AICPA Exam CPA-Auditing Topic 1 Question 71 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 71
Topic #: 1

Which of the following statements is true regarding an accountant's consideration of fraud/illegal acts in compilation and review engagements?

AThe accountant is not required to perform procedures designed to detect material misstatements due to fraud or illegal acts.

BThe accountant must inform an appropriate level of management of all instances of fraud or illegal acts.

CThe accountant must report only definite instances of fraud or an illegal act, but need not report information indicating that fraud or an illegal act may have occurred.

DInformation indicating that fraud or an illegal act may have occurred should be reported in writing to an appropriate level of management.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. A report on internal control related matters noted in an audit should not state that there are no significant deficiencies in internal control, since this statement might erroneously imply that the auditor searched for such conditions.

Choice 'a' is incorrect. The auditor is permitted to state that no material weaknesses were identified during the audit. Typically this occurs in reports submitted to governmental authorities.

Choice 'c' is incorrect. The auditor may suggest that corrective follow-up action should be taken due to the relative significance of material weakness discovered.

Choice 'd' is incorrect. The auditor's report may state that his or her consideration of internal control would not necessarily disclose all significant deficiencies that exist.

by Martina at Jul 06, 2023, 11:52 PM

Limited Time Offer

25%

Off

Get Premium CPA-Auditing Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Ellen

1 months ago

This question is a real 'accounting' for your actions, am I right? *wink wink* Anyway, D is the clear winner here.

upvoted 0 times

Gennie

3 days ago

Yes, D is the best choice. It's crucial to communicate any suspicions of fraud or illegal acts to the appropriate level of management.

upvoted 0 times

...

Lamonica

23 days ago

Definitely, D is the way to go. We have to make sure management is aware of any potential issues.

upvoted 0 times

...

Benedict

1 months ago

I agree, D is the correct answer. It's important to report any indication of fraud or illegal acts to management.

upvoted 0 times

...

Cassie

2 months ago

Option B sounds a bit too broad. I mean, do they really have to report every single instance, even the super minor ones? D is the way to go.

upvoted 0 times

Whitney

1 months ago

I think D strikes a good balance in reporting potential fraud or illegal acts without overwhelming management with minor instances.

upvoted 0 times

...

Elfriede

1 months ago

Yeah, reporting every single instance of fraud or illegal acts could be overwhelming. D is more practical.

upvoted 0 times

...

Roy

1 months ago

I agree, option B does seem like a lot of work. D seems more reasonable.

upvoted 0 times

...

Lonny

2 months ago

Hmm, I don't think the accountant can just ignore everything and wait for the fraud to come to them. Gotta go with D on this one.

upvoted 0 times

...

Leonida

2 months ago

Wait, so the accountant doesn't have to do anything to detect fraud or illegal acts? That's like asking a detective to solve a crime without investigating. Definitely not A.

upvoted 0 times

Juliann

2 days ago

B) The accountant must inform an appropriate level of management of all instances of fraud or illegal acts.

upvoted 0 times

...

Peter

4 days ago

Yes, information indicating that fraud or an illegal act may have occurred should be reported in writing to management. That's option D.

upvoted 0 times

...

Christiane

8 days ago

But the accountant doesn't have to report every instance of fraud or illegal acts, only definite ones. So, it's not B.

upvoted 0 times

...

Cornell

15 days ago

Right, the accountant must inform management of all instances of fraud or illegal acts. That's option B.

upvoted 0 times

...

Anisha

1 months ago

No, the accountant is not required to perform procedures to detect fraud or illegal acts. So, it's not A.

upvoted 0 times

...

Antonio

2 months ago

But why do you think that? I thought we only need to report definite instances of fraud.

upvoted 0 times

...

Nicolette

2 months ago

I disagree, I believe the answer is D.

upvoted 0 times

...

Antonio

2 months ago

I think the answer is A.

upvoted 0 times

...

Lorrine

2 months ago

But why do you think that? I thought the accountant must report all instances of fraud or illegal acts.

upvoted 0 times

...

Talia

2 months ago

I disagree, I believe the answer is D.

upvoted 0 times

...

Lorrine

2 months ago

I think the answer is A.

upvoted 0 times

...

Dalene

2 months ago

I'm pretty sure the accountant has to report any potential fraud or illegal acts, not just the definite ones. Option D seems to be the most accurate answer here.

upvoted 0 times