CPA AUD Real practice Exam With Actual
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Which assertion is most directly tested by observing the counting of a client’s year-end
inventory?
A. Valuation
B. Existence
C. Rights and obligations
D. Presentation and disclosure
Answer: B
Rationale: Observation of physical count provides evidence that inventory recorded
actually exists.
1. Which procedure provides the most persuasive evidence regarding the collectibility
of accounts receivable?
A. Inspect subsequent cash receipts
B. Send negative confirmations
C. Recalculate aging only
D. Compare AR turnover to prior years
Answer: A
Rationale: Cash collected after year-end directly evidences realizable value.
2. An auditor’s primary objective in performing tests of controls is to:
A. Detect material misstatements
B. Assess control risk
C. Determine inherent risk
D. Evaluate substantive procedures
Answer: B
Rationale: Tests of controls provide a basis for assessing control risk and planning
substantive work.
3. Which statement about audit risk is correct?
A. It can be eliminated with sufficient testing
B. It is a function of detection risk only
C. It is the risk of issuing an inappropriate opinion
, D. It is controlled entirely by the client
Answer: C
Rationale: Audit risk is the risk of an inappropriate opinion when statements are
materially misstated.
4. When are analytical procedures required?
A. Only during planning
B. Only during completion
C. During planning and overall review
D. During testing of details
Answer: C
Rationale: Standards require analytics in planning and final overall review; they are
optional as substantive tests.
5. Which procedure best addresses the cutoff assertion for sales?
A. Reperform price tests on invoices
B. Match shipping documents to sales invoices around year-end
C. Confirm accounts receivable
D. Perform ratio analysis on gross margin
Answer: B
Rationale: Tracing shipments to invoices around year-end tests whether
transactions are recorded in the proper period.
6. Independence is required for:
A. Audits and reviews
B. Audits only
C. Reviews and compilations
D. All attest engagements
Answer: D
Rationale: Independence is required for all attest services (audit, review,
examination, agreed-upon procedures).
7. Which control activity is most relevant to safeguarding cash receipts?
A. Bank reconciliations prepared by a cashier
B. Lockbox with bank for customer payments
C. Pre-numbered POs
D. Password-protected sales system
Answer: B
Rationale: A lockbox reduces custody risk by having payments go directly to the
bank.
8. In an integrated audit of an issuer, material weakness in internal control requires:
A. Adverse opinion on ICFR
, B. Qualified opinion on ICFR
C. Disclaimer on ICFR
D. Unmodified opinion with emphasis paragraph
Answer: A
Rationale: A material weakness results in an adverse opinion on internal control
over financial reporting.
9. A scope limitation most likely leads to which audit report for a nonissuer when
effects could be material but not pervasive?
A. Unmodified with emphasis
B. Qualified opinion
C. Adverse opinion
D. Disclaimer
Answer: B
Rationale: Material but not pervasive scope limitations lead to a qualified opinion
(“except for”).
10. Which action impairs independence under the AICPA Code?
A. Unpaid immaterial audit fees from 11 months ago
B. Former partner joins client as CFO and is on the attest team
C. Performing nonattest tax services with no management responsibilities
D. Accepting a gift basket worth $50 from client
Answer: B
Rationale: A covered member participating on the engagement when a former
partner is now a client officer impairs independence.
11. Negative confirmations of AR are most appropriate when:
A. Inherent risk is high
B. Many small balances, strong controls, and low assessed risk
C. Few large balances, weak controls
D. The client requests them
Answer: B
Rationale: Negatives are suitable with many small accounts, low risk, and strong
controls.
12. Which procedure best tests the rights and obligations assertion for inventory on
consignment?
A. Observe physical inventory
B. Review consignment agreements and correspondence
C. Perform price testing
D. Send positive confirmations to customers
Answer: B
Questions,Rationales And Verified
Answers/Expert Verified For Guaranteed
Pass/Latest Update/Download Pdf
Which assertion is most directly tested by observing the counting of a client’s year-end
inventory?
A. Valuation
B. Existence
C. Rights and obligations
D. Presentation and disclosure
Answer: B
Rationale: Observation of physical count provides evidence that inventory recorded
actually exists.
1. Which procedure provides the most persuasive evidence regarding the collectibility
of accounts receivable?
A. Inspect subsequent cash receipts
B. Send negative confirmations
C. Recalculate aging only
D. Compare AR turnover to prior years
Answer: A
Rationale: Cash collected after year-end directly evidences realizable value.
2. An auditor’s primary objective in performing tests of controls is to:
A. Detect material misstatements
B. Assess control risk
C. Determine inherent risk
D. Evaluate substantive procedures
Answer: B
Rationale: Tests of controls provide a basis for assessing control risk and planning
substantive work.
3. Which statement about audit risk is correct?
A. It can be eliminated with sufficient testing
B. It is a function of detection risk only
C. It is the risk of issuing an inappropriate opinion
, D. It is controlled entirely by the client
Answer: C
Rationale: Audit risk is the risk of an inappropriate opinion when statements are
materially misstated.
4. When are analytical procedures required?
A. Only during planning
B. Only during completion
C. During planning and overall review
D. During testing of details
Answer: C
Rationale: Standards require analytics in planning and final overall review; they are
optional as substantive tests.
5. Which procedure best addresses the cutoff assertion for sales?
A. Reperform price tests on invoices
B. Match shipping documents to sales invoices around year-end
C. Confirm accounts receivable
D. Perform ratio analysis on gross margin
Answer: B
Rationale: Tracing shipments to invoices around year-end tests whether
transactions are recorded in the proper period.
6. Independence is required for:
A. Audits and reviews
B. Audits only
C. Reviews and compilations
D. All attest engagements
Answer: D
Rationale: Independence is required for all attest services (audit, review,
examination, agreed-upon procedures).
7. Which control activity is most relevant to safeguarding cash receipts?
A. Bank reconciliations prepared by a cashier
B. Lockbox with bank for customer payments
C. Pre-numbered POs
D. Password-protected sales system
Answer: B
Rationale: A lockbox reduces custody risk by having payments go directly to the
bank.
8. In an integrated audit of an issuer, material weakness in internal control requires:
A. Adverse opinion on ICFR
, B. Qualified opinion on ICFR
C. Disclaimer on ICFR
D. Unmodified opinion with emphasis paragraph
Answer: A
Rationale: A material weakness results in an adverse opinion on internal control
over financial reporting.
9. A scope limitation most likely leads to which audit report for a nonissuer when
effects could be material but not pervasive?
A. Unmodified with emphasis
B. Qualified opinion
C. Adverse opinion
D. Disclaimer
Answer: B
Rationale: Material but not pervasive scope limitations lead to a qualified opinion
(“except for”).
10. Which action impairs independence under the AICPA Code?
A. Unpaid immaterial audit fees from 11 months ago
B. Former partner joins client as CFO and is on the attest team
C. Performing nonattest tax services with no management responsibilities
D. Accepting a gift basket worth $50 from client
Answer: B
Rationale: A covered member participating on the engagement when a former
partner is now a client officer impairs independence.
11. Negative confirmations of AR are most appropriate when:
A. Inherent risk is high
B. Many small balances, strong controls, and low assessed risk
C. Few large balances, weak controls
D. The client requests them
Answer: B
Rationale: Negatives are suitable with many small accounts, low risk, and strong
controls.
12. Which procedure best tests the rights and obligations assertion for inventory on
consignment?
A. Observe physical inventory
B. Review consignment agreements and correspondence
C. Perform price testing
D. Send positive confirmations to customers
Answer: B
