CPA EXAM MASTERY: THE ULTIMATE 200-QUESTION PRACTICE &
STUDY GUIDE COMPLETE WITH 100% VERIFIED ANSWERS
SECTION 1: AUDIT REPORTS & OPINIONS (Questions 1-25)
1. When a CPA examines a client's projected financial statements, the
CPA's report should:
A) State that the CPA performed procedures to evaluate management's
assumptions
B) Guarantee the accuracy of the projections
C) Disclaim any responsibility for the projections
D) Provide assurance on the achievability of the projections
Correct Answer: A) State that the CPA performed procedures to
evaluate management's assumptions
2. An auditor's report would be designated an audit of a special-
purpose financial statement when it is issued in connection with:
A) A basis of accounting that the entity uses to comply with an
agreement between the entity and one or more third parties other than
the auditor
B) General purpose financial statements prepared in accordance with
GAAP
C) Interim financial statements of a public company
D) Consolidated financial statements of a multinational corporation
,Correct Answer: A) A basis of accounting that the entity uses to
comply with an agreement between the entity and one or more third
parties other than the auditor
3. An auditor is reporting on condensed financial statements for an
annual period that are derived from the audited financial statements
of an issuer. The auditor's opinion should indicate whether the
information in the condensed financial statements is fairly stated in all
material respects:
A) In relation to the complete financial statements
B) Independent of the complete financial statements
C) As a standalone financial presentation
D) Without reference to the complete financial statements
Correct Answer: A) In relation to the complete financial statements
4. Jewel, CPA, audited Infinite Co.'s prior-year financial statements.
These statements are presented with those of the current year for
comparative purposes without Jewel's auditor's report, which
expressed a qualified opinion. In drafting the current year's auditor's
report, Crain, CPA, the successor auditor, should:
I. Not name Jewel as the predecessor auditor
II. Indicate the type of report issued by Jewel
III. Indicate the substantive reasons for Jewel's qualification
A) I only
B) II only
,C) I and II
D) I, II, and III
Correct Answer: D) I, II, and III
5. Which of the following matters is covered in a typical comfort
letter?
A) An opinion as to whether the audited financial statements comply in
form with the accounting requirements of the SEC
B) An opinion on the effectiveness of internal control over financial
reporting
C) A guarantee of future financial performance
D) An assessment of management's business strategy
Correct Answer: A) An opinion as to whether the audited financial
statements comply in form with the accounting requirements of the
SEC
6. In reporting under Government Auditing Standards, an auditor
most likely would be required to communicate management's
misappropriation of assets directly to a federal inspector general
when the fraudulent activities are:
A) Reported to the entity's governing body and the governing body fails
to make a required report to the federal inspector general
B) Less than material to the financial statements
C) Committed by lower-level employees
D) Already reported to local law enforcement
, Correct Answer: A) Reported to the entity's governing body and the
governing body fails to make a required report to the federal inspector
general
7. In performing a financial statement audit in accordance with
Government Auditing Standards, an auditor is required to report on
the entity's compliance with laws and regulations. This report should:
A) State that compliance with laws and regulations is the responsibility
of the entity's management
B) Provide an opinion on the entity's overall legal compliance
C) Guarantee that no illegal acts have occurred
D) Disclaim responsibility for detecting noncompliance
Correct Answer: A) State that compliance with laws and regulations is
the responsibility of the entity's management
8. If an accountant is performing a review engagement for a nonissuer
and considers it necessary to communicate a matter that is not
presented in the financial statements, then the accountant should
include this information in which of the following paragraphs in the
review report?
A) The other-matter paragraph
B) The opinion paragraph
C) The scope paragraph
D) The introductory paragraph
Correct Answer: A) The other-matter paragraph
STUDY GUIDE COMPLETE WITH 100% VERIFIED ANSWERS
SECTION 1: AUDIT REPORTS & OPINIONS (Questions 1-25)
1. When a CPA examines a client's projected financial statements, the
CPA's report should:
A) State that the CPA performed procedures to evaluate management's
assumptions
B) Guarantee the accuracy of the projections
C) Disclaim any responsibility for the projections
D) Provide assurance on the achievability of the projections
Correct Answer: A) State that the CPA performed procedures to
evaluate management's assumptions
2. An auditor's report would be designated an audit of a special-
purpose financial statement when it is issued in connection with:
A) A basis of accounting that the entity uses to comply with an
agreement between the entity and one or more third parties other than
the auditor
B) General purpose financial statements prepared in accordance with
GAAP
C) Interim financial statements of a public company
D) Consolidated financial statements of a multinational corporation
,Correct Answer: A) A basis of accounting that the entity uses to
comply with an agreement between the entity and one or more third
parties other than the auditor
3. An auditor is reporting on condensed financial statements for an
annual period that are derived from the audited financial statements
of an issuer. The auditor's opinion should indicate whether the
information in the condensed financial statements is fairly stated in all
material respects:
A) In relation to the complete financial statements
B) Independent of the complete financial statements
C) As a standalone financial presentation
D) Without reference to the complete financial statements
Correct Answer: A) In relation to the complete financial statements
4. Jewel, CPA, audited Infinite Co.'s prior-year financial statements.
These statements are presented with those of the current year for
comparative purposes without Jewel's auditor's report, which
expressed a qualified opinion. In drafting the current year's auditor's
report, Crain, CPA, the successor auditor, should:
I. Not name Jewel as the predecessor auditor
II. Indicate the type of report issued by Jewel
III. Indicate the substantive reasons for Jewel's qualification
A) I only
B) II only
,C) I and II
D) I, II, and III
Correct Answer: D) I, II, and III
5. Which of the following matters is covered in a typical comfort
letter?
A) An opinion as to whether the audited financial statements comply in
form with the accounting requirements of the SEC
B) An opinion on the effectiveness of internal control over financial
reporting
C) A guarantee of future financial performance
D) An assessment of management's business strategy
Correct Answer: A) An opinion as to whether the audited financial
statements comply in form with the accounting requirements of the
SEC
6. In reporting under Government Auditing Standards, an auditor
most likely would be required to communicate management's
misappropriation of assets directly to a federal inspector general
when the fraudulent activities are:
A) Reported to the entity's governing body and the governing body fails
to make a required report to the federal inspector general
B) Less than material to the financial statements
C) Committed by lower-level employees
D) Already reported to local law enforcement
, Correct Answer: A) Reported to the entity's governing body and the
governing body fails to make a required report to the federal inspector
general
7. In performing a financial statement audit in accordance with
Government Auditing Standards, an auditor is required to report on
the entity's compliance with laws and regulations. This report should:
A) State that compliance with laws and regulations is the responsibility
of the entity's management
B) Provide an opinion on the entity's overall legal compliance
C) Guarantee that no illegal acts have occurred
D) Disclaim responsibility for detecting noncompliance
Correct Answer: A) State that compliance with laws and regulations is
the responsibility of the entity's management
8. If an accountant is performing a review engagement for a nonissuer
and considers it necessary to communicate a matter that is not
presented in the financial statements, then the accountant should
include this information in which of the following paragraphs in the
review report?
A) The other-matter paragraph
B) The opinion paragraph
C) The scope paragraph
D) The introductory paragraph
Correct Answer: A) The other-matter paragraph
