AICPA Exam CPA-Auditing Topic 3 Question 36 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 36
Topic #: 3

Because of the pervasive effects of laws and regulations on the financial statements of governmental units, an auditor should obtain written management representations acknowledging that management has:

AIdentified and disclosed all laws and regulations that have a direct and material effect on its financial statements.

BImplemented internal controls designed to detect all illegal acts.

CExpressed both positive and negative assurance to the auditor that the entity complied with all laws and regulations.

DEmployed internal auditors who can report their findings, opinions, and conclusions objectively without fear of political repercussion.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. The auditor should obtain written representation that management has disclosed all laws and regulations that have a direct and material effect on its financial statements.

Choice 'b' is incorrect. Management need not acknowledge that it has implemented internal control activities to detect all illegal acts.

Choice 'c' is incorrect. Management should state that it is responsible for compliance with all laws and regulations.

Choice 'd' is incorrect. Management need not employ internal auditors.

by Iluminada at May 04, 2022, 03:08 AM

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