FREE Certified Public Accountant (CPA) Audit Questions and Answers

Question 1

An auditor must consider the facts listed below. What kind of audit opinion ought to be given?
-Management cannot accurately estimate a prospective loss's magnitude.
-The financial notes, excluding dollar amounts, completely disclose the probable loss.
-The company is a nonissue
-In the financial statements, management does not account for this loss.
-There is enough audit information proving the loss will be significant.

Accepted Answer

Unmodified opinion

Answer

Qualified option due to scope limitation

Answer

attributable to a significant misrepresentation in the financial accounts, qualified opinion

Answer

Unaltered opinion with a different matter

Question 2

For a customer, an accountant is considering materiality and allowable misrepresentation. The prevailing presumption is that there will be little chance of financial statement errors. Calculate relevancy and allowable misstatements using the information given.

The auditor determines materiality by applying the benchmark approach. Either total assets or gross revenue serves as the benchmark. The higher of the two serves as the benchmark. If all purchases are employed, the factor is 2%. In the case of gross income, the element is 1%.
Revenue: $3,500,000
Gross Profit: $100,300
Total Assets: $2,750,000
Stockholders' Equity: $1,000,000
What is the overall financial materiality?

Accepted Answer

35,000

Answer

55,000

Answer

35,750

Answer

27,500

Question 3

The kind of control that is intended to stop, catch, and fix significant misstatements before the action takes place is called a

Accepted Answer

Preventative Control

Answer

Detective Control

Answer

Risk Assessment

Answer

Monitoring Control

Question 4

Which sort of audit evidence among the following is the most convincing?

Accepted Answer

Bank statements from the client

Answer

Pre-numbered client purchase order forms

Answer

Tax allocations are supported by internal audit documentation.

Answer

Client representation letter

Question 5

Which form of statement does the auditor tackle from the bottom up?
Hint: This refers to the following transactions, from their initial source documents through the accounting process to the financial statements.

Accepted Answer

Completeness

Answer

Existence and Occurrence

Answer

Understandability and Classification

Answer

Cutoff

Question 6

For Geeks Company, the ratio of accounts payable turnover grew from year 3 to year 4. What might be the cause of this?

Accepted Answer

Accounts payable remained the same from year three to year four, although the cost of goods sold grew.

Answer

Total liabilities increased from year 3 to year 4

Answer

Accounts payable increased from year 3 to year 4

Answer

For the purpose of acquiring another company, the company took on a substantial long-term debt.

Question 7

When: An emphasis-of-matter paragraph must be added to the auditors' report.

Accepted Answer

There is a going concern uncertainty

Answer

The company has material misstatements in the financial statements

Answer

There is large cash disbursements relating to investment in assets

Answer

The company is purchasing another company