CPA Audit & Attestation (AUD) Exam Bank –
Practice Questions
(Original Practice Questions – Not Actual
AICPA/NASBA Items)
Instructions:
One best answer per question.
Correct answer: bold.
Rationale: italics.
Audit Responsibilities, Ethics & Professional Standards (1–25)
1. Which body issues Statements on Auditing Standards (SAS) for non-issuer audits in the U.S.?
A. FASB
B. PCAOB
C. ASB (AICPA)
D. SEC
Answer: C
Rationale: The Auditing Standards Board (ASB) of the AICPA issues SAS for non-issuers.
2. Under the AICPA Code of Professional Conduct, which is a fundamental principle?
A. Maximizing client fees
B. Integrity
C. Advocacy for the client
D. Guaranteeing audit opinions
Answer: B
Rationale: Integrity is a core principle; auditors must be honest and candid.
3. An auditor’s independence is most likely impaired when:
A. The auditor owns a material investment in the client
B. The auditor provides tax services to the client
C. The auditor uses client-provided data
D. The auditor rotates off after 7 years
Answer: A
Rationale: A material financial interest in the client impairs independence.
, 4. Which engagement provides the highest level of assurance?
A. Compilation
B. Review
C. Audit
D. Agreed-upon procedures
Answer: C
Rationale: An audit provides reasonable (highest) assurance; reviews provide limited assurance.
5. The primary objective of an audit of financial statements is to:
A. Detect all fraud
B. Express an opinion on whether the financial statements are presented fairly, in all material
respects
C. Prepare the financial statements
D. Guarantee future viability
Answer: B
Rationale: The auditor’s objective is to opine on fair presentation, not to guarantee or prepare
statements.
6. Which threat to independence arises when an auditor audits their own prior work?
A. Self-review threat
B. Advocacy threat
C. Familiarity threat
D. Financial interest threat
Answer: A
Rationale: Auditing one’s own work creates a self-review threat.
7. Under generally accepted auditing standards (GAAS), who is responsible for the fair
presentation of the financial statements?
A. Auditor
B. Management
C. Audit committee only
D. Regulators
Answer: B
Rationale: Management is responsible for the financial statements; auditors express an opinion.
8. Which of the following is required for an auditor to issue an unmodified opinion?
A. No misstatements of any kind
B. Financial statements free from material misstatement and audit performed in accordance
with GAAS
C. Perfect internal controls
D. No fraud whatsoever
, Answer: B
Rationale: An unmodified opinion requires that statements are fairly presented and the audit complied
with GAAS.
9. An auditor’s responsibility regarding fraud is to:
A. Guarantee detection of all fraud
B. Obtain reasonable assurance that the financial statements are free from material
misstatement, whether due to fraud or error
C. Ignore fraud risk
D. Report all fraud to the SEC regardless of materiality
Answer: B
Rationale: Auditors must plan and perform the audit to obtain reasonable assurance about material
misstatement due to fraud.
10. Which document outlines the agreed-upon terms of an audit engagement?
A. Management representation letter
B. Engagement letter
C. Internal control memo
D. Working paper index
Answer: B
Rationale: The engagement letter documents the terms and responsibilities.
11. Which of the following best describes “professional skepticism”?
A. Assuming management is dishonest
B. A questioning mind and critical assessment of audit evidence
C. Accepting management representations without question
D. Ignoring contradictory evidence
Answer: B
Rationale: Professional skepticism involves questioning and critically evaluating evidence.
12. An auditor is most likely to be independent if:
A. The auditor’s spouse is a controller of the client
B. The auditor has no financial or close family relationships with the client
C. The auditor previously worked for the client as CFO last year
D. The auditor owns a small mutual fund that holds client stock (immaterial)
Answer: B
Rationale: No financial or close family relationships supports independence.
13. Which of the following is a required element of GAAS?
A. Proper planning and supervision
B. Guaranteeing accuracy of financial statements
C. Preparing client tax returns
D. Providing management consulting as part of the audit
Practice Questions
(Original Practice Questions – Not Actual
AICPA/NASBA Items)
Instructions:
One best answer per question.
Correct answer: bold.
Rationale: italics.
Audit Responsibilities, Ethics & Professional Standards (1–25)
1. Which body issues Statements on Auditing Standards (SAS) for non-issuer audits in the U.S.?
A. FASB
B. PCAOB
C. ASB (AICPA)
D. SEC
Answer: C
Rationale: The Auditing Standards Board (ASB) of the AICPA issues SAS for non-issuers.
2. Under the AICPA Code of Professional Conduct, which is a fundamental principle?
A. Maximizing client fees
B. Integrity
C. Advocacy for the client
D. Guaranteeing audit opinions
Answer: B
Rationale: Integrity is a core principle; auditors must be honest and candid.
3. An auditor’s independence is most likely impaired when:
A. The auditor owns a material investment in the client
B. The auditor provides tax services to the client
C. The auditor uses client-provided data
D. The auditor rotates off after 7 years
Answer: A
Rationale: A material financial interest in the client impairs independence.
, 4. Which engagement provides the highest level of assurance?
A. Compilation
B. Review
C. Audit
D. Agreed-upon procedures
Answer: C
Rationale: An audit provides reasonable (highest) assurance; reviews provide limited assurance.
5. The primary objective of an audit of financial statements is to:
A. Detect all fraud
B. Express an opinion on whether the financial statements are presented fairly, in all material
respects
C. Prepare the financial statements
D. Guarantee future viability
Answer: B
Rationale: The auditor’s objective is to opine on fair presentation, not to guarantee or prepare
statements.
6. Which threat to independence arises when an auditor audits their own prior work?
A. Self-review threat
B. Advocacy threat
C. Familiarity threat
D. Financial interest threat
Answer: A
Rationale: Auditing one’s own work creates a self-review threat.
7. Under generally accepted auditing standards (GAAS), who is responsible for the fair
presentation of the financial statements?
A. Auditor
B. Management
C. Audit committee only
D. Regulators
Answer: B
Rationale: Management is responsible for the financial statements; auditors express an opinion.
8. Which of the following is required for an auditor to issue an unmodified opinion?
A. No misstatements of any kind
B. Financial statements free from material misstatement and audit performed in accordance
with GAAS
C. Perfect internal controls
D. No fraud whatsoever
, Answer: B
Rationale: An unmodified opinion requires that statements are fairly presented and the audit complied
with GAAS.
9. An auditor’s responsibility regarding fraud is to:
A. Guarantee detection of all fraud
B. Obtain reasonable assurance that the financial statements are free from material
misstatement, whether due to fraud or error
C. Ignore fraud risk
D. Report all fraud to the SEC regardless of materiality
Answer: B
Rationale: Auditors must plan and perform the audit to obtain reasonable assurance about material
misstatement due to fraud.
10. Which document outlines the agreed-upon terms of an audit engagement?
A. Management representation letter
B. Engagement letter
C. Internal control memo
D. Working paper index
Answer: B
Rationale: The engagement letter documents the terms and responsibilities.
11. Which of the following best describes “professional skepticism”?
A. Assuming management is dishonest
B. A questioning mind and critical assessment of audit evidence
C. Accepting management representations without question
D. Ignoring contradictory evidence
Answer: B
Rationale: Professional skepticism involves questioning and critically evaluating evidence.
12. An auditor is most likely to be independent if:
A. The auditor’s spouse is a controller of the client
B. The auditor has no financial or close family relationships with the client
C. The auditor previously worked for the client as CFO last year
D. The auditor owns a small mutual fund that holds client stock (immaterial)
Answer: B
Rationale: No financial or close family relationships supports independence.
13. Which of the following is a required element of GAAS?
A. Proper planning and supervision
B. Guaranteeing accuracy of financial statements
C. Preparing client tax returns
D. Providing management consulting as part of the audit
