Certified Public Accountant (CPA) Practice Examination
Complete Questions and Detailed Solutions | 2026/2027
Edition | 200 Verified Questions
CPA Exam 2026-2027 QUESTIONS AND ANSWERS ALREADY GRADED A+. 100% Verified Solutions | Updated
Per Latest AICPA Guidelines | Graded A+
This comprehensive practice examination is meticulously designed for CPA candidates preparing for
the 2026-2027 exam cycle. It includes 200 verified questions covering Financial Accounting and
Reporting (FAR), Auditing and Attestation (AUD), Regulation (REG), and the Business Analysis and
Reporting (BAR) discipline. Each question is accompanied by detailed solutions and rationales to
enhance understanding and retention. The content is aligned with the latest AICPA Blueprints and
reflects current standards and regulations.
Key Features:
Financial Accounting and Reporting (FAR) - 50 questions
Auditing and Attestation (AUD) - 50 questions
Regulation (REG) - 50 questions
Business Analysis and Reporting (BAR) Discipline - 50 questions
Detailed rationales for correct and incorrect answers
Updated for 2026-2027 exam changes and AICPA guidelines
Updates for 2026:
- Incorporates the latest AICPA Blueprint revisions for 2026-2027
- Includes new questions on data analytics and information systems in AUD and BAR
- Reflects recent updates to tax laws and regulations in REG
- Aligned with the latest FASB and GASB pronouncements in FAR
- Enhanced answer explanations with step-by-step problem-solving approaches
Abstract:
The CPA examination remains a rigorous assessment of accounting knowledge and skills. This practice exam is
structured to mirror the actual CPA exam format, including the core sections (FAR, AUD, REG) and the BAR
discipline. The 200 questions are carefully selected to represent the most frequently tested topics and to challenge
candidates at the appropriate difficulty level. Each question includes a detailed solution that not only provides the
correct answer but also explains the underlying concepts, common pitfalls, and alternative approaches. This
resource is invaluable for candidates seeking to assess their readiness, identify weak areas, and build confidence
before the exam. By engaging with these questions, candidates will develop a deeper understanding of the material
and improve their test-taking strategies, ultimately increasing their likelihood of passing the CPA exam on the first
attempt.
Keywords:
CPA Exam, FAR, AUD, REG, BAR Discipline, Practice Questions, 2026-2027, Verified Answers
Answer Format:
Each question is followed by the correct answer and a comprehensive rationale. The rationale explains why the
correct answer is right and why each incorrect option is wrong, providing a thorough review of the underlying
concepts. Additionally, some questions include tips for avoiding common mistakes and mnemonics to aid
memorization.
Compliance Checklist:
Page 1
, Aligned with AICPA 2026-2027 CPA Exam Blueprints
Updated for recent FASB, GASB, and IRS pronouncements
Includes all four sections: FAR, AUD, REG, and BAR
Questions are verified for accuracy and relevance
Detailed rationales for every answer option
Content Area Overview:
Content Area Questions Key Topics Weight
Financial Accounting and 1-50 Financial statements, Revenue recognition, 25%
Reporting (FAR) Leases, Consolidations, Governmental
accounting
Auditing and Attestation (AUD) 51-100 Audit planning, Internal controls, Evidence, 25%
Reporting, Professional responsibilities
Regulation (REG) 101-150 Federal taxation, Ethics, Business law, 25%
Contracts, Securities regulation
Business Analysis and Reporting 151-200 Data analytics, Financial risk management, 25%
(BAR) Business process improvement, Technology
impacts, Reporting
Page 2
,Q1. Under U.S. GAAP, how should a lessee classify a lease that transfers ownership of
the underlying asset to the lessee at the end of the lease term, but the present value of
the lease payments is only 60% of the fair value of the asset?
A. Operating lease
B. Finance lease
C. Sales-type lease
D. Direct financing lease
Correct Answer: B. Finance lease
Rationale: Under ASC 842, a lease that transfers ownership of the underlying asset to the
lessee by the end of the lease term is classified as a finance lease by the lessee, regardless
of the present value of lease payments relative to fair value. The transfer of ownership is a
sufficient criterion for finance lease classification. Sales-type and direct financing leases
are lessor classifications, not lessee classifications.
Why Wrong:
A - Operating lease classification is appropriate only if the lease does not meet any of
the finance lease criteria, including transfer of ownership.
C - Sales-type lease is a lessor classification, not a lessee classification.
D - Direct financing lease is a lessor classification, not a lessee classification.
Reference: FASB ASC 842-10-25-2 (Leases)
Q2. Which of the following audit procedures is most effective for detecting the
unauthorized recording of fictitious sales near the end of the fiscal year?
A. Confirming accounts receivable balances with customers
B. Reviewing the sales journal for unusual entries
C. Performing a cutoff test of shipping documents
D. Testing the internal controls over sales order entry
Correct Answer: A. Confirming accounts receivable balances with customers
Rationale: Confirming accounts receivable with customers is the most effective procedure
to detect fictitious sales because it directly tests whether the customers acknowledge the
receivable balances. Cutoff tests address timing of legitimate sales, while journal reviews
and control testing may not detect fabricated transactions if controls are weak.
Why Wrong:
B - Reviewing the sales journal may reveal unusual entries but is less reliable than
external confirmation.
C - Cutoff tests focus on whether sales are recorded in the correct period, not on the
existence of fictitious sales.
D - Testing controls evaluates the design and operation of controls, but does not
directly detect fictitious sales.
Page 3
, Reference: AICPA Audit Guide: Audit Evidence (AU-C 330)
Q3. A corporation has a net operating loss (NOL) of $1,000,000 in 2026. Which of the
following statements is correct regarding the treatment of this NOL for federal
income tax purposes?
A. The NOL can be carried back 2 years and forward 20 years, but the carryback is
limited to 80% of taxable income.
B. The NOL can be carried forward indefinitely, but the deduction is limited to 80% of
taxable income in each carryforward year.
C. The NOL can be carried back 5 years and forward indefinitely, with no limitation on
the carryforward deduction.
D. The NOL can be carried forward only 20 years, with no limitation on the deduction
amount.
Correct Answer: B. The NOL can be carried forward indefinitely, but the deduction
is limited to 80% of taxable income in each carryforward year.
Rationale: Under the Tax Cuts and Jobs Act (TCJA), as modified by the CARES Act, NOLs
arising in tax years beginning after December 31, 2020, cannot be carried back, but can
be carried forward indefinitely. The carryforward deduction is limited to 80% of taxable
income. This rule applies to NOLs generated in 2026.
Why Wrong:
A - The 2-year carryback was temporarily reinstated for 2020 NOLs, but not for NOLs
arising after 2020.
C - Carryback of 5 years was available for pre-2018 NOLs, but not for NOLs
generated in 2026.
D - The 20-year carryforward limit was eliminated for NOLs arising after 2020.
Reference: IRC § 172 (as amended by TCJA and CARES Act)
Q4. In the context of the BAR discipline, which of the following best explains why
Economic Value Added (EVA) is considered a superior measure of divisional
performance compared to Return on Investment (ROI)?
A. EVA focuses on accounting profit, while ROI focuses on cash flows.
B. EVA adjusts for the cost of equity capital, while ROI ignores it.
C. EVA is easier to calculate from financial statements than ROI.
D. EVA is not affected by the division's investment base.
Correct Answer: B. EVA adjusts for the cost of equity capital, while ROI ignores it.
Rationale: EVA deducts a charge for the cost of all capital, including equity, from net
operating profit after taxes (NOPAT). ROI, as traditionally calculated, uses accounting
income divided by investment and does not explicitly deduct the cost of equity capital,
which can lead to suboptimal decisions when a division's ROI exceeds the cost of capital
but is below the company's target.
Page 4
Complete Questions and Detailed Solutions | 2026/2027
Edition | 200 Verified Questions
CPA Exam 2026-2027 QUESTIONS AND ANSWERS ALREADY GRADED A+. 100% Verified Solutions | Updated
Per Latest AICPA Guidelines | Graded A+
This comprehensive practice examination is meticulously designed for CPA candidates preparing for
the 2026-2027 exam cycle. It includes 200 verified questions covering Financial Accounting and
Reporting (FAR), Auditing and Attestation (AUD), Regulation (REG), and the Business Analysis and
Reporting (BAR) discipline. Each question is accompanied by detailed solutions and rationales to
enhance understanding and retention. The content is aligned with the latest AICPA Blueprints and
reflects current standards and regulations.
Key Features:
Financial Accounting and Reporting (FAR) - 50 questions
Auditing and Attestation (AUD) - 50 questions
Regulation (REG) - 50 questions
Business Analysis and Reporting (BAR) Discipline - 50 questions
Detailed rationales for correct and incorrect answers
Updated for 2026-2027 exam changes and AICPA guidelines
Updates for 2026:
- Incorporates the latest AICPA Blueprint revisions for 2026-2027
- Includes new questions on data analytics and information systems in AUD and BAR
- Reflects recent updates to tax laws and regulations in REG
- Aligned with the latest FASB and GASB pronouncements in FAR
- Enhanced answer explanations with step-by-step problem-solving approaches
Abstract:
The CPA examination remains a rigorous assessment of accounting knowledge and skills. This practice exam is
structured to mirror the actual CPA exam format, including the core sections (FAR, AUD, REG) and the BAR
discipline. The 200 questions are carefully selected to represent the most frequently tested topics and to challenge
candidates at the appropriate difficulty level. Each question includes a detailed solution that not only provides the
correct answer but also explains the underlying concepts, common pitfalls, and alternative approaches. This
resource is invaluable for candidates seeking to assess their readiness, identify weak areas, and build confidence
before the exam. By engaging with these questions, candidates will develop a deeper understanding of the material
and improve their test-taking strategies, ultimately increasing their likelihood of passing the CPA exam on the first
attempt.
Keywords:
CPA Exam, FAR, AUD, REG, BAR Discipline, Practice Questions, 2026-2027, Verified Answers
Answer Format:
Each question is followed by the correct answer and a comprehensive rationale. The rationale explains why the
correct answer is right and why each incorrect option is wrong, providing a thorough review of the underlying
concepts. Additionally, some questions include tips for avoiding common mistakes and mnemonics to aid
memorization.
Compliance Checklist:
Page 1
, Aligned with AICPA 2026-2027 CPA Exam Blueprints
Updated for recent FASB, GASB, and IRS pronouncements
Includes all four sections: FAR, AUD, REG, and BAR
Questions are verified for accuracy and relevance
Detailed rationales for every answer option
Content Area Overview:
Content Area Questions Key Topics Weight
Financial Accounting and 1-50 Financial statements, Revenue recognition, 25%
Reporting (FAR) Leases, Consolidations, Governmental
accounting
Auditing and Attestation (AUD) 51-100 Audit planning, Internal controls, Evidence, 25%
Reporting, Professional responsibilities
Regulation (REG) 101-150 Federal taxation, Ethics, Business law, 25%
Contracts, Securities regulation
Business Analysis and Reporting 151-200 Data analytics, Financial risk management, 25%
(BAR) Business process improvement, Technology
impacts, Reporting
Page 2
,Q1. Under U.S. GAAP, how should a lessee classify a lease that transfers ownership of
the underlying asset to the lessee at the end of the lease term, but the present value of
the lease payments is only 60% of the fair value of the asset?
A. Operating lease
B. Finance lease
C. Sales-type lease
D. Direct financing lease
Correct Answer: B. Finance lease
Rationale: Under ASC 842, a lease that transfers ownership of the underlying asset to the
lessee by the end of the lease term is classified as a finance lease by the lessee, regardless
of the present value of lease payments relative to fair value. The transfer of ownership is a
sufficient criterion for finance lease classification. Sales-type and direct financing leases
are lessor classifications, not lessee classifications.
Why Wrong:
A - Operating lease classification is appropriate only if the lease does not meet any of
the finance lease criteria, including transfer of ownership.
C - Sales-type lease is a lessor classification, not a lessee classification.
D - Direct financing lease is a lessor classification, not a lessee classification.
Reference: FASB ASC 842-10-25-2 (Leases)
Q2. Which of the following audit procedures is most effective for detecting the
unauthorized recording of fictitious sales near the end of the fiscal year?
A. Confirming accounts receivable balances with customers
B. Reviewing the sales journal for unusual entries
C. Performing a cutoff test of shipping documents
D. Testing the internal controls over sales order entry
Correct Answer: A. Confirming accounts receivable balances with customers
Rationale: Confirming accounts receivable with customers is the most effective procedure
to detect fictitious sales because it directly tests whether the customers acknowledge the
receivable balances. Cutoff tests address timing of legitimate sales, while journal reviews
and control testing may not detect fabricated transactions if controls are weak.
Why Wrong:
B - Reviewing the sales journal may reveal unusual entries but is less reliable than
external confirmation.
C - Cutoff tests focus on whether sales are recorded in the correct period, not on the
existence of fictitious sales.
D - Testing controls evaluates the design and operation of controls, but does not
directly detect fictitious sales.
Page 3
, Reference: AICPA Audit Guide: Audit Evidence (AU-C 330)
Q3. A corporation has a net operating loss (NOL) of $1,000,000 in 2026. Which of the
following statements is correct regarding the treatment of this NOL for federal
income tax purposes?
A. The NOL can be carried back 2 years and forward 20 years, but the carryback is
limited to 80% of taxable income.
B. The NOL can be carried forward indefinitely, but the deduction is limited to 80% of
taxable income in each carryforward year.
C. The NOL can be carried back 5 years and forward indefinitely, with no limitation on
the carryforward deduction.
D. The NOL can be carried forward only 20 years, with no limitation on the deduction
amount.
Correct Answer: B. The NOL can be carried forward indefinitely, but the deduction
is limited to 80% of taxable income in each carryforward year.
Rationale: Under the Tax Cuts and Jobs Act (TCJA), as modified by the CARES Act, NOLs
arising in tax years beginning after December 31, 2020, cannot be carried back, but can
be carried forward indefinitely. The carryforward deduction is limited to 80% of taxable
income. This rule applies to NOLs generated in 2026.
Why Wrong:
A - The 2-year carryback was temporarily reinstated for 2020 NOLs, but not for NOLs
arising after 2020.
C - Carryback of 5 years was available for pre-2018 NOLs, but not for NOLs
generated in 2026.
D - The 20-year carryforward limit was eliminated for NOLs arising after 2020.
Reference: IRC § 172 (as amended by TCJA and CARES Act)
Q4. In the context of the BAR discipline, which of the following best explains why
Economic Value Added (EVA) is considered a superior measure of divisional
performance compared to Return on Investment (ROI)?
A. EVA focuses on accounting profit, while ROI focuses on cash flows.
B. EVA adjusts for the cost of equity capital, while ROI ignores it.
C. EVA is easier to calculate from financial statements than ROI.
D. EVA is not affected by the division's investment base.
Correct Answer: B. EVA adjusts for the cost of equity capital, while ROI ignores it.
Rationale: EVA deducts a charge for the cost of all capital, including equity, from net
operating profit after taxes (NOPAT). ROI, as traditionally calculated, uses accounting
income divided by investment and does not explicitly deduct the cost of equity capital,
which can lead to suboptimal decisions when a division's ROI exceeds the cost of capital
but is below the company's target.
Page 4
