AICPA Exam CPA-Auditing Topic 1 Question 84 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 84
Topic #: 1

The GAO standards of reporting for governmental financial audits incorporate the AICPA standards of reporting and prescribe supplemental standards to satisfy the unique needs of governmental audits.

Which of the following is a supplemental reporting standard for governmental financial audits?

AAuditors should report the scope of their testing of compliance with laws and regulations and of internal controls.

BMaterial indications of illegal acts should be reported in a document distributed only to the entity's senior officials.

CAll changes in the audit program from the prior year should be reported to the entity's audit committee.

DAny privileged or confidential information discovered should be reported to the organization that arranged for the audit.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. The auditor's report on compliance and on internal control over financial recording (based on an audit) must include the scope of testing of compliance and internal control.

Choice 'b' is incorrect. Material indications of illegal acts are not only reported to the members of the governing body of the audited entity and their senior staff officials but, in some circumstances, auditors should report illegal acts directly to external parties (such as the grantor agency).

Choice 'c' is incorrect. Although GAO standards require that the auditor communicate information regarding the nature, timing and extent of planned testing to officials of the audited entity and to individuals contracting for the audit, reporting of all changes is not required. (For example, immaterial changes to the audit program need not be reported.)

Choice 'd' is incorrect. Certain privileged or confidential information may be prohibited from general disclosure and should not be included in the audit report. The report should, however, disclose the nature of the information omitted and the requirement that makes an opinion necessary.

by Serina at Apr 10, 2024, 02:38 PM

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Makeda

6 months ago

I think option C) is also important as it ensures transparency in the audit process by reporting changes in the audit program.

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Filiberto

7 months ago

I disagree, I think option B) is more important because reporting illegal acts is crucial for preventing fraud.

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Fanny

7 months ago

I believe option A) is the correct answer, as it relates to testing compliance with laws and regulations.

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Tandra

7 months ago

I agree, it helps ensure transparency and accountability in the audit process.

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Maira

7 months ago

I think the supplemental reporting standard for governmental financial audits is important.

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Stephaine

6 months ago

I agree, that level of transparency is crucial in governmental financial audits.

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Karl

6 months ago

A) Auditors should report the scope of their testing of compliance with laws and regulations and of internal controls.

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Iola

8 months ago

True, that's a good point. But I think A is still the most likely answer here. The wording about 'supplemental standards to satisfy the unique needs' makes me think it's referring to something more broad and fundamental, like the scope of testing.

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Kaycee

8 months ago

Hmm, I'm not so sure. Option B about reporting illegal acts to senior officials only seems like it could be a supplemental standard as well. Governmental audits might have different requirements around handling sensitive information like that.

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Fannie

8 months ago

Yeah, I'm leaning towards A as well. The question states that the supplemental standards are meant to satisfy the unique needs of governmental audits, and reporting the scope of testing seems like a pretty standard requirement in that context.

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Mendy

8 months ago

Well, option A seems like the most logical choice to me. Reporting the scope of testing for compliance and internal controls is a key part of governmental financial audits, right? The other options seem a bit too specific or don't really match the description of supplemental standards.

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Cammy

8 months ago

I agree. The options given seem quite specific, so we really need to understand the details of these standards. I'm curious to hear what everyone else thinks about the correct answer.

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Kenny

8 months ago

Hmm, this is an interesting question. I think it's important to understand the nuances of governmental financial audits and how they differ from standard AICPA audits. The supplemental reporting standards are crucial to satisfying the unique needs of these types of audits.

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