AICPA CPA-Auditing Exam Dumps

Choice 'c' is correct. Ratio analysis is often used to examine relationships between balance sheet accounts.

Choice 'a' is incorrect. Trend analysis would be more appropriate for examining income statement accounts.

Choice 'b' is incorrect. Regression analysis would not likely be used since twenty to thirty past observations are generally required to reliably make estimates.

Choice 'd' is incorrect. Risk analysis would not be used to evaluate relationships between balance sheet accounts.

Choice 'a' is correct. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable. 5.0 = net credit sales / [($20,000 + $22,000)/2]. Net credit sales equal $105,000.

Choice 'b' is incorrect. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable.

Choice 'c' is incorrect. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable, not by year-end accounts receivable.

Choice 'd' is incorrect. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable, not by the sum of beginning and ending accounts receivable.

Choice 'c' is correct. A practitioner's report on agreed-upon procedures that is in the form of procedures and findings should contain a statement of restrictions on the use of the report.

Choice 'a' is incorrect. Agreed-upon procedures engagements do not provide assurance of any sort.

Choice 'b' is incorrect. The responsible party (not the practitioner) is responsible for the sufficiency of the procedures.

Choice 'd' is incorrect. The subject matter of an agreed-upon procedures engagement varies, and may be unrelated to the financial statements.

Choice 'c' is correct. The auditor should discuss with those charged with governance any significant disagreements with management, whether or not satisfactorily resolved, about matters that are significant to the financial statements or to the auditor's report.

Choices 'a' and 'b' are incorrect. There is no requirement that the auditor's communication with those charged with governance include a justification for any of the judgments made in conducting the audit.

Choice 'd' is incorrect. An auditor of an SEC client is required to discuss his or her judgment about the quality of the entity's accounting principles and estimates, not the quality of the entity's earnings. Note too that this requirement does not apply to non-SEC clients, and that no comparison to prior year is required.

Choice 'd' is correct. Requiring the signatures and presence of two designated officials in order to gain access to securities is an internal control that provides assurance regarding the safeguarding of securities.

Choice 'a' is incorrect. Having no access to securities between the year-end and the date of the auditor's security count would assure that no securities are added or taken away before the auditor counts them, but it would not ensure that securities are safeguarded for the entire year.

Choice 'b' is incorrect. Proceeds from the sale of investments should be received by an employee who does not have access to securities, but this control does not prevent the theft of investments that are not sold.

Choice 'c' is incorrect. Requiring authorization from a member of the board of directors before execution assures that investment purchases are approved and consistent with the financial philosophy of the organization (level of financial risk that the company is willing to accept), but this approval does not provide assurance that the assets will be safeguarded.