AICPA Exam CPA-Auditing Topic 1 Question 94 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 94
Topic #: 1

The management of Cain Company, a nonissuer, engaged Bell, CPA, to express an opinion on Cain's internal control. Bell's report described several material weaknesses and potential errors and irregularities that could occur. Subsequently, management included Bell's report in its annual report to the Board of Directors with a statement that the cost of correcting the weaknesses would exceed the benefits. Bell should:

ADisclaim an opinion as to management's cost-benefit statement.

BAdvise the Board that Bell either agrees or disagrees with management's statement.

CAdvise management that Bell's report was restricted for use only by management.

DAdvise both management and the Board that Bell was withdrawing the opinion.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. The auditor should disclaim an opinion as to management's cost-benefit statement (i.e., 'We do not express an opinion or any other form of assurance on management's cost-benefit statement.').

Choice 'b' is incorrect. The CPA should disclaim an opinion regarding management's representation.

Choice 'c' is incorrect. The CPA's report on internal control is not restricted as to use.

Choice 'd' is incorrect. The CPA does not need to withdraw the opinion as long as a disclaimer on management's cost-benefit statement is presented.

by Amalia at Aug 05, 2024, 11:09 PM

Limited Time Offer

25%

Off

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

Contribute your Thoughts:

Submit Cancel

Estrella

3 months ago

Even if that's the case, Bell should still advise the Board of their disagreement to ensure transparency.

upvoted 0 times

...

Cherry

3 months ago

But what if the cost of correcting the weaknesses really does exceed the benefits?

upvoted 0 times

...

4 months ago

Telling Bell to withdraw the opinion seems a bit drastic. Why not just have them clarify the report's intended use?

upvoted 0 times

Truman

2 months ago

C) Advise management that Bell's report was restricted for use only by management.

upvoted 0 times

...

Iluminada

3 months ago

Telling Bell to withdraw the opinion seems a bit drastic. Why not just have them clarify the report's intended use?

upvoted 0 times

...

Kara

3 months ago

B) Advise the Board that Bell either agrees or disagrees with management's statement.

upvoted 0 times

...

Deonna

3 months ago

A) Disclaim an opinion as to management's cost-benefit statement.

upvoted 0 times

...

4 months ago

Bell should definitely disclaim an opinion on the cost-benefit statement. That's not within the scope of the engagement.

upvoted 0 times

Ty

3 months ago

C) Advise management that Bell's report was restricted for use only by management.

upvoted 0 times

...

Stephaine

4 months ago

B) Advise the Board that Bell either agrees or disagrees with management's statement.

upvoted 0 times

...

Lore

4 months ago

A) Disclaim an opinion as to management's cost-benefit statement.

upvoted 0 times

...

Estrella

4 months ago

I think Bell should advise the Board that they disagree with management's statement.

upvoted 0 times

...