AICPA CPA-Auditing Exam Questions

Choice 'c' is correct. The objective of analytical procedures used in the overall review stage of the audit is to assist the auditor in assessing conclusions reached and in the evaluation of the overall financial statement presentation. Analytical procedures applied in the overall review stage are used to consider the adequacy of evidence gathered in response to unusual or unexpected balances identified in planning the audit, and to identify unusual or unexpected balances or relationships that were not previously identified.

Choice 'a' is incorrect. If analytical procedures are used to gather evidence about account balances that have not changed from last year, they are functioning as a substantive test rather than as a final review procedure.

Choice 'b' is incorrect. Analytical procedures are not used to test controls.

Choice 'd' is incorrect. If analytical procedures are used as a test of transactions, they are functioning as a substantive test rather than as a final review procedure.

Choice 'a' is correct. Tracing (old) equipment recorded in the books to the actual equipment during a plant tour is a control which tests for unrecorded retirements.

Choice 'b' is incorrect. Determining which assets are fully depreciated does not tell you which ones are retired, as fully depreciated assets may continue to be used.

Choice 'c' is incorrect. Selecting items from the plant tour and then tracing them to the equipment subsidiary ledger will provide evidence that all equipment is recorded. It will not detect whether recorded equipment has been retired. (This step is backwards.)

Choice 'd' is incorrect. Scanning the general journal for unusual equipment additions and excessive debits to repairs and maintenance expense provides evidence regarding fixed asset additions, not retirements.

Choice 'd' is correct. The content of the representation letter will generally not affect the nature and extent of audit documentation. Factors affecting the nature and extent of audit documentation include:

1. The risk of material misstatement;

2. The extent to which judgment was required in performing the work and evaluating the results;

3. The nature of the specific auditing procedure;

4. The significance of the evidence obtained;

5. The nature and extent of any problems identified; and

6. The need to document conclusions that may not be obvious.

Choice 'c' is correct. If an auditor has doubts about a material assertion (such as the valuation of inventory), he/she should gather sufficient evidence to eliminate the doubt.

Choices 'a' and 'b' are incorrect. The auditor would not consult with the audit committee regarding the sufficiency of audit evidence obtained, as this is determined based on the auditor's own judgment. In addition, if the auditor is able to obtain additional evidence, it might be possible to issue an unqualified opinion. Finally, even if no additional evidence is available, the auditor will still need to decide whether a qualified opinion or a disclaimer of opinion is more appropriate, depending on materiality.

Choice 'd' is incorrect. Since management representations are in fact 'statements from management,' obtaining additional statements from management would not provide additional support.