AUDIT CPA EXAM QUESTIONS AND ANSWERS
Which standards provide the most authoritative US auditing guidance for nonissuers and issuers, and
who issues those standards? - CORRECT ANSWER✅✅Nonissuers: Statements on Auditing Standards,
issued by AICPA
Issuers: Auditing Standards, issued by PCAOB
State the primary purpose of an audit - CORRECT ANSWER✅✅provide financial statement users with an
opinion on whether the financial statements are fairly presented in accordance with the applicable
financial reporting framework
What are the five general GAAS requirements related to the conduct of an audit? - CORRECT
ANSWER✅✅Professional Skepticism
Ethical Requirements
Professional Judgement
Sufficient & Appropriate Audit Evidence
Compliance with GAAS
Identify three inherent limitations of an audit - CORRECT ANSWER✅✅1. Nature of financial reporting
2. Nature of audit procedures
3. Timeliness of financial reporting & Cost/benefit
When should an auditor's opinion be modified? - CORRECT ANSWER✅✅1. Financial Statements as a
whole are materially misstated (GAAP issue)
2. Unable to obtain sufficient appropriate audit evidence
List in order the primary sections of an unmodified audit opinion (nonissuer) - CORRECT ANSWER✅✅1.
Title
2. Addressee
3. Auditor's Opinion
4. Basis for Opinion
,5. Responsibilities of Management for the F/S
6. Signature of the Auditor, Auditor's Address, and Date of the Auditor's Report
What should be included in the opinion paragraph of the unmodified audit opinion (nonissuer)? -
CORRECT ANSWER✅✅1. Entity under audit
2. Title of each financial statement and reference to the notes
3. Dates or periods covered by the financial statements
4. Statement that the F/S have been audited
5. Statement that the F/S present fairly
6. Applicable financial reporting framework
What should be included in the management's responsibility paragraph of the unmodified audit opinion
(nonissuer)? - CORRECT ANSWER✅✅1. Explanation that MGMT is responsible for F/S
2. Responsibility includes: Design, Implementation, ad maintenance of Internal Control
3. Entity's ability to continue as a going concern
Where in the standard unmodifed opinion (nonissuer) does the auditor refer to Applicable financial
reporting framework & generally accepted auditing standards? - CORRECT ANSWER✅✅1. Management
Responsibility and opinion sections
2. GAAS referred to in the basis for opinion & auditor's responsibility
What is the definition of a key audit matter (KAM)? - CORRECT ANSWER✅✅1. matters that were of
most significance
2. Related to audits of nonissuers
3. Entities choose to engage auditor to communicate these matters in the auditor's report
When an auditor is engaged to communicate KAM in the auditor's report, what information should be
included? - CORRECT ANSWER✅✅1. Separate section, headed "Key Audit Matters"
2. Description of each matter
3. Why it was significant
4. How was the matter addressed in the audit
,In what circumstance would an auditor be prohibited from communicating KAM in the auditor's report?
- CORRECT ANSWER✅✅When auditor expresses an adverse opinion or disclaims unless such reporting
is required by law or regulation.
Can an auditor that has been engaged to communicate key audit matters in the auditor's report
conclude that there are no key audit matters to communicate? - CORRECT ANSWER✅✅Yes! Include
statement that reflections this position.
List in order the primary sections of an unqualified audit opinion (issuer) - CORRECT ANSWER✅✅1. Title
2. Addressee
3. Opinion Section
4. Basis for Opinion Section
5. Critical Audit Matters
6. Signature, tenure, location
7. Report
What should be included in the opinion section of the unqualified audit opinion (Issuer)? - CORRECT
ANSWER✅✅- 1st section
- "OPINION ON THE F/S"
- Name of the company whose f/s have been audited
- Stmt identifying each f/s and related sch. that has been audited
- stmt indicating that the f/s were audited
- Opinion that the f/s present fairly
What should be included in the first paragraph under the Basis for opinion section in the unqualified
audit opinion (issuer)? - CORRECT ANSWER✅✅- 2nd section
- "BASIS FOR OPINION''
- Stmt that f/s are mgmt responsibility
- Stmt that auditor responsibility is to express an opinion of f/s
- Stmt that the auditor is registered with the PCAOB & independent
, What should be included in the second paragraph under the Basis for Opinion section in the unqualified
audit opinion (Issue)? - CORRECT ANSWER✅✅- Stmt that the audit was conducted with the standards
of the PCAOB
- Stmt that PCAOB standards require that the auditor plan & perform the audit to obtain reasonable
assurance about f/s
- stmt that includes: performing procedures to assess the risks of MM, examining evidence regarding the
amounts & disclosures, evaluating the accounting principles used and estimates made by MGMT,
evaluating the overall presentation of f/s
- Stmt that the auditor believes that the audit provides a reasonable basis for the opinion
Where in the standard unqualified opinion (issuer) does the auditor refer to applicable financial
reporting framework & standards of the PCAOB? - CORRECT ANSWER✅✅1. Financial Framework:
Opinion paragraph
2. Standards of the PCAOB: second paragraph under the Basis for opinion section
The auditor's report should not be dated earlier than the date on which the auditor has obtained
sufficient appropriate audit evidence. This should include evidence that what tree things have occurred?
- CORRECT ANSWER✅✅1. Audit documentation has been reviewed
2. f/s have been prepared
3. mgmt has taken responsibility for the f/s
In most audits of issuers, how many critical audit matters (CAMs) will an auditor normally identify? -
CORRECT ANSWER✅✅auditor would identify at least one CAM
What is the definition of a critical audit matter (CAM)? - CORRECT ANSWER✅✅- Matter that was
communicated to the audit committee
1. Related to accounts or disclosures that are material to the f/s
2. Auditor judgment due to complexity
3. must include any CAMS or state there were none
in determining critical audit matters (CAMS), what factors should the auditor consider? - CORRECT
ANSWER✅✅1. assessment of the risks of MM
Which standards provide the most authoritative US auditing guidance for nonissuers and issuers, and
who issues those standards? - CORRECT ANSWER✅✅Nonissuers: Statements on Auditing Standards,
issued by AICPA
Issuers: Auditing Standards, issued by PCAOB
State the primary purpose of an audit - CORRECT ANSWER✅✅provide financial statement users with an
opinion on whether the financial statements are fairly presented in accordance with the applicable
financial reporting framework
What are the five general GAAS requirements related to the conduct of an audit? - CORRECT
ANSWER✅✅Professional Skepticism
Ethical Requirements
Professional Judgement
Sufficient & Appropriate Audit Evidence
Compliance with GAAS
Identify three inherent limitations of an audit - CORRECT ANSWER✅✅1. Nature of financial reporting
2. Nature of audit procedures
3. Timeliness of financial reporting & Cost/benefit
When should an auditor's opinion be modified? - CORRECT ANSWER✅✅1. Financial Statements as a
whole are materially misstated (GAAP issue)
2. Unable to obtain sufficient appropriate audit evidence
List in order the primary sections of an unmodified audit opinion (nonissuer) - CORRECT ANSWER✅✅1.
Title
2. Addressee
3. Auditor's Opinion
4. Basis for Opinion
,5. Responsibilities of Management for the F/S
6. Signature of the Auditor, Auditor's Address, and Date of the Auditor's Report
What should be included in the opinion paragraph of the unmodified audit opinion (nonissuer)? -
CORRECT ANSWER✅✅1. Entity under audit
2. Title of each financial statement and reference to the notes
3. Dates or periods covered by the financial statements
4. Statement that the F/S have been audited
5. Statement that the F/S present fairly
6. Applicable financial reporting framework
What should be included in the management's responsibility paragraph of the unmodified audit opinion
(nonissuer)? - CORRECT ANSWER✅✅1. Explanation that MGMT is responsible for F/S
2. Responsibility includes: Design, Implementation, ad maintenance of Internal Control
3. Entity's ability to continue as a going concern
Where in the standard unmodifed opinion (nonissuer) does the auditor refer to Applicable financial
reporting framework & generally accepted auditing standards? - CORRECT ANSWER✅✅1. Management
Responsibility and opinion sections
2. GAAS referred to in the basis for opinion & auditor's responsibility
What is the definition of a key audit matter (KAM)? - CORRECT ANSWER✅✅1. matters that were of
most significance
2. Related to audits of nonissuers
3. Entities choose to engage auditor to communicate these matters in the auditor's report
When an auditor is engaged to communicate KAM in the auditor's report, what information should be
included? - CORRECT ANSWER✅✅1. Separate section, headed "Key Audit Matters"
2. Description of each matter
3. Why it was significant
4. How was the matter addressed in the audit
,In what circumstance would an auditor be prohibited from communicating KAM in the auditor's report?
- CORRECT ANSWER✅✅When auditor expresses an adverse opinion or disclaims unless such reporting
is required by law or regulation.
Can an auditor that has been engaged to communicate key audit matters in the auditor's report
conclude that there are no key audit matters to communicate? - CORRECT ANSWER✅✅Yes! Include
statement that reflections this position.
List in order the primary sections of an unqualified audit opinion (issuer) - CORRECT ANSWER✅✅1. Title
2. Addressee
3. Opinion Section
4. Basis for Opinion Section
5. Critical Audit Matters
6. Signature, tenure, location
7. Report
What should be included in the opinion section of the unqualified audit opinion (Issuer)? - CORRECT
ANSWER✅✅- 1st section
- "OPINION ON THE F/S"
- Name of the company whose f/s have been audited
- Stmt identifying each f/s and related sch. that has been audited
- stmt indicating that the f/s were audited
- Opinion that the f/s present fairly
What should be included in the first paragraph under the Basis for opinion section in the unqualified
audit opinion (issuer)? - CORRECT ANSWER✅✅- 2nd section
- "BASIS FOR OPINION''
- Stmt that f/s are mgmt responsibility
- Stmt that auditor responsibility is to express an opinion of f/s
- Stmt that the auditor is registered with the PCAOB & independent
, What should be included in the second paragraph under the Basis for Opinion section in the unqualified
audit opinion (Issue)? - CORRECT ANSWER✅✅- Stmt that the audit was conducted with the standards
of the PCAOB
- Stmt that PCAOB standards require that the auditor plan & perform the audit to obtain reasonable
assurance about f/s
- stmt that includes: performing procedures to assess the risks of MM, examining evidence regarding the
amounts & disclosures, evaluating the accounting principles used and estimates made by MGMT,
evaluating the overall presentation of f/s
- Stmt that the auditor believes that the audit provides a reasonable basis for the opinion
Where in the standard unqualified opinion (issuer) does the auditor refer to applicable financial
reporting framework & standards of the PCAOB? - CORRECT ANSWER✅✅1. Financial Framework:
Opinion paragraph
2. Standards of the PCAOB: second paragraph under the Basis for opinion section
The auditor's report should not be dated earlier than the date on which the auditor has obtained
sufficient appropriate audit evidence. This should include evidence that what tree things have occurred?
- CORRECT ANSWER✅✅1. Audit documentation has been reviewed
2. f/s have been prepared
3. mgmt has taken responsibility for the f/s
In most audits of issuers, how many critical audit matters (CAMs) will an auditor normally identify? -
CORRECT ANSWER✅✅auditor would identify at least one CAM
What is the definition of a critical audit matter (CAM)? - CORRECT ANSWER✅✅- Matter that was
communicated to the audit committee
1. Related to accounts or disclosures that are material to the f/s
2. Auditor judgment due to complexity
3. must include any CAMS or state there were none
in determining critical audit matters (CAMS), what factors should the auditor consider? - CORRECT
ANSWER✅✅1. assessment of the risks of MM
