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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 28 )

Updated On: 12-Feb-2026
Page 28 of 207
PDF with 1026 Questions

An auditor's report contains the following sentences:
We did not audit the financial statements of JK Co., a wholly owned subsidiary, which statements reflect total assets and revenues constituting 17 percent and 19 percent, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for JK Co., is based solely on the report of the other auditors.
These sentences:

  1. Are an improper form of reporting.
  2. Divide responsibility.
  3. Disclaim an opinion.
  4. Qualify the opinion.

Answer(s): B

Explanation:

Choice "b" is correct. The report indicates a division of responsibility. Choice "a" is incorrect. Words describing the percentages of revenues and assets audited by other auditors are proper in dividing responsibility.
Choice "c" is incorrect. Dividing responsibility does not affect the unqualified opinion, nor does it require a disclaimer of opinion.
Choice "d" is incorrect. Dividing responsibility does not affect the unqualified opinion, nor does it require a qualified opinion.



Which of the following phrases should be included in the opinion paragraph when an auditor expresses a qualified opinion?

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

Answer(s): D

Explanation:

Choice "d" is correct. No - No.
A qualified opinion phrase is, "in our opinion, except for [ of problem] as discussed in the preceding paragraph . . ."
Choice "a" is incorrect, as "when read in conjunction with Note X" is not a phrase included in the opinion paragraph of a qualified opinion.
Choice "b" is incorrect, as "with the foregoing " is not a phrase included in the opinion paragraph of a qualified opinion.
Choice "c" is incorrect. Neither phrase is included in the opinion paragraph of a qualified opinion. (This is why it's important to memorize the qualifying phrases as well as the standard independent auditor's report.)



Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?

  1. Recomputing a sample of large-dollar transactions occurring after year-end for arithmetic accuracy.
  2. Investigating changes in stockholders' equity occurring after year-end.
  3. Inquiring of the entity's legal counsel concerning litigation, claims, and assessments arising after yearend.
  4. Confirming bank accounts established after year-end.

Answer(s): C

Explanation:

Choice "c" is correct. The auditor would most likely inquire of the entity's legal counsel concerning litigation, claims and assessments arising after year-end in order to obtain evidence about the occurrence of subsequent events. Claims arising after year-end might well impact the year-end financial statements.
Choice "a" is incorrect. Recomputing a sample of large-dollar transactions occurring after year-end for arithmetic accuracy would not provide evidence about year-end amounts. Choice "b" is incorrect. The auditor would inquire about changes in stockholders' equity occurring after year-end, but would not generally perform an investigation of such items. Choice "d" is incorrect. Confirming bank accounts established after year-end is generally not done (only those in existence at year-end are confirmed). Accounts established after year-end generally would not be relevant to year-end amounts.



What is an auditor's responsibility for supplementary information required by the GASB that is placed outside the basic financial statements?

  1. Label the information as unaudited and expand the auditor's report to include a disclaimer on the information.
  2. Add an explanatory paragraph to the auditor's report and refer to the information as "required supplementary information."
  3. Apply limited procedures to the information and report deficiencies in, or the omission of, the information.
  4. Audit the required supplementary information in accordance with generally accepted governmental auditing standards.

Answer(s): C

Explanation:

Choice "c" is correct. With respect to supplementary information required by the GASB that is placed outside the basic financial statements, the auditor should apply limited procedures to the information (to determine that it is consistent with the basic audited financial statements) and report deficiencies in or the omission of the information (via an explanatory paragraph). Choice "a" is incorrect. If the information is labeled "unaudited," a disclaimer generally would not be necessary.
Choice "b" is incorrect. The explanatory paragraph is only added if the supplemental information required by the GASB is deficient, omitted entirely, if the auditor cannot complete procedures, or if there is doubt about conformity with guidelines.
Choice "d" is incorrect. The supplementary information required by the GASB is not required to be audited since it is placed outside of the basic financial statements; however, an opinion is permitted.



An auditor's responsibility to express an opinion on the financial statements is:

  1. Implicitly represented in the auditor's standard report.
  2. Explicitly represented in the opening paragraph of the auditor's standard report.
  3. Explicitly represented in the scope paragraph of the auditor's standard report.
  4. Explicitly represented in the opinion paragraph of the auditor's standard report.

Answer(s): B

Explanation:

Choice "b" is correct. The auditor's responsibility to express an opinion on the FS is explicitly represented in the last sentence of the opening paragraph: "Our responsibility is to express an opinion on these financial statements based on our audit." Choice "a" is incorrect. The responsibility to express an opinion is explicitly represented (i.e., clearly stated), not implicitly represented (i.e., assumed).
Choice "c" is incorrect. There are no words in the scope paragraph that represent an auditor's responsibility to express an opinion.
Choice "d" is incorrect. The opinion paragraph includes the auditor's opinion, but does not specifically mention the auditor's responsibility to express an opinion.






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