AICPA Exam CPA-Auditing Topic 2 Question 89 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 89
Topic #: 2

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 Johanna at May 30, 2024, 11:59 AM

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Aleisha

5 months ago

Haha, I bet the auditors would love to just report the juicy confidential stuff to the highest bidder. But that's not how governmental audits work!

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Sol

5 months ago

D seems a bit sketchy. Privileged information should be handled carefully, but the public has a right to know the findings of a governmental audit.

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Lenna

4 months ago

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

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Lenna

5 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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Jani

5 months ago

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

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Jani

5 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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Willard

6 months ago

I think C is a bit too specific. Governmental audits should focus on the overall reporting standards, not just changes from the prior year.

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Kirk

6 months ago

B sounds like it would undermine transparency. Governmental audits need to be open and accessible to the public, not just senior officials.

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Adria

5 months ago

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

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Kizzy

5 months ago

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

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Haydee

5 months ago

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

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Madonna

5 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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Elke

5 months ago

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

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Derick

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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Elenora

6 months ago

I disagree, I believe it is C) All changes in the audit program from the prior year should be reported to the entity's audit committee. That makes more sense to me.

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Dean

6 months ago

I think the supplemental reporting standard for governmental financial audits is A) Auditors should report the scope of their testing of compliance with laws and regulations and of internal controls.

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