Certified Public Accountant CPA Practice Exam
Question 1. Which of the following is a principle of independence according to the AICPA Code of
Professional Conduct?
A) Auditors may own shares in a client company
B) Auditors must avoid conflicts of interest
C) Auditors may prepare client tax returns
D) Auditors may supervise client employees
Answer: B
Explanation: Independence requires auditors to avoid any situation where their objectivity can be
impaired by conflicts of interest.
Question 2. What is the primary objective of a financial statement audit?
A) Detect fraud
B) Express an opinion on financial statements' fairness
C) Prepare tax returns
D) Review internal controls
Answer: B
Explanation: The auditor's main goal is to express an opinion on whether the financial statements are
presented fairly in accordance with the applicable framework.
Question 3. Under GAGAS, which type of independence is required for auditors?
A) Professional independence only
B) Both personal and organizational independence
C) Only financial independence
D) No independence required
Answer: B
Explanation: GAGAS requires both personal and organizational independence to maintain objectivity
throughout the audit.
, Certified Public Accountant CPA Practice Exam
Question 4. Which section of the AICPA Code covers client confidentiality?
A) Section 200
B) Section 301
C) Section 400
D) Section 500
Answer: B
Explanation: Section 301 deals specifically with client confidentiality, prohibiting members from
disclosing confidential client information.
Question 5. What is the first step when accepting a new audit engagement?
A) Assess audit risk
B) Communicate with predecessor auditor
C) Obtain engagement letter
D) Review prior year financial statements
Answer: C
Explanation: Obtaining a signed engagement letter formalizes the acceptance and outlines the terms of
the audit engagement.
Question 6. When must an auditor communicate significant deficiencies in internal control to
management?
A) At the end of fieldwork
B) Before the audit report
C) Within 60 days after audit
D) Whenever they are identified
Answer: D
, Certified Public Accountant CPA Practice Exam
Explanation: Significant deficiencies must be communicated to management and those charged with
governance as soon as they are identified.
Question 7. What is required when reporting on noncompliance with laws and regulations?
A) Disclosure in the management letter
B) Immediate notification to the IRS
C) Communication to those charged with governance
D) No action required
Answer: C
Explanation: Auditors must communicate identified noncompliance to those charged with governance.
Question 8. Which is NOT an element of a system of quality control?
A) Engagement performance
B) Monitoring
C) Client billing
D) Human resources
Answer: C
Explanation: Client billing is not a quality control element; engagement performance, monitoring, and
human resources are.
Question 9. What is the purpose of engagement quality control review?
A) Detect fraud
B) Ensure audit complies with standards
C) Prepare financial statements
D) Assess materiality
Answer: B
, Certified Public Accountant CPA Practice Exam
Explanation: Engagement quality control reviews ensure the audit meets professional standards before
the report is issued.
Question 10. Which factor most influences the determination of materiality in an audit?
A) Auditor's experience
B) Client's management
C) Financial statement users' needs
D) Internal audit reports
Answer: C
Explanation: Materiality is based on what is significant to users of the financial statements.
Question 11. What is the primary purpose of understanding the entity and its environment during audit
planning?
A) To assess inherent risk
B) To determine client billing rates
C) To select client staff
D) To set audit fees
Answer: A
Explanation: Understanding the entity helps auditors assess inherent risk and design appropriate
procedures.
Question 12. Which is NOT a component of the COSO Internal Control—Integrated Framework?
A) Control activities
B) Risk assessment
C) Financial reporting
D) Monitoring
Answer: C
Question 1. Which of the following is a principle of independence according to the AICPA Code of
Professional Conduct?
A) Auditors may own shares in a client company
B) Auditors must avoid conflicts of interest
C) Auditors may prepare client tax returns
D) Auditors may supervise client employees
Answer: B
Explanation: Independence requires auditors to avoid any situation where their objectivity can be
impaired by conflicts of interest.
Question 2. What is the primary objective of a financial statement audit?
A) Detect fraud
B) Express an opinion on financial statements' fairness
C) Prepare tax returns
D) Review internal controls
Answer: B
Explanation: The auditor's main goal is to express an opinion on whether the financial statements are
presented fairly in accordance with the applicable framework.
Question 3. Under GAGAS, which type of independence is required for auditors?
A) Professional independence only
B) Both personal and organizational independence
C) Only financial independence
D) No independence required
Answer: B
Explanation: GAGAS requires both personal and organizational independence to maintain objectivity
throughout the audit.
, Certified Public Accountant CPA Practice Exam
Question 4. Which section of the AICPA Code covers client confidentiality?
A) Section 200
B) Section 301
C) Section 400
D) Section 500
Answer: B
Explanation: Section 301 deals specifically with client confidentiality, prohibiting members from
disclosing confidential client information.
Question 5. What is the first step when accepting a new audit engagement?
A) Assess audit risk
B) Communicate with predecessor auditor
C) Obtain engagement letter
D) Review prior year financial statements
Answer: C
Explanation: Obtaining a signed engagement letter formalizes the acceptance and outlines the terms of
the audit engagement.
Question 6. When must an auditor communicate significant deficiencies in internal control to
management?
A) At the end of fieldwork
B) Before the audit report
C) Within 60 days after audit
D) Whenever they are identified
Answer: D
, Certified Public Accountant CPA Practice Exam
Explanation: Significant deficiencies must be communicated to management and those charged with
governance as soon as they are identified.
Question 7. What is required when reporting on noncompliance with laws and regulations?
A) Disclosure in the management letter
B) Immediate notification to the IRS
C) Communication to those charged with governance
D) No action required
Answer: C
Explanation: Auditors must communicate identified noncompliance to those charged with governance.
Question 8. Which is NOT an element of a system of quality control?
A) Engagement performance
B) Monitoring
C) Client billing
D) Human resources
Answer: C
Explanation: Client billing is not a quality control element; engagement performance, monitoring, and
human resources are.
Question 9. What is the purpose of engagement quality control review?
A) Detect fraud
B) Ensure audit complies with standards
C) Prepare financial statements
D) Assess materiality
Answer: B
, Certified Public Accountant CPA Practice Exam
Explanation: Engagement quality control reviews ensure the audit meets professional standards before
the report is issued.
Question 10. Which factor most influences the determination of materiality in an audit?
A) Auditor's experience
B) Client's management
C) Financial statement users' needs
D) Internal audit reports
Answer: C
Explanation: Materiality is based on what is significant to users of the financial statements.
Question 11. What is the primary purpose of understanding the entity and its environment during audit
planning?
A) To assess inherent risk
B) To determine client billing rates
C) To select client staff
D) To set audit fees
Answer: A
Explanation: Understanding the entity helps auditors assess inherent risk and design appropriate
procedures.
Question 12. Which is NOT a component of the COSO Internal Control—Integrated Framework?
A) Control activities
B) Risk assessment
C) Financial reporting
D) Monitoring
Answer: C
