CPA Exam Questions - Auditing and Attestation

This section of the CPA exam is titled Auditing and Attestation, but is commonly known as AUD.

This section will be four hours long beginning in 2011 and will be comprised of three multiple choice tests and seven practical simulations.

There are six areas of emphasis in AUD.

First of all, CPA exam applicants must understand what Auditing and Attestation is and what its purpose is. 

While it is the responsibility of the company's management to prepare the financial statements it is the responsibility of the auditor to express an opinion on them.  This is a critical role and not to be treated lightly.  Investors, lenders, employees, and governments rely on accurate financial statements for myriad reasons.

Look no further than some of the recent accounting scandals that have plagued the business world.  Bernie Madoff's auditor pleaded guilty in court to securities fraud charges for failing to properly perform audits on a company that eventually was caught executing one of the world's largest ponzi schemes.  

Or look at the WorldCom fiasco where, beginning in 1999 the company's officers began using fraudulent accounting to hide declining earnings.  The auditors failed to identify the underreporting of costs or the overreporting of revenues.  As a result, a correction of more than $11 billion had to be made and stockholders and employees suffered massive losses.

Those are the major reasons why auditing and attestation services are so important.  Virtually all stakeholders of an organization rely on a company's audited financial statements and the auditor plays one of the key checks-and-balances in the financial statement process.

It is extremely important for CPA exam candidates to understand why this process is represented by one entire exam.  The public relies on auditors to serve in this vital role.

The following areas of focus will be covered in the Auditing CPA exam.

This focus covers:

1. Engagement Acceptance

2. Understanding the Assignment

These topics will account for 12- 16% of the entire AUD exam.

This section covers:

1. Understanding the Entity

2. Internal Control Environment

These topics will be covered in 16 - 20% of the AUD exam.

These topics include:

1. Performing Audit Procedures

2. Evaluating Evidence

Approximately 16 - 20% of the exam will be reflected with this topic.

This area of focus includes:

1. Evaluating Audit Findings

2. Communications

3. Reporting

Approximately 16 - 20% of the AUD exam will be comprised of these topics.

This focus area covers Accounting and Review Service Engagements.  

12 - 16% of the questions will be on this topic.

This area of questions include:

1. Professional Responsibilities

2. Ethics

3. Independence

Another 12 - 16% of the test will include these topics.

The International Federation of Accountants serves the public interest by strengthening the accounting profession worldwide. It contributes to strong economies by developing and encouraging adherence to strong professional standards.

The International Auditing and Assurance Standards Board (IAASB) develops high quality International Standards on Auditing (ISA).  These standards are used by auditing professionals throughout the world.

Without an international standard, each country would be left to their own devices.  Some countries would have very strong auditing standards and professional ethics and independence policies while other countries may be weaker.  With the growing trend of international companies, investors will have difficulty in relying on the audit reports of many companies.