CPA Practice Exam Complete Questions And Answers

CPA Practice Exam Complete Questions And AnswersWhen a CPA examines a client's projected financial statements, the CPA's report should: state that the CPA performed procedures to evaluate management's assumptions. Davis, CPA, accepted an engagement to audit the financial statements of Tech Resources, a nonpublic entity. Before the completion of the audit, Tech requested Davis to change the engagement to a compilation of financial statements. Before Davis agrees to change the engagement, Davis is required to consider the: additional audit effort necessary to complete the audit. reason given for Tech's request. Both I and II The GAO standards list several threats to independence. The threat of familiarity is defined as: when, due to a long or close relationship with management or other personnel, the auditor will be too sympathetic or accepting of work. Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonissuer's financial statements? The accountant is independent with respect to the entity. Heath Co.'s current ratio is 4:1. Which of the following transactions would normally increase its current ratio? Selling inventory on account According to the AICPA Code of Professional Conduct, what would a covered member most appropriately do upon learning that another member of an attest engagement team is considering employment with the client? Notify an appropriate person in the firm. Which of the following factors most likely would assist an independent auditor in assessing the objectivity of the internal auditor? The organizational status of the director of internal audit If the business environment is experiencing a recession, the auditor most likely would focus increased attention on which of the following accounts? Allowance for doubtful accounts 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: in relation to the complete financial statements. An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of follow-up on errors reported by the customers. This test of controls Page 2 of 10 most likely is performed to support management's financial statement assertion of: existence. North Co., a privately held entity, asked its tax accountant, King, a CPA in public practice, to review and generate North's interim financial statements on King's microcomputer when King prepared North's quarterly tax return. King should not submit these financial statements to North unless, as a minimum, King complies with the provisions of: Statements on Standards for Accounting and Review Services. An auditor's report would be designated an audit of a special-purpose financial statement when it is issued in connection with: 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. An auditor most likely would not rely on controls if the payroll department supervisor is responsible for: authorizing payroll rate changes for all employees. Which of the following levels would most likely address the risk of material misstatement by the auditor's consideration of an entity's control environment? Financial statements Which of the following would most likely be associated with obtaining an understanding of relevant internal factors when satisfying the obligation to understand the entity and its environment on an audit? Revenue recognition practices Russell CPA is auditing contingent liabilities. What generally is the primary risk of material misstatement related to related financial statement disclosures? Completeness Nile, CPA, on completing an audit, was asked by the client to provide technical assistance in integrating a new IT system. The set of pronouncements designed to guide Nile in this engagement is the Statement(s) on: Standards for Consulting Services. Investment and property schedules are presented for purposes of additional analysis in an auditor-submitted document. The schedules are not required parts of the basic financial statements but accompany the basic financial statements. When reporting on such additional information, the measurement of materiality is the: same as that used in forming an opinion on the basic financial statements taken as a whole. Which of the following is required of an accountant in reviewing a company's financial statements under the Statements on Standards for Accounting and Review Services (SSARS)? Obtain knowledge of the client's industry Analytical procedures are required for which of the following? Audit planning Page 3 of 10 In planning an audit, the auditor's knowledge about the design of relevant control activities should be used to: identify the types of potential misstatements that could occur. A CPA firm is completing the fieldwork for an audit of Swenson Co. for the current year ended December 31. The manager in charge of the audit is performing the final steps in the evidence accumulation phase of the audit and notes that there have been several changes in Swenson during the year under audit. Which of the following items would indicate there could be substantial doubt about Swenson's ability to continue as a going concern for a reasonable period of time? Recurring working capital shortages