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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 211
A restricted-use auditor's report:
Select an option first.
Correct answer: A — Is intended solely for specified parties and should state that it is not suitable for others
Explanation: A report is RESTRICTED when its subject matter or the criteria used are suitable only for parties who understand them — agreed-upon procedures reports, reports on compliance with contractual provisions, and certain special purpose framework reports. The report includes an alert paragraph stating that it is intended SOLELY for the specified parties and is not suitable for anyone else.
Question 212
When the auditor is unable to obtain sufficient appropriate audit evidence about a matter that is material but NOT pervasive, the auditor should:
Select an option first.
Correct answer: C — Issue a qualified opinion, with a basis for qualified opinion paragraph explaining the inability
Explanation: A scope limitation that is material but NOT pervasive results in a QUALIFIED opinion. If it were material AND pervasive, the auditor would DISCLAIM. The 2x2 grid resolves this: on the SCOPE axis, material-not-pervasive gives qualified and material-and-pervasive gives disclaimer; on the MISSTATEMENT axis, the same two cells give qualified and adverse.
Question 213
Management refuses to remove a going concern emphasis-of-matter paragraph the auditor considers necessary. The auditor should:
Select an option first.
Correct answer: A — Retain the paragraph; the content of the auditor's report is the auditor's responsibility alone
Explanation: The AUDITOR'S REPORT is the auditor's own communication, and its content is the auditor's responsibility. Management has no authority to edit it. (Management can influence whether the paragraph is NEEDED — by improving disclosure or by alleviating the doubt — but cannot demand its removal.) Yielding to that pressure would be a failure of independence and of professional scepticism.
Question 214
Which statement about the auditor's report on comparative financial statements is correct?
Select an option first.
Correct answer: D — An opinion is expressed on each period presented
Explanation: When comparative financial statements are presented, the auditor expresses an opinion on EACH PERIOD presented. The auditor must also UPDATE the prior-period opinion, considering whether it remains appropriate in light of anything learned since — and if it does not, must express a different opinion and explain why in an other-matter paragraph.
Question 215
The date of the auditor's report on a non-issuer establishes:
Select an option first.
Correct answer: B — The end of the auditor's responsibility for subsequent events
Explanation: The report date marks the END of the SUBSEQUENT EVENTS evaluation period, which runs from the BALANCE SHEET DATE THROUGH the REPORT DATE. It is also the date by which the auditor must have obtained sufficient appropriate evidence, including the management representation letter. Dual dating or re-dating extends that responsibility, in the ways the standards prescribe.
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Question 216
An auditor identifies an immaterial instance of noncompliance with laws and regulations that has no financial statement effect but suggests possible illegal acts by senior management. The auditor should:
Select an option first.
Correct answer: C — Communicate the matter to those charged with governance, regardless of materiality
Explanation: Noncompliance involving SENIOR MANAGEMENT must be communicated to THOSE CHARGED WITH GOVERNANCE regardless of its materiality, because it bears on management's INTEGRITY — which colours the reliability of every representation management makes. Materiality governs the effect on the OPINION; it does not govern the duty to communicate. Direct reporting to law enforcement is generally constrained by confidentiality obligations.
Question 217
Which of the following is a valid reason for an auditor to withdraw from an engagement?
Select an option first.
Correct answer: C — Management's lack of integrity makes the representations unreliable, and the scope limitation cannot be overcome
Explanation: WITHDRAWAL is a last resort, appropriate when the auditor cannot obtain sufficient appropriate evidence AND management's INTEGRITY is in doubt such that the representations cannot be relied upon at all. Options A, D and B are ordinary features of engagements — an immaterial error, a budget overrun, and a permissible accounting change are none of them grounds for withdrawal.
Question 218
The auditor's report on an issuer must include a statement that the auditor is:
Select an option first.
Correct answer: C — Required to be independent with respect to the company in accordance with US federal securities laws and PCAOB rules
Explanation: The PCAOB report explicitly states that the auditor is a public accounting firm REGISTERED with the PCAOB and is REQUIRED TO BE INDEPENDENT with respect to the company under US federal securities laws and the applicable PCAOB and SEC rules. It provides reasonable, not absolute, assurance, and management — not the auditor — prepares the statements.
Question 219
Uncorrected misstatements should be communicated to those charged with governance:
Select an option first.
Correct answer: C — Together with a request that they be corrected, and with the effect on the opinion explained if they remain uncorrected
Explanation: The auditor accumulates UNCORRECTED misstatements (other than those that are clearly trivial), communicates them to those charged with governance, and REQUESTS correction. If they remain uncorrected, the auditor must consider their effect — INDIVIDUALLY and in AGGREGATE, quantitatively and qualitatively — on the opinion, and must explain that effect to governance.
Question 220
An auditor is engaged to report on summary financial statements derived from audited financial statements. The auditor should:
Select an option first.
Correct answer: A — Express an opinion on whether the summary statements are consistent, in all material respects, with the audited financial statements from which they were derived
Explanation: For SUMMARY financial statements, the opinion is on whether they are CONSISTENT, in all material respects, WITH THE AUDITED STATEMENTS from which they were derived — a different question from fair presentation under GAAP, which the summary statements by their nature cannot achieve. The report also identifies the audited statements and the date of that report.
Question 221
If an auditor's opinion on the prior-period financial statements differs from the opinion previously expressed, the auditor must disclose in an other-matter paragraph:
Select an option first.
Correct answer: B — The date of the previous report, the type of opinion previously expressed, the substantive reasons for the different opinion, and that the opinion is now different
Explanation: When an UPDATED opinion on a prior period DIFFERS from the one previously expressed, the other-matter paragraph must state: (1) the DATE of the previous report; (2) the TYPE of opinion previously expressed; (3) the SUBSTANTIVE REASONS for the different opinion; and (4) that the auditor's opinion on the amended statements is DIFFERENT from the previous opinion. All four elements, or the disclosure is incomplete.
Question 222
Which of the following best describes an 'other-matter' paragraph?
Select an option first.
Correct answer: C — It refers to a matter OTHER than those presented in the financial statements that is relevant to users' understanding of the audit, the auditor's responsibilities, or the report
Explanation: An OTHER-MATTER paragraph refers to something NOT presented or disclosed in the financial statements — for example, that the prior period was audited by a predecessor, that the report is restricted in use, or that supplementary information has been subjected to procedures. An EMPHASIS-OF-MATTER paragraph (option A) refers to something that IS in the statements. Neither modifies the opinion.
Question 223
The auditor concludes there is substantial doubt about going concern and management refuses to make any disclosure. The auditor should issue:
Select an option first.
Correct answer: D — A qualified or adverse opinion, because the omission of required disclosure is a GAAP departure
Explanation: If disclosure is REQUIRED and management REFUSES to provide it, the financial statements DEPART from the applicable framework. That is a GAAP departure, giving a QUALIFIED or (if pervasive) ADVERSE opinion. The emphasis-of-matter route (option A) is available only where disclosure IS adequate. This distinction — doubt itself does not modify the opinion, but inadequate disclosure of it does — is the single most tested going concern point.
Question 224
Under PCAOB standards, if the auditor determines there are NO critical audit matters, the report should:
Select an option first.
Correct answer: B — State that the auditor determined there are no critical audit matters
Explanation: If the auditor determines there are NO CAMs, the report must AFFIRMATIVELY STATE that the auditor determined there are none. Silence is not permitted, because a reader could not otherwise distinguish between 'no CAMs' and 'the auditor forgot'. Note that certain entities (for example, emerging growth companies and benefit plans) are exempt from the CAM requirements altogether.
Question 225
An auditor is asked to issue a report on whether a client complied with the debt covenants in a loan agreement. This report:
Select an option first.
Correct answer: C — Is typically restricted in use to the specified parties and may be issued in connection with the audited financial statements
Explanation: A report on COMPLIANCE with contractual provisions is based on criteria (the loan agreement) that are meaningful only to the parties to that agreement. It is therefore RESTRICTED IN USE to those specified parties. It may be provided in a separate report or in a paragraph of the auditor's report on the financial statements, and it provides NEGATIVE assurance in connection with the audit.
Question 226
Which of the following would result in the auditor's report on ICFR being modified, while the financial statement opinion remains unmodified?
Select an option first.
Correct answer: A — A material weakness in internal control that the auditor compensated for with additional substantive procedures
Explanation: A MATERIAL WEAKNESS produces an ADVERSE opinion on ICFR (control is not effective), but the auditor can still obtain sufficient appropriate evidence for the FINANCIAL STATEMENT opinion by performing additional SUBSTANTIVE procedures. So the two opinions diverge: adverse on ICFR, unmodified on the statements. This decoupling is one of the more counterintuitive features of an integrated audit and is examined regularly.
Question 227
The auditor is required to read 'other information' included in an annual report (such as the chairman's statement) in order to:
Select an option first.
Correct answer: D — Consider whether a material inconsistency exists between the other information and the audited financial statements, or the auditor's knowledge
Explanation: The auditor READS the other information to identify a MATERIAL INCONSISTENCY with the audited statements or with the auditor's knowledge obtained during the audit. No OPINION is expressed on it. If an uncorrected material inconsistency or misstatement of fact exists, the auditor communicates with governance and considers the implications — including describing it in an 'Other Information' section of the report.
Question 228
When financial statements are prepared on a REGULATORY basis and are intended for GENERAL use, the auditor should:
Select an option first.
Correct answer: A — Express an opinion on whether the statements are fairly presented in accordance with GAAP, and a separate opinion on the regulatory basis
Explanation: This is the DUAL OPINION scenario. Where regulatory-basis statements are intended for GENERAL use, the auditor expresses TWO opinions: one on whether the statements are fairly presented in accordance with GAAP (which they typically are NOT, giving an adverse GAAP opinion), and a SEPARATE opinion on fair presentation in accordance with the REGULATORY basis. Restriction (option A) applies where use is limited to those within the regulator's remit.
Question 229
The auditor identifies a subsequent event after the report date and after the report has been released, and management agrees to revise the financial statements. The auditor should:
Select an option first.
Correct answer: D — Perform procedures on the revision, and either dual-date the report or re-date it, and ensure the revised statements and report are issued
Explanation: Where management appropriately REVISES the statements, the auditor performs the necessary procedures on the revision and issues a NEW OR AMENDED report — either DUAL-DATED (limiting responsibility for the later period to that specific event) or RE-DATED (extending responsibility to all events through the new date). The auditor must also ensure the revised statements actually reach anyone who received the originals.
Question 230
A predecessor auditor is asked to REISSUE their prior-period report in comparative statements. Before doing so, the predecessor should:
Select an option first.
Correct answer: C — Read the current-period statements, compare them with the prior-period statements, and obtain representation letters from management and the successor auditor
Explanation: Before REISSUING, the predecessor must: READ the current-period statements; COMPARE them with the prior-period statements they reported on; and obtain REPRESENTATION LETTERS from BOTH management and the SUCCESSOR auditor (the latter confirming whether the successor's audit revealed anything that might materially affect the prior-period statements). Only then may the predecessor decide whether the original report remains appropriate.
Question 231
Which of the following is a required element of the auditor's report on a non-issuer?
Select an option first.
Correct answer: C — A statement that the audit was conducted in accordance with generally accepted auditing standards, and the auditor's city and state (or country)
Explanation: Required elements include the TITLE, ADDRESSEE, opinion section, basis for opinion, management's responsibilities, auditor's responsibilities, the auditor's SIGNATURE, the CITY AND STATE (or country) where the auditor practises, and the DATE. Fees and hours are never disclosed. Engagement partner naming (option A) is required for ISSUERS on PCAOB Form AP, not on the face of a non-issuer report.
Question 232
In an integrated audit, if the auditor identifies a material weakness AFTER the 'as of' date but before the report date, the auditor should:
Select an option first.
Correct answer: C — Consider whether it existed at the as-of date; if it did, issue an adverse ICFR opinion
Explanation: ICFR is assessed AS OF a specific date (usually year-end). The critical question is whether the weakness EXISTED at that date. A weakness that arose afterwards does not make the as-of assessment wrong — though it may require disclosure. If it DID exist at the as-of date and was simply not discovered until later, the ICFR opinion must be ADVERSE.
Question 233
The 'Auditor's Responsibilities for the Audit of the Financial Statements' section states that the auditor:
Select an option first.
Correct answer: D — Exercises professional judgement and maintains professional scepticism, and that reasonable assurance is a high but not absolute level of assurance
Explanation: This section explains that the objectives are to obtain REASONABLE ASSURANCE — a HIGH but NOT ABSOLUTE level — and to issue a report; that reasonable assurance is not a guarantee that a material misstatement will always be detected; and that the auditor EXERCISES PROFESSIONAL JUDGEMENT and MAINTAINS PROFESSIONAL SCEPTICISM throughout. It also notes the auditor's communication obligations to governance.
Question 234
If a client's financial statements contain an unjustified change in accounting principle, the auditor should:
Select an option first.
Correct answer: B — Issue a qualified or adverse opinion, because the change is a GAAP departure
Explanation: For a change in accounting principle to be acceptable, the new principle must be GAAP-compliant, the method of accounting for the change must be appropriate, AND the change must be JUSTIFIED (the new principle must be PREFERABLE). If it is not justified, the change is a GAAP DEPARTURE, giving a qualified or adverse opinion. The emphasis-of-matter route is reserved for changes that ARE justified and properly disclosed.
Question 235
An auditor's report that refers to the report of a component auditor and does NOT assume responsibility for that work:
Select an option first.
Correct answer: C — Is an unmodified opinion in which responsibility is divided
Explanation: DIVISION OF RESPONSIBILITY is not a modification. The group auditor issues an UNMODIFIED opinion, makes REFERENCE to the component auditor, and states the MAGNITUDE of the portion of the financial statements audited by that other auditor. The alternative is to ASSUME responsibility, in which case no reference is made. Both routes produce an unmodified opinion where the statements are fairly stated.
Question 236
The auditor is required to communicate significant findings from the audit to those charged with governance. These include:
Select an option first.
Correct answer: C — The auditor's views about qualitative aspects of the entity's significant accounting practices, including accounting policies, estimates and disclosures
Explanation: Significant findings include the auditor's views on the QUALITATIVE ASPECTS of significant accounting practices — whether policies are aggressive or conservative, whether estimates are neutral or biased, whether disclosures are clear. It also covers significant DIFFICULTIES encountered, DISAGREEMENTS with management, and UNCORRECTED MISSTATEMENTS. These conversations are among the most valuable outputs of an audit.
Question 237
Which report would an accountant issue when engaged to PREPARE financial statements under SSARS?
Select an option first.
Correct answer: A — No report; each page should indicate that no assurance is provided
Explanation: A PREPARATION engagement (AR-C 70) produces NO REPORT at all. Instead, each page of the financial statements must include a legend stating that NO ASSURANCE is provided. If the accountant is unable to include such a statement, they must issue a disclaimer or perform a compilation instead. Independence is not required and need not be disclosed.
Question 238
In evaluating whether the financial statements achieve fair presentation, the auditor considers:
Select an option first.
Correct answer: B — Whether, beyond technical compliance, the overall presentation, structure and content, and the underlying transactions, are represented in a manner that achieves fair presentation
Explanation: Fair presentation goes BEYOND technical GAAP compliance. The auditor evaluates the overall PRESENTATION, STRUCTURE and CONTENT — including whether the DISCLOSURES are adequate and whether the terminology used is appropriate — and whether the statements, taken as a whole, faithfully represent the underlying transactions. A technically compliant but misleading set of statements does not achieve fair presentation.
Question 239
The auditor's report on a non-issuer's financial statements prepared under a special purpose framework must include:
Select an option first.
Correct answer: C — An emphasis-of-matter paragraph identifying the framework, stating that it is not GAAP, and referring to the note describing it
Explanation: For a SPECIAL PURPOSE FRAMEWORK (cash, tax, regulatory or contractual basis), the report includes an EMPHASIS-OF-MATTER paragraph that identifies the framework, states that it is a basis of accounting OTHER THAN GAAP, and refers the reader to the note describing it. The opinion is on fair presentation in accordance with THAT framework — so an adverse opinion (option A) is not automatic.
Question 240
Which of the following is TRUE about the auditor's responsibility for supplementary information required by a designated accounting standards setter (RSI)?
Select an option first.
Correct answer: C — The auditor applies limited procedures and includes an other-matter paragraph describing the responsibility taken
Explanation: RSI receives LIMITED PROCEDURES — inquiry about preparation methods, comparison for consistency with the audited statements and the auditor's knowledge, and obtaining representations. The auditor does NOT opine on it, but must include an OTHER-MATTER paragraph describing the responsibility taken, and report if the RSI is omitted, materially departs from guidelines, or the auditor was unable to complete the procedures.
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