Ohio CPA Exam Practice Questions And
Correct Answers (Verified Answers) Plus
Rationales 2025|2026 Q&A | Instant
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1. Which of the following best describes the primary purpose of an
audit?
a) Detect all fraud
b) Provide absolute assurance
c) Provide reasonable assurance about the fairness of financial
statements
d) Guarantee profitability
Audits provide reasonable, not absolute, assurance regarding the
fairness of financial statements in accordance with GAAP.
2. Under the accrual basis of accounting, revenue is recognized when:
a) Cash is received
b) It is earned and realizable
, c) The customer is billed
d) Inventory is purchased
Accrual accounting recognizes revenue when it is earned and
realizable, regardless of cash collection.
3. Which organization sets auditing standards for nonpublic companies in
the United States?
a) SEC
b) PCAOB
c) AICPA (ASB)
d) IRS
The AICPA’s Auditing Standards Board (ASB) sets standards for
nonpublic companies. PCAOB sets standards for public companies.
4. Which of the following is a temporary account?
a) Accounts Receivable
b) Retained Earnings
c) Salaries Expense
d) Equipment
Temporary accounts (revenues, expenses, dividends) are closed at
year-end. Salaries Expense is temporary.
5. In the audit risk model, detection risk is:
a) Risk that material misstatement exists
b) Risk that auditor fails to detect misstatement
c) Risk controls won’t prevent misstatement
, d) Risk inherent to business
Detection risk is the risk that auditors’ procedures will fail to detect
material misstatements.
6. The Sarbanes-Oxley Act created which regulatory body?
a) AICPA
b) SEC
c) PCAOB
d) FASB
The PCAOB was established under Sarbanes-Oxley to oversee audits
of public companies.
7. Which inventory method results in the highest ending inventory
during periods of rising prices?
a) LIFO
b) FIFO
c) Weighted Average
d) Specific Identification
FIFO leaves the most recent (higher-priced) items in ending
inventory, increasing reported inventory.
8. Which of the following costs is capitalized to inventory?
a) Selling expense
b) Freight-in
c) Interest expense
d) Administrative costs
, Freight-in is part of the cost of bringing goods to condition and
location for sale.
9. Which financial statement reports cash inflows and outflows?
a) Income Statement
b) Balance Sheet
c) Statement of Cash Flows
d) Statement of Retained Earnings
The statement of cash flows reports operating, investing, and
financing cash movements.
10. Which depreciation method results in higher expense in early
years?
a) Straight-line
b) Double-declining balance
c) Units of production
d) None
Double-declining balance accelerates depreciation, producing higher
early expenses.
11. Which is not a component of internal control under COSO?
a) Control activities
b) Risk assessment
c) Budgeting process
d) Monitoring
COSO framework includes control environment, risk assessment,
Correct Answers (Verified Answers) Plus
Rationales 2025|2026 Q&A | Instant
Download Pdf
1. Which of the following best describes the primary purpose of an
audit?
a) Detect all fraud
b) Provide absolute assurance
c) Provide reasonable assurance about the fairness of financial
statements
d) Guarantee profitability
Audits provide reasonable, not absolute, assurance regarding the
fairness of financial statements in accordance with GAAP.
2. Under the accrual basis of accounting, revenue is recognized when:
a) Cash is received
b) It is earned and realizable
, c) The customer is billed
d) Inventory is purchased
Accrual accounting recognizes revenue when it is earned and
realizable, regardless of cash collection.
3. Which organization sets auditing standards for nonpublic companies in
the United States?
a) SEC
b) PCAOB
c) AICPA (ASB)
d) IRS
The AICPA’s Auditing Standards Board (ASB) sets standards for
nonpublic companies. PCAOB sets standards for public companies.
4. Which of the following is a temporary account?
a) Accounts Receivable
b) Retained Earnings
c) Salaries Expense
d) Equipment
Temporary accounts (revenues, expenses, dividends) are closed at
year-end. Salaries Expense is temporary.
5. In the audit risk model, detection risk is:
a) Risk that material misstatement exists
b) Risk that auditor fails to detect misstatement
c) Risk controls won’t prevent misstatement
, d) Risk inherent to business
Detection risk is the risk that auditors’ procedures will fail to detect
material misstatements.
6. The Sarbanes-Oxley Act created which regulatory body?
a) AICPA
b) SEC
c) PCAOB
d) FASB
The PCAOB was established under Sarbanes-Oxley to oversee audits
of public companies.
7. Which inventory method results in the highest ending inventory
during periods of rising prices?
a) LIFO
b) FIFO
c) Weighted Average
d) Specific Identification
FIFO leaves the most recent (higher-priced) items in ending
inventory, increasing reported inventory.
8. Which of the following costs is capitalized to inventory?
a) Selling expense
b) Freight-in
c) Interest expense
d) Administrative costs
, Freight-in is part of the cost of bringing goods to condition and
location for sale.
9. Which financial statement reports cash inflows and outflows?
a) Income Statement
b) Balance Sheet
c) Statement of Cash Flows
d) Statement of Retained Earnings
The statement of cash flows reports operating, investing, and
financing cash movements.
10. Which depreciation method results in higher expense in early
years?
a) Straight-line
b) Double-declining balance
c) Units of production
d) None
Double-declining balance accelerates depreciation, producing higher
early expenses.
11. Which is not a component of internal control under COSO?
a) Control activities
b) Risk assessment
c) Budgeting process
d) Monitoring
COSO framework includes control environment, risk assessment,
