AUD CPA Exam Final Review
(2025/2026) questions n answers
what auditor should consider for firm's client acceptance & continuance policies - correct
answer ✔✔ability to meet reporting deadlines, ability to staff engagements, independence, &
integrity of client mgmt. (do we want to be associated with them)
before accepting audit engagement - correct answer ✔✔determine if financial reporting
framework is acceptable & obtain agreement of mgmt that it acknowledges and understands
responsibilities
management responsibilities - correct answer ✔✔preparation & fair presentation of financial
statements; design, implementation, & maintenance of internal controls; provide auditor with
access to all relevant info, addtl info auditor may request, & unrestricted access to people
necessary to obtain evidence
inquiries should be made of predecessor auditor regarding - correct answer ✔✔integrity of
mgmt, mgmt disagreements with predecessor auditor, reason for change in auditors, any
fraud/noncompliance/internal control matters & commmunication of those to mgmt/audit
committee/those charged with governance
during audit of new client, auditor should obtain sufficient appropriate evidence about - correct
answer ✔✔if opening balances contain misstatements & if all accounting policies are
consistently applied
new auditor should review predecessor's documentation of - correct answer ✔✔planning, risk
assessment procedures, further audit procedures, results, matters of continuing accounting &
audit significance
,engagement letter - correct answer ✔✔contract between client & auditor to reduce risk of
misinterpretation
for recurring audits, auditor should assess - correct answer ✔✔if circumstances requires terms
of engagement to be revised
written engagement letter should include - correct answer ✔✔objective of audit, mgmt
responsibilities, auditor responsibilities (gather sufficient appropriate audit evidence, express an
opinion), limitations of engagement (not providing total assurance, not guarantee f/s free of
misstatements), identification of applicable financial reporting framework, reference to
expected form & content of report to be issued
audit documentation - correct answer ✔✔written record of work performed, evidence
obtained, & conclusion reached
qualities of audit documentation - correct answer ✔✔divided into permanent & current files,
supports auditor's report/opinion, aids in training & conduct/supervision of audit, provides
record of accumulated evidence, indicates that accounting records reconcile to financial
statement, contains enough info that an experienced auditor with no prior knowledge of client
could understand the work performed
audit documentation assembly & retention requirements - correct answer ✔✔issuers:
documentation must be assembled within 45 days of audit report release & must be kept for 7
years
non-issuers: documentation must be assembled within 60 days of audit report release & must
be kept for 5 years
audit documentation is confidential & can only be disclosed without client permission if -
correct answer ✔✔part of quality review program, subpoenaed for it, or part of investigation by
AICPA/state CPA society/state statute
, those charged with governance - correct answer ✔✔people who bear responsibility to oversee
obligations & direction of entity (includes board of directors & audit committee)
audit committee - correct answer ✔✔members of the board of directors (usually
independent/outside directors) who aren't employees or part of mgmt & don't have material
financial interests in the company
audit committee functions - correct answer ✔✔establish control environment, select & appoint
independent auditor, review quality of auditor's work, respond to auditor recommendations,
help resolve disagreements in accounting treatment of material items, & serve as bridge
between board of directors & auditor
communication responsibilities of auditor in financial statement audit - correct answer ✔✔not
required to (but may) search for deficiencies less sever than material weaknesses or express
opinion on internal control; , in writing, both significant deficiencies & material weaknesses to
mgmt/governance within 60 days of report release date; in writing, previously communicated
significant deficiencies/material weaknesses that haven't been corrected; other deficiencies
identified (in writing or orally); can't report absence of significant deficiencies but can report
absence of material weaknesses
independence is required for - correct answer ✔✔audits & attest services (including reviews);
NOT required for compilations, consulting, tax work
cases where independence is impaired - correct answer ✔✔1. CPA has direct financial interest
or indirect material interest in client
2. audit fees remain unpaid for more than a year
3. CPA has mgmt position with client or is employee; spouse can be employee as long as its not
in mgmt or financial reporting role
4. CPA makes hiring decisions for client
5. litigation, unless it is for immaterial amount unrelated to the audit
(2025/2026) questions n answers
what auditor should consider for firm's client acceptance & continuance policies - correct
answer ✔✔ability to meet reporting deadlines, ability to staff engagements, independence, &
integrity of client mgmt. (do we want to be associated with them)
before accepting audit engagement - correct answer ✔✔determine if financial reporting
framework is acceptable & obtain agreement of mgmt that it acknowledges and understands
responsibilities
management responsibilities - correct answer ✔✔preparation & fair presentation of financial
statements; design, implementation, & maintenance of internal controls; provide auditor with
access to all relevant info, addtl info auditor may request, & unrestricted access to people
necessary to obtain evidence
inquiries should be made of predecessor auditor regarding - correct answer ✔✔integrity of
mgmt, mgmt disagreements with predecessor auditor, reason for change in auditors, any
fraud/noncompliance/internal control matters & commmunication of those to mgmt/audit
committee/those charged with governance
during audit of new client, auditor should obtain sufficient appropriate evidence about - correct
answer ✔✔if opening balances contain misstatements & if all accounting policies are
consistently applied
new auditor should review predecessor's documentation of - correct answer ✔✔planning, risk
assessment procedures, further audit procedures, results, matters of continuing accounting &
audit significance
,engagement letter - correct answer ✔✔contract between client & auditor to reduce risk of
misinterpretation
for recurring audits, auditor should assess - correct answer ✔✔if circumstances requires terms
of engagement to be revised
written engagement letter should include - correct answer ✔✔objective of audit, mgmt
responsibilities, auditor responsibilities (gather sufficient appropriate audit evidence, express an
opinion), limitations of engagement (not providing total assurance, not guarantee f/s free of
misstatements), identification of applicable financial reporting framework, reference to
expected form & content of report to be issued
audit documentation - correct answer ✔✔written record of work performed, evidence
obtained, & conclusion reached
qualities of audit documentation - correct answer ✔✔divided into permanent & current files,
supports auditor's report/opinion, aids in training & conduct/supervision of audit, provides
record of accumulated evidence, indicates that accounting records reconcile to financial
statement, contains enough info that an experienced auditor with no prior knowledge of client
could understand the work performed
audit documentation assembly & retention requirements - correct answer ✔✔issuers:
documentation must be assembled within 45 days of audit report release & must be kept for 7
years
non-issuers: documentation must be assembled within 60 days of audit report release & must
be kept for 5 years
audit documentation is confidential & can only be disclosed without client permission if -
correct answer ✔✔part of quality review program, subpoenaed for it, or part of investigation by
AICPA/state CPA society/state statute
, those charged with governance - correct answer ✔✔people who bear responsibility to oversee
obligations & direction of entity (includes board of directors & audit committee)
audit committee - correct answer ✔✔members of the board of directors (usually
independent/outside directors) who aren't employees or part of mgmt & don't have material
financial interests in the company
audit committee functions - correct answer ✔✔establish control environment, select & appoint
independent auditor, review quality of auditor's work, respond to auditor recommendations,
help resolve disagreements in accounting treatment of material items, & serve as bridge
between board of directors & auditor
communication responsibilities of auditor in financial statement audit - correct answer ✔✔not
required to (but may) search for deficiencies less sever than material weaknesses or express
opinion on internal control; , in writing, both significant deficiencies & material weaknesses to
mgmt/governance within 60 days of report release date; in writing, previously communicated
significant deficiencies/material weaknesses that haven't been corrected; other deficiencies
identified (in writing or orally); can't report absence of significant deficiencies but can report
absence of material weaknesses
independence is required for - correct answer ✔✔audits & attest services (including reviews);
NOT required for compilations, consulting, tax work
cases where independence is impaired - correct answer ✔✔1. CPA has direct financial interest
or indirect material interest in client
2. audit fees remain unpaid for more than a year
3. CPA has mgmt position with client or is employee; spouse can be employee as long as its not
in mgmt or financial reporting role
4. CPA makes hiring decisions for client
5. litigation, unless it is for immaterial amount unrelated to the audit
