CPA AUD |ACTUAL QUESTIONS AND VERIFIED
ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
1) 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.
CORRECT ANSWER
C
Question 2
The two major factors affecting acceptable audit risk are:
A) inherent risk and the intended uses of the financial statements
B) control risk and intended uses of the financial statements
C) the likely statement users and the intended uses of the statements
D) the audit firm and the intended uses of the statements
CORRECT ANSWER
C
Question 3
1
,An engagement letter sent to a publicly held audit client usually would NOT include a:
A) reference to the auditor's responsibility for the detection of errors or irregularities
B) estimation of the time to be spent on the audit staff and management
C) statement that management advisory services would be made available upon request
D) reference to management's responsibility for the financial statements
CORRECT ANSWER
C
Question 4
The preliminary audit strategy:
A) is set before the auditor understands the client's reasons for the audit
B) guides the development of the audit plan
C) is determined after the engagement staffing is set
D) is the detailed steps to be followed for the substantive audit tests
CORRECT ANSWER
B
Question 5
If an auditor is requested to perform non-audit services for a public company audit client,
who is responsible for agreeing to those services with the audit firm?
A) the client's management
B) the client's chief executive officer
C) the client's chief financial officer
D) the client's audit committee
CORRECT ANSWER
D
2
,Question 6
Which of the following statements is true regarding communications between predecessor
and successor auditors?
A) the burden of initiating the communication rests with the predecessor
B) the predecessor's response can be limited to stating that no information will be provided
C) the predecessor should communicate with the successor only if the client is public
D) the predecessor auditor of a public company does not need permission from the client
before communicating with the successor audit
CORRECT ANSWER
B
Question 7
The purpose of an engagement letter is to:
A) document the CPA's firm responsibility to external users of the audited financial
statements
B) document the terms of the engagement
C) notify the audit staff of an upcoming engagement so that personnel scheduling can be
facilitated
D) emphasize management's responsibility for approving the audit program
CORRECT ANSWER
B
Question 8
Most auditors assess inherent risk as high for related parties and related-party
transactions because:
3
, A) of the unique classification of related-party transactions required on the balance sheet
B) of the lack of independence between the parties
C) of the unique classification of related-party transactions required on the income
statement
D) it is required by generally accepted accounting principles
CORRECT ANSWER
B
Question 9
The audit team gathers information about a new client's business and industry in order to
obtain:
A) an understanding of clients internal control system for financial reporting
B) an understanding of how economic events and transactions have an effect on the
company's financial statement
C) information about control risk
D) information regarding whether the company is engaging in financial statement fraud
CORRECT ANSWER
B
Question 10
The auditor determines that Mathews Company occupies the 3rd floor of an office tower
for which it pays no rent. The most likely explanation is:
A) they got lucky the landlord hasn't noticed the lack of payments
B) the landlord has weak internal controls over billings
C) a related party transaction in which a major shareholder owns the office tower
D) Mathews Company is engaging in fraudulent activities
CORRECT ANSWER
4
ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
1) 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.
CORRECT ANSWER
C
Question 2
The two major factors affecting acceptable audit risk are:
A) inherent risk and the intended uses of the financial statements
B) control risk and intended uses of the financial statements
C) the likely statement users and the intended uses of the statements
D) the audit firm and the intended uses of the statements
CORRECT ANSWER
C
Question 3
1
,An engagement letter sent to a publicly held audit client usually would NOT include a:
A) reference to the auditor's responsibility for the detection of errors or irregularities
B) estimation of the time to be spent on the audit staff and management
C) statement that management advisory services would be made available upon request
D) reference to management's responsibility for the financial statements
CORRECT ANSWER
C
Question 4
The preliminary audit strategy:
A) is set before the auditor understands the client's reasons for the audit
B) guides the development of the audit plan
C) is determined after the engagement staffing is set
D) is the detailed steps to be followed for the substantive audit tests
CORRECT ANSWER
B
Question 5
If an auditor is requested to perform non-audit services for a public company audit client,
who is responsible for agreeing to those services with the audit firm?
A) the client's management
B) the client's chief executive officer
C) the client's chief financial officer
D) the client's audit committee
CORRECT ANSWER
D
2
,Question 6
Which of the following statements is true regarding communications between predecessor
and successor auditors?
A) the burden of initiating the communication rests with the predecessor
B) the predecessor's response can be limited to stating that no information will be provided
C) the predecessor should communicate with the successor only if the client is public
D) the predecessor auditor of a public company does not need permission from the client
before communicating with the successor audit
CORRECT ANSWER
B
Question 7
The purpose of an engagement letter is to:
A) document the CPA's firm responsibility to external users of the audited financial
statements
B) document the terms of the engagement
C) notify the audit staff of an upcoming engagement so that personnel scheduling can be
facilitated
D) emphasize management's responsibility for approving the audit program
CORRECT ANSWER
B
Question 8
Most auditors assess inherent risk as high for related parties and related-party
transactions because:
3
, A) of the unique classification of related-party transactions required on the balance sheet
B) of the lack of independence between the parties
C) of the unique classification of related-party transactions required on the income
statement
D) it is required by generally accepted accounting principles
CORRECT ANSWER
B
Question 9
The audit team gathers information about a new client's business and industry in order to
obtain:
A) an understanding of clients internal control system for financial reporting
B) an understanding of how economic events and transactions have an effect on the
company's financial statement
C) information about control risk
D) information regarding whether the company is engaging in financial statement fraud
CORRECT ANSWER
B
Question 10
The auditor determines that Mathews Company occupies the 3rd floor of an office tower
for which it pays no rent. The most likely explanation is:
A) they got lucky the landlord hasn't noticed the lack of payments
B) the landlord has weak internal controls over billings
C) a related party transaction in which a major shareholder owns the office tower
D) Mathews Company is engaging in fraudulent activities
CORRECT ANSWER
4
