CPA Practice Exam Questions and Answers 100% correct

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CPA Practice Exam Questions and Answers 100% correct When a CPA examines a client's projected financial statements, the CPA's report should: Correct Answer: state that the CPA performed procedures... to evaluate management's assumptions. Davis, CPA, accepted an engagement to audit the financial statements of Tech Resources, a nonpublic entity. Before the completion of the audit, Tech requested Davis to change the engagement to a compilation of financial statements. Before Davis agrees to change the engagement, Davis is required to consider the: additional audit effort necessary to complete the audit. reason given for Tech's request. Correct Answer: Both I and II The GAO standards list several threats to independence. The threat of familiarity is defined as: Correct Answer: when, due to a long or close relationship with management or other personnel, the auditor will be too sympathetic or accepting of work. Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonissuer's financial statements? Correct Answer: The accountant is independent with respect to the entity. Heath Co.'s current ratio is 4:1. Which of the following transactions would normally increase its current ratio? Correct Answer: Selling inventory on account According to the AICPA Code of Professional Conduct, what would a covered member most appropriately do upon learning that another member of an attest engagement team is considering employment with the client? Correct Answer: Notify an appropriate person in the firm. Which of the following factors most likely would assist an independent auditor in assessing the objectivity of the internal auditor? Correct Answer: The organizational status of the director of internal audit If the business environment is experiencing a recession, the auditor most likely would focus increased attention on which of the following accounts? Correct Answer: Allowance for doubtful accounts An auditor is reporting on condensed financial statements for an annual period that are derived from the audited financial statements of an issuer. The auditor's opinion should indicate whether the information in the condensed financial statements is fairly stated in all material respects: Correct Answer: in relation to the complete financial statements. An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of follow-up on errors reported by the customers. This test of controls most likely is performed to support management's financial statement assertion of: Correct Answer: existence. North Co., a privately held entity, asked its tax accountant, King, a CPA in public practice, to review and generate North's interim financial statements on King's microcomputer when King prepared North's quarterly tax return. King should not submit these financial statements to North unless, as a minimum, King complies with the provisions of: Correct Answer: Statements on Standards for Accounting and Review Services. An auditor's report would be designated an audit of a special-purpose financial statement when it is issued in connection with: Correct Answer: a basis of accounting that the entity uses to comply with an agreement between the entity and one or more third parties other than the auditor. An auditor most likely would not rely on controls if the payroll department supervisor is responsible for: Correct Answer: authorizing payroll rate changes for all employees. Which of the following levels would most likely address the risk of material misstatement by the auditor's consideration of an entity's control environment? Correct Answer: Financial statements Which of the following would most likely be associated with obtaining an understanding of relevant internal factors when satisfying the obligation to understand the entity and its environment on an audit? Correct Answer: Revenue recognition practices Russell CPA is auditing contingent liabilities. What generally is the primary risk of material misstatement related to related financial statement disclosures? Correct Answer: Completeness Nile, CPA, on completing an audit, was asked by the client to provide technical assistance in integrating a new IT system. The set of pronouncements designed to guide Nile in this engagement is the Statement(s) on: Correct Answer: Standards for Consulting Services. Investment and property schedules are presented for purposes of additional analysis in an auditor-submitted document. The schedules are not required parts of the basic financial statements but accompany the basic financial statements. When reporting on such additional information, the measurement of materiality is the: Correct Answer: same as that used in forming an opinion on the basic financial statements taken as a whole. Which of the following is required of an accountant in reviewing a company's financial statements under the Statements on Standards for Accounting and Review Services (SSARS)? Correct Answer: Obtain knowledge of the client's industry Analytical procedures are required for which of the following? Correct Answer: Audit planning In planning an audit, the auditor's knowledge about the design of relevant control activities should be used to: Correct Answer: identify the types of potential misstatements that could occur. A CPA firm is completing the fieldwork for an audit of Swenson Co. for the current year ended December 31. The manager in charge of the audit is performing the final steps in the evidence accumulation phase of the audit and notes that there have been several changes in Swenson during the year under audit. Which of the following items would indicate there could be substantial doubt about Swenson's ability to continue as a going concern for a reasonable period of time? Correct Answer: Recurring working capital shortages Which of the following is correct regarding a compilation of financial statements engagement in accordance with the Statements on Standards for Accounting and Review Services (SSARS)? Correct Answer: The accountant is not required to make inquiries nor perform procedures to corroborate the information provided by the client. Which of the following sampling methods would be used to estimate a numerical measurement of a population, such as a dollar value? Correct Answer: Variables sampling Which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements? Correct Answer: Stratify the cash disbursements population so that the unusually large disbursements are selected If a difference between auditor expectations and actual results in a financial statement audit test cannot be explained, even after performing other audit procedures, which of the following is likely to be the most appropriate initial auditor response? Correct Answer: Aggregate a likely misstatement A CPA firm should establish procedures for conducting and supervising work at all organizational levels to provide reasonable assurance that the work performed meets the firm's standards of quality. To achieve this goal, the firm most likely would establish procedures for: Correct Answer: reviewing engagement working papers and reports. Independence is not required on which of the following types of engagements? Correct Answer: Compilation An auditor discovers that an account balance believed not to be materially misstated based on an audit sample was materially misstated based on the total population of the account balance. This is an example of which of the following sampling types of risks? Correct Answer: Incorrect acceptance Title IV of the Sarbanes-Oxley Act of 2002 requires which of the following? Correct Answer: All of the answer choices are correct. Which of the following is a valid statement related to the relationship of internal control using information technology and financial reporting risk? Correct Answer: Controls should be embedded into both the software and hardware to preserve the integrity of data. [Show More]

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