Download CPA Auditing and Attestation Exam.AUD.ActualTests.2019-03-15.613q.tqb

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.

Choice "C" is correct. Financial statements are presented fairly in conformity with GAAP when there are no material misstatements included therein. The fact that there may occasionally be immaterial misstatements means that the financial statements are correct "within a range of acceptable limits."  Choice "A" is incorrect. Accounting principles may change from year to year. As long as such changes are properly accounted for, the financial statements are still in conformity with GAAP.  Choice "B" is incorrect. The AICPA and the FASB determine GAAP, not the Auditing Standards Board.  Choice "D" is incorrect. There is no requirement that an entity's financial statements be prepared in accordance with prevalent industry practices in order to be in conformity with GAAP

Choice "C" is correct. An auditor's responsibility is to express an opinion on financial statements based on an audit.  Choice "A" is incorrect. An auditor may draft an entity's financial statements based on information from management's financial system. This would be referred to as a compilation engagement.  Choice "B" is incorrect. The adoption of sound accounting policies is an implicit part of management's responsibilities, not the auditor's responsibilities.  Choice "D" is incorrect. An auditor often makes suggestions that are adopted about an entity's internal control environment.