Free CPA AUD (Auditing & Attestation) Ethics, Professional Responsibilities and General Principles Practice Questions
Ethics and professional responsibilities on the CPA AUD exam cover independence rules under the AICPA Code of Professional Conduct, quality control standards (SQCS), and general auditing principles. AUD requires a score of 75 to pass (AICPA).
Sample Questions
Question 1
Easy
Under AU-C 210, which of the following must be included in an audit engagement letter?
Solution
AU-C 210 requires the engagement letter to specify management's responsibilities, including preparing financial statements in accordance with the applicable financial reporting framework. The auditor cannot guarantee detection of all material misstatements—the letter must acknowledge inherent limitations. Specific materiality thresholds and detailed procedures are auditor judgments developed during planning, not required engagement letter elements.
Question 2
Medium
Under AU-C 200, which of the following represents the overall objectives of the auditor when conducting an audit of financial statements?
Solution
AU-C 200 establishes three overall objectives: (1) obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; (2) report on the financial statements, and communicate as required by GAAS, in accordance with the auditor's findings; and (3) communicate with management and those charged with governance as required. The auditor expresses an opinion—not a guarantee or certification—and is not responsible for preparing the statements or designing internal controls.
Question 3
Hard
During a single audit of a state government entity, the auditor identifies a significant questioned cost related to a major federal program. The questioned cost resulted from expenditures that did not comply with the allowable cost requirements specified in the federal award agreement. Under the Uniform Guidance and Government Auditing Standards, the auditor should:
Solution
A is correct.
Under the Uniform Guidance (2 CFR 200.516), the auditor reports questioned costs in the schedule of findings and questioned costs. For each finding, the auditor must also evaluate and report whether the noncompliance constitutes a material weakness, significant deficiency, or neither, in the entity's internal control over compliance with the federal program requirements. This dual reporting -- the compliance finding and the internal control assessment -- is a core requirement of the single audit.
Under the Uniform Guidance (2 CFR 200.516), the auditor reports questioned costs in the schedule of findings and questioned costs. For each finding, the auditor must also evaluate and report whether the noncompliance constitutes a material weakness, significant deficiency, or neither, in the entity's internal control over compliance with the federal program requirements. This dual reporting -- the compliance finding and the internal control assessment -- is a core requirement of the single audit.