ARIZONA STATE UNIVERSITY
ACC 421: AUDITING
EXAM 2 PRACTICE QUESTIONS
2025 EDITION | DETAILED SOLUTIONS
✔ 100+ MCQs & True/False
✔ Fraud Risk & Materiality Focus
✔ Perfect for Midterm Prep
,ACC 421 – Arizona State University – 2025 – Exam 2 Practice Questions with
Detailed Answers
For all audits of financial statements made in accordance with auditing standards, the use of analytical
procedures is required to some extent In the planning stage and the completion stage
Which of the following situations has the best chance of being detected when a CPA compares 2019
revenues and expenses with the prior year and investigates all changes exceeding a fixed percent?
The company changed its capitalization policy for small tools in 2019.
Which of the following would not be considered to be an analytical procedure?
Projecting the error rate by comparing the results of a statistical sample with the actual population
characteristics
Analytical procedures used in planning the audit should focus on
Areas that may represent specific risks relevant to the audit
,Which of the following is the most important step in analytical procedures
Expectation formulation (for account balance or item)
Which of the following parts of analytical procedures does not need documentation during the audit?
Evaluation
Analytical procedures used in planning an audit should focus on identifying
areas that may represent specific risks relevant to the audit.
Which of the following will most likely indicate the existence of related parties?
Borrowing money at a rate significantly below the market rate
Which of the following is least likely to be included in the auditor's engagement letter?
Details about the preliminary audit strategy
When approached to perform an audit for the first time, the CPA should make inquiries of the
predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the
successor with information that will assist the successor in determining whether
the engagement should be accepted.
A successor would most likely make specific inquiries of the predecessor auditor regarding
disagreements with management as to auditing procedures.
, Which of the following circumstances would most likely pose the greatest risk in accepting a new audit
engagement?
There will be a client-imposed scope limitation.
Which one of the following statements is correct concerning the concept of materiality?
Materiality is a matter of professional judgment.
In considering materiality for planning purposes, an auditor believes that misstatements aggregating
$10,000 will have a material effect on an entity's income statement, but that misstatements will have to
aggregate $20,000 to materially affect the balance sheet. Ordinarily, it is appropriate to design audit
procedures that are expected to detect misstatements that aggregate
$10,000.
We have an expert-written solution to this problem!
A client decides not to record an auditor's proposed adjustments that collectively are not material and
wants the auditor to issue the report based on the unadjusted numbers. Which of the following
statements is correct regarding the financial statement presentation?
The financial statements are free from material misstatement, and no disclosure is required in the notes
to the financial statements.
In which of the following circumstances would an auditor of an issuer be least likely to reevaluate
established materiality levels?
The client released third-quarter results before the SEC-prescribed deadline.
ACC 421: AUDITING
EXAM 2 PRACTICE QUESTIONS
2025 EDITION | DETAILED SOLUTIONS
✔ 100+ MCQs & True/False
✔ Fraud Risk & Materiality Focus
✔ Perfect for Midterm Prep
,ACC 421 – Arizona State University – 2025 – Exam 2 Practice Questions with
Detailed Answers
For all audits of financial statements made in accordance with auditing standards, the use of analytical
procedures is required to some extent In the planning stage and the completion stage
Which of the following situations has the best chance of being detected when a CPA compares 2019
revenues and expenses with the prior year and investigates all changes exceeding a fixed percent?
The company changed its capitalization policy for small tools in 2019.
Which of the following would not be considered to be an analytical procedure?
Projecting the error rate by comparing the results of a statistical sample with the actual population
characteristics
Analytical procedures used in planning the audit should focus on
Areas that may represent specific risks relevant to the audit
,Which of the following is the most important step in analytical procedures
Expectation formulation (for account balance or item)
Which of the following parts of analytical procedures does not need documentation during the audit?
Evaluation
Analytical procedures used in planning an audit should focus on identifying
areas that may represent specific risks relevant to the audit.
Which of the following will most likely indicate the existence of related parties?
Borrowing money at a rate significantly below the market rate
Which of the following is least likely to be included in the auditor's engagement letter?
Details about the preliminary audit strategy
When approached to perform an audit for the first time, the CPA should make inquiries of the
predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the
successor with information that will assist the successor in determining whether
the engagement should be accepted.
A successor would most likely make specific inquiries of the predecessor auditor regarding
disagreements with management as to auditing procedures.
, Which of the following circumstances would most likely pose the greatest risk in accepting a new audit
engagement?
There will be a client-imposed scope limitation.
Which one of the following statements is correct concerning the concept of materiality?
Materiality is a matter of professional judgment.
In considering materiality for planning purposes, an auditor believes that misstatements aggregating
$10,000 will have a material effect on an entity's income statement, but that misstatements will have to
aggregate $20,000 to materially affect the balance sheet. Ordinarily, it is appropriate to design audit
procedures that are expected to detect misstatements that aggregate
$10,000.
We have an expert-written solution to this problem!
A client decides not to record an auditor's proposed adjustments that collectively are not material and
wants the auditor to issue the report based on the unadjusted numbers. Which of the following
statements is correct regarding the financial statement presentation?
The financial statements are free from material misstatement, and no disclosure is required in the notes
to the financial statements.
In which of the following circumstances would an auditor of an issuer be least likely to reevaluate
established materiality levels?
The client released third-quarter results before the SEC-prescribed deadline.
