CPA practice questions

1. 01

   Reliability of Data and Information

   Question 1. When inconsistent audit evidence is obtained from different sources regarding the same assertion, an auditor should most appropriately take which of the following actions?

   Answer to question 1

   AA. Accept the evidence that supports management's positionBB. Discard all inconsistent evidence and obtain entirely new evidenceCC. Rely solely on the externally sourced evidenceDD. Determine what additional procedures are necessary to resolve the inconsistency

   Check answerExplanation after you answer
2. 02

   Service Organization Implications

   Question 2. Reed Co.'s auditor plans to use a SOC 1 Type 2 report issued on a service organization that processes Reed's payroll. Before relying on the report, the auditor should:

   Answer to question 2

   AA. Evaluate the professional competence of the service auditor.BB. Obtain an updated engagement letter from the service organization.CC. Require the service organization to provide a management representation letter to Reed's auditor.DD. Reperform all tests of controls documented in the report.

   Check answerExplanation after you answer
3. 03

   Sampling Techniques

   Question 3. Voss Inc. completed its audit sampling for a substantive test of accounts receivable. After evaluating the sample results, the auditor found that the projected misstatement was below tolerable misstatement. However, the auditor noted that several misstatements appeared intentional. In this situation, the auditor should most appropriately:

   Answer to question 3

   AA. Accept the account balance without further actionBB. Consider the qualitative aspects of the misstatements identifiedCC. Increase the tolerable misstatement to accommodate the findingsDD. Reduce the sample size for the remaining audit areas

   Check answerExplanation after you answer
4. 04

   Accounting Estimates

   Question 4. A higher degree of estimation uncertainty in an accounting estimate most directly affects which of the following aspects of the audit?

   Answer to question 4

   AA. The scope of the auditor's inquiry of legal counselBB. The timing of the engagement letter issuanceCC. The nature and extent of audit procedures performed on the estimateDD. The assessed level of risk related to the estimate

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5. 05

   Service Organization Implications

   Question 5. A Type 2 SOC 1 report, as compared to a Type 1 SOC 1 report, additionally includes:

   Answer to question 5

   AA. An opinion on whether the description is fairly presented.BB. Tests of the operating effectiveness of controls over a period of time.CC. An assessment of complementary user entity controls.DD. A description of the service organization's system.

   Check answerExplanation after you answer

Questions from the MiloPrep question bank. Independently authored practice, not official exam items. This short set is for learning and does not predict an exam score.