CPA Auditing Principles & Procedures 2

Question 1

Which sampling method gives every item in a population an equal chance of selection?

Accepted Answer

Simple random sampling

Answer

Simple random sampling ensures each item has an equal and independent probability of being selected from the population.

Question 2

An auditor discovers a material misstatement after issuing an unmodified opinion. The auditor should first:

Accepted Answer

Notify the client and determine if the financial statements need revision

Answer

Per AU-C 560, the auditor must notify management and those charged with governance to assess whether the financial statements need to be revised.

Question 3

Which type of analytical procedure compares current-year account balances to prior-year balances?

Accepted Answer

Trend analysis

Answer

Trend analysis involves comparing financial data over multiple periods to identify unusual fluctuations or patterns.

Question 4

The concept of 'audit risk' is best described as the risk that:

Accepted Answer

The auditor expresses an inappropriate opinion on materially misstated statements

Answer

Audit risk is the risk that the auditor issues an unmodified (clean) opinion when the financial statements are actually materially misstated.

Question 5

When an auditor lacks independence, which report should be issued?

Accepted Answer

No report should be issued and the engagement must be withdrawn

Answer

A lack of independence is a scope limitation so fundamental that the auditor must withdraw from the engagement rather than issue any form of opinion.

(CPA) Certified Practicing Accountant Practice Test