Download AICPA.AUD.ActualTests.2019-03-15.613q.vcex

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.

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

Choice "C" is correct. An auditor's responsibility is to express an opinion on financial statements based on an audit.  Choice "A" is incorrect. An auditor may draft an entity's financial statements based on information from management's financial system. This would be referred to as a compilation engagement.  Choice "B" is incorrect. The adoption of sound accounting policies is an implicit part of management's responsibilities, not the auditor's responsibilities.  Choice "D" is incorrect. An auditor often makes suggestions that are adopted about an entity's internal control environment.

Choice "C" is correct. General guidance provided by a Statement on Auditing Standards is the most authoritative of level of auditing guidance. 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.

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.

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.

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.

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.

Choice "B" is correct. When a qualified opinion is issued due to a lack of sufficient audit evidence, the lack of evidence should be disclosed in an explanatory paragraph before the opinion paragraph. Since insufficient evidence is a scope limitation, the scope paragraph should also be modified to refer to the limitation and to the explanatory paragraph that discusses it.  Choices "A" and "C" are incorrect. Management (and not the auditor) prepares the notes to the financial statements. The auditor therefore would not refer to this (or any other) situation in the notes to the financial statements.  Choice "D" is incorrect. The auditor does refer to the situation in the scope paragraph.

Choice "C" is correct. Whether substantial doubt remains or is alleviated is a judgment call made by the auditor, and there is no requirement to document management's opinion on the matter.  Choices "A", "B", and "D" are incorrect. When an auditor believes there is substantial doubt about the ability of an entity to continue as a going concern, the conditions that gave rise to the substantial doubt, the auditor's conclusion about whether substantial doubt remains or is alleviated, and the effect of the auditor's conclusion on the auditor's report should all be documented.