AICPA CPA-Auditing Exam Dumps

Choice 'a' is correct. The scope of an audit is not restricted when an attorney's response is limited to matters to which the attorney has given substantive attention in the form of legal representation. The attorney may also limit his or her response to matters that are considered individually or collectively to be material.

Choices 'b', 'c', and 'd' are incorrect. The scope of an audit may be restricted when an attorney's response is limited to:

1. An evaluation of the likelihood of an unfavorable outcome of the matter disclosed by the entity. (The attorney's response should also address the nature of the claim, the progress to date, and the intended response.)

2. The attorney's opinion of the entity's historical experience in recent similar litigation. (The attorney's response should address the current situation, which may not parallel historical experience).

3. The probable outcome of asserted claims and pending or threatened litigation. (The attorney's response should also address the nature of the claim, the progress to date, and the intended response, as well as unasserted claims).

Choice 'a' is correct. An auditor is required to communicate certain matters to those charged with governance, including disagreements with management about significant audit adjustments, whether or not satisfactorily resolved.

Choice 'b' is incorrect. Written communications should include a limitation on the use of the communication.

Choice 'c' is incorrect. The auditor is not required to distribute the report to management, especially since certain matters might be inappropriate for discussion with management.

Choice 'd' is incorrect. The auditor is not required to make the communication before the auditor's report on the financial statements is finalized, as long as the communication occurs on a timely basis. (Note, however, that for audits of issuers, the communication must be made before the auditor's report is filled with the SEC.)

Choice 'c' is correct. Before performing a review of a nonissuer's financial statements, an accountant should obtain a sufficient level of knowledge of the accounting principles and practices of the industry in which the entity operates.

Choices 'a', 'b', and 'd' are incorrect. These are appropriate steps performed during the review, not prior to it.

Choice 'c' is correct. The auditor should consider that fraud might occur regardless of any past experience with the entity. An assessment of management's honesty and integrity performed during the previous year would not necessarily be relevant to the current year's audit.

Choice 'a' is incorrect. An auditor might apply professional skepticism by performing additional audit procedures designed to improve the reliability of evidence.

Choice 'b' is incorrect. Corroborating management's Explanation: s is an example of the application of professional skepticism, since the auditor is obtaining additional support rather than simply accepting the Explanation: as given.

Choice 'd' is incorrect. Using third party confirmations to provide support for management's representations is an example of the application of professional skepticism, since the auditor is obtaining additional support rather than simply accepting the Explanation: as given.