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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 30 )

Updated On: 12-Feb-2026
Page 30 of 207
PDF with 1026 Questions

An auditor was unable to obtain audited financial statements or other evidence supporting an entity's investment in a foreign subsidiary. Between which of the following opinions should the entity's auditor choose?

  1. Adverse and unqualified with an explanatory paragraph added.
  2. Disclaimer and unqualified with an explanatory paragraph added.
  3. Qualified and adverse.
  4. Qualified and disclaimer.

Answer(s): D

Explanation:

Choice "d" is correct.
When an auditor is unable to obtain audited financial statements or other evidence supporting an entity's investment in a subsidiary (foreign or domestic), the auditor should issue a qualified or disclaimer of opinion depending on the materiality of the investment in the subsidiary.
Choices "a", "b", and "c" are incorrect. An adverse opinion is only issued when the FS are not presented fairly in conformity with GAAP, and an unqualified opinion with an explanatory paragraph is not appropriate for a scope limitation.



Which of the following standards requires a critical review of the work done and the judgment exercised by those assisting in an audit at every level of supervision?

  1. Proficiency.
  2. Audit risk.
  3. Inspection.
  4. Due care.

Answer(s): D

Explanation:

Choice "d" is correct. The third general standard is: "The auditor must exercise due professional care in the planning and performance of the audit and the preparation of the report." This standard is interpreted to require a critical review of the work performed and the judgment exercised at every level of supervision.
Choice "a" is incorrect. Proficiency relates to the first general standard (technical training and proficiency of an auditor).
Choice "b" is incorrect. Audit risk and materiality underlie the application of all the standards of fieldwork and reporting, but are not standards themselves. Choice "c" is incorrect. Inspection pertains to the audit evidence standard, which is the third standard of fieldwork.



Six months after issuing an unqualified opinion on audited financial statements, an auditor discovered that the engagement personnel failed to confirm several of the client's material accounts receivable balances.
The auditor should first:

  1. Request the permission of the client to undertake the confirmation of accounts receivable.
  2. Perform alternative procedures to provide a satisfactory basis for the unqualified opinion.
  3. Assess the importance of the omitted procedures to the auditor's ability to support the previously expressed opinion.
  4. Inquire whether there are persons currently relying, or likely to rely, on the unqualified opinion.

Answer(s): C

Explanation:

Choice "c" is correct.
When an auditor discovers the omission of an audit procedure related to a previously issued report, the auditor should first assess the importance of the omitted procedure to the auditor's ability to support the previously expressed opinion. Choice "a" is incorrect. The auditor would request the permission of the client to undertake the confirmation of accounts receivable only after determining that the procedure was necessary to support the previously expressed opinion and no other alternative procedure had been performed. Choice "b" is incorrect. Alternative procedures would be performed only after the auditor determined that the procedure was necessary to support the previously expressed opinion. Choice "d" is incorrect. The auditor needs to be able to support (or revise) the previously issued opinion regardless of whether or not there are persons currently relying on it.



Which of the following procedures would an auditor ordinarily perform during the review of subsequent events?

  1. Review the cut-off bank statements for the period after the year-end.
  2. Inquire of the client's legal counsel concerning litigation.
  3. Investigate significant deficiencies in internal control previously communicated to the client.
  4. Analyze related party transactions to discover possible irregularities.

Answer(s): B

Explanation:

Choice "b" is correct. An auditor would most likely obtain a letter from the entity's legal counsel describing any pending litigation, unasserted claims, or loss contingencies, to obtain evidence that might impact the year-end financial statements.
Choice "a" is incorrect. Reviewing cut-off bank statements for the period after year-end generally is performed to evaluate the year-end cash balance, not to identify subsequent events. Choice "c" is incorrect. Investigating significant deficiencies in internal control previously communicated to the client would be a procedure performed as part of the planning process and would provide the auditor with information regarding the internal control structure, not subsequent events.
Choice "d" is incorrect. Analyzing related party transactions to discover possible irregularities generally is performed to evaluate financial statement disclosure, not to identify subsequent events.



An annual shareholders' report includes audited financial statements and contains supplementary information required by GAAP. Is it permissible for the auditor to report on such information?

  1. No, because such reporting may lead to the belief that the auditor is responsible for the information.
  2. No, because the auditor has no responsibility to read the other information in a document containing audited financial statements.
  3. Yes, provided the report provides negative assurance only.
  4. Yes, provided the auditor performs sufficient audit procedures to determine whether the information is fairly stated, in all material respects, in relation to the financial statements.

Answer(s): D

Explanation:

Choice "d" is correct. If the auditor performs sufficient procedures, he or she may report on whether the information is fairly stated, in all material respects, in relation to the financial statements. Choices "a" and "b" are incorrect. The auditor may report on such information. Choice "c" is incorrect. The report provides positive assurance about whether the information is fairly stated, in all material respects, in relation to the financial statements.






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