Auditing Principles & Procedures Flashcards
7 cards from real CPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing Principles & Procedures flashcards as text
Which of the following conditions, if present, would most likely cause an auditor to withdraw from an engagement?
Answer: Management's refusal to provide written representations
Management's refusal to provide written representations (management letter) is a scope limitation so severe that AU-C 580 requires the auditor to disclaim or withdraw.
An auditor using monetary-unit sampling (MUS) discovers a $500 error in a $2,000 sample item. The tainting percentage is:
Answer: 25%
Tainting percentage = error amount / book value of item = $500 / $2,000 = 25%, which is then projected across the sampling interval.
When the auditor becomes aware of a material weakness in internal control, they must communicate it to:
Answer: Management and those charged with governance in writing
AU-C 265 requires auditors to communicate material weaknesses to management and those charged with governance in writing.
Which of the following audit procedures provides the most reliable evidence regarding inventory valuation?
Answer: Observation of the physical inventory count
Physical observation of the inventory count provides direct, first-hand evidence that is more reliable than inquiries, documentation review, or analytical comparisons.
A predecessor auditor's workpapers may be reviewed by a successor auditor primarily to:
Answer: Obtain information about opening balances and accounting policies
The successor auditor reviews predecessor workpapers to gain an understanding of opening balances, significant accounting policies, and prior-year issues.
In a government audit under GAGAS (Yellow Book), which additional requirement applies compared to GAAS?
Answer: Auditors must complete 80 hours of CPE every two years including government-specific training
GAGAS requires auditors to complete 80 hours of CPE every two-year period, with at least 24 hours directly related to government auditing.
The 'expectation gap' in auditing refers to the difference between:
Answer: What the public believes auditors do versus what auditors are actually responsible for
The expectation gap is the difference between the public's perception of auditor responsibilities (e.g., detecting all fraud) and the auditor's actual professional obligations.