Louisiana Certified Public Accountant
(CPA) Examination Questions And
Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A | Instant
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1. Which objective best describes an independent financial statement
audit?
A. To guarantee that financial statements contain no errors
B. To provide reasonable assurance that financial statements are free
from material misstatement
C. To prepare financial statements for management
D. To eliminate management's responsibility for financial reporting
Answer: B. To provide reasonable assurance that financial
statements are free from material misstatement
Rationale: An audit provides reasonable, not absolute, assurance that
financial statements are free from material misstatement caused by
fraud or error. Management remains responsible for preparing and
presenting the financial statements.
2. Which circumstance most directly increases audit risk?
A. Strong internal controls
B. Effective management oversight
C. A significant risk of material misstatement
D. A low inherent risk environment
Answer: C. A significant risk of material misstatement
,Rationale: Audit risk increases when the financial statements are more
likely to contain material misstatements. Auditors respond by assessing
inherent and control risks and designing procedures that appropriately
address those risks.
3. Which assertion concerns whether recorded transactions actually
occurred?
A. Completeness
B. Occurrence
C. Classification
D. Cutoff
Answer: B. Occurrence
Rationale: The occurrence assertion addresses whether transactions
and events recorded in the financial statements actually took place and
relate to the entity. Completeness addresses transactions that should
have been recorded but were omitted.
4. Which audit procedure provides the strongest evidence that an
accounts receivable balance exists?
A. Reviewing management's aging schedule
B. Asking the accounts receivable clerk
C. Confirming balances with customers
D. Comparing receivables with prior-year balances
Answer: C. Confirming balances with customers
Rationale: External confirmations provide evidence directly from
independent third parties. When appropriately designed and controlled
by the auditor, confirmation evidence can be persuasive regarding the
existence of receivables.
5. What is the primary purpose of an audit working paper?
,A. To replace the financial statements
B. To document audit procedures, evidence, and conclusions
C. To serve as management's accounting records
D. To guarantee audit results
Answer: B. To document audit procedures, evidence, and conclusions
Rationale: Audit documentation supports the auditor's conclusions and
demonstrates that the engagement was planned and performed in
accordance with applicable professional standards.
6. Which risk exists because auditors may reach an inappropriate
conclusion based on an audit sample?
A. Sampling risk
B. Business risk
C. Liquidity risk
D. Market risk
Answer: A. Sampling risk
Rationale: Sampling risk arises because the auditor examines less than
the entire population. The sample may not represent the population
adequately, causing the auditor to reach a conclusion different from
one based on examining every item.
7. Which control best reduces the risk that unauthorized payments
will be made?
A. Monthly bank reconciliations
B. Segregation of authorization and payment functions
C. Increasing advertising expenditures
D. Preparing budgets annually
Answer: B. Segregation of authorization and payment functions
, Rationale: Separating authorization from payment processing reduces
the opportunity for one individual to authorize and execute an
unauthorized transaction without detection.
8. What is the auditor's responsibility regarding fraud?
A. Guarantee that all fraud is discovered
B. Obtain reasonable assurance that financial statements are free of
material misstatement due to fraud or error
C. Investigate every employee
D. Prevent all employee theft
Answer: B. Obtain reasonable assurance that financial statements
are free of material misstatement due to fraud or error
Rationale: Auditors are responsible for obtaining reasonable
assurance regarding material misstatement, including misstatements
caused by fraud. They are not guarantors that every fraud will be
discovered.
9. Which procedure is generally considered substantive analytical
procedure?
A. Comparing current-year gross margin with expected gross margin
B. Observing inventory counting
C. Inspecting a signed contract
D. Reperforming a bank reconciliation
Answer: A. Comparing current-year gross margin with expected
gross margin
Rationale: Substantive analytical procedures evaluate plausible
relationships among financial and nonfinancial information to
identify potential material misstatements.
10. What is materiality?
(CPA) Examination Questions And
Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A | Instant
Download Pdf
1. Which objective best describes an independent financial statement
audit?
A. To guarantee that financial statements contain no errors
B. To provide reasonable assurance that financial statements are free
from material misstatement
C. To prepare financial statements for management
D. To eliminate management's responsibility for financial reporting
Answer: B. To provide reasonable assurance that financial
statements are free from material misstatement
Rationale: An audit provides reasonable, not absolute, assurance that
financial statements are free from material misstatement caused by
fraud or error. Management remains responsible for preparing and
presenting the financial statements.
2. Which circumstance most directly increases audit risk?
A. Strong internal controls
B. Effective management oversight
C. A significant risk of material misstatement
D. A low inherent risk environment
Answer: C. A significant risk of material misstatement
,Rationale: Audit risk increases when the financial statements are more
likely to contain material misstatements. Auditors respond by assessing
inherent and control risks and designing procedures that appropriately
address those risks.
3. Which assertion concerns whether recorded transactions actually
occurred?
A. Completeness
B. Occurrence
C. Classification
D. Cutoff
Answer: B. Occurrence
Rationale: The occurrence assertion addresses whether transactions
and events recorded in the financial statements actually took place and
relate to the entity. Completeness addresses transactions that should
have been recorded but were omitted.
4. Which audit procedure provides the strongest evidence that an
accounts receivable balance exists?
A. Reviewing management's aging schedule
B. Asking the accounts receivable clerk
C. Confirming balances with customers
D. Comparing receivables with prior-year balances
Answer: C. Confirming balances with customers
Rationale: External confirmations provide evidence directly from
independent third parties. When appropriately designed and controlled
by the auditor, confirmation evidence can be persuasive regarding the
existence of receivables.
5. What is the primary purpose of an audit working paper?
,A. To replace the financial statements
B. To document audit procedures, evidence, and conclusions
C. To serve as management's accounting records
D. To guarantee audit results
Answer: B. To document audit procedures, evidence, and conclusions
Rationale: Audit documentation supports the auditor's conclusions and
demonstrates that the engagement was planned and performed in
accordance with applicable professional standards.
6. Which risk exists because auditors may reach an inappropriate
conclusion based on an audit sample?
A. Sampling risk
B. Business risk
C. Liquidity risk
D. Market risk
Answer: A. Sampling risk
Rationale: Sampling risk arises because the auditor examines less than
the entire population. The sample may not represent the population
adequately, causing the auditor to reach a conclusion different from
one based on examining every item.
7. Which control best reduces the risk that unauthorized payments
will be made?
A. Monthly bank reconciliations
B. Segregation of authorization and payment functions
C. Increasing advertising expenditures
D. Preparing budgets annually
Answer: B. Segregation of authorization and payment functions
, Rationale: Separating authorization from payment processing reduces
the opportunity for one individual to authorize and execute an
unauthorized transaction without detection.
8. What is the auditor's responsibility regarding fraud?
A. Guarantee that all fraud is discovered
B. Obtain reasonable assurance that financial statements are free of
material misstatement due to fraud or error
C. Investigate every employee
D. Prevent all employee theft
Answer: B. Obtain reasonable assurance that financial statements
are free of material misstatement due to fraud or error
Rationale: Auditors are responsible for obtaining reasonable
assurance regarding material misstatement, including misstatements
caused by fraud. They are not guarantors that every fraud will be
discovered.
9. Which procedure is generally considered substantive analytical
procedure?
A. Comparing current-year gross margin with expected gross margin
B. Observing inventory counting
C. Inspecting a signed contract
D. Reperforming a bank reconciliation
Answer: A. Comparing current-year gross margin with expected
gross margin
Rationale: Substantive analytical procedures evaluate plausible
relationships among financial and nonfinancial information to
identify potential material misstatements.
10. What is materiality?
