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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 29 )

Updated On: 12-Feb-2026
Page 29 of 207
PDF with 1026 Questions

When an independent CPA assists in preparing the financial statements of a publicly held entity, but has not audited or reviewed them, the CPA should issue a disclaimer of opinion. In such situations, the CPA has no responsibility to apply any procedures beyond:

  1. Ascertaining whether the financial statements are in conformity with generally accepted accounting principles.
  2. Determining whether management has elected to omit substantially all required disclosures.
  3. Documenting that the internal control structure is not being relied on.
  4. Reading the financial statements for obvious material misstatements.

Answer(s): D

Explanation:

Choice "d" is correct.
When an independent CPA assists in preparing the FS of a publicly held entity, but has not "audited" or "reviewed" them, the CPA should issue a disclaimer of opinion and has only the responsibility to read the FS for obvious material misstatements. Choice "a" is incorrect. A disclaimer does not require ascertaining whether the FS are in conformity with GAAP.
Choice "b" is incorrect. A disclaimer does not require ascertaining whether management has elected to omit substantially all required disclosures.
Choice "c" is incorrect. A disclaimer of opinion does not require ascertaining whether or not the internal control structure is being relied upon.



An auditor issued an audit report that was dual dated for a subsequent event occurring after the original date of the auditor's report. The auditor's responsibility for events occurring subsequent to the original date was:

  1. Extended to subsequent events occurring through the date of reissuance of the report.
  2. Extended to include all events occurring since the original date of the auditor's report.
  3. Limited to the specific event referenced.
  4. Limited to include only events occurring up to the date of the last subsequent event referenced.

Answer(s): C

Explanation:

Choice "c" is correct.
When an auditor issues a report that is dual dated for a subsequent event occurring after the original date of the auditor's report, the auditor's responsibility for events occurring subsequent to the original date of the auditor's report is limited to the specific event referenced.
Choices "a", "b", and "d" are incorrect. The auditor takes responsibility for only the specific event noted in the dual dating and for no other event occurring subsequent to the original date of the auditor's report.



An auditor most likely would issue a disclaimer of opinion because of:

  1. Inadequate disclosure of material information.
  2. The omission of the statement of cash flows.
  3. A material departure from generally accepted accounting principles.
  4. Management's refusal to furnish written representations.

Answer(s): D

Explanation:

Choice "d" is correct. Management's refusal to furnish written representations is a significant client imposed restriction on the scope of an audit, ordinarily warranting a disclaimer of opinion. Choice "a" is incorrect. Inadequate disclosure would result in a qualified or adverse opinion. Choice "b" is incorrect. A qualified report would be appropriate when a "statement of cash flows" is omitted and the scope of the audit is not restricted.
Choice "c" is incorrect. A departure from GAAP would result in either a qualified or adverse opinion, depending on materiality.



When an auditor qualifies an opinion because of the inability to confirm accounts receivable by direct communication with debtors, the wording of the opinion paragraph of the auditor's report should indicate that the qualification pertains to the:

  1. Limitation on the auditor's scope.
  2. Possible effects on the financial statements.
  3. Lack of sufficient appropriate audit evidence.
  4. Departure from generally accepted auditing standards.

Answer(s): B

Explanation:

Choice "b" is correct.
When an auditor qualifies his or her opinion because of a scope limitation, such as the inability to confirm A/R, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the FS and not to the scope limitation itself. The opinion paragraph should not refer to the scope limitation itself, the lack of evidence, or the departure from GAAS.

Choices "a", "c", and "d" are incorrect, based on the above Explanation.



The adverse effects of events causing an auditor to believe there is substantial doubt about an entity's ability to continue as a going concern would most likely be mitigated by evidence relating to the:

  1. Ability to expand operations into new product lines in the future.
  2. Feasibility of plans to purchase leased equipment at less than market value.
  3. Marketability of assets that management plans to sell.
  4. Committed arrangements to convert preferred stock to long-term debt.

Answer(s): C

Explanation:

Choice "c" is correct. The adverse effects of events causing an auditor to believe there is a substantial doubt about an entity's ability to continue as a going concern would most likely be mitigated by evidence relating to the marketability of assets that management plans to sell. By providing evidence that there is a ready market for assets that could be converted to cash, management has demonstrated that the company could remain in operation for a longer period of time, thereby mitigating the need for an explanatory paragraph describing the matter. Choices "a", "b", and "d" are incorrect. Evidence regarding the ability to expand operations into new product lines in the future, the feasibility of plans to purchase leased equipment at less than market value, or committed arrangements to convert preferred stock to long-term debt would not be sufficient to mitigate doubts about an entity's ability to continue as a going concern, unless it could also be demonstrated that the events would provide adequate cash flow to fund operations for at least the next year.






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