Becker Audit CPA Exam Questions
with 100% Verified Answers
When a predecessor auditor's report is NOT PRESENTED, the successor auditor
should indicate what items? - ✔ ✔ 1. That the statement were audited by a
predecessor audit - should no be named unless the practice of the
predecessors was acquired by or merged with that of the successor.
2. The type of opinion expressed by the predecessor auditor, and if the
opinion was modified the REASON FOR THE MODIFICATION
3. The nature of any emphasis-of-matter, other-matter, or explanatory paragraph
included in the predecessor auditor's report
4. The date of the predecessor auditor's report.
If the group engagement partner is unable to review the audit programs and
audit documentation of the component auditor, - ✔ ✔ He or she is likely to
"divide responsibility by making reference to the component auditor in the
auditor's report."
If the group engagement partner is satisfied as to the independence and
professional reputation of the component, - ✔ ✔ the group engagement partner
decides not to make reference to another CPA who audited a client's subsidiary.
,When the group engagement partner will divide responsibility and make
reference to the component auditor - ✔ ✔ 1. when the group engagement
partner finds it impractical to review the component auditor's work
2. when the financial statements audited by the other auditor are material
2. group engagement partner is unable to be satisfied as to the independence and
professional reputation of the component auditor
When the group engagement auditor accepts responsibility for the work
performed by a component, the group engagement partner: - ✔ ✔ 1. must
contact the component auditor and review the audit program and working
papers pertaining to the component
2. the group engagement partner has assumed responsibility for the work
performed by the component auditor
3. does not need to obtain written permission from component auditor to
omit reference
4. no reference to the component auditor or the component's financial
statements is made in the auditor's report.
Circumstances would an entity be expected to accrue a loss contingency for the
period under audit? - ✔ ✔ 1) Before the issuance the audit report, the entity
estimated the amount of a claim that had a probable adverse outcome related to
a product sold during the year under audit.
,*this is a Recognized Subsequent Event (underlying event "product sale" relates
to year under audit and has probable adverse outcome)
Subsequent Events
GAAP requires an accrual for? - ✔ ✔ GAAP requires an accrual for a loss
contingency for an unfavorable judgement that can be (1) estimated and (2)
is probable (not reasonably possible)
Events that requires adjustments to the F/S for the year ended Dec. 31, Year 1?
- ✔ ✔ 1) Loss on an A/R as the result of a customer suffering a deteriorating
financial condition that led to bankruptcy filing in Jan, Year 2.
*this condition (customer's inability to pay) has occurred over time and existed at
Dec. 31, Year 1, therefore, it's a recognized subsequent event.
After the B/S date, an auditor's client suffers a material loss from a decline in
value of marketable securities. What advice should the auditor give the client? -
✔ ✔ 1) Disclose the material loss in the F/S to assure that the F/S are "not
misleading"
*this is a Nonrecognized subsequent event (did not exist at the B/S date)
Auditor's responsibility for Supplementary Information (disclosure of pension
information, which is outside the basic financial statements but required by
GASB)? - ✔ ✔ The auditor should apply certain limited procedures to the
supplementary information and add a separate section to the auditor's report.
, An auditor's report on financial statements prepared on the cash receipts and
disbursements basis of accounting should include? - ✔ ✔ 1) An opinion as to
whether the financial statements are presented fairly in conformity with the
cash receipts and disbursements basis of accounting.
2) A statement that the audit was conducted in accordance with
auditing standards accepted in the United States of America (GAAS).
3) A reference to the note to the financial statements that describes the cash
receipts and disbursements basis of accounting.
When performing an audit in accordance with GAAS - ✔ ✔ We are required
to communicate with those charged with governance regarding, among
other matters, (1) the planned scope and timing of the audit, (2) significant
audit findings, and (3) certain internal control-related matters identified
during the audit.
In the opinion section, the auditor generally refers to generally accepted
auditing principles.
True or False? - ✔ ✔ False - generally accepting ACCOUNTING principles (GAAP)
In the opinion section, indicates management is responsible for the financial
statements.
True or False? - ✔ ✔ False - Management responsibility for the financial
statements is indicated in the basis for opinion section (issuers) or
responsibilities of management for the financial statements (nonissuers)
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