Audit exam 1 Practice Questions and
Already Passed Solutions 2026 Updated.
1) In the auditing process
A) the types and amounts of evidence remain constant from audit to audit.
B) the criteria for evaluating information will not vary depending on the information being
audited.
C) the audit report communicates the auditor's findings to users.
D) records are gathered by the auditor to determine whether the audited information is stated
in accordance with SEC standards. - Answer C) the audit report communicates the auditor's
findings to users.
3) Which of the following can be used as a criteria for evaluating information being audited?
A) International Financial Reporting Standards (IFRS)
B) Generally Accepted Accounting Principles (GAAP)
C) Internal Revenue Code (IRC)
D) all of the above - Answer D) all of the above
4) Evidence is paramount to audit and attestation engagements. List the four basic types of
audit evidence.
Answer: The four types of audit and attestation evidence include
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
3. Observations by the auditor
4. Oral testimony of the auditee (client) - Answer
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose
of providing financial information for decision making is commonly called
A) finance.
B) auditing.
C) accounting.
D) economics. - Answer C) accounting.
2) An accountant
A) must possess expertise in the accumulation of audit evidence.
B) must decide the number and types of items to test.
,C) must have an understanding of the principles and rules that provide the basis for preparing
the accounting information.
D) must be a CPA. - Answer C) must have an understanding of the principles and rules that
provide the basis for preparing the accounting information.
3) When auditing accounting data, auditors focus on
A) determining whether recorded information properly reflects the economic events that
occurred during the accounting period.
B) determining if fraud has occurred.
C) determining if taxable income has been calculated correctly.
D) analyzing the financial information to be sure that it complies with government
requirements. - Answer A) determining whether recorded information properly reflects the
economic events that occurred during the accounting period.
4) The trait that distinguishes auditors from accountants is the
A) auditor's ability to interpret accounting principles generally accepted in the United States.
B) auditor's education beyond the bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's expertise in the accumulation and interpretation of audit evidence. - Answer D)
auditor's expertise in the accumulation and interpretation of audit evidence.
1) ________ risk reflects the possibility that the information upon which the business decision
was made was inaccurate.
A) Client acceptance
B) Information
C) Business
D) Control - Answer B) Information
2) The possibility that a business may not be able to repay a bank loan because of an economic
downturn is referred to as
A) materiality risk.
B) information risk.
C) interest rate risk.
D) business risk. - Answer D) business risk.
1) A correct relationship among the auditor, the client, and the external users is
A) management of a public company hires the independent auditor.
,B) the audit committee of a private company hires the independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to reduce information risk. - Answer D)
the external users can rely upon the auditor's report to reduce information risk.
2) The most common way for users to obtain reliable information is to
A) have an internal audit.
B) have an independent audit.
C) verify all information individually.
D) verify the information with management. - Answer B) have an independent audit.
3) External users of the financial statements
A) value the auditor's report because of the auditor's independence from the client.
B) look to the auditor's report as an indication of the statements' reliability.
C) use the audited information on the assumption that it is reasonably complete, accurate, and
unbiased.
D) all of the above. - Answer D) all of the above.
1) In the audit of historical financial statements, management asserts that the financial
statements are fairly stated in accordance with what standards?
A) regulatory accounting principles
B) applicable international accounting standards
C) applicable U.S. accounting standards
D) B and C - Answer D) B and C
2) Any service that requires a CPA firm to issue a report about the reliability of an assertion that
is made by another party is a(n)
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service. - Answer B) attestation service.
3) Three common types of attestation services are
A) audits of historical financial statements, reviews of historical financial statements, and audits
of internal control over financial reporting.
B) audits of historical financial information, verifications of historical financial information, and
attestations regarding internal controls.
, C) reviews of historical financial information, verifications of future financial information, and
attestations regarding internal controls.
D) audits of historical financial information, reviews of controls related to investments, and
verifications of historical financial information. - Answer A) audits of historical financial
statements, reviews of historical financial statements, and audits of internal control over
financial reporting.
4) Which of the following services provides the lowest level of assurance on a financial
statement?
A) review
B) audit
C) Neither service provides assurance on financial statements.
D) Each service provides the same level of assurance on financial statements. - Answer A)
review
5) Which of the following is an accurate statement regarding assurance services?
A) Assurance services must be performed by a CPA.
B) An attestation service is not a type of assurance service.
C) Assurance services improve the quality of information for decision makers.
D) Assurance services can only be performed on financial data. - Answer C) Assurance services
improve the quality of information for decision makers.
6) Audits
A) are an assurance service, but not an attestation service.
B) are designed to provide absolute assurance that the financial statements are free of material
misstatement.
C) are required for publicly traded companies in the United States.
D) do not require the auditor to express their opinion in a written report. - Answer C) are
required for publicly traded companies in the United States.
7) A high, but not absolute, level of assurance is called
A) probable assurance.
B) reasonable assurance.
C) limited assurance.
D) incomplete assurance. - Answer B) reasonable assurance.
8) Which of the following is an accurate statement regarding the various types of other
assurance services?
Already Passed Solutions 2026 Updated.
1) In the auditing process
A) the types and amounts of evidence remain constant from audit to audit.
B) the criteria for evaluating information will not vary depending on the information being
audited.
C) the audit report communicates the auditor's findings to users.
D) records are gathered by the auditor to determine whether the audited information is stated
in accordance with SEC standards. - Answer C) the audit report communicates the auditor's
findings to users.
3) Which of the following can be used as a criteria for evaluating information being audited?
A) International Financial Reporting Standards (IFRS)
B) Generally Accepted Accounting Principles (GAAP)
C) Internal Revenue Code (IRC)
D) all of the above - Answer D) all of the above
4) Evidence is paramount to audit and attestation engagements. List the four basic types of
audit evidence.
Answer: The four types of audit and attestation evidence include
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
3. Observations by the auditor
4. Oral testimony of the auditee (client) - Answer
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose
of providing financial information for decision making is commonly called
A) finance.
B) auditing.
C) accounting.
D) economics. - Answer C) accounting.
2) An accountant
A) must possess expertise in the accumulation of audit evidence.
B) must decide the number and types of items to test.
,C) must have an understanding of the principles and rules that provide the basis for preparing
the accounting information.
D) must be a CPA. - Answer C) must have an understanding of the principles and rules that
provide the basis for preparing the accounting information.
3) When auditing accounting data, auditors focus on
A) determining whether recorded information properly reflects the economic events that
occurred during the accounting period.
B) determining if fraud has occurred.
C) determining if taxable income has been calculated correctly.
D) analyzing the financial information to be sure that it complies with government
requirements. - Answer A) determining whether recorded information properly reflects the
economic events that occurred during the accounting period.
4) The trait that distinguishes auditors from accountants is the
A) auditor's ability to interpret accounting principles generally accepted in the United States.
B) auditor's education beyond the bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's expertise in the accumulation and interpretation of audit evidence. - Answer D)
auditor's expertise in the accumulation and interpretation of audit evidence.
1) ________ risk reflects the possibility that the information upon which the business decision
was made was inaccurate.
A) Client acceptance
B) Information
C) Business
D) Control - Answer B) Information
2) The possibility that a business may not be able to repay a bank loan because of an economic
downturn is referred to as
A) materiality risk.
B) information risk.
C) interest rate risk.
D) business risk. - Answer D) business risk.
1) A correct relationship among the auditor, the client, and the external users is
A) management of a public company hires the independent auditor.
,B) the audit committee of a private company hires the independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to reduce information risk. - Answer D)
the external users can rely upon the auditor's report to reduce information risk.
2) The most common way for users to obtain reliable information is to
A) have an internal audit.
B) have an independent audit.
C) verify all information individually.
D) verify the information with management. - Answer B) have an independent audit.
3) External users of the financial statements
A) value the auditor's report because of the auditor's independence from the client.
B) look to the auditor's report as an indication of the statements' reliability.
C) use the audited information on the assumption that it is reasonably complete, accurate, and
unbiased.
D) all of the above. - Answer D) all of the above.
1) In the audit of historical financial statements, management asserts that the financial
statements are fairly stated in accordance with what standards?
A) regulatory accounting principles
B) applicable international accounting standards
C) applicable U.S. accounting standards
D) B and C - Answer D) B and C
2) Any service that requires a CPA firm to issue a report about the reliability of an assertion that
is made by another party is a(n)
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service. - Answer B) attestation service.
3) Three common types of attestation services are
A) audits of historical financial statements, reviews of historical financial statements, and audits
of internal control over financial reporting.
B) audits of historical financial information, verifications of historical financial information, and
attestations regarding internal controls.
, C) reviews of historical financial information, verifications of future financial information, and
attestations regarding internal controls.
D) audits of historical financial information, reviews of controls related to investments, and
verifications of historical financial information. - Answer A) audits of historical financial
statements, reviews of historical financial statements, and audits of internal control over
financial reporting.
4) Which of the following services provides the lowest level of assurance on a financial
statement?
A) review
B) audit
C) Neither service provides assurance on financial statements.
D) Each service provides the same level of assurance on financial statements. - Answer A)
review
5) Which of the following is an accurate statement regarding assurance services?
A) Assurance services must be performed by a CPA.
B) An attestation service is not a type of assurance service.
C) Assurance services improve the quality of information for decision makers.
D) Assurance services can only be performed on financial data. - Answer C) Assurance services
improve the quality of information for decision makers.
6) Audits
A) are an assurance service, but not an attestation service.
B) are designed to provide absolute assurance that the financial statements are free of material
misstatement.
C) are required for publicly traded companies in the United States.
D) do not require the auditor to express their opinion in a written report. - Answer C) are
required for publicly traded companies in the United States.
7) A high, but not absolute, level of assurance is called
A) probable assurance.
B) reasonable assurance.
C) limited assurance.
D) incomplete assurance. - Answer B) reasonable assurance.
8) Which of the following is an accurate statement regarding the various types of other
assurance services?
