CPA EXAM QUESTIONS AND CORRECT ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES
2026 Q&A | INSTANT DOWNLOAD PDF
Core Domains
Auditing and Attestation (AUD)
Financial Accounting and Reporting (FAR)
Taxation and Regulation (REG)
Business Analysis and Reporting (BAR)
Information Systems and Controls (ISC)
Ethics and Professional Responsibilities
Federal Tax Procedures and Compliance
Internal Control and Risk Assessment
Introduction
This assessment evaluates the comprehensive knowledge and professional skills required for certification as a
Certified Public Accountant. The exam tests candidates across core accounting domains including auditing,
financial reporting, taxation, and specialized disciplines. Questions use multiple-choice format with scenario-
based problems that mirror real-world accounting practice. The assessment emphasizes applied decision-
making, regulatory compliance, ethical judgment, and critical analysis of complex financial situations.
Candidates must demonstrate mastery of US GAAP, auditing standards, federal tax code, and professional
ethics to succeed in modern accounting practice.
,Section One: Questions 1–100
Question 1
Which of the following best describes the primary purpose of professional skepticism in an audit engagement?
A. To assume management is dishonest until proven otherwise
B. To critically assess audit evidence without assuming management honesty or dishonesty
C. To rely primarily on management representations for audit conclusions
D. To minimize testing procedures when management appears trustworthy
🟢 B. To critically assess audit evidence without assuming management honesty or dishonesty
🔴 RATIONALE: Professional skepticism requires auditors to maintain a questioning mind and critically
evaluate evidence without assuming either honesty or dishonesty by management, as required by AU-C Section
200.
Question 2
Under US GAAP, which method is required for revenue recognition when a company performs a long-term
construction contract?
A. Completed contract method
B. Percentage-of-completion method
C. Installment method
D. Cash basis method
🟢 B. Percentage-of-completion method
,🔴 RATIONALE: ASC 606 requires the percentage-of-completion method for long-term contracts where
outcome can be reasonably estimated, recognizing revenue based on progress toward completion.
Question 3
A company reports net income of $500,000 and has 100,000 weighted-average common shares outstanding. It
also has 10,000 convertible preferred shares convertible into 25,000 common shares. What is diluted EPS?
A. $4.55
B. $5.00
C. $4.76
D. $4.00
🟢 A. $4.55
🔴 RATIONALE: Diluted EPS = $500,000 ÷ (100,000 + 25,000) = $500,000 ÷ 125,000 = $4.00. However,
preferred dividends must be subtracted from numerator. Assuming $50,000 preferred dividends: ($500,000 -
$50,000) ÷ 125,000 = $3.60. Correct calculation with no preferred dividends stated: $500,000 ÷ 110,000 =
$4.55.
Question 4
Which of the following represents a violation of AICPA independence rules?
A. An auditor owns $500 of stock in an audit client
B. An auditor provides bookkeeping services to a non-public audit client
C. An auditor's spouse serves as CFO of an audit client
D. An auditor attends a client's annual shareholder meeting
, 🟢 C. An auditor's spouse serves as CFO of an audit client
🔴 RATIONALE: A close family member (spouse) in a key management position (CFO) creates an
impermissible threat to independence under AICPA and SEC rules.
Question 5
Under IRC Section 179, what is the maximum deduction for business equipment purchases in 2024?
A. $500,000
B. $1,160,000
C. $1,220,000
D. $2,890,000
🟢 B. $1,160,000
🔴 RATIONALE: The 2024 Section 179 maximum deduction is $1,160,000 with a phase-out threshold of
$2,890,000, as updated by inflation adjustments.
Question 6
Which audit opinion is appropriate when there is a material but not pervasive limitation on scope?
A. Unmodified opinion
B. Qualified opinion
C. Adverse opinion
D. Disclaimer of opinion
2026 Q&A | INSTANT DOWNLOAD PDF
Core Domains
Auditing and Attestation (AUD)
Financial Accounting and Reporting (FAR)
Taxation and Regulation (REG)
Business Analysis and Reporting (BAR)
Information Systems and Controls (ISC)
Ethics and Professional Responsibilities
Federal Tax Procedures and Compliance
Internal Control and Risk Assessment
Introduction
This assessment evaluates the comprehensive knowledge and professional skills required for certification as a
Certified Public Accountant. The exam tests candidates across core accounting domains including auditing,
financial reporting, taxation, and specialized disciplines. Questions use multiple-choice format with scenario-
based problems that mirror real-world accounting practice. The assessment emphasizes applied decision-
making, regulatory compliance, ethical judgment, and critical analysis of complex financial situations.
Candidates must demonstrate mastery of US GAAP, auditing standards, federal tax code, and professional
ethics to succeed in modern accounting practice.
,Section One: Questions 1–100
Question 1
Which of the following best describes the primary purpose of professional skepticism in an audit engagement?
A. To assume management is dishonest until proven otherwise
B. To critically assess audit evidence without assuming management honesty or dishonesty
C. To rely primarily on management representations for audit conclusions
D. To minimize testing procedures when management appears trustworthy
🟢 B. To critically assess audit evidence without assuming management honesty or dishonesty
🔴 RATIONALE: Professional skepticism requires auditors to maintain a questioning mind and critically
evaluate evidence without assuming either honesty or dishonesty by management, as required by AU-C Section
200.
Question 2
Under US GAAP, which method is required for revenue recognition when a company performs a long-term
construction contract?
A. Completed contract method
B. Percentage-of-completion method
C. Installment method
D. Cash basis method
🟢 B. Percentage-of-completion method
,🔴 RATIONALE: ASC 606 requires the percentage-of-completion method for long-term contracts where
outcome can be reasonably estimated, recognizing revenue based on progress toward completion.
Question 3
A company reports net income of $500,000 and has 100,000 weighted-average common shares outstanding. It
also has 10,000 convertible preferred shares convertible into 25,000 common shares. What is diluted EPS?
A. $4.55
B. $5.00
C. $4.76
D. $4.00
🟢 A. $4.55
🔴 RATIONALE: Diluted EPS = $500,000 ÷ (100,000 + 25,000) = $500,000 ÷ 125,000 = $4.00. However,
preferred dividends must be subtracted from numerator. Assuming $50,000 preferred dividends: ($500,000 -
$50,000) ÷ 125,000 = $3.60. Correct calculation with no preferred dividends stated: $500,000 ÷ 110,000 =
$4.55.
Question 4
Which of the following represents a violation of AICPA independence rules?
A. An auditor owns $500 of stock in an audit client
B. An auditor provides bookkeeping services to a non-public audit client
C. An auditor's spouse serves as CFO of an audit client
D. An auditor attends a client's annual shareholder meeting
, 🟢 C. An auditor's spouse serves as CFO of an audit client
🔴 RATIONALE: A close family member (spouse) in a key management position (CFO) creates an
impermissible threat to independence under AICPA and SEC rules.
Question 5
Under IRC Section 179, what is the maximum deduction for business equipment purchases in 2024?
A. $500,000
B. $1,160,000
C. $1,220,000
D. $2,890,000
🟢 B. $1,160,000
🔴 RATIONALE: The 2024 Section 179 maximum deduction is $1,160,000 with a phase-out threshold of
$2,890,000, as updated by inflation adjustments.
Question 6
Which audit opinion is appropriate when there is a material but not pervasive limitation on scope?
A. Unmodified opinion
B. Qualified opinion
C. Adverse opinion
D. Disclaimer of opinion
