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CPA Questions - AUD and BEC

Hello I have been trying to study for the CPA and I need some help with the following questions and if you can tell me if my answers are correct

1.To whom should internal auditors report to?
a. the board of directors
b. the president of the company
c. the controller
d. the independent auditors
Answer: I am not sure between A and B. When I read about this it seems that the internal auditors should report to both the board of directors and the president of company

2.Which of the following would indicate a possible related party transaction?
a. the corporation sells land in exchange for a zero interest note receivable.
b. selling products to an individual at a volume discount
c. issuing stock in exchange for legal services
d. none of the above would alert you to a related party transaction
Answer: c

3.Which of the following is a procedure you would perform while planning an engagement?
a. tests of control
b. set materiality level for accounts receivable
c. research the integrity of management
d. obtain a management representation letter
Answer: c

4. Which of the following would prevent you from accepting an audit engagement? a. unable to contact previous auditor
b. weaknesses in internal control
c. the presence of related party transactions
d. management prevents you from sending confirmations
Answer : b

5.The 10 audit standards :
a. no longer are considered GAAS
b. addresses the nature of the audit
c. refers to the quantity of procedures
d. none of the above are correct
Answer: d

6. Which of the following is the use of analytical procedures NOT required?
a. when planning the audit
b. as a substantive test
c. at the end of the audit as a type of reasonableness test
d. all of the above are required
Answer: d. I think they are all included in analytical procedures

7. Which of the following should you consider when deciding whether to use the client's internal auditors?
a. to whom they report?
b. education
c. certification (cpa, cia, or cma)
d. all of the above
Answer: c

Solution Preview

1.To whom should internal auditors report to?
a. the board of directors
b. the president of the company
c. the controller
d. the independent auditors
Answer: I am not sure between A and B. When I read about this it seems that the internal auditors should report to both the board of directors and the president of company
-- Both, but more specifically, B. Generally, the internal auditors report to the board of directors and the CAE (Chief Audit Executive) reports exclusively to the CEO.

2.Which of the following would indicate a possible related party transaction?
a. the corporation sells land in exchange for a zero interest note receivable.
b. selling products to an individual at a volume discount
c. issuing stock in exchange for legal services
d. none of the above would alert you to a related party transaction
Answer: c -- correct. We ...

Solution Summary

This solution provides the correct answers with explanations to the CPA exam study questions listed. These questions are applicable to both the BEC and AUD sections.

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