Certified Public Accountant (CPA) Audit 3

Question 1

Which of the following is an example of a substantive analytical procedure?

Accepted Answer

Comparing current-year gross margin to prior-year gross margin

Answer

Comparing current-year gross margin percentage to prior years is an analytical procedure that evaluates financial data by studying plausible relationships.

Question 2

A client refuses to allow the auditor to confirm accounts receivable with customers. The auditor should:

Accepted Answer

Issue an unmodified opinion if alternative procedures provide sufficient evidence

Answer

If alternative procedures (such as examining subsequent cash receipts) provide sufficient appropriate evidence, an unmodified opinion may still be appropriate.

Question 3

The primary purpose of preparing a lead schedule during an audit is to:

Accepted Answer

Summarize account balances and link them to the financial statements and supporting schedules

Answer

Lead schedules provide a summary of account balances, cross-reference to supporting workpapers, and tie account totals to the trial balance and financial statements.

Question 4

Which of the following most likely represents a significant deficiency in internal control?

Accepted Answer

The absence of a process to identify and review complex accounting estimates

Answer

The absence of a review process for complex accounting estimates represents a significant deficiency because estimates carry high inherent risk and lack of oversight could allow material errors.

Question 5

When auditing fair value measurements, the auditor's primary concern is typically:

Accepted Answer

Whether the assumptions and methods are reasonable and supportable

Answer

Auditors evaluate whether the entity's assumptions, inputs, and valuation techniques are reasonable and consistent with market-based evidence.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant (CPA) Audit 3