Monica March banks is attempting to determine whether her firm is
required to follow a particular standard included in the AICPA's
Statements on Auditing Standards. Which of the following statements
is FALSE? - ANS ✓A statement in the auditing standards that uses the word
"should" is explanatory material that does not impose a requirement on the
auditor
Statements that use the word "should" are considered "presumptively
mandatory." As stated in another answer choice, presumptively
mandatory standards do impose a requirement on the auditor, but the
auditor may depart in rare cases from such standards if justification
for the departure is documented.
A CPA is subject to criminal liability if the CPA - ANS ✓Wilfully omits a
material fact from a set of financial statements.
Wilfully omitting a material fact from a set of financial statements by
the CPA constitutes fraud on the part of the CPA. When a material
misstatement is made and there is both knowledge of its falsity and
intent to deceive, especially if in the opinion on the financial
statements, the CPA attests to the financial statements being fairly
presented and in accordance with GAAP, then the CPA has committed
CPA exam review
, 2
CPA
a fraudulent act. Relevant laws specifically covering this are Securities
Acts of 1933 and 1934
If the Public Companies Accounting Oversight Board (PCAOB)
identifies a violation during its inspection of a registered accounting
firm, which of the following may occur? - ANS ✓The PCAOB could take
any or all of the above steps if it identifies a violation.
The PCAOB has enforcement power, owing to the Sarbanes-Oxley Act,
it can fine, censure, suspend, or bar from practice registered firms
that violate the Sarbanes-Oxley Act. Additionally, the PCAOB can
report any violation to the SEC and the state accountancy boards.
The assessed level of detection risk in an audit is inversely related to
which of the following? - ANS ✓Assurance provided by substantive tests.
Detection risk is the risk that the auditor's procedures will not detect
an error in an account when in fact one exists. As the auditor's
assurance that there are no errors in an account balance is increased
by the application of substantive procedures, the auditor's
assessment of detection risk will decrease.
An auditor most likely would analyze inventory turnover rates to
obtain evidence concerning management's assertions about - ANS
✓Valuation or allocation.
Assertions about valuation or allocation deal with whether asset,
liability, revenue, and expense components have been included in the
financial statements at appropriate amounts. An auditor would look
at inventory turnover rates to determine if the inventory amount on
the balance sheet and the cost of goods sold amount on the income
statement are reasonable, in relation to each other.
CPA exam review
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