CPA Exam: The Auditing and Attestation Test

Part of the CPA Exam For Dummies Cheat Sheet

The auditing and attestation test (AUD test) requires you to understand the entire process of auditing a company. An audit requires the CPA to provide an opinion. That opinion states whether or not the financial statements are materially correct. This work requires you to assess all of the accounts in both the balance sheet and the income statement. The test covers planning the audit, understanding the client’s business, and evaluating the firm’s internal controls:

  • Unqualified versus qualified audit opinions: A large portion of the AUD test covers audit opinions (or audit reports). The differences between these opinions can be tricky. An unqualified audit opinion means that the financial statements are materially correct. Review and memorize the exact language for an unqualified opinion.

    An auditor writes a qualified opinion when he or she finds issues in the audit. For example, if an auditor can’t gather sufficient audit evidence on the inventory account balance, the auditor has a scope limitation, which means that the auditor’s audit work isn’t sufficient for an unqualified opinion on the financial statements. An auditor writes a qualified report for a scope limitation. The qualified report language requires making changes and additions to the unqualified report language. If you memorize the unqualified report language, you have a starting point for writing a qualified report.

  • Segregation of duties: A heavily tested area on the AUD test is segregation of duties. To prevent theft and fraud, a company should segregate three types of duties among three employees:

    • Custody of assets refers to having physical access to the company checkbook or keys to the warehouse.

    • Authorization to move assets means an individual can sign a check or approve a purchase.

    • Recordkeeping refers to posting accounting entries.

    If these duties are kept separate, a firm has a better chance of preventing fraud and theft in the business.

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