CPA AUD Free Practice Test

Question 1

Which of the following is an example of a substantive analytical procedure?

Accepted Answer

Comparing recorded revenue to a budget or prior year and investigating significant fluctuations

Answer

Observing the client's physical inventory count

Answer

Inspecting signed loan agreements for covenant compliance

Answer

Recalculating depreciation expense using the client's fixed asset schedule

Question 2

A positive confirmation request sent to a customer asks the customer to

Accepted Answer

Reply whether or not the customer agrees with the balance stated

Answer

Reply only if the balance shown is incorrect

Answer

Verify the balance with the client's bank instead of the auditor

Answer

Sign and return the confirmation only if no response is required

Question 3

An auditor most likely would inspect loan agreements under which the client's assets are pledged as collateral for which primary purpose?

Accepted Answer

To identify unrecorded liens against pledged assets that may affect asset presentation and disclosure

Answer

To evaluate the effectiveness of the client's internal controls over cash disbursements

Answer

To determine whether the client's revenue recognition policy is appropriate

Answer

To assess whether officer compensation is properly disclosed

Question 4

When using audit sampling for tests of controls, an increase in the tolerable rate of deviation from the prescribed control, all else equal, would

Accepted Answer

Decrease the required sample size

Answer

Increase the required sample size

Answer

Have no effect on the required sample size

Answer

Require a switch from statistical to nonstatistical sampling

Question 5

Which of the following procedures would provide the most reliable evidence about the existence of accounts receivable?

Accepted Answer

Confirming a sample of receivable balances directly with customers

Answer

Reviewing the aging schedule prepared by the client

Answer

Recalculating the allowance for doubtful accounts

Answer

Vouching subsequent cash receipts to the cash receipts journal

Question 6

In a variables sampling application designed to estimate the dollar amount of misstatement in an account balance, the auditor is primarily concerned with which risk?

Accepted Answer

Risk of incorrect acceptance

Answer

Risk of assessing control risk too low

Answer

Risk of overreliance on internal controls

Answer

Detection risk arising from inadequate segregation of duties

Question 7

An auditor selects a sample of shipping documents and traces them forward to sales invoices and the sales journal. This test is designed primarily to detect

Accepted Answer

Unrecorded sales, that is, an understatement of revenue

Answer

Sales recorded in the wrong period

Answer

Fictitious sales recorded without shipment

Answer

Improper cutoff of purchase transactions

Question 8

Which of the following best describes the purpose of dual-purpose testing?

Accepted Answer

Testing both the operating effectiveness of a control and the monetary correctness of the same transaction using one sample

Answer

Testing two unrelated accounts using a single sample

Answer

Confirming both accounts receivable and accounts payable simultaneously

Answer

Performing both interim and year-end substantive procedures on the same population

Question 9

An auditor is testing the completeness of accounts payable at year end. Which procedure provides the most relevant evidence?

Accepted Answer

Examining unmatched receiving reports and vendor invoices received after year end to identify unrecorded liabilities

Answer

Confirming accounts payable balances with vendors selected from the accounts payable subsidiary ledger

Answer

Vouching a sample of recorded payables to supporting vendor invoices

Answer

Recalculating the mathematical accuracy of the accounts payable aging schedule

Question 10

A client uses a perpetual inventory system with a strong cycle-count program that the auditor has tested and found effective throughout the year. Under these circumstances, the auditor may most appropriately

Accepted Answer

Observe a physical count at an interim date rather than at year end, adjusting for intervening transactions

Answer

Omit inventory observation procedures entirely regardless of materiality

Answer

Rely solely on management's representation letter regarding inventory existence

Answer

Confirm inventory quantities with the client's insurance carrier instead of performing observation

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