CPA AUDIT- EXAM QUESTIONS &
UPDATED ANSWERS ALREADY
GRADED A+ LATEST VERSION
the primary objective of an auditor when considering the acceptance of an initial audit
engagement of a nonissuer is to:
a) establish whether the preconditions for an audit are present
b) agree w mgt on timing the tests at interim
c) limit the auditor's responsibility if mgt fails to provide written representations
d) specify the degree to which mgt intends to rely on the auditor's testing of internal ctrls
- Correct Answer ✔✔ establish whether the preconditions for an audit are present
an auditor is testing a client's pension benefit obligation. which of the following types of
evidence would be most appropriate for determining that the financial statement
balance is fairly stated?
a) client prepared schedule showing accounting entries made to the GL balance
b) an actuarial valuation obtained by an outside firm
c) confirmation of pmts received by the retirees
d) analytical procedures that compare last year's balance to this year's balance -
Correct Answer ✔✔ an actuarial valuation obtained by an outside firm because it
calculates fair value of the obligation
which of the following would provide an auditor of a nonissuer with the best evidence of
fair value pertaining to a client's investments in derivative instruments that are listed on
a national exchange and disclosed at fair value?
a) client's personnel who trade the derivative
b) quoted market prices
c) docs related to the original purchase of the derivative
d) estimates of fair value provided by broker dealers - Correct Answer ✔✔ quoted
market prices since it is on a national exchange
which of the following qualitative factors would an auditor consider most relevant to the
consideration of whether a discovered misstatement is material?
a) audit team found a mistmt that if recorded affects the client's compliance with loan
covenants
b) audit team found one mistmt due to an error
c) audit team found a miscalculation in the client's tax filing that does not affect the
client's current FS but has the effect of increasing its tax liability in the future
d) the co recently emerged from bankruptcy after receiving addtl bank financing -
Correct Answer ✔✔ A is correct because if the mistmt was recorded it affects the
client's compliance with loan convenants
, if, while performing a review engagement, an accountant has reason to believe that a
material misappropriation of assets might have occurred, what should the accountant
do?
a) assess whether controls are in place to deter similar misappropriations
b) require an investigation to determine whether the misappropriation actually occurred
c) disclose the potential misappropriation as supplementary info in the accountant's
report
d) document communications with senior mgt about the matter - Correct Answer ✔✔ D
is correct
in the integrated audit of an issuer, an auditor has identified entity- level controls that
are important to the conclusion as to whether the company has effective internal control
over financial reporting. each of the following is an example of an entity- level control,
except:
a) controls over the period end financial reporting process
b) co's risk assessment process
c) controls over the completeness of deposited cash
d) controls over mgt override - Correct Answer ✔✔ controls over the completeness of
deposited cash relates to controls at the account level
which of the following is a complete and accurate list of the walkthrough procedures
usually performed in an issuer's integrated audit?
a) inquiry, observation, analytical procedures, TOC
b) inquiry, sampling, analytical procedures, TOC
c) inquiry, observation, inspection of relevant documentation, and reperformance of
controls
d) inquiry, inspection of relevant documentation, sampling, and reperformance of
controls - Correct Answer ✔✔ inquiry, observation, inspection of relevant
documentation, and reperformance of controls
an overall response to address a high-assessed risk of material misstatement at the
financial statement level of a nonissuer may include:
a) increasing reliance on results on internal control testing
b) emphasizing the need for more accounting staff
c) incorporating addtl predictability into the selection of procedures
d) providing more supervision of the audit team - Correct Answer ✔✔ providing more
supervision of the audit team
which of the following factors would the auditor not explicitly consider when determining
sample size in an attribute sample for test of controls?
a) acceptable level of the risk of overreliance
b) tolerable deviation rate
c) expected population deviation rate
d) tolerable mistmt - Correct Answer ✔✔ D is correct because tolerable misstatement. it
is considered in variable sampling.
UPDATED ANSWERS ALREADY
GRADED A+ LATEST VERSION
the primary objective of an auditor when considering the acceptance of an initial audit
engagement of a nonissuer is to:
a) establish whether the preconditions for an audit are present
b) agree w mgt on timing the tests at interim
c) limit the auditor's responsibility if mgt fails to provide written representations
d) specify the degree to which mgt intends to rely on the auditor's testing of internal ctrls
- Correct Answer ✔✔ establish whether the preconditions for an audit are present
an auditor is testing a client's pension benefit obligation. which of the following types of
evidence would be most appropriate for determining that the financial statement
balance is fairly stated?
a) client prepared schedule showing accounting entries made to the GL balance
b) an actuarial valuation obtained by an outside firm
c) confirmation of pmts received by the retirees
d) analytical procedures that compare last year's balance to this year's balance -
Correct Answer ✔✔ an actuarial valuation obtained by an outside firm because it
calculates fair value of the obligation
which of the following would provide an auditor of a nonissuer with the best evidence of
fair value pertaining to a client's investments in derivative instruments that are listed on
a national exchange and disclosed at fair value?
a) client's personnel who trade the derivative
b) quoted market prices
c) docs related to the original purchase of the derivative
d) estimates of fair value provided by broker dealers - Correct Answer ✔✔ quoted
market prices since it is on a national exchange
which of the following qualitative factors would an auditor consider most relevant to the
consideration of whether a discovered misstatement is material?
a) audit team found a mistmt that if recorded affects the client's compliance with loan
covenants
b) audit team found one mistmt due to an error
c) audit team found a miscalculation in the client's tax filing that does not affect the
client's current FS but has the effect of increasing its tax liability in the future
d) the co recently emerged from bankruptcy after receiving addtl bank financing -
Correct Answer ✔✔ A is correct because if the mistmt was recorded it affects the
client's compliance with loan convenants
, if, while performing a review engagement, an accountant has reason to believe that a
material misappropriation of assets might have occurred, what should the accountant
do?
a) assess whether controls are in place to deter similar misappropriations
b) require an investigation to determine whether the misappropriation actually occurred
c) disclose the potential misappropriation as supplementary info in the accountant's
report
d) document communications with senior mgt about the matter - Correct Answer ✔✔ D
is correct
in the integrated audit of an issuer, an auditor has identified entity- level controls that
are important to the conclusion as to whether the company has effective internal control
over financial reporting. each of the following is an example of an entity- level control,
except:
a) controls over the period end financial reporting process
b) co's risk assessment process
c) controls over the completeness of deposited cash
d) controls over mgt override - Correct Answer ✔✔ controls over the completeness of
deposited cash relates to controls at the account level
which of the following is a complete and accurate list of the walkthrough procedures
usually performed in an issuer's integrated audit?
a) inquiry, observation, analytical procedures, TOC
b) inquiry, sampling, analytical procedures, TOC
c) inquiry, observation, inspection of relevant documentation, and reperformance of
controls
d) inquiry, inspection of relevant documentation, sampling, and reperformance of
controls - Correct Answer ✔✔ inquiry, observation, inspection of relevant
documentation, and reperformance of controls
an overall response to address a high-assessed risk of material misstatement at the
financial statement level of a nonissuer may include:
a) increasing reliance on results on internal control testing
b) emphasizing the need for more accounting staff
c) incorporating addtl predictability into the selection of procedures
d) providing more supervision of the audit team - Correct Answer ✔✔ providing more
supervision of the audit team
which of the following factors would the auditor not explicitly consider when determining
sample size in an attribute sample for test of controls?
a) acceptable level of the risk of overreliance
b) tolerable deviation rate
c) expected population deviation rate
d) tolerable mistmt - Correct Answer ✔✔ D is correct because tolerable misstatement. it
is considered in variable sampling.
