Multiple choice questions: 1. An auditor is engaged to audit the Eastern Planning and Development District, a

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Multiple choice questions:

1. An auditor is engaged to audit the Eastern Planning and Development District, a not-for-profit entity that receives federal financial assistance. The auditor designed his audit to provide reasonable assurance of detecting material misstatements resulting from illegal acts. What additional requirements does the auditor have with regard to compliance?

a. None.

b. The auditor must design the audit to provide reasonable assurance of detecting noncompliance with terms of grants and contracts.

c. The auditor must design the audit to provide reasonable assurance of detecting all misstatements resulting from illegal acts.

d. The auditor must design the audit to provide reasonable assurance of detecting any fraud.

2. An elected State Auditor, employed by the State, would NOT be considered independent when auditing which of the following entities?

a. A component unit of the State.

b. An agency of the State.

c. The office of the State Auditor.

d. All of the above.

3. An independent CPA is conducting an audit of an entity that is subject to the GAO audit standards, but is not subject to the OMB audit standards. While conducting the audit, the CPA found that the entity had violated a law that had a large, but not material, potential penalty associated with such violation. There was no accrual for the potential penalty or disclosure of the violation. What action(s) must the CPA take with regard to this violation?

a. Nothing, since the financial statements are not materially misstated.

b. Must issue an adverse opinion if the financial statements are not changed to reflect the violation.

c. Must issue a report that details the violation and the potential dollar effect.

d. Must report the incident to the local law enforcement agency.

4. An independent CPA is conducting an audit of an entity that receives federal financial assistance and is subject to the GAO standards (GAGAS). The auditor must design the audit to provide reasonable assurance of detecting which of the following?

a. Immaterial misstatements, if they result from illegal acts.

b. Noncompliance with entity policies and procedures.

c. Noncompliance with the terms of contracts or grant agreements.

d. All of the above.