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Free CPA Auditing and Attestation Practice Questions & Answers
500 exam-style Auditing and Attestation questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 271
The auditor's responsibility with respect to 'other information' in a document containing audited financial statements is to:
Select an option first.
Correct answer: B — Read it and consider whether it is materially inconsistent with the financial statements or with the auditor's knowledge, and respond if a material inconsistency or misstatement of fact exists
Explanation: The auditor READS the other information (the chairman's statement, the MD&A in an annual report) and considers whether a MATERIAL INCONSISTENCY exists with the audited statements or with knowledge obtained in the audit. The auditor expresses NO OPINION. If an uncorrected material inconsistency or a material misstatement of FACT remains, the auditor communicates with governance and considers further action, including withholding the report or withdrawing.
Question 272
When comparative financial statements are presented and the prior period was NOT audited, the auditor should:
Select an option first.
Correct answer: A — Include an other-matter paragraph stating that the prior period was not audited and that the auditor assumes no responsibility for it
Explanation: If the prior period was NOT audited (or was only reviewed or compiled), the auditor must include an OTHER-MATTER paragraph clearly stating the SERVICE performed on the prior period, the DATE of any prior report, and — critically — that the auditor assumes NO RESPONSIBILITY for the prior period. Silence would mislead readers into believing both periods were audited.
Question 273
A material weakness identified during an integrated audit that was REMEDIATED and tested by the auditor BEFORE the as-of date results in:
Select an option first.
Correct answer: D — An unmodified ICFR opinion, provided the auditor has obtained sufficient evidence that the new control is designed and operating effectively for a sufficient period
Explanation: ICFR is assessed AS OF year-end. A weakness that was genuinely REMEDIATED — and where the NEW control has been tested and shown to operate effectively for a SUFFICIENT PERIOD before the as-of date — does not require an adverse opinion, because it did not exist at the assessment date. The key judgement is whether the remediation period was long enough to support a conclusion.
Question 274
The audit report for an employee benefit plan subject to ERISA where management elects an ERISA Section 103(a)(3)(C) audit:
Select an option first.
Correct answer: A — Contains a two-part opinion, in which the auditor does not express an opinion on the certified investment information but does opine on the remainder
Explanation: Under an ERISA Section 103(a)(3)(C) audit, certain INVESTMENT information certified by a qualifying institution is EXCLUDED from the scope of the audit. Under SAS 136 this is NOT treated as a scope limitation and is NOT a disclaimer — the report contains a distinctive TWO-PART opinion: no opinion on the certified investment information, and an opinion on the remaining amounts and disclosures.
Question 275
If an auditor identifies a material misstatement in the OTHER INFORMATION (not the financial statements) and management refuses to correct it, the auditor should:
Select an option first.
Correct answer: B — Communicate with those charged with governance and consider the implications, including describing the misstatement in the report, withholding the report, or withdrawing
Explanation: A material misstatement of FACT in the other information that management refuses to correct requires escalation: communicate with GOVERNANCE and consider the implications — which may include describing it in the OTHER INFORMATION section of the report, WITHHOLDING the report, or WITHDRAWING from the engagement. It does not, however, make the FINANCIAL STATEMENTS wrong, so an adverse opinion on them (option D) would be inappropriate.
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Question 276
An auditor is engaged to examine and report on a schedule of investment returns of an investment fund. This engagement is:
Select an option first.
Correct answer: D — An examination of a specific element, account or item of a financial statement
Explanation: An auditor may report on a SPECIFIC ELEMENT, ACCOUNT OR ITEM — a schedule of returns, a royalty computation, a profit participation — as a distinct engagement. Materiality is applied to the ELEMENT, not to the financial statements as a whole, which usually means far more extensive procedures relative to the size of the item than a full audit would require.
Question 277
The concept of 'reasonable period of time' for the going concern evaluation under AICPA standards is:
Select an option first.
Correct answer: B — Within one year AFTER the date the financial statements are issued (or available to be issued)
Explanation: The evaluation covers a reasonable period, defined as within ONE YEAR AFTER the date the financial statements are ISSUED (or are available to be issued). Because issuance typically follows year-end by two to four months, the lookout window extends materially beyond twelve months from the balance sheet date — and measuring from the WRONG starting point is the most common error on this topic.
Question 278
An issuer must file a FORM 8-K to report:
Select an option first.
Correct answer: B — Material events occurring between periodic reports, such as a change in auditors, an acquisition, or bankruptcy, generally within four business days
Explanation: FORM 8-K is the 'current report' used to disclose MATERIAL EVENTS as they occur between the periodic filings — a change in the certifying accountant, a major acquisition or disposal, entry into or termination of a material agreement, bankruptcy, or a determination that previously issued statements can no longer be relied upon. It is generally due within FOUR BUSINESS DAYS. The 10-K is annual; the 10-Q is quarterly.
Question 279
Under SOX Section 302, the CEO and CFO must:
Select an option first.
Correct answer: D — Certify, in each periodic report, that they have reviewed it, that it fairly presents the financial condition, and that they are responsible for disclosure controls and procedures
Explanation: SOX Section 302 requires the CEO and CFO to personally CERTIFY each periodic report (10-K, 10-Q): that they reviewed it; that, to their knowledge, it does not contain material misstatements or omissions and fairly presents the financial condition; and that they are responsible for establishing and maintaining DISCLOSURE CONTROLS AND PROCEDURES. Section 404 addresses internal control over financial reporting specifically; 302 is the broader officer certification.
Question 280
The auditor's report on an issuer's financial statements and the report on ICFR may be presented:
Select an option first.
Correct answer: C — As a combined report or as two separate reports, at the auditor's discretion
Explanation: In an INTEGRATED audit, the auditor may present the opinion on the financial statements and the opinion on ICFR either as a COMBINED report or as TWO SEPARATE reports. Where separate reports are issued, each must refer to the other. The two opinions are distinct and can diverge — for example, an adverse ICFR opinion alongside an unmodified opinion on the financial statements.
Question 281
Which of the following would trigger an 8-K disclosure regarding the auditor?
Select an option first.
Correct answer: D — A change in the registrant's certifying accountant (dismissal or resignation), including any disagreements
Explanation: A CHANGE in the certifying accountant — whether the auditor was dismissed or resigned — is a reportable event on FORM 8-K (Item 4.01). The registrant must disclose the change, whether there were any DISAGREEMENTS on accounting or auditing matters, and whether the former auditor's reports contained any adverse opinion, disclaimer or qualification. The former auditor must also furnish a letter stating whether they agree with the registrant's disclosures.
Question 282
A 'restricted-use' alert in an auditor's or practitioner's report states that the report is intended solely for the specified parties. It is required when:
Select an option first.
Correct answer: C — The subject matter or the criteria are suitable only for, or the report is intended only for, specified parties
Explanation: A RESTRICTED-USE alert is required when the subject matter or the CRITERIA are suitable only for specified parties (a contractual basis, a regulatory basis for the regulator's use), or when the report is by its nature intended only for specified parties (agreed-upon procedures, compliance reports). General-use GAAP-basis financial statement reports (option A) carry no such restriction.
Question 283
When financial statements prepared on a TAX BASIS are appropriate for the intended users, the auditor's report should:
Select an option first.
Correct answer: C — Express an opinion on whether the statements are fairly presented in accordance with the tax basis, and include an emphasis-of-matter paragraph describing the framework
Explanation: The TAX BASIS is a SPECIAL PURPOSE FRAMEWORK. The auditor opines on fair presentation in accordance with THAT framework (not GAAP), and includes an EMPHASIS-OF-MATTER paragraph that identifies the framework, states that it is a basis other than GAAP, and refers to the note describing it. Depending on the intended use, a restricted-use alert may also be required.
Question 284
In a group audit where the group engagement team assumes responsibility for a component auditor's work, the group auditor's report:
Select an option first.
Correct answer: D — Makes NO reference to the component auditor
Explanation: When the group auditor ASSUMES RESPONSIBILITY for the component auditor's work, NO REFERENCE is made to the component auditor in the group report — the group auditor takes full responsibility as if the work were its own (having been sufficiently involved in it). Reference IS made only when responsibility is DIVIDED, in which case the report indicates the magnitude of the portion audited by the other firm.
Question 285
For a non-issuer, when the auditor believes there is substantial doubt about going concern that is alleviated by management's plans, the auditor should:
Select an option first.
Correct answer: C — NOT add a going concern paragraph, because the substantial doubt has been alleviated, though disclosure of the conditions and plans may still be appropriate
Explanation: If management's plans ALLEVIATE the substantial doubt, the going concern EMPHASIS-OF-MATTER paragraph is NOT required — the doubt no longer exists in the auditor's judgement. Disclosure of the underlying conditions and of management's plans may still be appropriate in the notes, and the auditor evaluates that disclosure, but the report itself is not modified with a going concern paragraph.
Question 286
A key element distinguishing an EXAMINATION from a REVIEW under the attestation standards is that an examination:
Select an option first.
Correct answer: A — Provides reasonable assurance and results in an opinion, whereas a review provides limited assurance and a conclusion
Explanation: Under the attestation standards, an EXAMINATION provides REASONABLE assurance and results in an OPINION on the subject matter (or assertion). A REVIEW provides LIMITED (moderate) assurance and results in a CONCLUSION expressed in the negative form ('nothing came to our attention'). AGREED-UPON PROCEDURES provide no assurance and result in FINDINGS. The level of assurance drives the amount of evidence gathered.
Question 287
The auditor of an employee benefit plan is engaged to perform a full-scope audit (not an ERISA Section 103(a)(3)(C) audit). This means:
Select an option first.
Correct answer: D — The auditor audits all the plan's financial information, including investments, without excluding institution-certified information
Explanation: A FULL-SCOPE benefit plan audit covers ALL the plan's financial statement information, including the INVESTMENTS, with no exclusion. In an ERISA Section 103(a)(3)(C) audit (formerly the 'limited-scope' audit), management may elect to EXCLUDE certified investment information from the scope, producing a distinctive two-part opinion rather than a disclaimer.
Question 288
An auditor's report contains an 'Emphasis of Matter' paragraph regarding a significant related-party transaction that is properly disclosed. The purpose is to:
Select an option first.
Correct answer: B — Draw users' attention to the matter, which is fundamental to their understanding, without modifying the opinion
Explanation: An EMPHASIS-OF-MATTER paragraph draws attention to a matter APPROPRIATELY DISCLOSED that is FUNDAMENTAL to users' understanding — a significant related-party transaction, a major uncertainty, a subsequent event. It does NOT modify the opinion. If the related-party transaction were NOT properly disclosed, that would be a GAAP departure requiring a modified opinion instead.
Question 289
When an accountant performs a compilation and becomes aware that the financial statements are materially misstated, the accountant should:
Select an option first.
Correct answer: D — Propose appropriate revision; if management refuses, withdraw from the engagement
Explanation: Even though a compilation provides NO ASSURANCE, the accountant cannot be associated with statements the accountant KNOWS to be materially misstated. The accountant should propose the appropriate REVISION. If management REFUSES to revise, the accountant should WITHDRAW from the engagement. A compilation report cannot be modified to disclose the departure and still be issued if the departure makes the statements misleading.
Question 290
The successor auditor who is engaged to re-audit prior-period financial statements (rather than relying on the predecessor) should:
Select an option first.
Correct answer: B — Perform the audit procedures necessary to obtain sufficient appropriate evidence and express the successor's own opinion on the prior period
Explanation: A RE-AUDIT of the prior period is a full audit — the successor performs the necessary procedures to obtain sufficient appropriate evidence and expresses the SUCCESSOR'S OWN opinion. This differs from merely relying on the predecessor's reissued report, or from auditing opening balances in an initial engagement. The successor typically requests access to the predecessor's working papers but reaches an independent conclusion.
Question 291
The written representations obtained from management at the conclusion of the audit:
Select an option first.
Correct answer: A — Complement other evidence but do not, by themselves, provide sufficient appropriate evidence about the matters they address
Explanation: Written representations are audit evidence, but they are NOT a substitute for other evidence the auditor could reasonably expect to be available. They COMPLEMENT other procedures — for instance, a representation that all liabilities are recorded supports, but does not replace, the search for unrecorded liabilities. Management's refusal to provide required representations is itself a scope limitation of the gravest kind.
Question 292
Which of the following is a required section or element of the standard unmodified auditor's report for a non-issuer under AICPA standards?
Select an option first.
Correct answer: A — An opinion section that appears FIRST, followed by the basis for opinion
Explanation: Under the AICPA reporting model, the OPINION section appears FIRST, immediately followed by the BASIS FOR OPINION section. The report also includes sections on management's responsibilities and the auditor's responsibilities, the auditor's signature, the city and state, and the date. Placing the opinion first was a deliberate change to make the most important information immediately visible to users.
Question 293
An auditor who agrees to issue a report on a SPECIFIC ELEMENT of a financial statement on which the auditor has ALSO expressed an ADVERSE opinion (on the statements as a whole) may:
Select an option first.
Correct answer: B — Issue an unmodified opinion on the element only if it is presented separately and not accompanying the adverse-opinion statements
Explanation: Expressing an UNMODIFIED opinion on a specific ELEMENT would be a prohibited 'piecemeal opinion' if it accompanied, or appeared alongside, financial statements on which the auditor issued an ADVERSE opinion or a disclaimer — because it would contradict and undermine the overall conclusion. It may be permissible only if the element report is presented SEPARATELY and does not accompany the adverse-opinion financial statements.
Question 294
In a review of a non-issuer's financial statements under SSARS, if the accountant becomes aware of a departure from the applicable framework, the accountant should:
Select an option first.
Correct answer: B — Request that the statements be revised; if management refuses, disclose the departure in the review report, or withdraw if disclosure is insufficient to prevent the report from being misleading
Explanation: In a SSARS REVIEW, a known departure from the framework is addressed by first requesting REVISION. If management refuses, the accountant may DISCLOSE the departure in a separate paragraph of the review report. If the accountant concludes that disclosure is INSUFFICIENT to prevent the report from being misleading, the accountant should WITHDRAW. A review report never carries an audit-style adverse opinion.
Question 295
A change in the reporting entity, such as a change in the companies included in combined financial statements, is accounted for by:
Select an option first.
Correct answer: D — Retrospective application, restating all prior periods presented as if the new reporting entity had always existed
Explanation: A change in the REPORTING ENTITY is applied RETROSPECTIVELY — all prior periods presented are restated as if the current reporting entity had existed throughout — so the comparatives remain meaningful. The auditor evaluates the restatement and typically the report includes an emphasis-of-matter paragraph if the change materially affects comparability. This mirrors the treatment of a change in accounting principle.
Question 296
An auditor is engaged to report on whether a schedule of gross rental income is fairly stated. The engagement is:
Select an option first.
Correct answer: C — An audit of a specific element of a financial statement, applying materiality to that element
Explanation: Reporting on a single SCHEDULE (a specific element, account or item) applies materiality to THAT element rather than to financial statements as a whole. Because the element is smaller than the statements, effective materiality is lower and the procedures relative to the item's size are correspondingly more extensive. The report expresses an opinion on whether the element is fairly stated in accordance with the applicable criteria.
Question 297
Under PCAOB standards, if the auditor identifies a material weakness that management has NOT included in its assessment, the auditor should:
Select an option first.
Correct answer: A — Express an adverse opinion on ICFR and state that a material weakness was identified but not included in management's assessment
Explanation: If the auditor identifies a MATERIAL WEAKNESS not included in management's assessment, the auditor expresses an ADVERSE opinion on ICFR AND the report specifically states that a material weakness was identified that was NOT included in management's assessment. The disagreement between management's conclusion and the auditor's is itself important information for users.
Question 298
When comparative statements are presented for a non-issuer and the current-period opinion is UNMODIFIED but the prior-period opinion (by the same auditor) was QUALIFIED and the matter is STILL unresolved, the auditor should:
Select an option first.
Correct answer: B — Update and repeat the qualified opinion on the prior period
Explanation: When the same auditor reports on comparatives, the prior-period opinion is UPDATED. If the matter that caused the prior qualification is STILL UNRESOLVED, the auditor continues to express (updates and repeats) the QUALIFIED opinion on the prior period, while the current period may be unmodified if that period is not affected. Each period receives the opinion appropriate to it.
Question 299
The purpose of the 'Basis for Opinion' section in the auditor's report is to:
Select an option first.
Correct answer: D — State that the audit was conducted in accordance with GAAS, refer to the auditor's responsibilities section, address independence and ethical responsibilities, and state that the evidence obtained is sufficient and appropriate
Explanation: The BASIS FOR OPINION section states that the audit was conducted in accordance with GAAS (or PCAOB standards for issuers), refers to the auditor's RESPONSIBILITIES section, affirms the auditor's INDEPENDENCE and other ethical responsibilities, and states the auditor's belief that the evidence obtained is SUFFICIENT and APPROPRIATE to provide a basis for the opinion. It does not itemise procedures or fees.
Question 300
A practitioner engaged to examine a company's schedule of greenhouse gas emissions is performing:
Select an option first.
Correct answer: B — An attestation examination on non-financial subject matter, providing reasonable assurance and an opinion
Explanation: Reporting on NON-FINANCIAL subject matter — greenhouse gas emissions, sustainability metrics, compliance with a framework — falls under the ATTESTATION standards (SSAEs). An EXAMINATION provides REASONABLE assurance and an OPINION on whether the subject matter is presented in accordance with the applicable criteria. The same subject matter could instead be subject to a review (limited assurance) or agreed-upon procedures (findings only).
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