Free CPA AUD (Auditing & Attestation) Performing Further Procedures and Obtaining Evidence Practice Questions
Audit procedures and evidence on the CPA AUD exam tests substantive testing, tests of controls, analytical procedures, audit sampling methods (statistical and non-statistical), and the evaluation of sufficient appropriate evidence.
Sample Questions
Question 1
Easy
In audit sampling, the term "sampling risk" refers to the risk that:
Solution
B is correct.
AU-C 530.05 defines sampling risk as the risk that the auditor's conclusion based on a sample may differ from the conclusion that would be reached if the entire population were subjected to the same audit procedure. This is an inherent limitation of sampling — the sample may not be perfectly representative of the population.
AU-C 530.05 defines sampling risk as the risk that the auditor's conclusion based on a sample may differ from the conclusion that would be reached if the entire population were subjected to the same audit procedure. This is an inherent limitation of sampling — the sample may not be perfectly representative of the population.
Question 2
Medium
Under AU-C 560, which of the following is a Type II subsequent event that requires financial statement disclosure but does not require adjustment of the financial statements?
Solution
A is correct.
AU-C 560.A2 distinguishes between two types of subsequent events. Type I events (adjusting events) provide additional evidence about conditions that existed at the balance sheet date and require adjustment of the financial statements. Type II events (nonadjusting events) are indicative of conditions that arose after the balance sheet date and require disclosure but not adjustment. A significant lawsuit arising from events that occurred after the balance sheet date is a Type II event — the condition (the event giving rise to the lawsuit) did not exist at year-end, so no adjustment is required, but the lawsuit's potential financial impact warrants disclosure.
AU-C 560.A2 distinguishes between two types of subsequent events. Type I events (adjusting events) provide additional evidence about conditions that existed at the balance sheet date and require adjustment of the financial statements. Type II events (nonadjusting events) are indicative of conditions that arose after the balance sheet date and require disclosure but not adjustment. A significant lawsuit arising from events that occurred after the balance sheet date is a Type II event — the condition (the event giving rise to the lawsuit) did not exist at year-end, so no adjustment is required, but the lawsuit's potential financial impact warrants disclosure.
Question 3
Hard
An auditor is evaluating the results of substantive testing and has identified several misstatements. The auditor has aggregated all identified misstatements (both factual and projected) and determined that the aggregate exceeds performance materiality but is below overall materiality. Under AU-C 450, the auditor should:
Solution
C is correct.
Under AU-C 450.07-.11, when the auditor identifies misstatements, the auditor should communicate them to management and request correction. If management refuses to correct some or all misstatements, the auditor evaluates whether uncorrected misstatements are material, individually or in the aggregate. When aggregate misstatements exceed performance materiality but are below overall materiality, the auditor may need to perform additional procedures to reduce the risk that remaining undetected misstatements, combined with uncorrected misstatements, could exceed overall materiality.
Under AU-C 450.07-.11, when the auditor identifies misstatements, the auditor should communicate them to management and request correction. If management refuses to correct some or all misstatements, the auditor evaluates whether uncorrected misstatements are material, individually or in the aggregate. When aggregate misstatements exceed performance materiality but are below overall materiality, the auditor may need to perform additional procedures to reduce the risk that remaining undetected misstatements, combined with uncorrected misstatements, could exceed overall materiality.