CPA AUD Auditing & Attestation

Which AICPA framework is used to evaluate threats to a CPA's compliance with the Code of Professional Conduct?

• ARules-based ethics framework
• BConceptual framework approach (identify, evaluate, address threats)
• CSarbanes-Oxley independence framework
• DIntegrated risk control framework

Under the AICPA Independence Rule, a covered member's spouse owns 100 shares (immaterial) of an audit client's stock. What is the effect on independence?

• AIndependence is unimpaired because the holding is immaterial
• BIndependence is impaired regardless of materiality because direct financial interests of…
• CIndependence is impaired only if the spouse is an officer of the client
• DIndependence is unimpaired if the shares are held in a blind trust

Which body's independence rules are MOST stringent regarding the provision of non-audit services to public company audit clients?

• AAICPA
• BPCAOB and SEC
• CGAO Yellow Book
• DDOL ERISA rules

Under SQMS No. 1, who has ultimate responsibility and accountability for the firm's system of quality management?

• AThe engagement partner on each individual engagement
• BThe firm's leadership (e.g., managing partner or CEO equivalent)
• CThe firm's quality management monitoring team
• DThe engagement quality reviewer

SQMS No. 2 addresses which specific aspect of a firm's quality management system?

• ANetwork firm information sharing
• BEngagement quality reviews (selection of reviewers, scope, and documentation)
• CClient acceptance and continuance
• DMonitoring and remediation

SAS 146 (effective December 15, 2025) primarily addresses:

• ARisk assessment procedures
• BQuality management at the engagement level (auditor's responsibilities for an audit engag…
• CGroup audits
• DCommunicating Key Audit Matters

Which of the following is a self-review threat to independence?

• AAuditor preparing financial statements that are then subject to the auditor's audit
• BAuditor advocating for the client in a tax dispute
• CLong-standing personal friendship between the auditor and the CFO
• DPressure from the client to reduce audit fees

Under AICPA ET 1.295 (Nonattest Services), a CPA may perform bookkeeping services for an audit client only if:

• AThe client accepts no responsibility for the services
• BManagement designates a qualified individual to oversee the service, evaluate adequacy an…
• CThe CPA limits the engagement to data entry only
• DAn independent third party reviews the work

What is professional skepticism, as defined in AU-C 200?

• AAn assumption that management is dishonest until proven otherwise
• BAn attitude that includes a questioning mind, alertness to conditions that may indicate p…
• CA formal written checklist completed at year-end
• DMandatory reliance on third-party confirmations

Under PCAOB rules, an auditor of a public company must rotate the lead engagement partner after how many consecutive years?

• A3 years
• B5 years (with a 5-year cooling-off period)
• C7 years
• D10 years

Under the AICPA Integrity and Objectivity Rule, a member providing tax services to an attest client should:

• ADecline the engagement automatically
• BMaintain objectivity, avoid conflicts of interest, and not subordinate judgment
• CDisclose the engagement to all shareholders
• DLimit the tax engagement to no more than 20 hours per year

Under GAO Yellow Book (Government Auditing Standards), independence requirements:

• AMirror AICPA standards exactly
• BAre generally more restrictive than AICPA standards and require evaluation of nonaudit se…
• CApply only to federal auditors
• DAre recommended but not required

Under DOL ERISA independence rules for auditors of employee benefit plans, an auditor's independence is impaired if:

• AThe auditor reads the plan document
• BThe auditor or a member of the firm has a direct financial interest in the plan sponsor
• CThe auditor charges fees on an hourly basis
• DThe auditor provides tax compliance services to the plan sponsor

Under AU-C 210 (Terms of Engagement), the engagement letter should include:

• AA guarantee of an unmodified opinion
• BObjective and scope of audit, responsibilities of auditor and management, identification…
• CThe audit's projected materiality threshold in dollars
• DA schedule of staff hours by procedure

Which of the following is NOT a required precondition for accepting an audit engagement under AU-C 210?

• ADetermining the financial reporting framework is acceptable
• BObtaining management's agreement that it acknowledges and understands its responsibilities
• CAchieving a mutual understanding regarding fees
• DConcluding there is no significant scope limitation that would lead to a disclaimer

Under the AICPA Acts Discreditable Rule, which of the following is most likely an act discreditable to the profession?

• ACharging an audit fee that is higher than the prior year
• BFailing to file the CPA's own personal income tax return
• CDisclosing the audit fee in the engagement letter
• DAdvertising professional services using factual information

Contingent fees are prohibited for which AICPA member service?

• APreparing an original tax return
• BPerforming an audit of an attest client
• CCompiling pro forma information for management's internal use
• DConsulting on a non-attest client's IT system

Under the AICPA Confidential Client Information Rule, a member may disclose confidential client information without consent in which circumstance?

• ATo respond to a validly issued and enforceable subpoena or summons
• BTo a prospective client to solicit business
• CTo another CPA firm seeking peer review participants
• DTo an industry analyst for benchmarking

An auditor uses professional judgment when:

• ADetermining materiality and the nature, timing, and extent of audit procedures
• BSelecting the correct audit software vendor
• CSetting the firm's billing rates
• DChoosing the auditor's office location

Under the AICPA Code, which best describes 'covered member'?

• AAny employee of the firm in any role
• BAn individual on the attest engagement team, in a position to influence the attest engage…
• COnly the engagement partner
• DAnyone holding a CPA license in the state

Audit risk is defined as the risk that:

• AThe auditor expresses an inappropriate opinion when the financial statements are material…
• BInternal controls fail to detect fraud
• CManagement overrides the financial reporting process
• DAn audit client goes bankrupt within one year

If inherent risk and control risk are both high, the auditor should set detection risk to:

• AHigh, to maintain audit efficiency
• BLow, by performing more substantive testing of greater rigor or extending the testing per…
• CEqual to inherent risk
• DZero

Under SAS 145 (revised AU-C 315), an auditor's understanding of the entity must specifically include consideration of:

• AOnly general industry data
• BThe entity's IT environment, including general IT controls relevant to the audit
• COnly the entity's pricing strategy
• DOnly management's compensation arrangements

Materiality at the financial statement level is initially based on which benchmark for a profit-oriented entity?

• ATotal assets
• BOften a percentage of pre-tax income from continuing operations (e.g., 5%), though benchm…
• CNet cash flow from operations
• DTotal revenue

Performance materiality is best described as:

• AThe same as overall materiality at the financial statement level
• BAn amount lower than overall materiality used to reduce to an appropriately low level the…
• CThe threshold for clearly trivial misstatements
• DThe misstatement amount that triggers an adverse opinion

How many components make up the COSO 2013 Internal Control — Integrated Framework?

• A3 components and 12 principles
• B5 components and 17 principles
• C7 components and 25 principles
• D4 components and 20 principles

Which COSO component sets the tone at the top, including integrity, ethical values, and the commitment to competence?

• ARisk Assessment
• BControl Environment
• CMonitoring Activities
• DInformation and Communication

Under AU-C 240, the auditor's response to identified fraud risks should include:

• ALimiting testing to inquiries of management
• BIncorporating an element of unpredictability in the procedures performed and addressing t…
• CIssuing an adverse opinion
• DReducing sample sizes to improve efficiency

Under AU-C 240, the auditor must always presume which of the following is a fraud risk?

• AImproper revenue recognition and management override of controls
• BInventory obsolescence
• CGoing concern uncertainty
• DRelated-party transactions

The fraud triangle (Cressey) consists of which three elements?

• APressure/incentive, opportunity, and rationalization
• BGreed, fear, and ignorance
• CMateriality, judgment, and skepticism
• DInherent risk, control risk, and detection risk

Under AU-C 250 (Consideration of Laws and Regulations), if the auditor identifies a possible noncompliance with laws and regulations, the auditor should:

• AImmediately resign from the engagement
• BObtain understanding of the act and circumstances, evaluate possible effects on financial…
• CReport directly to law enforcement
• DDisregard if amounts appear immaterial

Under AU-C 260 (Communication with Those Charged with Governance), the auditor must communicate which of the following?

• AEach individual journal entry test result
• BThe auditor's responsibilities, planned scope and timing, significant findings, and (when…
• CDetailed staff scheduling assignments
• DInternal firm performance reviews

AU-C 265 distinguishes 'material weakness' from 'significant deficiency' based on:

• AThe dollar amount of the misstatement only
• BThe reasonable possibility that a material misstatement of the financial statements will…
• CWhether the deficiency is in IT or manual controls
• DWhether the entity is public or private

Under AU-C 300, the audit plan should include:

• AOnly the budgeted hours by staff member
• BDescription of the nature, timing, and extent of planned risk assessment and further audi…
• CMarketing strategy for next year
• DList of competitor firms

Under revised AU-C 600 (group audits, effective 2026), the group engagement partner is responsible for:

• APerforming all component audits personally
• BDirecting, supervising, and reviewing the work of component auditors and forming the grou…
• CIssuing the auditor's report only after each component auditor signs
• DReplacing component auditors at year-end

Per AU-C 610, when the auditor uses the work of internal auditors, the auditor must evaluate:

• AThe internal audit function's level of objectivity and competence, and the application of…
• BOnly the internal audit budget
• CWhether internal auditors are CPAs
• DThe internal audit charter only

Under AU-C 620, when an auditor uses the work of an auditor's specialist (e.g., actuary, valuation specialist), the auditor must:

• ABecome equally qualified in the specialist's field
• BEvaluate competence, capabilities, and objectivity; obtain understanding of the specialis…
• CHire only firm-employed specialists
• DRefer to the specialist's work in a standard unmodified report