CPA Exam For Dummies with Online Practice
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The auditing and attestation (AUD) test on the CPA exam requires students to learn and use a great deal of technical language. Audit opinions (also called audit reports) document whether or not a set of financial statements are free of material misstatement. An audit opinion is signed by the CPA and provided to the client under audit.

The language in audit opinions is very specific. Take time to understand and memorize that language.

  1. A CPA should not submit unaudited financial statements of a nonpublic company to a client or others unless, at a minimum, the CPA complies with the provisions applicable to

    A. Compilation engagements.

    B. Review engagements.

    C. Statements on auditing standards.

    D. Attestation standards.

Answer: A. An accountant should not submit such information unless he or she has, at a minimum, complied with the provisions applicable to a compilation engagement.

  1. Carmel Department Store has an ERP information system and is planning to issue credit cards to creditworthy customers.

    To strengthen internal controls by making it difficult for one to create a valid customer account number, the company’s independent auditor has suggested the inclusion of a check digit, which should be placed

    A. At the beginning of a valid account number only.

    B. In the middle of a valid account number only.

    C. At the end of a valid account number only.

    D. Consistently in any position.

Answer: D. A check digit, while normally at the end of an account number, may be placed consistently in any position in the account when adequate computer programming exists (that is, the mathematical calculation of the check digit can be performed regardless of placement).

  1. An auditor examining inventory may appropriately apply sampling for attributes in order to estimate the

    A. Average price of inventory items.

    B. Percentage of slow-moving inventory items.

    C. Dollar value of inventory.

    D. Physical quantity of inventory items.

Answer: B. Attribute sampling expresses a conclusion about the population in terms of a rate of occurrence. Accordingly, determining the percentage of slow-moving inventory items would be an appropriate attribute sampling application.

  1. The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the

    A. Partner assigned to the audit engagement.

    B. Management of the company.

    C. Auditor in charge of the fieldwork.

    D. Securities and Exchange Commission.

Answer: B. Financial statements are the representations of management, which is responsible for producing proper financial statements.

  1. When auditing a publicly traded client, the auditor’s program for owner’s equity is least likely to include a step requiring

    A. Analysis of the accounting for the proceeds of stock issuance.

    B. Confirmation of outstanding shares with an independent registrar.

    C. Reconciliation of the stock certificate book with the general ledger.

    D. Tests of the computation of earnings per share.

Answer: C. Independent registrars maintain most stock certificate books, so the auditor is least likely to reconcile the stock certificate book with the general ledger for publicly traded companies.

  1. To verify that all sales transactions for which shipment has occurred have been recorded, a test of transactions should be completed on a representative sample drawn from

    A. Entries in the sales journal.

    B. The billing clerk’s file of sales orders.

    C. A file of duplicate copies of sales invoices for which all prenumbered forms in the series have been accounted for.

    D. The shipping clerk’s file of duplicate copies of bills of lading.

Answer: D. This answer is correct because items actually shipped (as evidenced by bills of lading) represent the client’s sales.

  1. Which of the following best describes the auditor’s responsibility for “other information” included in the annual report to stockholders, which contains financial statements and the auditor’s report?

    A. The auditor has no obligation to read the “other information.”

    B. The auditor has no obligation to corroborate the “other information” but should read the “other information” to determine whether it is materially inconsistent with the financial statements.

    C. The auditor should extend the examination to the extent necessary to verify the “other information.”

    D. The auditor must modify the auditor’s report to state that the “other information is unaudited” or “not covered by the auditor’s report.”

Answer: B. The professional standards require that an auditor read the “other information” to determine whether it is inconsistent with the financial statements.

  1. A CPA in public practice may not disclose confidential client information regarding auditing services without the client’s consent in response to which of the following situations?

    A. A review of the CPA’s professional practice by a state CPA society.

    B. A letter to the client from the IRS.

    C. An inquiry from the professional ethics division of the AICPA.

    D. A court-ordered subpoena or summons.

Answer: B. A CPA may not disclose information to the IRS without the client’s consent.

About This Article

This article is from the book:

About the book author:

Kenneth W. Boyd, a former CPA, has over twenty-nine years of experience in accounting, education, and financial services. He is the owner of St. Louis Test Preparation (, where he provides online tutoring in accounting and finance to both graduate and undergraduate students.

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