2011 Becker CPA PassMaster A1 2

2011 Becker CPA PassMaster A1 2 - Becker Professional...

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Unformatted text preview: Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-02298 Which of the following provides the most authoritative guidance for the auditor of a nonissuer? a. An AICPA audit and accounting guide that provides specific guidance with respect to the accounting practices in the client's industry. b. A Journal of Accountancy article discussing implementation of a new standard. c. General guidance provided by a Statement on Auditing Standards. d. Specific guidance provided by an interpretation of a Statement on Auditing Standards. Explanation Choice c Is correct. General guidance provided by a Statement on Auditing Standards is the most authoritative of level of auditing guidance for audits of nonissuers. Auditors are required to comply with SASs, and should be prepared to justify any departures therefrom. Choices "a" and "d" are incorrect. AICPA audit and accounting guides and SAS interpretations are interpretive publications that provide guidance regarding how SASs should be applied in specific situations. They are not as authoritative as SASS. Choice "b" is incorrect. Journal of Accountancy articles have no authoritative status but may be helpful to the auditor. 2011 Edition. Distributed by DeVryl'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-02299 Which of the following accurately depicts the auditor's responsibility with respect to Statements on Auditing Standards? a. The auditor is required to follow the guidance provided by the Standards, without exception. b. The auditor is generally required to follow the guidance provided by Standards with which he or she is familiar, but will not be held responsible for departing from provisions of which he or she was unaware. c. The auditor is generally required to follow the guidance provided by the Standards, unless following such guidance would result in an audit that is not cost-effective. d. The auditor is generally required to follow the guidance provided by the Standards, and should be able to justify any departures. Explanation Choice "d" is correct. The auditor is generally required to follow the guidance provided by the Standards, and should be able to justify any departures. Choice "a" is incorrect. On rare occasions, the auditor may depart from the guidance provided by the SASS, but he or she must justify such departures. Choice "b" is incorrect. Lack of familiarity with a SAS is not a valid reason for departing from its guidance. The auditor is expected to have sufficient knowledge of the SASs to identify those that are applicable to a given audit engagement. Choice c Is incorrect. The cost associated with following the guidance provided by a SAS is not an acceptable reason for departing from its guidance. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryz‘Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-02302 Harris, CPA, has been asked to audit and report on the balance sheet of Fox Co., but not on the statements of income, retained earnings, or cash flows. Harris will have access to all information underlying the basic financial statements. Under these circumstances, Harris may: a. Not accept the engagement because it would constitute a violation of the profession‘s ethical standards. b. Not accept the engagement because it would be tantamount to rendering a piecemeal opinion. c. Accept the engagement because such engagements merely involve limited reporting objectives. d. Accept the engagement but should disclaim an opinion because of an inability to apply the procedures considered necessary. Explanation Choice c Is correct. An auditor may express an opinion on one financial statement, such as a balance sheet, and not on other related financial statements, provided that the auditor's procedures and access to all information underlying the basic financial statements have not been restricted. This is simply an engagement with limited reporting objectives. Choice a is incorrect. Compliance with this request would not violate any ethical standards of the profession. Choice "b" is incorrect. A "piecemeal" opinion, which is prohibited, is one in which different opinions are issued on enough different elements in the same financial statement as to constitute a "major portion" of the financial statements. Choice "d" is incorrect. As long as the auditor's scope has not been limited, the auditor may report on only one financial statement. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘vlivid Book.org [email protected] Question CPA-02304 The fourth standard of reporting requires the auditor's report to contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed. The objective of the fourth standard is to prevent: a. An auditor from expressing different opinions on each of the basic financial statements. b. Restrictions on the scope of the audit, whether imposed by the client or by the inability to obtain evidence. c. Misinterpretations regarding the degree of responsibility the auditor is assuming. d. An auditor from reporting on one basic financial statement and not the others. Explanation Choice "c" is correct. The objective of the fourth reporting standard is to prevent any misinterpretation of the degree of responsibility the auditor assumes when his or her name is associated with financial statements. Choice "a" is incorrect. The auditor may express different opinions on each of the basic financial statements. Choice "b" is incorrect. While the fourth reporting standard may deter deliberate limitation of scope by the client, this is not its objective. Choice "d" is incorrect. An auditor may express an opinion on one financial statement, such as a balance sheet, and not on other related financial statements, as long as the auditor's procedures have not been restricted. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-02309 In the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. Under these circumstances, the auditor should: a. Not report on the client‘s income statement. b. Not refer to consistency in the auditor's report. c. State that the consistency standard does not apply. d. State that the accounting principles have been applied consistently. Explanation Choice "b" is correct. The auditor's standard report implies that the auditor is satisfied that the comparability of financial statements between periods has not been materially affected by changes in accounting principles and that such principles have been consistently applied between or among periods. Since the auditor has gathered sufficient evidence about consistency, no reference need be made in the report. Choice a Is incorrect. If the auditor is able to obtain sufficient evidence about consistency, the auditor may report on the entity's financial statements. Choice c Is incorrect. The consistency standard is one of the ten GAAS, and it does apply to this audit. Choice "d" is incorrect. If the auditor is able to obtain sufficient evidence about consistency, no mention of consistency need be made. Consistency is implied in the standard report. 2011 Edition. Distributed by DeVryi'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-02315 The third general standard states that due care is to be exercised in the performance of an audit. This standard is ordinarily interpreted to require: a. Thorough review of the existing safeguards over access to assets and records. b. Limited review of the indications ofemployee fraud and illegal acts. c. Objective review of the adequacy of the technical training and proficiency of firm personnel. d. Critical review of the judgment exercised at every level of supervision. Explanation Choice "d" is correct. The third general standard of due care is ordinarily interpreted to require critical review of the judgment exercised at every level of supervision, and the judgment exercised by those assisting in the audit. Choice "a" is incorrect. The third general standard of due care does not require a thorough review of the existing safeguards over access to assets and records. Choice "b" is incorrect. The standard of due care does not specifically require a limited review of the indications of employee fraud and illegal acts. Choice c Is incorrect. The standard of due care does not require a review of audit staff training and proficiency. 2011 Edition. Distributed by DeVryl'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘viivid Book.org [email protected] Question CPA-02330 The concept of materiality would be least important to an auditor when considering the: Adequacy of disclosure of a client‘s illegal act. a. b. Discovery of weaknesses in a client‘s internal control. c. Effects of a direct financial interest in the client on the CPA's independence. d. Decision whether to use positive or negative confirmations of accounts receivable. Explanation Choice c Is correct. Any direct financial interest in a client impairs independence, even if it is immaterial. Choice a is incorrect. A material illegal act may require disclosure in or adjustment to the financial statements, whereas an immaterial illegal act may not require disclosure. Choice "b" is incorrect. A material weakness in internal control will affect the nature, timing, and extent of audit procedures, whereas an immaterial weakness in internal control may have little impact on the audit. Choice "d" is incorrect. An auditor is likely to use positive confirmations for material accounts receivable, but may consider negative confirmations for immaterial receivable balances. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘viivid Book.org [email protected] Question CPA-02800 Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of: a. Objective judgment. b. Independent integrity. c. Professional skepticism. d. Impartial conservatism. Explanation Choice c Is correct. The auditor should plan and perform the audit with an attitude of professional skepticism. This attitude includes a questioning mind and a critical assessment of audit evidence. Choices "a", "b", and "d" are incorrect. Objectivity, independence, integrity, and impartiality are basic ethical characteristics and professional qualities embodied in the general standards. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-02820 Which of the following is not an example of the application of professional skepticism? a. Designing additional auditing procedures to obtain more reliable evidence in support of a particular financial statement assertion. b. Obtaining corroboration of management's explanations through consultation with a specialist. c. Inquiring of prior year engagement personnel regarding their assessment of management‘s honesty and integrity. d. Using third party confirmations to provide support for management's representations. Explanation Choice o Is correct. The auditor should consider that fraud might occur regardless of any past experience with the entity. An assessment of management's honesty and integrity performed during the previous year would not necessarin be relevant to the current year's audit. Choice "a" is incorrect. An auditor might apply professional skepticism by performing additional audit procedures designed to improve the reliability of evidence. Choice "b" is incorrect. Corroborating management's explanations is an example of the application of professional skepticism, since the auditor is obtaining additional support rather than simply accepting the explanation as given. Choice "d" is incorrect. Using third party confirmations to provide support for management's representations is an example of the application of professional skepticism, since the auditor is obtaining additional support rather than simply accepting the explanation as given. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-04640 An auditor of a nonissuer must conduct the audit in accordance with: l. ASB standards. ll. PCAOB standards. a. |. b. Both land II. c. Either I or II, but not both. d. H. Explanation Choice a is correct. An auditor of a nonissuer must conduct the audit in accordance with ASB standards. Choice "b" is incorrect. An auditor of a nonissuer is not required to conduct the audit in accordance with PCAOB standards. Choice c Is incorrect. While an auditor is only required to conduct the audit in accordance with ASB standards, the auditor may choose to follow PCAOB standards as well. Choice "d" is incorrect. An auditor of a nonissuer is not required to conduct the audit in accordance with PCAOB standards. 2011 Edition. Distributed by DeVrvi'Becker Educational Development Corp. Copyright ?2010 DeVrvi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-05465 Which of the following categories is included in generally accepted auditing standards? a. Standards of review. b. Standards of planning. c. Standards of fieldwork. d. Standards of evidence. Explanation Choice c Is correct. Generally accepted auditing standards include three categories: general standards, standards of fieldwork, and standards of reporting. Choices "a", "b", and "d" are incorrect, based on the above explanation. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryz‘Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-05709 According to the third standard of fieldwork, which of the following terms identifies a requirement for audit evidence? a. Appropriate. b. Adequate. c. Reasonable. d. Disconfirming. Explanation Choice a is correct. According to the third standard of fieldwork, the auditor must obtain sufficient appropriate audit evidence to afford a reasonable basis for the opinion. Choice "b" is incorrect. The third standard of fieldwork does not use the word adequate in describing the requirements for audit evidence. Choice c Is incorrect. Although the third standard of fieldwork does use the word reasonabie, this is used to describe the basis for the opinion, and not to describe a specific requirement for audit evidence. Choice "d" is incorrect. The third standard of fieldwork does not use the word disconfirming in describing the requirements for audit evidence. 2011 Edition. Distributed by DeVrvi'Becker Educational Development Corp. Copyright ?2010 DeVrvi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org [email protected] Question CPA-06682 An independent auditor must have which of the following? a. A pre-existing and well-informed point of view with respect to the audit. b. Technical training that is adequate to meet the requirements of a professional. c. A background in many different disciplines. d. Experience in taxation that is sufficient to comply with generally accepted auditing standards. Explanation Choice "b" is correct. The first general standard states that the auditor must have adequate technical training and proficiency as an auditor. Choice a is incorrect. The independent auditor should maintain an attitude of professional skepticism - an unbiased and objective view with respect to the audit. Choice "c" is incorrect. An auditor does not need to have a background in many different disciplines. The auditor must have adequate technical training and proficiency as an auditor. Choice "d" is incorrect. Generally accepted auditing standards do not require the independent auditor to have experience in taxation; rather the auditor must have adequate technical training and experience as an auditor. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. ...
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This note was uploaded on 09/27/2011 for the course ACCT 540 taught by Professor Haight during the Spring '11 term at NMSU.

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2011 Becker CPA PassMaster A1 2 - Becker Professional...

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