CPA Exam — Auditing and Attestation (AUD)

In an audit of a nonissuer, which evidence about the year-end cash balance is generally the most reliable?

1. AThe treasurer's oral statement of the balance during a meeting
2. BThe year-end bank reconciliation prepared by the client's accountant
3. CA confirmation that the bank sends directly to the auditorCorrect
4. DA copy of the bank statement given to the auditor by the controller

Why: AU-C 500.A22 states that reliability generally increases when evidence comes from external parties, because it is less exposed to management bias, and AU-C 500.A24 says documentary evidence is generally more reliable than oral representations. A confirmation received directly from the bank is external and never passes through the client's hands. A statement copy supplied by the controller has passed through the client, a reconciliation is prepared internally, and an oral statement is the weakest of these.

In planning an audit of a nonissuer, which item belongs in the audit plan rather than in the overall audit strategy?

1. AThe reporting objectives, used to plan the timing of required communications
2. BPlanned further audit procedures at the relevant assertion levelCorrect
3. CThe nature, timing, and extent of the resources needed for the engagement
4. DThe characteristics of the engagement that define its scope

Why: AU-C 300.08 places the scope of the engagement, the reporting objectives, the factors that direct the team's efforts, and the resources needed in the overall audit strategy. AU-C 300.09 lists the contents of the audit plan: planned direction, supervision, and review; planned risk assessment procedures; and the nature, timing, and extent of planned further audit procedures at the relevant assertion level. The strategy sets the broad approach and the plan turns it into specific procedures.