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AICPA CPA-Auditing Exam Questions
- Topic 1: Auditing and Attestation (AUD)
- Topic 2: Business Environment and Concepts (BEC)
- Topic 3: Financial Accounting and Reporting (FAR)
Free AICPA CPA-Auditing Exam Actual Questions
Note: Premium Questions for CPA-Auditing were last updated On Jul. 30, 2026 (see below)
An auditor most likely would inspect loan agreements under which an entity's inventories are pledged to support management's financial statement assertion of completeness with respect to:
Choice 'a' is correct. Inspecting loan agreements under which an entity's inventories are pledged provides evidence regarding completeness with respect to presentation and disclosure, since such information must be disclosed in the financial statements.
Choices 'b', 'c', and 'd' are incorrect. Inspecting loan agreements under which an entity's inventories are pledged does not provide information regarding the completeness of transactions, events, or account balances.
Baker, CPA, was engaged to review the financial statements of Hall Co., a nonissuer. During the engagement Baker uncovered a complex scheme involving client illegal acts and fraud that materially affect Hall's financial statements. If Baker believes that modification of the standard review report is not adequate to indicate the deficiencies in the financial statements, Baker should:
Choice 'c' is correct. If the accountant believes that modification of the standard report is not adequate to indicate the deficiencies in the financial statements taken as a whole, the accountant should withdraw from the review engagement and provide no further services with respect to those financial statements.
Note that the accountant should also request that management consider the effect of the scheme on the financial statements.
Choice 'a' is incorrect. Since Baker believes modification of the standard report is not adequate, a disclaimer is inappropriate. Baker should withdraw from the engagement.
Choices 'b' and 'd' are incorrect. No opinion may be given based on a review engagement.
Which of the following is true regarding the auditor's responsibility to report on information accompanying the basic financial statements in a client-prepared document?
Choice 'c' is correct. If an auditor chooses to report on information accompanying the basic financial statements in a client-prepared document, the report should include a description of both the character of the audit work performed and the degree of responsibility assumed.
Choice 'a' is incorrect. There is no requirement that the auditor be specifically engaged to report on such information. If auditing procedures have been applied to the information, the auditor is permitted to report thereon.
Choice 'b' is incorrect. The auditor is permitted but not required to report on such information.
Choice 'd' is incorrect. If an auditor chooses to report on information accompanying the basic financial statements in a client-prepared document, the report should include an opinion on the information and a description of both the character of the audit work performed and the degree of responsibility assumed.
Which of the following internal control procedures most likely would deter lapping of collections from customers?
Choice 'c' is correct. Lapping is a defalcation in which a cash shortage is concealed by applying later customer remittances to a receivable account from which money was stolen. Lapping can be deterred by appropriate segregation of duties between receiving cash and posting to the accounts receivable ledger.
This makes it more difficult for the employee who is stealing the cash to cover it up through inappropriate remittance credits.
Choice 'a' is incorrect. Even with a lapping scheme, the dates of cash receipts journal entries and the dates of daily cash summaries would still agree, since the stolen funds would be excluded from both places and subsequent receipts would be included in both places.
Choice 'b' is incorrect. The authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval would not deter lapping, since lapping schemes do not involve write-offs.
Choice 'd' is incorrect. Even with a lapping scheme, the daily cash summary would still agree with the sum of the cash receipts journal entries. Stolen funds would be excluded from both places and subsequent receipts would be included in both places.
An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The auditor designed a statistical sample that would provide 1% risk of assessing control risk too low (99% confidence) that not more than 7% of the sales invoices lacked approval. The auditor estimated from previous experience that about 2.5% of the sales invoices lacked approval. A sample of 200 invoices was examined and 7 of them were lacking approval. The auditor then determined the upper deviation rate to be 8%.
The allowance for sampling risk was:
Choice 'b' is correct. The allowance for sampling risk is the excess of the 8% upper deviation rate over the 3.5% (= 7 200) sample deviation rate, or 4.5%.
Choices 'a', 'c', and 'd' are incorrect, based on the above Explanation: .
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