Certified Public Accountant (CPA) Exam
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1.
A company recognizes revenue when goods are shipped, even though payment is
expected in 60 days. This follows which accounting principle?
A. Cash basis accounting
B. Revenue recognition principle
C. Matching principle only
D. Cost recovery method
Answer: B. Revenue recognition principle
Rationale: Revenue is recognized when earned, not when cash is received under
accrual accounting.
2.
An auditor finds that a company’s internal controls are weak but no material
misstatements exist. What opinion is appropriate?
A. Adverse opinion
B. Qualified opinion
C. Unqualified opinion with emphasis of matter
D. Disclaimer of opinion
Answer: C. Unqualified opinion with emphasis of matter
,Rationale: Weak controls alone do not require modification if financial statements
are fairly presented.
3.
A company purchases equipment for $50,000 with a 10-year useful life and no
salvage value. Straight-line depreciation annually is:
A. $5,000
B. $10,000
C. $2,500
D. $50,000
Answer: A. $5,000
Rationale: $50,000 ÷ 10 years = $5,000 per year.
4.
Which financial statement shows a company’s financial position at a specific point
in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C. Balance sheet
Rationale: The balance sheet shows assets, liabilities, and equity at a point in time.
5.
A CPA discovers intentional misstatement of financial records by management.
This is:
A. Error
B. Fraud
,C. Estimation variance
D. Audit risk
Answer: B. Fraud
Rationale: Intentional misrepresentation constitutes fraud.
6.
Which audit procedure provides the strongest evidence?
A. Inquiry
B. Observation
C. External confirmation
D. Analytical procedures
Answer: C. External confirmation
Rationale: Evidence from independent third parties is most reliable.
7.
A company uses LIFO inventory method during inflation. Compared to FIFO, net
income will generally be:
A. Higher
B. Lower
C. Unchanged
D. Equal after tax
Answer: B. Lower
Rationale: LIFO results in higher cost of goods sold during inflation.
8.
Which is NOT a component of internal control under COSO framework?
, A. Control environment
B. Risk assessment
C. External auditing
D. Monitoring activities
Answer: C. External auditing
Rationale: External audit is independent of internal control system.
9.
A CPA firm performing an audit must remain:
A. Biased toward client management
B. Independent in fact and appearance
C. Focused on maximizing client profits
D. Dependent on client recommendations
Answer: B. Independent in fact and appearance
Rationale: Independence ensures audit credibility.
10.
Which tax filing status generally results in the lowest tax liability?
A. Single
B. Married filing jointly
C. Married filing separately
D. Head of household
Answer: B. Married filing jointly
Rationale: Joint filing typically provides broader tax benefits.
11.
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1.
A company recognizes revenue when goods are shipped, even though payment is
expected in 60 days. This follows which accounting principle?
A. Cash basis accounting
B. Revenue recognition principle
C. Matching principle only
D. Cost recovery method
Answer: B. Revenue recognition principle
Rationale: Revenue is recognized when earned, not when cash is received under
accrual accounting.
2.
An auditor finds that a company’s internal controls are weak but no material
misstatements exist. What opinion is appropriate?
A. Adverse opinion
B. Qualified opinion
C. Unqualified opinion with emphasis of matter
D. Disclaimer of opinion
Answer: C. Unqualified opinion with emphasis of matter
,Rationale: Weak controls alone do not require modification if financial statements
are fairly presented.
3.
A company purchases equipment for $50,000 with a 10-year useful life and no
salvage value. Straight-line depreciation annually is:
A. $5,000
B. $10,000
C. $2,500
D. $50,000
Answer: A. $5,000
Rationale: $50,000 ÷ 10 years = $5,000 per year.
4.
Which financial statement shows a company’s financial position at a specific point
in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C. Balance sheet
Rationale: The balance sheet shows assets, liabilities, and equity at a point in time.
5.
A CPA discovers intentional misstatement of financial records by management.
This is:
A. Error
B. Fraud
,C. Estimation variance
D. Audit risk
Answer: B. Fraud
Rationale: Intentional misrepresentation constitutes fraud.
6.
Which audit procedure provides the strongest evidence?
A. Inquiry
B. Observation
C. External confirmation
D. Analytical procedures
Answer: C. External confirmation
Rationale: Evidence from independent third parties is most reliable.
7.
A company uses LIFO inventory method during inflation. Compared to FIFO, net
income will generally be:
A. Higher
B. Lower
C. Unchanged
D. Equal after tax
Answer: B. Lower
Rationale: LIFO results in higher cost of goods sold during inflation.
8.
Which is NOT a component of internal control under COSO framework?
, A. Control environment
B. Risk assessment
C. External auditing
D. Monitoring activities
Answer: C. External auditing
Rationale: External audit is independent of internal control system.
9.
A CPA firm performing an audit must remain:
A. Biased toward client management
B. Independent in fact and appearance
C. Focused on maximizing client profits
D. Dependent on client recommendations
Answer: B. Independent in fact and appearance
Rationale: Independence ensures audit credibility.
10.
Which tax filing status generally results in the lowest tax liability?
A. Single
B. Married filing jointly
C. Married filing separately
D. Head of household
Answer: B. Married filing jointly
Rationale: Joint filing typically provides broader tax benefits.
11.
