Free CPA-Auditing Mock Exam – Practice Online Confidently

A CPA firm would be reasonably assured of meeting its responsibility to provide services that conform with professional standards by:

What effect would the sale of a company's trading securities at their carrying amounts for cash have on each of the following ratios? 

This question consists of an item pertaining to possible deficiencies in an accountant's review report.Jordan & Stone, CPAs, audited the financial statements of Tech Co., a nonissuer, for the year endedDecember 31, 20X1, and expressed an unqualified opinion. For the year ended December 31, 20X2,Tech issued comparative financial statements. Jordan & Stone reviewed Tech's 20X2 financialstatements and Kent, an assistant on the engagement, drafted the accountants' review report below.Land, the engagement supervisor, decided not to reissue the prior year's auditors' report, but instructedKent to include a separate paragraph in the current year's review report describing the responsibilityassumed for the prior year's audited financial statements. This is an appropriate reporting procedure.Land reviewed Kent's draft and indicated in the Supervisor's Review Notes below that there were severaldeficiencies in Kent's draft.Accountant's Review ReportWe have reviewed and audited the accompanying balance sheets of Tech Co. as of December 31, 20X2and 20X1, and the related statements of income, retained earnings, and cash flows for the years thenended, in accordance with Statements on Standards for Accounting and Review Services issued by theAmerican Institute of Certified Public Accountants and generally accepted auditing standards. Allinformation included in these financial statements is the representation of the management of Tech Co.A review consists principally of inquiries of company personnel and analytical procedures applied tofinancial datA. It is substantially less in scope than an audit in accordance with generally acceptedauditing standards, the objective of which is the expression of an opinion regarding the financialstatements taken as a whole.Based on our review, we are not aware of any material modifications that should be made to theaccompanying financial statements. Because of the inherent limitations of a review engagement, thisreport is intended for the information of management and should not be used for any other purpose.The financial statements for the year ended December 31, 20X1, were audited by us and our report wasdated March 2, 20X2. We have no responsibility for updating that report for events and circumstancesoccurring after that date.Jordan and Stone, CPAsNlarch 1, 20X3 Supervisor's Review NotesThere should be no reference to the American Institute of Certified Public Accountants in the first(introductory) paragraph.

A CPA wishes to determine how various publicly-held companies have complied with the disclosure requirements of a new financial accounting standarD. Which of the following information sources would the CPA most likely consult for this information?

Restrictions imposed by a retail entity that is a new client prevent an auditor from observing any physical inventories. These inventories account for 40% of the entity's assets. Alternative auditing procedures cannot be applied due to the nature of the entity's records. Under these circumstances, the auditor should express a(an):