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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 24 )

Updated On: 12-Feb-2026
Page 24 of 207
PDF with 1026 Questions

An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. The auditor believes that the financial statements do not require revision, but the client is unwilling to revise or eliminate the material inconsistency in the other information. Under these circumstances, what action would the auditor most likely take?

  1. Consider the situation closed because the other information is not in the audited financial statements.
  2. Issue an "except for" qualified opinion after discussing the matter with the client's audit committee.
  3. Disclaim an opinion on the financial statements after explaining the material inconsistency in a separate explanatory paragraph.
  4. Revise the auditor's report to include a separate explanatory paragraph describing the material inconsistency.

Answer(s): D

Explanation:

Choice "d" is correct. If the auditor discovers a material inconsistency in other information accompanying the audited financial statements, the financial statements do not require revision, and the client refuses to eliminate or revise the inconsistency, the auditor should consider 1) revising the report to include a separate paragraph describing the inconsistency, 2) withholding the report, or 3) withdrawing from the engagement.
Choice "a" is incorrect. Even though the auditor has no responsibility to audit or otherwise corroborate other information accompanying the financial statements, the auditor has a responsibility to read the other information accompanying the financial statements for consistency and to identify any material misstatements of fact included therein. Choice "b" is incorrect. A qualified opinion is generally not warranted because the financial statements are fairly stated.
Choice "c" is incorrect. A disclaimer of opinion is generally not warranted because there is no limitation on scope.



In the standard report on condensed financial statements that are derived from a public entity's audited financial statements, a CPA should indicate that the:

  1. Condensed financial statements are prepared in conformity with another comprehensive basis of accounting.
  2. CPA has audited and expressed an opinion on the complete financial statements.
  3. Condensed financial statements are not fairly presented in all material respects.
  4. CPA expresses limited assurance that the financial statements conform with GAAP.

Answer(s): B

Explanation:

Choice "b" is correct. The auditor's report on condensed statements derived from audited statements should indicate (1) that the CPA audited and expressed an opinion on the complete financial statements,
(2) the date of the auditor's report on the complete financial statements, (3) the type of opinion expressed, and (4) whether, in the auditor's opinion, the information set forth in the condensed financial statements is fairly stated in all material respects in relation to the complete financial statements from which it was derived.
Choice "a" is incorrect. Condensed financial statements are not prepared in conformity with a comprehensive basis of accounting other than GAAP.
Choice "c" is incorrect. The auditor's report on condensed financial statements does not indicate whether they are fairly presented in all material respects; rather, the report indicates whether they are fairly presented in relation to the complete financial statements. Choice "d" is incorrect. The auditor does not express an opinion (or provide any assurance) on whether condensed FS conform with GAAP; only whether such statements are fairly stated in relation to the complete FS.



Investment and property schedules are presented for purposes of additional analysis in an auditor submitted document. The schedules are not required parts of the basic financial statements, but accompany the basic financial statements.
When reporting on such additional information, the measurement of materiality is the:

  1. Same as that used in forming an opinion on the basic financial statements taken as a whole.
  2. Lesser of the individual schedule of investments or schedule of property taken by itself.
  3. Greater of the individual schedule of investments or schedule of property taken by itself.
  4. Combined total of both the individual schedules of investments and property taken as a whole.

Answer(s): A

Explanation:

Choice "a" is correct.
When reporting on additional information accompanying the audited financial statements, the measure of materiality would be the same as that used in forming an opinion on the financial statements taken as a whole.
Choices "b", "c", and "d" are incorrect, based on the above Explanation.



What is an auditor's responsibility for supplementary information which is outside the basic financial statements, but required by the FASB?

  1. The auditor has no responsibility for required supplementary information as long as it is outside the basic financial statements.
  2. The auditor's only responsibility for required supplementary information is to determine that such information has not been omitted.
  3. The auditor should apply certain limited procedures to the required supplementary information, and report deficiencies in, or omissions of, such information.
  4. The auditor should apply tests of details of transactions and balances to the required supplementary information, and report any material misstatements in such information.

Answer(s): C

Explanation:

Choice "c" is correct. For additional supplementary information required by the FASB, the auditor should apply certain limited procedures to the information, and report deficiencies in or omissions of such information.
Choice "a" is incorrect. Required supplementary information is considered an essential part of financial reporting, and therefore certain limited procedures should be applied by the auditor. Choice "b" is incorrect. For additional supplementary information required by the FASB, the auditor should apply certain limited procedures to the information, and report deficiencies in or omissions of such information.
Choice "d" is incorrect. Certain limited procedures should be applied to required supplementary information, but this information need not be audited.



Which of the following best describes the auditor's reporting responsibility concerning information accompanying the basic financial statements in an auditor-submitted document?

  1. The auditor has no reporting responsibility concerning information accompanying the basic financial statements.
  2. The auditor should report on the information accompanying the basic financial statements only if the auditor participated in its preparation.
  3. The auditor should report on the information accompanying the basic financial statements only if the auditor did not participate in its preparation.
  4. The auditor should report on all the information included in the document.

Answer(s): D

Explanation:

Choice "d" is correct.
When an auditor submits a document containing audited financial statements to the client or others, the auditor has a responsibility to report on all the information included in the document.
Choice "a" is incorrect. The auditor does have additional reporting responsibilities concerning information that accompanies the basic financial statements in an auditor-submitted document. Choice "b" is incorrect. The auditor has responsibility to report on any additional information regardless of whether the auditor participated in the preparation of the information. Choice "c" is incorrect. The auditor has reporting responsibilities regardless of whether the auditor participated in the preparation of the information.






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