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AICPA CPA-Auditing Exam - Topic 2 Question 105 Discussion

Actual exam question for AICPA's CPA-Auditing exam
Question #: 105
Topic #: 2
[All CPA-Auditing Questions]

Which of the following events occurring after the issuance of an auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

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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.


by Yuki at Jan 10, 2025, 05:19 PM

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Eulah
3 months ago
I agree with B, that could really impact the financials!
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Marquetta
3 months ago
D seems significant too, selling a major subsidiary could change everything.
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Cassie
3 months ago
Wait, isn't A just a resolved issue? Why would that matter now?
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Carlene
4 months ago
I think C is more relevant, going concern is crucial.
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Pok
4 months ago
Definitely B, new info on related parties is a big deal!
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Darrel
4 months ago
I’m leaning towards option A, but I’m not convinced. A lawsuit resolution seems less likely to require further inquiries than new undisclosed info.
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Linette
4 months ago
I practiced a similar question where new information after the report was key. I feel like option B is definitely a strong contender here.
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Kenneth
4 months ago
I'm not entirely sure, but I remember something about going concern issues being really important, so maybe option C?
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Clorinda
5 months ago
I think option B makes the most sense because undisclosed related party transactions could significantly impact the financial statements.
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Frederick
5 months ago
Ah, this is a good one. I remember discussing similar scenarios in class, so I feel fairly confident I can narrow down the options and choose the correct answer.
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Detra
5 months ago
Okay, I think I've got a strategy for this. I'll focus on identifying which event could potentially affect the accuracy or completeness of the prior-year financial statements, and that's the one I'll select.
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Leonor
5 months ago
Hmm, I'm a bit unsure about this one. I'll need to review the relevant auditing standards to determine which event would most likely prompt further inquiries by the auditor.
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Colette
5 months ago
This seems like a tricky question. I'll need to carefully consider each option and think about how the events could impact the previously issued financial statements.
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Kenneth
10 months ago
I'm going with B) - undisclosed related party transactions are a big red flag and can't be ignored. The auditor better get to the bottom of that one, pronto!
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Shawnta
9 months ago
User 3: It's important for the auditor to investigate any new information that comes to light about related party transactions.
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Kirk
9 months ago
User 2: Yeah, the auditor should definitely look into that further to make sure everything is above board.
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Ashton
9 months ago
User 1: I agree, undisclosed related party transactions are definitely a cause for concern.
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Pete
10 months ago
D) Wait, selling a subsidiary that accounts for 35% of sales? That's a pretty big deal! I think the auditor should definitely take a closer look.
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Louvenia
8 months ago
C) A technological development occurs that affects the entity's ability to continue as a going concern.
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Edelmira
9 months ago
B) New information is discovered concerning undisclosed related party transactions of the prior year.
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Shoshana
9 months ago
D) Absolutely, the auditor needs to ensure the financial statements accurately reflect the entity's current financial position.
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Florinda
9 months ago
A) A lawsuit is resolved that is explained in a separate paragraph of the prior-year's auditor's report.
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Adelle
9 months ago
C) I think any major event like that would definitely warrant further inquiries from the auditor.
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Paris
10 months ago
B) Agreed, undisclosed related party transactions could also have a significant impact on the financial statements.
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Janna
10 months ago
A) Yes, selling a subsidiary that accounts for such a large portion of sales could definitely impact the financial statements.
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Avery
10 months ago
A) That's a tricky one. A resolved lawsuit might not be enough to warrant further inquiries, unless it had a material impact on the financials.
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Hollis
10 months ago
Hmm, I'm not so sure about C). Technological developments, while important, don't necessarily require revisiting the previous year's financial statements.
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Franklyn
9 months ago
User 2: I agree, undisclosed related party transactions could definitely impact the financial statements.
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Keneth
10 months ago
User 1: I think B) is the most likely reason for the auditor to make further inquiries.
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Brandon
11 months ago
Because undisclosed related party transactions could impact the financial statements.
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Magda
11 months ago
Why do you think that?
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Ernest
11 months ago
B) Definitely! Undisclosed related party transactions could significantly impact the financial statements and warrant further investigation.
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Tawna
9 months ago
D) The entity sells a subsidiary that accounts for 35% of the entity's consolidated sales.
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Fabiola
9 months ago
C) A technological development occurs that affects the entity's ability to continue as a going concern.
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Staci
10 months ago
B) New information is discovered concerning undisclosed related party transactions of the prior year.
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Gladys
10 months ago
A) A lawsuit is resolved that is explained in a separate paragraph of the prior-year's auditor's report.
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Brandon
11 months ago
I think the answer is B.
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