Audit CPA Exam QUESTIONS AND
ANSWERS 2026
Management is responsible for - AnswerFinancial statements - the preparation and fair presentation
Internal controls - design, implementation and maintenance relevant to the FS
Providing auditor with access to info and persons needed to complete the audit
The preparation and fair presentation of the FS requires - Answeridentification of the applicable
financial reporting framework
preparation and fair presentation in accordance with framework
inclusion of adequate description of the framework
to obtain reasonable assurance - Answerplan the work and properly supervise the assistants
determine and apply appropriate materiality levels
identify and assess risks of material misstatement, whether due to error or fraud
and obtain sufficient appropriate audit evidence
The applicable financial reporting framework - AnswerThe financial reporting framework that is
acceptable in view of the nature of the entity and the objective of the financial statements
Includes general purpose: designed to meet needs of a wide range of users (GAAP & IFRS)
and special purpose frameworks
Fair presentation frameworks - AnswerAll financial reporting frameworks in the US are fair
presentation frameworks
,Acknowledges explicity or implicitly that to achieve fair presentation of the FS, it may be necessary
for management to provide disclosures beyond those specifically required
Acknowledges explicitly that it may be necessary for mgmt (RARE) to depart from a requirement to
achieve fair presentation
Auditing standards - Answer(GAAS) Generally accepted auditing standards - mandatory on all audit
engagements
(GAGAS) Generally accepted government auditing standards - audits of government organizations,
programs or activities that receive government funds
(PCAOB) - established pursuant to SOX - establish auditing standards for issuers
(ISA) International standards of auditing
The term "must" or "is required" - Answerindicates an unconditional requirement
must be followed in all cases
The term "should" - Answerpresumptively mandatory requirement
must be followed in all cases where the requirement is relevant but allows for departures in rare
circumstances if there is appropriate justification
Conditions that indicate possible fraud - AnswerPressure
Opportunity
Rationalization
If there is substantial doubt about going concern, the auditor should: - Answerconsider the adequacy
of the disclosure about the entity's possible inability to continue as a going concern
include an emphasis of matter paragraph in the auditors report to reflect this conclusion
, Going concern documentation - AnswerConditions or events that gave rise to the concern
Any mitigating factors the auditor finds significant
Audit work performed to evaluate mgmt plans
Conclusion about whether it remains or is alleviated
The effect on the financial statements and disclosures
Mitigating factors - Answerwhen an auditors believe there is substantial doubt about going concern,
the auditor is required to consider MANAGEMENTS PLAN FOR DEALING WITH the conditions or
events that led to the auditors belief
-Plan to borrow money or restructure debt
-Plan to sell assets
-Plan to delay or reduce expenditures
-Plan to increase ownership equity
Must have BOTH intent and ability
No audit work can be done - AnswerNO AUDIT OPINION
not even a bad opinion
Subsequent discovery of facts after report release date: If client refuses to follow procedures
"DAR" them to fix it - AnswerDisassociate
Alert regulatory agencies
ANSWERS 2026
Management is responsible for - AnswerFinancial statements - the preparation and fair presentation
Internal controls - design, implementation and maintenance relevant to the FS
Providing auditor with access to info and persons needed to complete the audit
The preparation and fair presentation of the FS requires - Answeridentification of the applicable
financial reporting framework
preparation and fair presentation in accordance with framework
inclusion of adequate description of the framework
to obtain reasonable assurance - Answerplan the work and properly supervise the assistants
determine and apply appropriate materiality levels
identify and assess risks of material misstatement, whether due to error or fraud
and obtain sufficient appropriate audit evidence
The applicable financial reporting framework - AnswerThe financial reporting framework that is
acceptable in view of the nature of the entity and the objective of the financial statements
Includes general purpose: designed to meet needs of a wide range of users (GAAP & IFRS)
and special purpose frameworks
Fair presentation frameworks - AnswerAll financial reporting frameworks in the US are fair
presentation frameworks
,Acknowledges explicity or implicitly that to achieve fair presentation of the FS, it may be necessary
for management to provide disclosures beyond those specifically required
Acknowledges explicitly that it may be necessary for mgmt (RARE) to depart from a requirement to
achieve fair presentation
Auditing standards - Answer(GAAS) Generally accepted auditing standards - mandatory on all audit
engagements
(GAGAS) Generally accepted government auditing standards - audits of government organizations,
programs or activities that receive government funds
(PCAOB) - established pursuant to SOX - establish auditing standards for issuers
(ISA) International standards of auditing
The term "must" or "is required" - Answerindicates an unconditional requirement
must be followed in all cases
The term "should" - Answerpresumptively mandatory requirement
must be followed in all cases where the requirement is relevant but allows for departures in rare
circumstances if there is appropriate justification
Conditions that indicate possible fraud - AnswerPressure
Opportunity
Rationalization
If there is substantial doubt about going concern, the auditor should: - Answerconsider the adequacy
of the disclosure about the entity's possible inability to continue as a going concern
include an emphasis of matter paragraph in the auditors report to reflect this conclusion
, Going concern documentation - AnswerConditions or events that gave rise to the concern
Any mitigating factors the auditor finds significant
Audit work performed to evaluate mgmt plans
Conclusion about whether it remains or is alleviated
The effect on the financial statements and disclosures
Mitigating factors - Answerwhen an auditors believe there is substantial doubt about going concern,
the auditor is required to consider MANAGEMENTS PLAN FOR DEALING WITH the conditions or
events that led to the auditors belief
-Plan to borrow money or restructure debt
-Plan to sell assets
-Plan to delay or reduce expenditures
-Plan to increase ownership equity
Must have BOTH intent and ability
No audit work can be done - AnswerNO AUDIT OPINION
not even a bad opinion
Subsequent discovery of facts after report release date: If client refuses to follow procedures
"DAR" them to fix it - AnswerDisassociate
Alert regulatory agencies
