Auditing 1 PassMaster Questions - Becker CPA Review,...

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Unformatted text preview: Becker CPA Review, PassMaster Questions Lecture: Auditing 1 1 2009 DeVry/Becker Educational Development Corp. All rights reserved. CPA PassMaster QuestionsAuditing 1 Export Date: 10/30/08 Becker CPA Review, PassMaster Questions Lecture: Auditing 1 2 2009 DeVry/Becker Educational Development Corp. All rights reserved. Audited Financial Statements - The Basics CPA-02320 Type1 M/C A-D Corr Ans: A PM#2 A 1-01 1. CPA-02320 Au Nov 93 #52 Page 58 Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle. Which of the following should the auditor consider the most authoritative? a. FASB Technical Bulletins. b. AICPA Accounting Interpretations. c. FASB Statements of Financial Accounting Concepts. d. AICPA Technical Practice Aids. CPA-02320 Explanation Choice "a" is correct. In accordance with the GAAP hierarchy, FASB Technical Bulletins are considered the most authoritative of the sources listed in the question. Choice "b" is incorrect. Of the sources listed, AICPA Accounting Interpretations would be considered the second most authoritative. Choice "c" is incorrect. FASB Statements of Financial Accounting Concepts are among the least authoritative sources of GAAP available to auditors. Choice "d" is incorrect. AICPA Technical Practice Aids are among the least authoritative sources of GAAP available to auditors. CPA-02325 Type1 M/C A-D Corr Ans: C PM#3 A 1-01 2. CPA-02325 Au Nov 91 #23 Page 3 For an entity's financial statements to be presented fairly in conformity with generally accepted accounting principles, the principles selected should: a. Be applied on a basis consistent with those followed in the prior year. b. Be approved by the Auditing Standards Board or the appropriate industry subcommittee. c. Reflect transactions in a manner that presents the financial statements within a range of acceptable limits. d. Match the principles used by most other entities within the entity's particular industry. CPA-02325 Explanation Choice "c" is correct. Financial statements are presented fairly in conformity with GAAP when there are no material misstatements included therein. The fact that there may occasionally be immaterial misstatements means that the financial statements are correct "within a range of acceptable limits." Choice "a" is incorrect. Accounting principles may change from year to year. As long as such changes are properly accounted for, the financial statements are still in conformity with GAAP. Choice "b" is incorrect. The AICPA and the FASB determine GAAP, not the Auditing Standards Board. Choice "d" is incorrect. There is no requirement that an entity's financial statements be prepared in accordance with prevalent industry practices in order to be in conformity with GAAP....
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This note was uploaded on 09/25/2011 for the course ACCOUNTING AC555ON taught by Professor Abekele during the Spring '10 term at Keller Graduate School of Management.

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Auditing 1 PassMaster Questions - Becker CPA Review,...

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