Auditing Aicpa Rules

2012 AICPA Newly Released Questions – Auditing

Following are multiple choice questions recently released by the AICPA. These questions were released by the AICPA with letter answers only. Our editorial board has provided the accompanying explanation. Please note that the AICPA generally releases questions that it does NOT intend to use again. These questions and content may or may not be representative of questions you may see on any upcoming exams.

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2012 AICPA Newly Released Questions – Auditing

1. Which of the following audit procedures most likely would assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity's ability to continue as a going concern? a. b. c. d. Confirmation of accounts receivable from principal customers. Reconciliation of interest expense with debt outstanding. Confirmation of bank balances. Review of compliance with terms of debt agreements.

Solution: Choice "d" is correct. By reviewing the debt agreements, the auditor may discover that the entity is near or in noncompliance with specific debt (financial) covenants. This may cast doubt on whether the entity will be able to continue as a going concern. Choice "a" is incorrect. This procedure would not provide information on whether the entity has a going concern issue but instead could detect errors in financial reporting by the entity. Choice "b" is incorrect. The mere reconciliation of interest expense to the debt outstanding would not provide information regarding the entity's ability to function as a going concern. Choice "c" is incorrect. Confirming bank balances could detect reporting errors but would not be a procedure to ascertain whether the entity has a going concern issue.

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2012 AICPA Newly Released Questions – Auditing

2. A principal auditor decides not to refer to the audit of another CPA who audited a subsidiary of the principal auditor's client. After making inquiries about the other...