AUD Sample CPA Exam Questions

Weekly Review Quiz #378 – AUD: Attestation Standards

Thank you for taking our Auditing and Attestation (AUD) review quiz. Check back again for five new sample AUD CPA questions to help you prepare for the exam.

 

Question 1

Which of the following is a conceptual similarity between generally accepted auditing standards and the attestation standards?

  1. Both sets of standards require the CPA to report on the adequacy of disclosure in the financial statements.
  2. All of the standards of fieldwork in generally accepted auditing standards are included in the attestation standards.
  3. The requirement that the CPA be independent in mental attitude is included in both sets of standards.
  4. Both sets of standards are applicable to engagements regarding financial forecasts and projections.

The correct answer is: C.

A. Incorrect… Attestation Standards apply to attestation engagements involving subject matter other than GAAP-based financial statements that are the focus of GAAS.

B. Incorrect… Generally Accepted Auditing Standards have 3 Fieldwork Standards, whereas the Attestation Standards have 2 Fieldwork Standards.

C. Correct! The General Standards of both GAAS and the Attestation Standards require the CPA to be independent.

D. Incorrect… The Statements on Standards for Attestation Engagements include guidance with respect to providing assurance on forecasts and projections, whereas the Statements on Auditing Standards do not.

Question 2

A practitioner has been engaged to apply agreed-upon procedures in accordance with Statements on Standards for Attestation Engagements (SSAE) to prospective financial statements. Which of the following conditions must be met for the practitioner to perform the engagement?

  1. The prospective financial statement includes a summary of significant accounting policies.
  2. The practitioner takes responsibility for the sufficiency of the agreed-upon procedures.
  3. The practitioner and specified parties agree upon the procedures to be performed by the practitioner.
  4. The practitioner reports on the criteria to be used in the determination of findings.

The correct answer is: C.

A. Incorrect… The definition of “prospective financial statements” is “… financial forecasts or financial projections including the summaries of significant assumptions and accounting policies” (AT 301.08a). That definition is not specific to an agreed-upon procedures engagement, which is the focus of this question.

B. Incorrect… A requirement of an agreed-upon procedures engagement is that the specified users take responsibility for the adequacy of the procedures for their purposes (AT 201.03).

C. Correct! The specified parties and the practitioner agree upon the procedures to be performed by the practitioner that the specified parties believe are appropriate.

D. Incorrect… Although the criteria to be used in such an engagement are agreed upon between the practitioner and the specified parties, the practitioner’s report presents the findings associated with the agreed-upon procedures.

Question 3

Which of the following statements should be included in a practitioner’s report on the application of agreed-upon procedures?

  1. A statement that the practitioner performed an examination of prospective financial statements.
  2. A statement of scope limitation that will qualify the practitioner’s opinion.
  3. A statement referring to standards established by the AICPA.
  4. A statement of negative assurance based on procedures performed.

The correct answer is: C.

A. Incorrect… An examination is a different type of attestation engagement, which results in a positive expression of opinion. An agreed-upon procedures report would not refer to an examination of prospective financial statements.

B. Incorrect… A report for an agreed-upon procedures engagement would not include a statement of scope limitation, nor would it include an expression of any form of opinion. The agreed-upon procedures engagement results in assurance in the form of “procedures and findings.”

C. Correct! A report for an agreed-upon procedures engagement would include the following statement: “This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants.”

D. Incorrect… Negative assurance is associated with a review, which is a different type of attestation engagement. An agreed-upon procedures report would not include such negative assurance.

Question 4

Which of the following is not an attestation standard?

  1. Sufficient evidence shall be obtained to provide a reasonable basis for the conclusion that is expressed in the report.
  2. The report shall identify the assertion being reported on and state the character of the engagement.
  3. The work shall be adequately planned and assistants, if any, shall be properly supervised.
  4. A sufficient understanding of internal control structure shall be obtained to plan the engagement.

The correct answer is: D.

A. Incorrect… The attestation standards require the gathering of sufficient evidence to support the opinion expressed.

B. Incorrect… The attestation standards require that the report identify the assertion being reported on and the character of the engagement.

C. Incorrect… The attestation standards require that the work be planned and supervised.

D. Correct! The attestation standards do not require an understanding of internal control. That is required for an audit of the financial statements.

Question 5

A practitioner is engaged to express an opinion on management’s assertion that the square footage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer to which of the following sources for professional guidance?

  1. Statements on Auditing Standards
  2. Statements on Standards for Attestation Engagements
  3. Statements on Standards for Accounting and Review Services
  4. Statements on Standards for Consulting Services

The correct answer is: B.

A. Incorrect… Statements on Auditing Standards apply specifically to an engagement to audit the financial statements of a nonissuer.

B. Correct! Statements on Standards for Attestation Engagements apply specifically to an attest engagement performed by a CPA. That is defined as examining, reviewing, or performing agreed-upon procedures on subject matter or an assertion by the responsible party about the subject matter. The engagement described here is an examination (resulting in the expression of opinion) on management’s assertion about the square footage of a warehouse.

C. Incorrect… Statements on Standards for Accounting and Review Services apply specifically to a CPA’s engagement to review or compile the financial statements of a nonissuer.

D. Incorrect… Statements on Standards for Consulting Services apply specifically to consulting services performed by CPAs. A consulting engagement is normally a two-party relationship involving only the client entity and the CPA performing the engagement.

End of Quiz

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