AUD A5: M1-M3

If a service auditor is unable to obtain a written assertion from the service organization's management regarding its system and the suitability of the design and operating effectiveness of controls, it would be most appropriate for the auditor to:

• a.) Increase the substantive testing of the service organization's controls

• b.) Withdraw from the engagement unless prohibited by law

• c.) Report management's action in the auditor's communication to those charged with governance

• d.) Assess a higher level of detection risk for the engagement

When planning an audit of the effectiveness of the entity's internal control in an integrated audit of a nonissuer, an auditor would be least likely to consider which of the following factors?

• a.) Preliminary judgments about the effectiveness of internal control

• b.) The extent of recent changes in the entity and its operations

• c.) The evaluation of the operating effectiveness of the controls

• d.) The type of available evidential matter pertaining to the effectiveness of the entity's internal control

Which of the following statements correctly describes the "top-down approach" used during an audit of internal control over financial reporting?

• a.) Begin reviewing balance sheet accounts and then review income statement accounts

• b.) Begin reviewing income statement accounts and then review balance sheet accounts

• c.) Begin by understanding the overall risks to internal control over financial reporting at the general ledger level

• d.) Begin by understanding the overall risks to internal control over financial reporting at the financial statement level

Which of the following best describes the responsibility of the auditor to report significant deficiencies and material weaknesses in an engagement to audit the effectiveness of a nonissuer's internal control?

• a.) The auditor must communicate both significant deficiencies and material weaknesses

• b.) The auditor must communicate material weaknesses, but need not disclose significant deficiencies

• c.) Neither significant deficiencies nor material weaknesses are required to be communicated

• d.) The auditor must communicate significant deficiencies, but need not separately identify material weaknesses

An auditor has been hired to report on a nonissuer's internal control over financial reporting. Which of the following best describes a reporting option in this scenario?

• a.) If management fails to provide a written representation letter acknowledging its responsibility for the effectiveness of internal control, the auditor will generally issue an unmodified opinion with additional explanatory language

• b.) When a material weakness exists, the auditor should issue an adverse opinion

• c.) If management fails to provide a written representation letter acknowledging its responsibility for the effectiveness of internal control, the auditor may issue either a qualified opinion or an adverse opinion

• d.) When a significant deficiency exists, the auditor may issue either a qualified or adverse option

A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements when engaged to:

• a.) Issue a letter for an underwriter, also known as a comfort letter, to a broker or dealer of securities

• b.) Compile financial statements in conformity with a comprehensive basis of accounting other than GAAP

• c.) Communicate with an audit committee regarding management's consultations with another CPA

• d.) Provide assurance on investment performance statistics prepared by an investment company on established criteria

Which of the following is a conceptual difference between the attestation standards and generally accepted auditing standards (GAAS)?

• a.) The requirement that the practitioner be independent is omitted from the attestation standards

• b.) The attestation standards do not permit an attest engagement to be part of a business acquisition study or a feasibility study

• c.) GAAS allows the auditor to use another auditor's work while attestation standards do not allow the use of another practitioner's work

• d.) The attestation standards provide a framework for the attest function beyond historical financial statements