100+ Free Intermediate Auditor (China) Practice Questions

Audit-Related Basic Knowledge (审计相关基础知识)

Comprehensive foundation in macroeconomic policy, corporate financial management, Chinese Accounting Standards (CAS), and economic law: (1) Macroeconomics: AS-AD equilibrium, fiscal policy tools (spending, taxes, automatic stabilizers, multipliers), monetary policy instruments (deposit reserve ratios, open market operations, rediscount, MLF), inflation mechanisms (demand-pull, cost-push, structural), unemployment types, balance of payments (current vs capital/financial accounts), and China's managed floating exchange rate regime; (2) Corporate Financial Management: time value of money, annuities due, effective annual interest rate (EAR), capital budgeting (NPV, IRR, PI, payback period), cost of capital (WACC with debt tax shield), operating leverage (DOL), financial leverage (DFL), combined leverage (DCL), cash management models (Baumol model), credit terms (cost of forgoing cash discounts), inventory EOQ, and DuPont analysis (ROE = Net Margin × Asset Turnover × Equity Multiplier); (3) Corporate Financial Accounting: CAS 1 inventory valuation (FIFO, weighted average, lower of cost and NRV; LIFO prohibited), CAS 22 expected credit losses and bad debt provisions, fixed assets accelerated depreciation (double declining balance and sum-of-the-years'-digits), subsequent expenditure capitalization vs expensing, CAS 6 R&D expensing vs capitalization, financial asset classifications (Amortized Cost, FVOCI, FVTPL), CAS 2 long-term equity investments (cost method for subsidiaries, equity method for associates), bonds payable effective interest method, employee benefits and deemed sales, CAS 14 five-step revenue model, owner's equity composition, balance sheet contract assets vs receivables, and cash flow statement classification; (4) Legal Principles & Economic Law: PRC Audit Law (scope of government audit, statutory powers to inspect accounts, query bank accounts, freeze assets, issue audit reports and audit decisions, remedies via 60-day government ruling), PRC Company Law (5-year registered capital subscription rule, shareholders' meeting vs board vs supervisory board/audit committee, 10% statutory surplus reserve until 50% threshold), PRC Budget Law (full-caliber four-budget system, local government bond quotas and prohibition of illegal guarantees/implicit debt), PRC Administrative Penalty Law (penalty types, hearing thresholds, 2-year general and 5-year financial security statutes of limitations), and Administrative Reconsideration (60-day limit) and Litigation (6-month limit).

Audit Theory and Practice (审计理论与实务)

In-depth audit methodology, statutory standards, risk control, business cycle substantive testing, and specialized audit types: (1) Audit Theory and Standards: Three pillars of auditing in China (National Audit, Internal Audit, CPA/Independent Audit), CNAO National Audit Standards, Internal Audit Standards, management assertions (Existence, Completeness, Valuation, Rights & Obligations, Presentation), core audit procedures (Inspection, Observation, Inquiry, Confirmation, Recalculation, Reperformance, Analytical Procedures), evidence qualities (sufficiency and appropriateness), evidence hierarchy, working papers three-level review system (三级复核制), audit sampling theory (sampling vs non-sampling risk, risk of overreliance vs underreliance, risk of incorrect acceptance vs incorrect rejection, attribute vs variable difference estimation sampling); (2) Audit Risk and Internal Control: Audit risk model (AR = RMM × DR), financial statement level vs assertion level risk, inverse relation between RMM and acceptable detection risk, materiality benchmarking (overall materiality, performance materiality 50%–75%, clearly trivial threshold 3%–5%), five internal control components (Control Environment, Risk Assessment, Control Activities, Information & Communication, Monitoring), segregation of incompatible duties, walkthrough testing, mandatory substantive procedures, substantive analytical procedures, internal control deficiency classification (material weakness, significant deficiency, general deficiency), and the fraud triangle with mandatory revenue fraud presumption; (3) Enterprise Financial Auditing: Sales and collection cycle (credit approval, 3-route sales cutoff testing, positive/negative accounts receivable confirmations and alternative procedures), purchasing and payment cycle (three-way match of PO, receiving report, and invoice; search for unrecorded liabilities), production and inventory cycle (physical count observation responsibilities, net realizable value testing, manufacturing overhead allocation verification), payroll cycle (headcount and ghost employee detection), financing and investment cycle (debt covenant compliance, Level 1/2/3 fair value testing), monetary funds audit (surprise cash counts, bank reconciliation statement audits, mandatory bank confirmations for all active/closed accounts), related-party transaction audit red flags, and subsequent events (adjusting Type I vs non-adjusting Type II); (4) Special Audits and Emerging Audit Practices: Government performance auditing (the 3Es: Economy, Efficiency, Effectiveness), audit evaluation criteria selection, special audit investigations (macro and cross-departmental focus), computerized auditing and ETL data pipelines, big data multi-source cross-matching analytics, leading cadres economic responsibility audits (during-tenure and exit audits, 'Three Major and One Large' decision oversight), natural resource assets exit audits (land, water, forest, mineral stewardship and ecological red lines), green environmental auditing (dual carbon targets and carbon allowance trading), and audit findings rectification tracking under the statutory 90-day reporting requirement.