CPA AUD Practice Questions (11–20)
Question 11
Which item must be returned to a client even if they haven't paid their audit fees?
A. Confirmations obtained during the audit
B. Audit workpapers created by the auditor
C. Client documents created by the auditor
D. Records originally prepared by the client
Correct Answer: D
Explanation:
Auditors are required to return original client documents, even if payment is pending. These belong to the client and are not considered auditor workpapers.
Question 12
Which party is not considered a “covered member” under the AICPA Code of Professional Conduct?
A. Partner in the same office as the engagement lead
B. Managing partner in a different office
C. Former auditor now working at a firm providing consulting to the client
D. The firm’s employee benefit plan
Correct Answer: C
Explanation:
A former auditor working for a third-party consultant to the client is generally not considered a covered member, assuming no ongoing relationship exists.
Question 13
What influences the form and extent of risk assessment documentation for a nonissuer audit?
A. Documentation should be uniform across audits
B. Auditor must document full industry knowledge
C. It depends on the entity's nature, size, and internal controls
D. Risk assessment and strategy documents must be separate
Correct Answer: C
Explanation:
The audit documentation should reflect the complexity and nature of the entity, with more detailed documentation for complex entities.
Question 14
Which of the following is not a primary purpose of communicating with those charged with governance?
A. Describing audit scope and timing
B. Sharing relevant audit observations
C. Getting approval for the planned audit scope
D. Obtaining relevant information
Correct Answer: C
Explanation:
While communication is essential, the auditor is not required to seek approval for audit procedures from governance bodies.
Question 15
To understand a client’s financial reporting system, an auditor should:
A. Exclude significant estimates from understanding
B. Understand how transactions are authorized, processed, and recorded
C. Ask internal audit about fraud risks
D. Discuss general business risks with management
Correct Answer: B
Explanation:
Understanding transaction flows, authorizations, and processing is essential to assess risks and design effective audit procedures.
Question 16
Which situation indicates a higher risk of fraud-related misstatements?
A. Password-protected access to records
B. Daily transaction entries
C. High inventory levels
D. Management makes significant period-end adjustments
Correct Answer: D
Explanation:
Aggressive management intervention in financial adjustments is a red flag for potential manipulation or fraud.
Question 17
Which change does not invalidate prior-year tests of control effectiveness?
A. Different method of data aggregation
B. Updated accounting software
C. Altered control environment
D. New reports generated by the system
Correct Answer: D
Explanation:
Changes that don’t impact the control operations, such as adding new reporting capabilities, typically don’t affect control testing reliance.
Question 18
Under government auditing standards, an auditor may:
A. Make independent materiality decisions
B. Use audit findings as desired
C. Report primarily to the GAO
D. Use a specialist at their discretion
Correct Answer: D
Explanation:
Government audits permit the use of specialists when appropriate, as long as professional standards are maintained.
Question 19
Which question is not typically asked of internal audit personnel during a fraud risk assessment?
A. How did you communicate ethical expectations to employees?
B. Are you aware of any known or suspected fraud?
C. What procedures did you perform related to fraud detection?
D. How did management respond to fraud-related findings?
Correct Answer: A
Explanation:
While important, asking about communication of ethical values is not directly related to assessing internal audit’s fraud detection role.
Question 20
When should an auditor consider selecting a larger sample size for tests of details?
A. Based on sampling method
B. Due to population size
C. When both control and inherent risk are high
D. If tolerable misstatement is large
Correct Answer: C
Explanation:
Higher assessed risks demand more evidence, which often requires a larger sample size to draw reliable conclusions.