Texas CPA Examination Questions
And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A |
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1. An auditor obtains an understanding of an entity's internal control
primarily to:
A. Express an opinion on the effectiveness of internal control in every
financial statement audit
B. Identify and assess risks of material misstatement and design
appropriate audit procedures
C. Eliminate the need for substantive testing
D. Determine whether management's financial forecasts are reasonable
Answer: B. Identify and assess risks of material misstatement and
design appropriate audit procedures
Rationale: Understanding internal control allows the auditor to
identify and assess risks of material misstatement and determine the
nature, timing, and extent of further audit procedures. An ordinary
financial statement audit does not automatically require an opinion on
internal-control effectiveness.
2. Which assertion addresses whether all transactions and accounts
that should have been recorded are included in the financial
statements?
A. Existence
B. Rights and obligations
,C. Completeness
D. Valuation
Answer: C. Completeness
Rationale: The completeness assertion addresses whether transactions,
events, assets, liabilities, and disclosures that should be recorded have
actually been included. Existence addresses whether recorded items
exist, while valuation addresses whether amounts are properly stated.
3. Which audit procedure provides the strongest evidence about the
existence of accounts receivable?
A. Inspecting subsequent cash receipts
B. Reviewing the client's sales journal
C. Asking management whether receivables are collectible
D. Comparing receivable balances with prior-year balances
Answer: A. Inspecting subsequent cash receipts
Rationale: Subsequent cash receipts provide persuasive evidence that
receivables existed at the reporting date and were collectible. Evidence
generated outside the client's accounting records is generally more
reliable than internally generated explanations or analytical
comparisons.
4. An auditor sends positive confirmations of accounts receivable. A
customer does not respond. What should the auditor ordinarily do?
A. Automatically assume the balance is correct
B. Delete the balance from the confirmation population
C. Perform alternative procedures
D. Issue a qualified opinion immediately
Answer: C. Perform alternative procedures
,Rationale: A nonresponse to a positive confirmation does not by itself
establish a misstatement. The auditor should perform alternative
procedures, such as examining subsequent cash receipts or supporting
shipping and sales documentation, to obtain sufficient appropriate
evidence.
5. Which circumstance most likely represents a significant deficiency
in internal control?
A. A minor clerical error corrected immediately
B. A control deficiency that is less severe than a material weakness but
important enough to merit attention
C. A disagreement between two employees about vacation schedules
D. A temporary delay in filing a routine document
Answer: B. A control deficiency that is less severe than a material
weakness but important enough to merit attention
Rationale: A significant deficiency is a deficiency, or combination of
deficiencies, that is less severe than a material weakness yet important
enough to merit attention by those charged with governance.
6. Audit evidence is generally considered more reliable when it is:
A. Produced internally without controls
B. Obtained orally from management
C. Obtained directly by the auditor from an independent external source
D. Based exclusively on management representations
Answer: C. Obtained directly by the auditor from an independent
external source
Rationale: Evidence obtained directly by the auditor and from
independent external sources generally has greater reliability than
evidence generated internally or provided solely through management
, representations. Reliability also depends on the nature and
circumstances of the evidence.
7. Which procedure is primarily substantive rather than a test of
controls?
A. Inspecting evidence that a manager approved purchases
B. Observing whether employees follow segregation-of-duties
procedures
C. Recalculating depreciation expense
D. Inspecting evidence of supervisory review
Answer: C. Recalculating depreciation expense
Rationale: Recalculation directly tests the accuracy of an account
balance and therefore is a substantive procedure. Tests of controls
determine whether controls operated effectively during the relevant
period.
8. What is the primary purpose of audit sampling?
A. Guarantee detection of all errors
B. Permit conclusions about a population based on testing less than all
items
C. Eliminate professional judgment
D. Replace risk assessment
Answer: B. Permit conclusions about a population based on testing
less than all items
Rationale: Audit sampling allows an auditor to apply procedures to
less than 100 percent of a population while obtaining a reasonable
basis for conclusions about the population. Sampling does not
guarantee detection of all errors.
9. Which statement best describes professional skepticism?
And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A |
Instant Download Pdf
1. An auditor obtains an understanding of an entity's internal control
primarily to:
A. Express an opinion on the effectiveness of internal control in every
financial statement audit
B. Identify and assess risks of material misstatement and design
appropriate audit procedures
C. Eliminate the need for substantive testing
D. Determine whether management's financial forecasts are reasonable
Answer: B. Identify and assess risks of material misstatement and
design appropriate audit procedures
Rationale: Understanding internal control allows the auditor to
identify and assess risks of material misstatement and determine the
nature, timing, and extent of further audit procedures. An ordinary
financial statement audit does not automatically require an opinion on
internal-control effectiveness.
2. Which assertion addresses whether all transactions and accounts
that should have been recorded are included in the financial
statements?
A. Existence
B. Rights and obligations
,C. Completeness
D. Valuation
Answer: C. Completeness
Rationale: The completeness assertion addresses whether transactions,
events, assets, liabilities, and disclosures that should be recorded have
actually been included. Existence addresses whether recorded items
exist, while valuation addresses whether amounts are properly stated.
3. Which audit procedure provides the strongest evidence about the
existence of accounts receivable?
A. Inspecting subsequent cash receipts
B. Reviewing the client's sales journal
C. Asking management whether receivables are collectible
D. Comparing receivable balances with prior-year balances
Answer: A. Inspecting subsequent cash receipts
Rationale: Subsequent cash receipts provide persuasive evidence that
receivables existed at the reporting date and were collectible. Evidence
generated outside the client's accounting records is generally more
reliable than internally generated explanations or analytical
comparisons.
4. An auditor sends positive confirmations of accounts receivable. A
customer does not respond. What should the auditor ordinarily do?
A. Automatically assume the balance is correct
B. Delete the balance from the confirmation population
C. Perform alternative procedures
D. Issue a qualified opinion immediately
Answer: C. Perform alternative procedures
,Rationale: A nonresponse to a positive confirmation does not by itself
establish a misstatement. The auditor should perform alternative
procedures, such as examining subsequent cash receipts or supporting
shipping and sales documentation, to obtain sufficient appropriate
evidence.
5. Which circumstance most likely represents a significant deficiency
in internal control?
A. A minor clerical error corrected immediately
B. A control deficiency that is less severe than a material weakness but
important enough to merit attention
C. A disagreement between two employees about vacation schedules
D. A temporary delay in filing a routine document
Answer: B. A control deficiency that is less severe than a material
weakness but important enough to merit attention
Rationale: A significant deficiency is a deficiency, or combination of
deficiencies, that is less severe than a material weakness yet important
enough to merit attention by those charged with governance.
6. Audit evidence is generally considered more reliable when it is:
A. Produced internally without controls
B. Obtained orally from management
C. Obtained directly by the auditor from an independent external source
D. Based exclusively on management representations
Answer: C. Obtained directly by the auditor from an independent
external source
Rationale: Evidence obtained directly by the auditor and from
independent external sources generally has greater reliability than
evidence generated internally or provided solely through management
, representations. Reliability also depends on the nature and
circumstances of the evidence.
7. Which procedure is primarily substantive rather than a test of
controls?
A. Inspecting evidence that a manager approved purchases
B. Observing whether employees follow segregation-of-duties
procedures
C. Recalculating depreciation expense
D. Inspecting evidence of supervisory review
Answer: C. Recalculating depreciation expense
Rationale: Recalculation directly tests the accuracy of an account
balance and therefore is a substantive procedure. Tests of controls
determine whether controls operated effectively during the relevant
period.
8. What is the primary purpose of audit sampling?
A. Guarantee detection of all errors
B. Permit conclusions about a population based on testing less than all
items
C. Eliminate professional judgment
D. Replace risk assessment
Answer: B. Permit conclusions about a population based on testing
less than all items
Rationale: Audit sampling allows an auditor to apply procedures to
less than 100 percent of a population while obtaining a reasonable
basis for conclusions about the population. Sampling does not
guarantee detection of all errors.
9. Which statement best describes professional skepticism?
