CPA Auditing and Attestation Practice Questions

1. Projecting an expected total for the current year's sales based on sales figures and trends over past years is an example of what?

a. Assessing risk
b. An analytical procedure
c. Creating an internal control
d. Establishing quality control

2. Which of the following is true regarding securities?

a. People who have accounting responsibilities for securities should also have custody of the securities.
b. People who have accounting responsibilities for securities should never have custody of the securities.
c. Only one person should have access to the securities.
d. It is not necessary to register the securities in the name of the owner.

3. Which of the following statements about using systems flowcharts to document internal controls are correct?

I. They provide a visual explanation of the activities of clients.
II. They help auditors quickly grasp the design of the internal controls system.
III. They make it easy to identify weaknesses in the internal controls.
IV. They are always better than using internal control questionnaires.

a. I and II
b. II and III
c. III and IV
d. I, II, III, and IV

4. How would you determine the record count for the invoices in this entity's batch?

a. Add all the items in the quantity column
b. Multiply the quantity by the price in each row, and then add those figures to create a total
c. Count the number of invoices
d. Add all the items in the price column

5. What is the principal that states that the internal controls of an entity should not be greater than the benefits those controls can be expected to deliver?

a. Reasonable assurance
b. Quality control
c. Segregation of duties
d. Risk assessment

6. Which of the following has the goal of evaluating the effectiveness and efficiency of an entity's operations with the goal of finding areas that need improvement?

a. Financial statement auditing
b. Internal control examination
c. Operational auditing
d. Analytical procedures

7. CPA Sheryl Smith audited the December 31, 2007 financial statements of Capstone, completing the fieldwork on March 12, 2008. A later event occurred on March 23, 2008 that required her to adjust Capstone's 2007 financial statement. The event came to Smith's attention on April 1, 2008, and she corrected the statement on April 7, 2008. Smith made the adjustment without disclosure of the event. Under most circumstances, what would the report be dated?

a. December 31, 2007
b. March 12, 2008
c. April 1, 2008
d. April 7, 2008

8. When auditing a nonpublic company, which of the following is true about performing tests of controls?

I. It should be done if the auditor relies on the controls.
II. It should be done if substantive tests alone are not sufficient to the audit needs.

a. I only
b. II only
c. I and II
d. Neither I nor II

9. Which of the following statements is most correct about the standard financial statement report by an auditor?

a. The scope paragraph includes the generally accepted auditing standards (GAAS) followed during the audit.
b. The opinion paragraph includes the generally accepted auditing standards (GAAS) followed during the audit.
c. The scope paragraph explains that the financial statements comply with generally accepted auditing principles (GAAP) followed during the audit.
d. The opinion paragraph explains that the financial statements comply with the generally accepted auditing principles (GAAP).

10. Which statement about batch processing transactions and online transaction processing is most accurate?

a. Batch processing transactions creates an audit trail that is generally easier to follow than online transaction processing does.
b. Online transaction processing creates an audit trail that is generally easier to follow than batching processing transactions does.
c. There is no difference in the audit trail created by either method.
d. The ease of following the audit trail cannot be predicted by knowing the transaction processing method.

11. Amp Co. determines the cost of its domestic inventory using LIFO, and determines the cost of the inventory of its international subsidiary using LIFO.

Given the information above, which of the following statements is true?

a. There is an inherent lack of consistency between accounting periods.
b. Using both methods creates a deviation from generally accepted accounting principles (GAAP).
c. The auditor's report on Amp Co. should express an unqualified opinion.
d. The auditor's report should express an adverse opinion.

12. During a financial statement audit, an auditor is required to explicitly assess the risk of material misstatements that arise as a result of:

a. Human error
b. Software error
c. Fraud
d. Criminal acts

13. As a result of inadequate disclosure, an auditor expresses a qualified opinion in a financial statement report. Which of the following should the auditor do?

I. Include an explanation of the omission in a separate explanatory paragraph
II. Modify the opinion paragraph

a. I only
b. II only
c. I and II
d. Neither I nor II

14. Which of the following is intended to provide assurance of the privacy, security, business practices/transaction integrity, availability, and confidentiality of a website?

a. TechZone
b. WebTrust
c. WebSafe
d. TechTrust

15. If the tolerable rate is greater than the deviation rate in a population, and if the auditor estimates-based on sample results-that the tolerable rate is greater than the deviation rate, which of the following statements is most accurate?

a. The control risk is above the planned assessed level.
b. The control risk is below the planned assessed level.
c. The control risk is above or equal to the planned assessed level.
d. The control risk is below or equal to the planned assessed level.

16. A registration statement filed with the SEC includes audit reports on financial statements for different periods by two different, independent auditors-the predecessor auditor and the successor auditor. The predecessor auditor must:

a. Read the pertinent sections of the registration statement.
b. Obtain a letter of representation from the successor auditor.
c. Read the pertinent sections of the registration statement and obtain a letter of representation from the successor auditor.
d. Neither read the pertinent sections of the registration statement nor obtain a letter of representation from the successor auditor.

17. An auditor is considering materiality for planning purposes. The auditor should design auditing procedures to detect misstatements that aggregate which amount?

a. The smallest amount that would have a material effect on the entity's income statement
b. The largest amount that would have a material effect on the entity's income statement
c. The smallest amount that would have a material effect on the balance sheet
d. The combined total of the smallest amounts that would affect the income statement and the balance sheet

18. The expected rate of errors in an accounting record is usually:

a. Higher than the tolerable rate of deviations for a test of a related control.
b. The same as the tolerable rate of deviations for a test of a related control.
c. Lower than the tolerable rate of deviations for a test of a related control.
d. Twice as high as the tolerable rate of deviations for a test of a related control.

19. At which points of an audit is an auditor prohibited from identifying risk factors?

a. Planning
b. Conducting fieldwork
c. Considering acceptance of clients and engagements
d. None of the above

20. Which of the following is true of deviations from control procedures?

I. They necessarily result in errors.
II. They increase the risk of material misstatements.

a. I only
b. II only
c. I and II
d. Neither I nor II

Answer Key