Sample Questions
Question 1
Easy
Audit documentation for the audit of a nonissuer should be retained for:
Solution
C is correct.
AU-C Section 230 establishes a minimum five-year retention period for audit documentation on nonissuer engagements, measured from the report release date.
AU-C Section 230 establishes a minimum five-year retention period for audit documentation on nonissuer engagements, measured from the report release date.
Question 2
Medium
Which of the following matters is an auditor of a nonissuer required to communicate to those charged with governance?
Solution
A is correct.
AU-C 260 requires auditors to communicate significant findings from the audit to those charged with governance. These findings encompass the auditor's views about qualitative aspects of the entity's significant accounting practices (including accounting policies, accounting estimates, and financial statement disclosures), significant difficulties encountered during the audit, disagreements with management, and uncorrected misstatements aggregated by the auditor.
AU-C 260 requires auditors to communicate significant findings from the audit to those charged with governance. These findings encompass the auditor's views about qualitative aspects of the entity's significant accounting practices (including accounting policies, accounting estimates, and financial statement disclosures), significant difficulties encountered during the audit, disagreements with management, and uncorrected misstatements aggregated by the auditor.
Question 3
Hard
An auditor of a nonissuer is conducting an audit in accordance with GAGAS. Which of the following documentation requirements applies under GAGAS but not under GAAS alone?
Solution
C is correct.
Government Auditing Standards (GAGAS, Chapter 3) require auditors to document their consideration of threats to independence, including threats identified, safeguards applied, and the auditor's conclusion regarding independence for the engagement. This documentation requirement is broader and more explicit than what GAAS alone requires. Under GAAS (AU-C 220), independence is required but the documentation of the specific threat-and-safeguard analysis is not as prescriptively mandated as under GAGAS. Materiality documentation is addressed by AU-C 320 and internal control documentation by AU-C 315, both of which apply under GAAS as well.
Government Auditing Standards (GAGAS, Chapter 3) require auditors to document their consideration of threats to independence, including threats identified, safeguards applied, and the auditor's conclusion regarding independence for the engagement. This documentation requirement is broader and more explicit than what GAAS alone requires. Under GAAS (AU-C 220), independence is required but the documentation of the specific threat-and-safeguard analysis is not as prescriptively mandated as under GAGAS. Materiality documentation is addressed by AU-C 320 and internal control documentation by AU-C 315, both of which apply under GAAS as well.
