AICPA CPA-Auditing Exam - Topic 1 Question 71 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 71
Topic #: 1

Which of the following statements is true regarding an accountant's consideration of fraud/illegal acts in compilation and review engagements?

AThe accountant is not required to perform procedures designed to detect material misstatements due to fraud or illegal acts.

BThe accountant must inform an appropriate level of management of all instances of fraud or illegal acts.

CThe accountant must report only definite instances of fraud or an illegal act, but need not report information indicating that fraud or an illegal act may have occurred.

DInformation indicating that fraud or an illegal act may have occurred should be reported in writing to an appropriate level of management.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. A report on internal control related matters noted in an audit should not state that there are no significant deficiencies in internal control, since this statement might erroneously imply that the auditor searched for such conditions.

Choice 'a' is incorrect. The auditor is permitted to state that no material weaknesses were identified during the audit. Typically this occurs in reports submitted to governmental authorities.

Choice 'c' is incorrect. The auditor may suggest that corrective follow-up action should be taken due to the relative significance of material weakness discovered.

Choice 'd' is incorrect. The auditor's report may state that his or her consideration of internal control would not necessarily disclose all significant deficiencies that exist.

by Martina at Jul 06, 2023, 11:52 PM

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Dolores

5 months ago

D makes sense, better safe than sorry!

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Jonell

5 months ago

B is misleading, they only need to report certain things.

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Rebbecca

5 months ago

Wait, so they don't have to report suspicions? That seems off.

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Wendell

5 months ago

Totally agree, it's all about the level of engagement!

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Lashaunda

6 months ago

A is correct, no obligation to detect fraud in compilations.

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Lasandra

6 months ago

I’m leaning towards option D because it seems important to report any indications of fraud, but I’m not 100% confident. I need to double-check my notes on this.

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Norah

6 months ago

I’m a bit confused about option C. I thought accountants had to report any signs of fraud, not just definite instances.

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Sage

6 months ago

I feel like I’ve seen a question like this before, and I think option B might be the right answer. It makes sense that management should be informed about fraud.

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Freeman

6 months ago

I think option A sounds familiar, but I’m not entirely sure if it’s correct. I remember something about the accountant's responsibilities in these engagements.

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Benton

6 months ago

I'm a little confused by this question. Telephony, email, and the camera all seem like they could be useful features for a navigation app, but I'm not sure which one is the most important. I'll have to weigh the pros and cons of each option.

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Madonna

6 months ago

Okay, I think I've got this. The key is to configure the Extract process with the FORMATASCII SQLLOADER option to generate the non-canonical extract file.

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Mitzie

6 months ago

I'm a little confused by this question. I know protocol analyzers are used for network troubleshooting, but I'm not sure how the specific options relate to that. I'll have to guess on this one.

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Dino

6 months ago

I remember practicing a question similar to this, and I also thought it was the project management plan. Just makes sense since it's all about managing resources and contracts.

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Ellen

11 months ago

This question is a real 'accounting' for your actions, am I right? *wink wink* Anyway, D is the clear winner here.

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Gennie

10 months ago

Yes, D is the best choice. It's crucial to communicate any suspicions of fraud or illegal acts to the appropriate level of management.

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Lamonica

11 months ago

Definitely, D is the way to go. We have to make sure management is aware of any potential issues.

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Benedict

11 months ago

I agree, D is the correct answer. It's important to report any indication of fraud or illegal acts to management.

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Cassie

11 months ago

Option B sounds a bit too broad. I mean, do they really have to report every single instance, even the super minor ones? D is the way to go.

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Whitney

11 months ago

I think D strikes a good balance in reporting potential fraud or illegal acts without overwhelming management with minor instances.

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Elfriede

11 months ago

Yeah, reporting every single instance of fraud or illegal acts could be overwhelming. D is more practical.

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Roy

11 months ago

I agree, option B does seem like a lot of work. D seems more reasonable.

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Lonny

11 months ago

Hmm, I don't think the accountant can just ignore everything and wait for the fraud to come to them. Gotta go with D on this one.

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Leonida

12 months ago

Wait, so the accountant doesn't have to do anything to detect fraud or illegal acts? That's like asking a detective to solve a crime without investigating. Definitely not A.

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German

10 months ago

D) Information indicating that fraud or an illegal act may have occurred should be reported in writing to an appropriate level of management.

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Audry

10 months ago

C) The accountant must report only definite instances of fraud or an illegal act, but need not report information indicating that fraud or an illegal act may have occurred.

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Juliann

10 months ago

B) The accountant must inform an appropriate level of management of all instances of fraud or illegal acts.

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Peter

10 months ago

Yes, information indicating that fraud or an illegal act may have occurred should be reported in writing to management. That's option D.

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Christiane

10 months ago

But the accountant doesn't have to report every instance of fraud or illegal acts, only definite ones. So, it's not B.

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Cornell

10 months ago

Right, the accountant must inform management of all instances of fraud or illegal acts. That's option B.

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Anisha

11 months ago

No, the accountant is not required to perform procedures to detect fraud or illegal acts. So, it's not A.

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Antonio

12 months ago

But why do you think that? I thought we only need to report definite instances of fraud.

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Nicolette

12 months ago

I disagree, I believe the answer is D.

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Antonio

12 months ago

I think the answer is A.

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Lorrine

12 months ago

But why do you think that? I thought the accountant must report all instances of fraud or illegal acts.

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Talia

12 months ago

I disagree, I believe the answer is D.

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Lorrine

1 year ago

I think the answer is A.

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Dalene

1 year ago

I'm pretty sure the accountant has to report any potential fraud or illegal acts, not just the definite ones. Option D seems to be the most accurate answer here.

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