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CPA Practice Test

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Module
CPA - Certified Public Accountant

Institution
CPA - Certified Public Accountant

This CPA Practice Test is designed to help you prepare for the four sections of the CPA exam: Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting and Reporting (FAR), and Regulation (REG). The test consists of multiple-choice questions (MCQs) and task-based...

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Institution CPA - Certified Public Accountant
Module CPA - Certified Public Accountant

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‭CPA Practice Test‬

‭Auditing and Attestation (AUD)‬
‭Multiple-Choice Questions (MCQs)‬

‭1.‬ A ‭ n auditor is engaged to audit the financial statements of XYZ Corporation. Which of the‬
‭following should be the auditor’s primary consideration when accepting the‬
‭engagement?‬
‭○‬ ‭A. Availability of audit staff.‬
‭○‬ ‭B. Management's commitment to internal controls.‬
‭○‬ ‭C. The integrity of management.‬
‭○‬ ‭D. The timing of the audit.‬
‭2.‬ ‭When performing a risk assessment, which of the following is an example of a control‬
‭risk?‬
‭○‬ ‭A. A material misstatement due to a poorly designed control system.‬
‭○‬ ‭B. A misstatement due to inherent complexity of transactions.‬
‭○‬ ‭C. The auditor's failure to detect a misstatement during substantive testing.‬
‭○‬ ‭D. Noncompliance with regulatory requirements.‬
‭3.‬ ‭What is the primary purpose of an audit report?‬
‭○‬ ‭A. To provide assurance on the effectiveness of internal controls.‬
‭○‬ ‭B. To express an opinion on whether the financial statements are fairly‬
‭presented.‬
‭○‬ ‭C. To confirm the accuracy of financial statement balances.‬
‭○‬ ‭D. To detect and prevent fraud.‬
‭4.‬ ‭Which of the following types of engagements requires a written assertion from‬
‭management?‬
‭○‬ ‭A. Compilation.‬
‭○‬ ‭B. Review.‬
‭○‬ ‭C. Agreed-upon procedures.‬
‭○‬ ‭D. Examination.‬
‭5.‬ ‭An auditor performs analytical procedures as part of planning. What is the primary‬
‭purpose of this step?‬
‭○‬ ‭A. To identify areas of higher audit risk.‬
‭○‬ ‭B. To test internal controls.‬
‭○‬ ‭C. To confirm account balances.‬
‭○‬ ‭D. To finalize the audit strategy.‬
‭6.‬ ‭The auditor's responsibility for fraud detection includes:‬
‭○‬ ‭A. Identifying all fraud regardless of materiality.‬

, ‭ ‬ ‭B. Providing reasonable assurance that material fraud is detected.‬
○
‭○‬ ‭C. Ensuring no fraud exists in the financial statements.‬
‭○‬ ‭D. Investigating all employee complaints.‬
‭7.‬ ‭Which of the following is an example of a substantive procedure?‬
‭○‬ ‭A. Testing controls over cash disbursements.‬
‭○‬ ‭B. Reviewing the client's IT environment.‬
‭○‬ ‭C. Confirming accounts receivable balances.‬
‭○‬ ‭D. Assessing inherent risk.‬
‭8.‬ ‭An unmodified opinion with an emphasis-of-matter paragraph is appropriate when:‬
‭○‬ ‭A. There is substantial doubt about the entity’s ability to continue as a going‬
‭concern.‬
‭○‬ ‭B. The financial statements are not fairly presented.‬
‭○‬ ‭C. A significant internal control deficiency exists.‬
‭○‬ ‭D. The auditor's independence is impaired.‬
‭9.‬ ‭Which of the following is most likely to increase control risk?‬
‭○‬ ‭A. A lack of segregation of duties.‬
‭○‬ ‭B. Routine transactions.‬
‭○‬ ‭C. Effective IT systems.‬
‭○‬ ‭D. Frequent audits by external firms.‬
‭10.‬‭When auditing a nonprofit organization, the auditor should focus on:‬
‭○‬ ‭A. Revenue recognition under government contracts.‬
‭○‬ ‭B. Financial ratios for performance evaluation.‬
‭○‬ ‭C. Compliance with donor restrictions.‬
‭○‬ ‭D. Fair value measurement of investments.‬

‭Task-Based Simulation (TBS)‬

‭Scenario‬‭: You are auditing ABC Company. During testing,‬‭you identify the following issues:‬

‭‬ S
● ‭ ales were recorded before shipment.‬
‭●‬ ‭A $50,000 receivable is past due by six months.‬
‭●‬ ‭Inventory valuation includes outdated items.‬

‭Required‬‭:‬

‭ .‬ F
1 ‭ or each issue, identify the likely impact on the financial statements.‬
‭2.‬ ‭Suggest an audit procedure to address each issue.‬

‭Business Environment and Concepts (BEC)‬

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