Discuss AICPA CPA-Auditing Exam Topic 1 Question 75

Which of the following procedures would an auditor most likely perform during an audit engagement's overall review stage in formulating an opinion on an entity's financial statements?

AObtain assurance from the entity's attorney that all material litigation has been disclosed in the financial statements.

BVerify the clerical accuracy of the entity's proof of cash and its bank cutoff statement.

CDetermine whether inadequate provisions for the safeguarding of assets have been corrected.

DConsider whether the results of audit procedures affect the assessment of the risk of material misstatement due to fraud.
Explanation
Choice 'd' is correct. During every stage of the audit, the auditor should consider the assessment of the risk of material misstatement. During the overall review stage, the auditor should consider whether the results of any of the audit procedures affect the assessment of the risk of material misstatement due to fraud.
Choice 'a' is incorrect. The entity's attorney does not provide assurance regarding financial statement disclosure.
Choice 'b' is incorrect. Verifying clerical accuracy of client schedules would be performed during the audit, not during the overall review stage.
Choice 'c' is incorrect. Evaluating whether control weaknesses have been corrected is not typically performed during the overall review stage.

Suggested Answer: A

Choice 'a' is correct. The auditor's report on compliance and on internal control over financial recording (based on an audit) must include the scope of testing of compliance and internal control.

Choice 'b' is incorrect. Material indications of illegal acts are not only reported to the members of the governing body of the audited entity and their senior staff officials but, in some circumstances, auditors should report illegal acts directly to external parties (such as the grantor agency).

Choice 'c' is incorrect. Although GAO standards require that the auditor communicate information regarding the nature, timing and extent of planned testing to officials of the audited entity and to individuals contracting for the audit, reporting of all changes is not required. (For example, immaterial changes to the audit program need not be reported.)

Choice 'd' is incorrect. Certain privileged or confidential information may be prohibited from general disclosure and should not be included in the audit report. The report should, however, disclose the nature of the information omitted and the requirement that makes an opinion necessary.

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38 comments · newest first

Dorinda 11 months ago

Not sure about that, seems like all options have their place.

Staci 11 months ago

Definitely agree, assessing fraud risk is key!

Kindra 11 months ago

Surprised that the attorney's assurance isn't considered!

Skye 11 months ago

I thought verifying clerical accuracy was more important?

Benedict 12 months ago

Choice D makes total sense for the review stage!

Laquanda 12 months ago

Choice D makes sense to me. I recall that we need to consider how all audit findings impact our risk assessments, especially at the end of the audit.

Cathern 12 months ago

I feel like we had a practice question about attorney letters and their role in disclosures. I think that was a different stage, though.

Lenna 1 year ago

I'm not entirely sure, but I think verifying clerical accuracy is more of a detailed testing step, not something we do in the overall review.

Cyndy 1 year ago

I remember we discussed how the overall review stage is crucial for assessing risks, especially related to fraud.

Chu 1 year ago

Easy peasy! The overall review is where the auditor pulls everything together and forms their final opinion, so looking at the fraud risk is a key part of that. I'm confident D is the right answer here.

Hubert 1 year ago

Okay, I think I've got this. The overall review is all about stepping back and looking at the big picture, so option D makes sense since it's asking about considering the fraud risk assessment. The other options are more focused on specific audit procedures.

Sherell 1 year ago

Hmm, I'm a bit unsure about this one. The options seem pretty similar, and I'm not totally clear on the differences between the overall review stage and the other audit stages. I'll have to think this through carefully.

Shad 1 year ago

This question seems straightforward - the overall review stage is all about considering the risk of material misstatement, so option D looks like the best choice.

Hubert 1 year ago

This is a tricky one. The productivity improvements are all relatively small, which makes me think Kaizen, but the wording about "best described by" has me a bit confused. I'll have to review my notes on the different problem-solving approaches to make sure I'm not missing something.

Colene 1 year ago

Okay, let's think this through step-by-step. First, we need to determine if the VNF deployment is the issue, or if there's something else going on with the network. Checking the firewall rules on the Edge seems like a good place to start. If that's not the problem, then we can look at the VNF configuration and resource usage.

Basilia 1 year ago

I'm a bit confused by the wording of the question. What exactly do they mean by "unique solution"? And how do I know if my solution will meet the goal? I'll need to think this through carefully.

Annice 1 year ago

I'm leaning towards the Develop Project Management Plan, but I feel unsure; I need to think about how the business case is used across different processes.

Maile 1 year ago

I bet the person who wrote this question has a wicked sense of humor. 'Safeguarding of assets'? Really?

Candra 1 year ago

Correcting control weaknesses? Sounds like a job for the internal controls team, not the overall review stage.

Shay 1 year ago

↳ replying to Candra

Internal controls team plays a crucial role in addressing control weaknesses, but auditors also need to consider fraud risk during the overall review stage.

Troy 1 year ago

↳ replying to Candra

That's right, the auditor's focus during the overall review stage is on the assessment of fraud risk.

Susana 1 year ago

↳ replying to Candra

Definitely, the overall review stage is more about assessing the risk of material misstatement.

Alesia 1 year ago

↳ replying to Candra

I agree, control weaknesses should be addressed by the internal controls team.

Mila 1 year ago

Ah, the overall review stage. Where the auditor puts on their detective hat and looks for any suspicious activity. Option D it is!

Renato 1 year ago

↳ replying to Mila

User 3: Option D is the way to go in formulating an opinion on the entity's financial statements.

Graciela 1 year ago

↳ replying to Mila

User 2: Definitely, it's like being a financial detective and connecting all the dots.

Sarah 1 year ago

↳ replying to Mila

User 1: I agree, during the overall review stage, we need to consider the risk of material misstatement due to fraud.

Roselle 1 year ago

Verifying the proof of cash? Sounds like a real snooze-fest. Glad that's not the right answer.

Asuncion 1 year ago

Wait, the entity's attorney doesn't provide assurance? That's news to me. I guess I need to brush up on my audit procedures.

Iola 1 year ago

↳ replying to Asuncion

Verifying clerical accuracy is done during audit, not overall review stage.

Willard 1 year ago

↳ replying to Asuncion

During overall review, auditor considers if audit procedures affect risk of material misstatement due to fraud.

Sherly 1 year ago

↳ replying to Asuncion

Attorney's role is not to provide assurance on financial statement disclosure.

Page 1 year ago

Hmm, I think option D is the way to go. Gotta keep an eye out for potential fraud, you know?

Glenn 1 year ago

↳ replying to Page

User 2: Definitely, assessing the risk of material misstatement due to fraud is crucial for the audit process.

Lezlie 1 year ago

↳ replying to Page

User 1: I agree, option D is important to consider during the overall review stage.

Gracia 2 years ago

Exactly, it's important to assess the impact of audit procedures on the risk of fraud.

Colene 2 years ago

I agree with you, choice D seems like the most relevant procedure to perform at that stage.

Gracia 2 years ago

I think the auditor should consider the risk of material misstatement due to fraud during the overall review stage.

AICPA CPA-Auditing Exam - Topic 1 Question 75 Discussion