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Question: 5

Which of the following accurately depicts the auditor’s responsibility with respect to Statements on Auditing Standards?

  1. The auditor is required to follow the guidance provided by the Standards, without exception.
  2. The auditor is generally required to follow the guidance provided by Standards with which he or she is familiar, but will not be held responsible for departing from provisions of which he or she was unaware.
  3. The auditor is generally required to follow the guidance provided by the Standards, unless following such guidance would result in an audit that is not cost-effective.
  4. The auditor is generally required to follow the guidance provided by the Standards, and should be able to justify any departures.


Answer: D

Explanation:

Choice “d” is correct. The auditor is generally required to follow the guidance provided by the Standards, and should be able to justify any departures.

Choice “a” is incorrect. On rare occasions, the auditor may depart from the guidance provided by the SASs, but he or she must justify such departures.

Choice “b” is incorrect. Lack of familiarity with a SAS is not a valid reason for departing from its guidance.

The auditor is expected to have sufficient knowledge of the SASs to identify those that are applicable to a given audit engagement.

Choice “c” is incorrect. The cost associated with following the guidance provided by a SAS is not an acceptable reason for departing from its guidance.

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Question: 4

Which of the following provides the most authoritative guidance for an auditor?

  1. An AICPA audit and accounting guide that provides specific guidance with respect to the accounting practices in the client’s industry.
  2. A Journal of Accountancy article discussing implementation of a new standard.
  3. General guidance provided by a Statement on Auditing Standards.
  4. Specific guidance provided by an interpretation of a Statement on Auditing Standards.


Answer: C

Explanation:

Choice “c” is correct. General guidance provided by a Statement on Auditing Standards is the most authoritative of level of auditing guidance. Auditors are required to comply with SASs, and should be prepared to justify any departures therefrom.

Choices “a” and “d” are incorrect. AICPA audit and accounting guides and SAS interpretations are interpretive publications that provide guidance regarding how SASs should be applied in specific situations. They are not as authoritative as SASs.

Choice “b” is incorrect. Journal of Accountancy articles have no authoritative status but may be helpful to the auditor.

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Question: 1

Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle. Which of the following should the auditor consider the most authoritative?

  1. FASB Technical Bulletins.
  2. AICPA Accounting Interpretations.
  3. FASB Statements of Financial Accounting Concepts.
  4. AICPA Technical Practice Aids.


Answer: A

Explanation: :

Choice “a” is correct. In accordance with the GAAP hierarchy, FASB Technical Bulletins are considered the most authoritative of the sources listed in the question.

Choice “b” is incorrect. Of the sources listed, AICPA Accounting Interpretations would be considered the second most authoritative.

Choice “c” is incorrect. FASB Statements of Financial Accounting Concepts are among the least authoritative sources of GAAP available to auditors.

Choice “d” is incorrect. AICPA Technical Practice Aids are among the least authoritative sources of GAAP available to auditors.

Question: 5

Which of the following accurately depicts the auditor’s responsibility with respect to Statements on Auditing Standards?

  1. The auditor is required to follow the guidance provided by the Standards, without exception.
  2. The auditor is generally required to follow the guidance provided by Standards with which he or she is familiar, but will not be held responsible for departing from provisions of which he or she was unaware.
  3. The auditor is generally required to follow the guidance provided by the Standards, unless following such guidance would result in an audit that is not cost-effective.
  4. The auditor is generally required to follow the guidance provided by the Standards, and should be able to justify any departures.


Answer: D

Explanation:

Choice “d” is correct. The auditor is generally required to follow the guidance provided by the Standards, and should be able to justify any departures.

Choice “a” is incorrect. On rare occasions, the auditor may depart from the guidance provided by the SASs, but he or she must justify such departures.

Choice “b” is incorrect. Lack of familiarity with a SAS is not a valid reason for departing from its guidance.

The auditor is expected to have sufficient knowledge of the SASs to identify those that are applicable to a given audit engagement.

Choice “c” is incorrect. The cost associated with following the guidance provided by a SAS is not an acceptable reason for departing from its guidance.