D215 - Auditing | OA Guides

Question 1: Which type of report should be issued if an auditor has determined that a company has maintained effective internal controls over financial reporting for the period under audit?

Adverse

Qualified

Disclaimer

Unqualified

Question 2: Which type of work performed by a CPA is considered an attestation service?

Risk advisory

Website security assurance

Data integrity

Financial statement review

Question 3: Which entity may obtain audited financial statements to ensure a company is complying with industry regulations?

Lenders

Consumers

Governments

General public

Question 4: Which group performs an audit and review of financial statements to ensure financial statement users' needs are met?

Internal auditors

The Internal Revenue Service (IRS)

Independent third-party auditors

The Financial Accounting Standards Board (FASB)

Question 5: A new CPA is aware of how accounting affects stakeholders. Which characteristic of professionalism is motivating this awareness?

Level of expertise

Advanced certification

Professional judgment

Concern for the public interest

Question 6: Which component of the AICPA Code of Professional Conduct provides the tenets of ethical conduct that govern the professional responsibility of its members?

Morals

Principles

Interpretations

Rules of conduct

Question 7: A CPA firm provides tax services for a large automotive client. Over the years, the client has continually pushed for aggressive tax strategies that the CPA does not always agree with. While performing the current year's tax return, the client threatens to discontinue the relationship if the firm continues to disagree. Which type of threat to ethical decision-making is demonstrated by this practice?

Self-review

Self-interest

Adverse interest

Undue influence

Question 8: A CPA has prepared a couple's joint tax returns for 10 years, but the couple is now experiencing a complicated divorce, with both parties wishing to claim the same child as a dependent. The CPA agrees to work with both clients on their tax returns. Which standard of the AICPA Code of Professional Conduct is being violated by this CPA’s action?

Independence

Contingent Fees

Accounting Principles

Integrity and Objectivity

Question 9: A large client asks a CPA firm for consulting help with their quarterly sales and use tax reporting. The CPA firm specializes in audit and tax preparation and has not dealt with this type of work before but would like to add it. What step is required to maintain compliance with the general standards of the AICPA Code of Professional Conduct?

The CPA firm must send the CPAs to a continuing professional education course on sales and use tax reporting.

The CPA firm must be independent of the client to perform consulting services on sales and use tax reports.

The CPA firm must develop this line of work by adding additional clients who need assistance with sales and use tax reports.

The CPA firm must collect sufficient relevant data to complete sales and use tax reports.

Question 10: A junior accountant is providing tax and audit services to a large company that is pressuring the accountant to reduce the amount of taxes owed. The junior accountant decides to use last year’s tax laws instead of the current year’s laws to save the company money. Which general standard of the AICPA Code of Professional Conduct is the junior accountant violating?

Due Professional Care

Sufficient Relevant Data

Planning and Supervision

Professional Competence

Question 11: A CPA firm has been retained to audit a client’s financial statements. The client’s bank has requested audited financial statements in order to approve or deny a loan. The client has suggested that the CPA firm will earn a $20,000 bonus if the bank grants the loan to the client. Which statement characterizes the permissibility of this fee structure?

The CPA will need to obtain a ruling letter from the AICPA before agreeing to this fee structure.

This fee structure is not permitted under ethical standards applicable to the auditing profession.

The CPA will need to obtain written permission from the client’s bank before agreeing to this fee structure.

This fee structure is an acceptable arrangement under ethical standards applicable to the auditing profession.

Question 12: A CPA is auditing a car dealership and is identifying factors that affect the likelihood of overstated revenue. During which phase of the audit does the CPA take this action?

Reporting

Regulatory

Risk response

Risk assessment

Question 13: After performing risk assessment procedures and tests of controls, an auditor has determined that the risk of material misstatement (RMM) is high. How should the auditor proceed?

Withdraw from the audit engagement

Select a substantive approach for the audit strategy

Issue a qualified opinion in the auditor’s report

Select a reliance on a controls approach for the audit strategy

Question 14: An audit firm is finalizing the acceptance of an audit by sending the client an engagement letter. Which piece of information should be included in this letter?

Client’s reason for switching audit firms

Client’s confirmation of management integrity

Client’s statement that no conflict of interest exists

Client’s responsibility for the preparation of the financial statements

Question 15: An audit manager is concerned about a severe economic downturn in the country where its audit client is based. Which component of the audit risk model is of concern to this manager?

Control

Inherent

Detection

Quantitative

Question 16: A company has been operating with weak internal accounting policies within an industry known for poor accounting practices. The auditor must keep audit risk below 1%. Which situation must be present to ensure this level of audit risk?

There must be a low level of inherent risk.

There must be a high level of inherent risk.

There must be a low level of detection risk.

There must be a high level of detection risk.

Question 17: A staff auditor working on a large company’s audit has found a red flag that may indicate fraud. Which item was found by the auditor?

Simple business structure

Strong internal controls

Inadequate training programs

Basic business transactions

Question 18: An auditor has a new audit engagement of an urgent care clinic with a high turnover of direct care workers in a geographic area that has experienced tremendous population growth. Which procedure should the auditor perform to gain an understanding of the client?

Test the client’s procedures for recording payroll liabilities

Review AICPA industry guides for the healthcare industry

Test a sample of wage calculations from a payroll register

Review the client’s formal procedures for classifying payroll expenses

Question 19: How does the inclusion of a non-executive individual in the composition of the board of directors affect an auditor’s risk assessment?

It increases the risk of a material misstatement due to a lack of expertise.

It reduces the risk of a material misstatement because they are more impartial.

It increases the risk of a material misstatement due to a lack of a vested interest in the company.

It reduces the risk of a material misstatement because they are outside of corporate governance.

Question 20: A company begins to use a new accounts payable computer system and then realizes a critical data field present in the old system is missing in the new system. Which type of risk is present for this company?