©THESTAR 2024/2025 ALL RIGHTS RESERVED 1:27PM. A+
CPA Exam Questions And Answers |Latest
2025 | Guaranteed Pass.
Generally Accepted Accounting Principles (GAAP) - Answer✔the standards by which the quality
of the financial statements is judged
Auditor's primary role - Answer✔to provide an impartial (independent) assessment of the
reliability of management's financial statement
What do financial statements represent? - Answer✔representations of management
benefits of an audit to a private company - Answer✔"1) more favorable cost of capital
Generally Accepted Accounting Standards (GAAS) - Answer✔the standards by which the quality
of the auditor's performance is judged
Three Fieldwork standards - Answer✔"1. Planning and supervision
Six Elements of a Quality Control System - Answer✔"1. leadership responsibilities for quality
within the firm
administration of quality control system - Answer✔may be vested in one person but everyone
shares responsibility
Statements on Auditing Standards (SASs) - Answer✔Pronouncements issued by the Auditing
Standards Board of the AICPA that serve as interpretations of GAAS
Four reporting standards - Answer✔"1. Consistency
Three General Standards - Answer✔"1. Training
Internal control consideration - Answer✔"1. obtain an understanding for planning purposes as
required
Types of tests of details - Answer✔"1. test of transactions
Planning considerations - Answer✔"1. determine whether to accept or continue engagement
1|Page
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Basic steps in audit process - Answer✔"1. planning
types of substantive audit procedures - Answer✔"1. analytical procedures
reasons for a disclaimer of opinion - Answer✔"1. lack of independence
reason for adverse opinion - Answer✔1. major GAAP departure
reasons for qualified opinion - Answer✔"1. minor GAAP departure
Types of opinions - Answer✔"1. unqualified
structure of the standard audit report - Answer✔3 paragraphs: introductory, scope, opinion
SSARSs - Answer✔Statements on Standard for Accounting and Review Services
SSAEs - Answer✔Statement on Standards for Attestation Engagements
Compilation - Answer✔When the CPA assembles into financial statement format the financial
records of a private company, without expressing any degree of assurance on the reliability of
those financial statements
Audits - Answer✔Conveys a high level of assurance about financial statements
Review - Answer✔Convenys a moderate level of assurance about financial statements
Audit planning procedures - Answer✔"1. reivew client records
usual factors considered in planning - Answer✔"1. client's industry and business
initiator of predecessor-successor communications - Answer✔successor
characteristics of audit program - Answer✔"1. required in writing
matters covered in successor's inquiry of predecessor - Answer✔"1. facts related to
management's integrity
pre-engagement activities - Answer✔"1. quality control concerning acceptance and/or
continuance of clients and engagements
Component risk within Auditor's control - Answer✔detection risk
Audit risk model - Answer✔Audit risk= f(inherent risk, control risk, detection risk)
Three variables adjusted to change detection risk - Answer✔"1. nature
detection risk - Answer✔the probability that a material misstatement, that was not prevented
or detected by internal control, was not detected by the auditor's substantive audit procedures
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 1:27PM. A+
planning stage materiality - Answer✔What size misstatements is the audit program designed to
catch
evaluation stage materiality - Answer✔at the conclusion of the fieldwork, does the evidence
suggest that the financial statements are 'fairly' stated
Inherent risk - Answer✔the probability that a material misstatement would occur in the
particular audit area in the absence of any internal control policies and procedures
Audit risk - Answer✔the probability that the auditor fails to modify the opinion on the financial
statements that contain a material misstatement
Two contexts of materiality - Answer✔planning-level materiality and evaluation-level
materiality
control risk - Answer✔the probability that a material misstatement, that occurred in the first
place, would not be detected by applicable internal controls
analytical procedures in planning - Answer✔aids in understanding client activities and in
targeting risky areas where material misstatements are more likely
three purposes of analytical procedurse - Answer✔"1. required during planning
factors affecting use of analytical procedures as substantive evidence - Answer✔"1. nature of
assertion
analytical procedures - Answer✔evaluations of financial information made by a study of
plausible relationships among both financial and nonfinancial data
analytical procedures in overall review - Answer✔verifies conclusions reached in audit
Auditor's responsiblities concerning fraud - Answer✔"1. must design audit to provide
reasonable assurance of detecting material misstatements
Two categories of risk factors for misappropriation of assets - Answer✔"1. susceptibility of
assets to misappropriation
Two types of misstatements concerning fraud - Answer✔"1. from fraudulent financial reporting
when auditor may inform others outside entity of fraud - Answer✔"1. in response to valid
subpoena
Three categories of risk factors for fraudulent financial reporting - Answer✔"1. management
characteristics
required communications about fraud - Answer✔"1. the appropriate level of management
should be notified
3|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 1:27PM. A+
Audit procedures used to detect illegal acts - Answer✔make inquiries of management about
compliance with applicable laws
Auditor's basic responsibility to detect illegal acts - Answer✔must design the audit to provide
'reasonable assurance' of detecting illegal acts having a direct and material effect on the
financial statements
Audit procedures when an illegal act has been detected - Answer✔"1. gather additional
evidence to determine facts
Reporting effects of detected illegal acts - Answer✔"1. ask client to revise financial statements
Factors in selection of a specialist - Answer✔"1. professional credentials
Required communications with audit committees and those charged with governance -
Answer✔"1. matters applicable to planning
effect of a specialist on an audit report - Answer✔"1. unqualified opinions usually do not
mention specialist
Transaction cycle - Answer✔a group of essentially homogeneous transactions
Disadvantages of Flowcharts - Answer✔"1. tedious and time consuming to prepare
Disadvantages of internal control questionnairs (ICQs) - Answer✔"1. not tailored to client
Advantages of Internal Control Questionnaires (ICQs) - Answer✔"1. can have standard form for
many clients
Limitations of Internal Controls - Answer✔"1. cost of controls should not outweigh benefits
Advantages of Flowcharts - Answer✔"1. systematic approach
Steps in Study and Evaluation of Internal Control - Answer✔"1. gain and document
understanding
Procedures in Obtaining and Understanding of Internal Control - Answer✔"1. inquiry of
appropriate personnel
Disadvantages of Narratives - Answer✔"1. easy to overlook internal control issues
Ways of Documenting Understanding of Internal Controls - Answer✔"1. Flowcharts of
transaction cycles
Advantages of Narratives - Answer✔"1. tailored to client
4|Page
CPA Exam Questions And Answers |Latest
2025 | Guaranteed Pass.
Generally Accepted Accounting Principles (GAAP) - Answer✔the standards by which the quality
of the financial statements is judged
Auditor's primary role - Answer✔to provide an impartial (independent) assessment of the
reliability of management's financial statement
What do financial statements represent? - Answer✔representations of management
benefits of an audit to a private company - Answer✔"1) more favorable cost of capital
Generally Accepted Accounting Standards (GAAS) - Answer✔the standards by which the quality
of the auditor's performance is judged
Three Fieldwork standards - Answer✔"1. Planning and supervision
Six Elements of a Quality Control System - Answer✔"1. leadership responsibilities for quality
within the firm
administration of quality control system - Answer✔may be vested in one person but everyone
shares responsibility
Statements on Auditing Standards (SASs) - Answer✔Pronouncements issued by the Auditing
Standards Board of the AICPA that serve as interpretations of GAAS
Four reporting standards - Answer✔"1. Consistency
Three General Standards - Answer✔"1. Training
Internal control consideration - Answer✔"1. obtain an understanding for planning purposes as
required
Types of tests of details - Answer✔"1. test of transactions
Planning considerations - Answer✔"1. determine whether to accept or continue engagement
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 1:27PM. A+
Basic steps in audit process - Answer✔"1. planning
types of substantive audit procedures - Answer✔"1. analytical procedures
reasons for a disclaimer of opinion - Answer✔"1. lack of independence
reason for adverse opinion - Answer✔1. major GAAP departure
reasons for qualified opinion - Answer✔"1. minor GAAP departure
Types of opinions - Answer✔"1. unqualified
structure of the standard audit report - Answer✔3 paragraphs: introductory, scope, opinion
SSARSs - Answer✔Statements on Standard for Accounting and Review Services
SSAEs - Answer✔Statement on Standards for Attestation Engagements
Compilation - Answer✔When the CPA assembles into financial statement format the financial
records of a private company, without expressing any degree of assurance on the reliability of
those financial statements
Audits - Answer✔Conveys a high level of assurance about financial statements
Review - Answer✔Convenys a moderate level of assurance about financial statements
Audit planning procedures - Answer✔"1. reivew client records
usual factors considered in planning - Answer✔"1. client's industry and business
initiator of predecessor-successor communications - Answer✔successor
characteristics of audit program - Answer✔"1. required in writing
matters covered in successor's inquiry of predecessor - Answer✔"1. facts related to
management's integrity
pre-engagement activities - Answer✔"1. quality control concerning acceptance and/or
continuance of clients and engagements
Component risk within Auditor's control - Answer✔detection risk
Audit risk model - Answer✔Audit risk= f(inherent risk, control risk, detection risk)
Three variables adjusted to change detection risk - Answer✔"1. nature
detection risk - Answer✔the probability that a material misstatement, that was not prevented
or detected by internal control, was not detected by the auditor's substantive audit procedures
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 1:27PM. A+
planning stage materiality - Answer✔What size misstatements is the audit program designed to
catch
evaluation stage materiality - Answer✔at the conclusion of the fieldwork, does the evidence
suggest that the financial statements are 'fairly' stated
Inherent risk - Answer✔the probability that a material misstatement would occur in the
particular audit area in the absence of any internal control policies and procedures
Audit risk - Answer✔the probability that the auditor fails to modify the opinion on the financial
statements that contain a material misstatement
Two contexts of materiality - Answer✔planning-level materiality and evaluation-level
materiality
control risk - Answer✔the probability that a material misstatement, that occurred in the first
place, would not be detected by applicable internal controls
analytical procedures in planning - Answer✔aids in understanding client activities and in
targeting risky areas where material misstatements are more likely
three purposes of analytical procedurse - Answer✔"1. required during planning
factors affecting use of analytical procedures as substantive evidence - Answer✔"1. nature of
assertion
analytical procedures - Answer✔evaluations of financial information made by a study of
plausible relationships among both financial and nonfinancial data
analytical procedures in overall review - Answer✔verifies conclusions reached in audit
Auditor's responsiblities concerning fraud - Answer✔"1. must design audit to provide
reasonable assurance of detecting material misstatements
Two categories of risk factors for misappropriation of assets - Answer✔"1. susceptibility of
assets to misappropriation
Two types of misstatements concerning fraud - Answer✔"1. from fraudulent financial reporting
when auditor may inform others outside entity of fraud - Answer✔"1. in response to valid
subpoena
Three categories of risk factors for fraudulent financial reporting - Answer✔"1. management
characteristics
required communications about fraud - Answer✔"1. the appropriate level of management
should be notified
3|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 1:27PM. A+
Audit procedures used to detect illegal acts - Answer✔make inquiries of management about
compliance with applicable laws
Auditor's basic responsibility to detect illegal acts - Answer✔must design the audit to provide
'reasonable assurance' of detecting illegal acts having a direct and material effect on the
financial statements
Audit procedures when an illegal act has been detected - Answer✔"1. gather additional
evidence to determine facts
Reporting effects of detected illegal acts - Answer✔"1. ask client to revise financial statements
Factors in selection of a specialist - Answer✔"1. professional credentials
Required communications with audit committees and those charged with governance -
Answer✔"1. matters applicable to planning
effect of a specialist on an audit report - Answer✔"1. unqualified opinions usually do not
mention specialist
Transaction cycle - Answer✔a group of essentially homogeneous transactions
Disadvantages of Flowcharts - Answer✔"1. tedious and time consuming to prepare
Disadvantages of internal control questionnairs (ICQs) - Answer✔"1. not tailored to client
Advantages of Internal Control Questionnaires (ICQs) - Answer✔"1. can have standard form for
many clients
Limitations of Internal Controls - Answer✔"1. cost of controls should not outweigh benefits
Advantages of Flowcharts - Answer✔"1. systematic approach
Steps in Study and Evaluation of Internal Control - Answer✔"1. gain and document
understanding
Procedures in Obtaining and Understanding of Internal Control - Answer✔"1. inquiry of
appropriate personnel
Disadvantages of Narratives - Answer✔"1. easy to overlook internal control issues
Ways of Documenting Understanding of Internal Controls - Answer✔"1. Flowcharts of
transaction cycles
Advantages of Narratives - Answer✔"1. tailored to client
4|Page
