Most Recent AICPA CPA-Auditing Exam Questions & Answers

Prepare for the AICPA CPA Auditing and Attestation exam with our extensive collection of questions and answers. These practice Q&A are updated according to the latest syllabus, providing you with the tools needed to review and test your knowledge.

QA4Exam focus on the latest syllabus and exam objectives, our practice Q&A are designed to help you identify key topics and solidify your understanding. By focusing on the core curriculum, These Questions & Answers helps you cover all the essential topics, ensuring you're well-prepared for every section of the exam. Each question comes with a detailed explanation, offering valuable insights and helping you to learn from your mistakes. Whether you're looking to assess your progress or dive deeper into complex topics, our updated Q&A will provide the support you need to confidently approach the AICPA CPA-Auditing exam and achieve success.

The questions for CPA-Auditing were last updated on Dec 20, 2024.

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Question No. 1

Which of the following statements is correct concerning an auditor's responsibilities regarding financial statements?

AAn auditor may not draft an entity's financial statements based on information from management's accounting system.

BThe adoption of sound accounting policies is an implicit part of an auditor's responsibilities.

CAn auditor's responsibilities for audited financial statements are confined to the expression of the auditor's opinion.

DMaking suggestions that are adopted about an entity's internal control environment impairs an auditor's independence.

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Correct Answer: C

Choice 'c' is correct. An auditor's responsibility is to express an opinion on financial statements based on an audit.

Choice 'a' is incorrect. An auditor may draft an entity's financial statements based on information from management's financial system. This would be referred to as a compilation engagement.

Choice 'b' is incorrect. The adoption of sound accounting policies is an implicit part of management's responsibilities, not the auditor's responsibilities.

Choice 'd' is incorrect. An auditor often makes suggestions that are adopted about an entity's internal control environment.

Professional Standards

Question No. 2

Which of the following procedures most likely would not be included in a review engagement of a nonissuer?

AObtaining a management representation letter.

BConsidering whether the financial statements conform with GAAP.

CAssessing control risk.

DInquiring about subsequent events.

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Correct Answer: C

Choice 'c' is correct. An accountant is not required to assess control risk as part of a review engagement. Assessment of control risk would be appropriate for an audit engagement.

Choice 'a' is incorrect. Obtaining a management representation letter is an appropriate review procedure.

Choice 'b' is incorrect. Considering whether the financial statements are in accordance with GAAP is an appropriate review procedure.

Choice 'd' is incorrect. Inquiring of management regarding subsequent events is an appropriate review procedure.

Question No. 3

When a client engages in transactions involving derivatives, the auditor should:

ADevelop an understanding of the economic substance of each derivative.

BConfirm with the client's broker whether the derivatives are for trading purposes.

CNotify those charged with governance about the risks involved in derivative transactions.

DAdd an explanatory paragraph to the auditor's report describing the risks associated with each derivative.

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Correct Answer: A

Choice 'a' is correct. In auditing investments in securities and derivatives, the auditor must assess the reasonableness and appropriateness of assumptions, market variables, and valuation models. In order to do this, the auditor must consider whether the substance of transactions or events differs materially from their form. Remember that generally accepted accounting principles require transactions and events to be reported in accordance with their economic substance, even if this differs from their form.

Choice 'b' is incorrect. While the auditor might confirm settled and unsettled transactions with the broker, whether a security is held for trading purposes is based on management intent and would not be confirmed with the broker.

Choice 'c' is incorrect. There is no requirement that the auditor notify those charged with governance about the risks involved in derivative transactions.

Choice 'd' is incorrect. There is no requirement that the auditor add an explanatory paragraph to the auditor's report describing the risks associated with each derivative.

Question No. 4

The objective of a review of interim financial information of a public entity is to provide the accountant with a basis for:

ADetermining whether the prospective financial information is based on reasonable assumptions.

BExpressing a limited opinion that the financial information is presented in conformity with generally accepted accounting principles.

CDeciding whether to perform substantive audit procedures prior to the balance sheet date.

DReporting whether material modifications should be made for such information to conform with generally accepted accounting principles.

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Correct Answer: D

Choice 'd' is correct. The objective of a review of interim financial information of a public entity is to provide the accountant with a basis for reporting whether material modifications should be made to conform with GAAP.

Choice 'a' is incorrect. Prospective financial information (concerning future events) is not part of the interim financial information filed by a public company.

Choice 'b' is incorrect. No form of opinion is expressed based on a review; however, limited assurance is provided regarding the financial statements.

Choice 'c' is incorrect. The objective of an interim review is not to provide guidance regarding the timing of audit procedures.

Question No. 5

Which of the following is true about the term "likely misstatement?"

AIt refers to misstatements that have not been specifically identified, but which are likely to exist based on the auditor's judgment.

BIt refers to the cumulative effect of misstatements from prior years on the current year's financial statements.

CIt refers to misstatements that have been specifically identified by the auditor.

DIt includes both identified misstatements and an estimate of unidentified misstatements.
Explanation
Choice 'a' is correct. A 'likely misstatement' is one that has not been specifically identified, but which is likely to exist based on the auditor's judgment.
Choice 'b' is incorrect. 'Likely misstatement' does not refer to the cumulative effect of prior year errors.
It is a measure of misstatements the auditor considers likely to exist, that have not been specifically identified.
Choice 'c' is incorrect. 'Likely misstatement' is a measure of misstatements the auditor considers likely to exist, that have not been specifically identified.
Choice 'd' is incorrect. The term 'likely misstatement' includes only an estimate of potential errors. It does not include specific misstatements identified during the audit.

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Correct Answer: A

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