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

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16 days 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.

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Cathern

3 days ago

But what about option A? It says the accountant is not required to detect material misstatements due to fraud or illegal acts.

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Aleta

4 days ago

I think you're right, option D does seem to be the most accurate answer.

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