AICPA AICPA Certifications CPA-TEST Questions & Answers

• Question 1111:

  A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain:

  A. A statement of limitations on the use of the report.

  B. An opinion about whether management's assertion is fairly stated.

  C. Negative assurance that control risk has not been assessed.

  D. An acknowledgment of responsibility for the sufficiency of the procedures.

  Correct Answer: A

  Explanation: Choice "a" is correct. The practitioner's report on agreed-upon procedures related to management's assertion about the entity's compliance with specified requirements is intended solely for the use of specified parties. Thus, the report should include a statement of limitations on the use of the report. Choice "b" is incorrect. The report is in the form of procedures and findings. Since the work performed is less in scope than an examination, the accountant disclaims any opinion. Choice "c" is incorrect. The auditor does not provide any negative assurance relative to assessment of control risk or to compliance with the specified requirements. Choice "d" is incorrect. The report contains a statement that the sufficiency of the procedures is solely the responsibility of the parties specifying the procedures and a disclaimer of responsibility on the part of the accountant.

• Question 1112:

  An entity engaged a CPA to determine whether the client's web sites meet defined criteria for standard business practices and controls over transaction integrity and information protection. In performing this engagement, the CPA should comply with the provisions of:

  A. Statements on Assurance Standards.

  B. Statements on Standards for Attestation Engagements.

  C. Statements on Standards for Management Consulting Services.

  D. Statements on Auditing Standards.

  Correct Answer: B

  Explanation:

  Choice "b" is correct. A WebTrust engagement is an attestation engagement in which the CPA determines

  whether the client's web site meets defined criteria relating to transaction integrity, information protection,

  and disclosure of business practices. Attestation engagements should be performed in accordance with

  Statements on Standards for Attestation Engagements (SSAEs).

  Choice "a" is incorrect. Statements on Assurance Standards is a distracter.

  Choice "c" is incorrect. Consulting services provided by CPAs range from advice on accounting-related

  matters to a wide range of services involving diverse technical disciplines. Consulting services performed

  by CPAs should be performed in accordance with Statements on Standards for Consulting Services

  (SSCSs).

  Choice "d" is incorrect. Audits (generally of financial statements) performed by CPAs should be performed

  in accordance with Statements on Auditing Standards (SASs).

• Question 1113:

  Which of the following is a term for an attest engagement in which a CPA assesses a client's commercial Internet site for predefined criteria that are designed to measure transaction integrity, information protection, and disclosure of business practices?

  A. ElectroNet.

  B. EDIFACT.

  C. TechSafe.

  D. WebTrust.

  Correct Answer: D

  Explanation: Choice "d" is correct. A WebTrust engagement is an attestation engagement designed to measure transaction integrity, information protection, and disclosure of business practices. When an unqualified report is issued, the client may add the CPA WebTrust Seal to its Web site, indicating that its site is a reasonably safe and private place for e-commerce. Choice "a" is incorrect. ElectroNet is an Internet service provider. Choice "b" is incorrect. EDIFACT refers to standards developed by the United Nations for Electronic Data Interchange for Administration, Commerce, and Transport. These standards facilitate information flow among trading partners in many industries. The scope and format of these standards is similar, but not identical, to those developed in the United States.

  Choice "c" is incorrect. TechSafe is a distracter.

• Question 1114:

  In an attest engagement, use of the accountant's report should be restricted to specified parties in all of the following situations, except:

  A. When the criteria used to evaluate the subject matter are appropriate for only a limited number of parties.

  B. When reporting on an assertion about the subject matter instead of reporting directly on the subject matter.

  C. When reporting directly on the subject matter and a written assertion has not been provided.

  D. When reporting on an agreed-upon procedures engagement.

  Correct Answer: B

  Explanation:

  Choice "b" is correct. There is no requirement that the accountant's report be restricted to specified parties

  when reporting on an assertion about the subject matter instead of reporting directly on the subject matter.

  Choice "a" is incorrect, since use of the accountant's report should be restricted to specified parties when

  the criteria used to evaluate the subject matter are appropriate for only a limited number of parties.

  Choice "c" is incorrect, since use of the accountant's report should be restricted to specified parties when

  reporting directly on the subject matter and a written assertion has not been provided.

  Choice "d" is incorrect, since use of the accountant's report should be restricted to specified parties when

  reporting on an agreed-upon procedures engagement.

• Question 1115:

  When an accountant issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receive:

  A. Negative assurance on capsule information.

  B. Positive assurance on supplementary disclosures.

  C. A limited opinion on "pro forma" financial statements.

  D. A disclaimer on prospective financial statements.

  Correct Answer: A

  Explanation:

  Choice "a" is correct. When an accountant issues to an underwriter a comfort letter containing comments

  on data that have not been audited, the underwriter most likely will receive negative assurance on capsule

  information.

  Choice "b" is incorrect. Positive assurance cannot be given if the information was not audited.

  Choices "c" and "d" are incorrect. A comfort letter generally covers the period from the date of the last

  auditor's report to the effective date of the registration. It does not cover "pro forma" or prospective

  financial statements.

• Question 1116:

  Comfort letters ordinarily are:

  

  A. Option A

  B. Option B

  C. Option C

  D. Option D

  Correct Answer: D

  Explanation:

  Choice "d" is correct. A comfort letter is a letter from the independent auditor to the named underwriter just

  before the registration of the client's securities.

  Choices "a", "b", and "c" are incorrect, based on the above explanation.

• Question 1117:

  A CPA in public practice is required to comply with the provisions of the Statements on Standards for Attestation Engagements (SSAE) when:

  

  A. Option A

  B. Option B

  C. Option C

  D. Option D

  Correct Answer: C

  Explanation:

  Choice "c" is correct. Statements on Standards for Attestation Engagements provide guidance with respect

  to compilation of a financial projection, but they do not address services involving advocating for a client,

  such as testifying as an expert witness.

  Choices "a", "b", and "d" are incorrect, per above explanation.

• Question 1118:

  Comfort letters ordinarily are signed by the client's:

  A. Independent auditor.

  B. Underwriter of securities.

  C. Audit committee.

  D. Senior management.

  Correct Answer: A

  Explanation:

  Choice "a" is correct. A comfort letter is a letter containing a negative assurance from the CPA to the

  underwriter or certain other requesting parties just before the registration of the client's securities.

  Choice "b" is incorrect. The comfort letter is sent to the underwriter.

  Choice "c" is incorrect. The audit committee does not sign a comfort letter.

  Choice "d" is incorrect. Senior management may sign a client representation letter, not a comfort letter.

• Question 1119:

  Which of the following matters is covered in a typical comfort letter?

  A. Negative assurance concerning whether the entity's internal controls operated as designed during the period being audited.

  B. An opinion regarding whether the entity complied with laws and regulations under Government Auditing Standards and the Single Audit Act of 1984.

  C. Positive assurance concerning whether unaudited condensed financial information complied with generally accepted accounting principles.

  D. An opinion as to whether the audited financial statements comply in form with the accounting requirements of the SEC.

  Correct Answer: D

  Explanation:

  Choice "d" is correct. In a typical comfort letter, the accountants express an opinion (i.e., positive

  assurance) concerning the financial statements' compliance (as to form) with the pertinent accounting

  requirements of the SEC.

  Choice "a" is incorrect. No assurance is generally provided in a comfort letter regarding the operation of an

  entity's internal control.

  Choice "b" is incorrect. A typical comfort letter is addressed to the underwriters of the securities.

  Government Auditing Standards and the Single Audit Act are not applicable to a comfort letter related to

  the issuance of securities.

  Choice "c" is incorrect. Negative assurance (not positive) is typically provided regarding unaudited

  condensed financial information.

• Question 1120:

  The quarterly data required by SEC Regulation S-K have been omitted. Which of the following statements must be included in the auditor's report?

  A. The auditor was unable to review the data.

  B. The company's internal control provides an adequate basis to complete the review.

  C. The company has not presented the selected quarterly financial data.

  D. The auditor will review the selected data during the review of the subsequent quarterly financial data.

  Correct Answer: C

  Explanation:

  Choice "c" is correct. If the quarterly data required by SEC Regulation S-K have been omitted, the auditor's

  report must include a statement indicating that the company has not presented such data.

  Choice "a" is incorrect. The auditor's report should only state that the auditor was unable to review

  quarterly data required by SEC Regulation S-K when the data have been included, but the auditor has not

  reviewed such data.

  Choice "b" is incorrect. Generally, the auditor's report does not make reference to a review of interim

  financial information, since such information is not a required part of GAAP financial statements. (Note,

  however, that the auditor's report might be modified to indicate that the company's internal control was not sufficient to provide an adequate basis for a review of such information, in situations where quarterly data is included but not reviewed). Choice "d" is incorrect. If an entity is required to file quarterly reports, a review of this quarterly data is also required. Such review should be completed before the quarterly report is filed, not postponed to a subsequent quarter.