Explanation:

Choice "c" is correct. If an auditor chooses to report on information accompanying the basic financial statements in a client-prepared document, the report should include a description of both the character of the audit work performed and the degree of responsibility assumed. Choice "a" is incorrect. There is no requirement that the auditor be specifically engaged to report on such information. If auditing procedures have been applied to the information, the auditor is permitted to report thereon.
Choice "b" is incorrect. The auditor is permitted but not required to report on such information. Choice "d" is incorrect. If an auditor chooses to report on information accompanying the basic financial statements in a client-prepared document, the report should include an opinion on the information and a description of both the character of the audit work performed and the degree of responsibility assumed.






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