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Israel CPA — Advanced Financial Accounting (חשבונאות פיננסית מתקדמת)

Practice Questions
Exam Review

Key Facts: CPA Advanced Auditing Exam

4 Hours

Exam Duration

Auditors Council Autumn 2026 exam notice

60

Points Needed to Pass

Auditors Regulations, 5716-1955

979 ILS

Fee per Final Part B Subject

Auditors Council Autumn 2026 exam notice

2

Final Part B Papers

Auditors Council exam structure

2 Years

Internship Required

Auditors Law, 5715-1955

100

Practice Questions

OpenExamPrep Bank

The Auditors Council sets Auditing and Special Audit Problems twice a year as a Final Part B paper — the Autumn 2026 sitting falls on 10 January 2027 at Binyanei Ha'Uma in Jerusalem, running four hours on computer in two parts with a break, for a fee of 979 ILS. A candidate scoring under 60 points fails the subject. The Council's published focus list grades each topic Level 1 to Level 3 and caps the score obtainable on it. This bank offers 100 independent English-language practice questions written by OpenExamPrep to the topics on that list.

Sample CPA Advanced Auditing Practice Questions

Try these sample questions to review concepts for the CPA Advanced Auditing exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under ISA 701 (תקן ביקורת 701) as adopted in Israel, how are Key Audit Matters (KAM / ענייני ביקורת מרכזיים) defined and selected for disclosure in the auditor's report?
A.Those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period, selected from matters communicated with those charged with governance.
B.Any transaction that exceeded 1% of total assets, regardless of whether it involved complex estimates or risks.
C.All matters discussed during board meetings that resulted in a disagreement between management and independent directors.
D.Any accounting matter that led to a material misstatement in prior financial statements that was subsequently restated.
Explanation: ISA 701 defines Key Audit Matters (KAM) as those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period. They are chosen from among the matters communicated with those charged with governance (the audit committee and board of directors), reflecting areas of high assessed risk of material misstatement, significant management judgment/estimates, and significant unusual transactions.
2Under ISA 701, in which rare circumstance may the auditor omit communicating a Key Audit Matter (KAM) in the auditor's report?
A.When law or regulation precludes public disclosure about the matter, or in extremely rare circumstances, when the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of communication.
B.Whenever the chief executive officer requests in writing that the matter be kept confidential to protect commercial secrets.
C.If the matter relates to fair value estimates that have not yet materialized into realized cash flows.
D.If the company's market capitalization has declined by more than 20% during the reported fiscal year.
Explanation: Under paragraph 14 of ISA 701, the auditor shall describe each key audit matter unless: (a) law or regulation precludes public disclosure about the matter; or (b) in extremely rare circumstances, the auditor determines that the matter should not be communicated because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
3Under ISA 705 (תקן ביקורת 705), what is the decisive technical criterion that distinguishes an Adverse Opinion (חוות דעת שלילית) from a Qualified Opinion (חוות דעת מסויגת) regarding misstatements in the financial statements?
A.Whether the identified misstatements are both material AND pervasive (מהותיות ומפושטות) to the financial statements, rather than material but not pervasive.
B.Whether the client is a publicly traded reporting corporation rather than a private corporation.
C.Whether the misstatement involves cash balances rather than non-current assets.
D.Whether the audit committee agreed with the auditor's proposed adjusting journal entries.
Explanation: Under ISA 705, when financial statements contain misstatements: if the effects are material but NOT pervasive, the auditor expresses a Qualified Opinion ('except for'). If the effects are BOTH material AND pervasive (meaning they are not confined to specific elements, represent a substantial proportion of the statements, or are fundamental to users' understanding), the auditor must express an Adverse Opinion.
4Under what conditions must an auditor express a Disclaimer of Opinion (הימנעות מחוות דעת) under ISA 705?
A.When the auditor is unable to obtain sufficient appropriate audit evidence due to a severe limitation of scope, and the possible effects on the financial statements of undetected misstatements could be both material and pervasive.
B.Whenever the company incurs a net operating loss for two consecutive fiscal quarters.
C.When the auditor discovers that the client changed its inventory valuation method from FIFO to weighted average.
D.Whenever there is an ongoing tax audit by the Israel Tax Authority that has not yet reached a final assessment.
Explanation: A Disclaimer of Opinion is mandated under ISA 705.09 when the auditor cannot obtain sufficient appropriate audit evidence on which to base the opinion, and concludes that the possible effects of undetected misstatements could be both material and pervasive. It represents the most severe form of scope limitation.
5What is the technical difference between an 'Emphasis of Matter' paragraph (פסקת הפניית תשומת לב) and an 'Other Matter' paragraph (פסקת עניין אחר) under ISA 706?
A.An Emphasis of Matter paragraph refers to a matter appropriately presented or disclosed in the financial statements that is fundamental to users' understanding, whereas an Other Matter paragraph refers to a matter relevant to users' understanding of the audit, auditor's responsibilities, or audit report that is NOT required to be presented in the financial statements.
B.Emphasis of Matter changes the opinion from clean to qualified, whereas Other Matter leaves the opinion unmodified.
C.Emphasis of Matter is only used in interim review reports, while Other Matter is used exclusively in annual statutory audits.
D.An Other Matter paragraph is used exclusively to report criminal fraud directly to the Ministry of Justice.
Explanation: Under ISA 706: an Emphasis of Matter paragraph highlights a matter already properly disclosed in the financial statements that is of such importance that it is fundamental to user understanding (e.g. major catastrophe, litigation outcome). An Other Matter paragraph communicates matters other than those presented or disclosed in the financial statements that are relevant to understanding the audit or auditor's role. Neither paragraph modifies the audit opinion.
6Under ISA 570 (תקן ביקורת 570) on Going Concern, how must the auditor report when management has made adequate and appropriate note disclosure regarding a material uncertainty related to going concern (ספק משמעותי בדבר הימשכות העסק כעסק חי)?
A.The auditor issues an unmodified opinion and includes a distinct, separate section titled 'Material Uncertainty Related to Going Concern' (ספק משמעותי בדבר הימשכות העסק כעסק חי) that draws attention to the relevant note in the financial statements.
B.The auditor must issue an Adverse Opinion because going concern uncertainty is inherently pervasive.
C.The auditor must issue a Qualified Opinion ('except for') because the uncertainty cannot be resolved by audit procedures.
D.The auditor cannot release the audit report until all debts are paid in full by the controlling shareholder.
Explanation: Under ISA 570.22, if adequate disclosure about the material uncertainty is made in the financial statements, the auditor expresses an unmodified opinion and includes a dedicated section under the heading 'Material Uncertainty Related to Going Concern' (ספק משמעותי בדבר הימשכות העסק כעסק חי), referencing the note and stating that the opinion is not modified in respect of the matter.
7What is the minimum future period that management and the auditor must assess when evaluating the entity's ability to continue as a Going Concern under ISA 570 and Israeli accounting standards?
A.At least 12 months from the reporting date (date of the statement of financial position / תאריך הדוח על המצב הכספי).
B.Exactly 6 months from the date the audit report is signed.
C.Five fiscal years matching the entity's strategic long-term corporate plan.
D.Until the next scheduled annual general meeting of shareholders.
Explanation: Under ISA 570 and IAS 1, management's assessment of the entity's ability to continue as a going concern must cover a period of at least twelve months from the end of the reporting period. The auditor is required to evaluate management's assessment covering this same minimum period.
8Under ISA 560 (תקן ביקורת 560 - אירועים לאחר תאריך המאזן), how should the auditor treat a major post-balance-sheet event occurring between the reporting date and the audit report date that provides evidence of conditions that arose AFTER the reporting date (Type 2 non-adjusting event)?
A.Verify that the event is adequately disclosed in the financial statement notes (including its nature and estimated financial effect); no adjustment to the recognized numbers is made, and if the event is exceptionally significant, consider an Emphasis of Matter paragraph.
B.Force management to retroactively adjust the reported balance sheet numbers to reflect the event.
C.Issue an immediate Adverse Opinion because the historical figures no longer reflect current reality.
D.Ignore the event completely because the auditor's responsibility terminates on the balance sheet date.
Explanation: Under IAS 10 and ISA 560, events occurring after the reporting date that relate to conditions arising after that date (Type 2 / אירועים שאינם מחייבי תיאום, such as a major uninsured fire or post-year-end business acquisition) require note disclosure only, not financial statement adjustment. If critical to user understanding, an Emphasis of Matter paragraph may be added.
9Under ISA 720 (תקן ביקורת 720 מתוקן - אחריות רואה החשבון למידע אחר), what is the auditor's statutory responsibility regarding 'Other Information' (such as the Directors' Report / דוח הדירקטוריון) included in an annual report containing audited financial statements?
A.The auditor must read the Other Information to identify any material inconsistency between it and the financial statements or the auditor's knowledge obtained in the audit, and report any uncorrected material misstatements in a dedicated 'Other Information' section.
B.The auditor must audit every single operational statistic and executive biography in the Directors' Report with full substantive testing.
C.The auditor bears zero responsibility for reading or reviewing any documents outside the audited balance sheet.
D.The auditor must disclaim an opinion on the financial statements whenever the Directors' Report includes optimistic growth projections.
Explanation: ISA 720 requires the auditor to read and consider the Other Information (such as the Board of Directors' Report). While not auditing that information, the auditor must determine whether there is a material inconsistency between the other information and the financial statements, or with the auditor's knowledge obtained during the audit. The auditor's report includes a dedicated 'Other Information' section describing these responsibilities.
10Under Israeli auditing practice and ISA 710 (מספרי השוואה), if the prior period's financial statements were audited by a predecessor auditor (רואה חשבון קודם), how must this be communicated in the current auditor's report?
A.In an Other Matter paragraph (פסקת עניין אחר), stating that the prior period was audited by another auditor, the type of opinion expressed, and the date of that report.
B.By adding the predecessor auditor's signature alongside the current auditor's signature on the main opinion.
C.By issuing a Qualified Opinion on the opening balances automatically in every first-year audit.
D.The predecessor auditor must be named and their personal home address published in the notes.
Explanation: Under ISA 710.13, if the financial statements of the prior period were audited by a predecessor auditor and the auditor is not prohibited by law from referring to the predecessor auditor's report, the auditor shall state in an Other Matter paragraph: (a) that the financial statements of the prior period were audited by the predecessor auditor; (b) the type of opinion expressed by the predecessor auditor and reasons for any modification; and (c) the date of that report.

About the CPA Advanced Auditing Exam

Auditing and Special Audit Problems (ביקורת חשבונות ובעיות ביקורת מיוחדות) is one of the two Final Part B papers of the Israeli CPA qualification, set by the Auditors Council under the Ministry of Justice. The Council publishes a focus list (רשימת מיקוד) that fixes the examinable material and grades every topic by level: Level 1 demands deep understanding and the ability to perform, evaluate and resolve complex and special audit problems; Level 2 requires the use of concepts and techniques to support conclusions; Level 3 requires knowledge of principles and basic concepts only. The list is organised around the Israeli auditing standards — תקני ביקורת (ישראל) — covering the auditor's objectives, documentation, fraud, planning, risk assessment, materiality, evidence, estimates, fair value, going concern, reliance on other auditors, experts, the opinion and its modifications, key audit matters, professional conduct and independence, the auditor's legal responsibility, computerised information systems, the audit of components of internal control over financial reporting under תקנים 910 and 911, and review of interim financial information under תקן סקירה (ישראל) 2410. The official examination is set and sat in Hebrew, and its questions are open written questions rather than multiple choice; this bank is an independent English-language multiple-choice study adaptation and is neither an official translation nor a simulation of the examination's format.

Exam sponsor: Israel Auditors Council, Ministry of Justice (מועצת רואי חשבון, משרד המשפטים). The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

Four-hour computerised examination sat in two parts with a break between them, held at Binyanei Ha'Uma in Jerusalem starting at 11:00

Time Limit

4 hours (240 minutes)

Passing Score

60 points (a candidate scoring under 60 in a subject fails that subject, under the Auditors Regulations, 5716-1955)

Exam / Certification Fees

979 ILS per Final Part B subject (Auditors Council notice for the Autumn 2026 sitting)

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Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

25%

Audit Reports, Audit Opinions & Key Audit Matters (KAM)

Standard audit report structure (ISA 700), opinion modifications (Qualified, Adverse, Disclaimer under ISA 705), Emphasis of Matter and Other Matter paragraphs (ISA 706), Going Concern uncertainty evaluations (ISA 570), Key Audit Matters communication (ISA 701), subsequent events (ISA 560), and dual dating.

20%

Audit Planning, Risk Assessment & Materiality

Identifying and assessing risks of material misstatement under Revised ISA 315, automated processes and IT general controls (GITC), auditor responses (ISA 330), fraud risk presumptions and management override procedures (ISA 240), planning and performance materiality (ISA 320), clearly trivial thresholds (ISA 450), and substantive analytical procedures (ISA 520).

20%

Internal Control over Financial Reporting & ISOX

Audit of components of internal control over financial reporting under תקן ביקורת (ישראל) 911 and the integrated audit under תקן ביקורת (ישראל) 910; regulation 9B and regulation 38C of the Securities Regulations (Periodic and Immediate Reports), 5730-1970; the four assessed control components (entity-level controls, the financial statement preparation and closing process, general IT controls, and processes very material to financial reporting and disclosure); COSO as a suitable and recognised control framework; walkthroughs; design versus operating deficiencies; the definition of a material weakness and the modified report formats in the standard's appendices; small corporation relief under regulation 5D; and review of interim financial information under תקן סקירה (ישראל) 2410.

20%

Special Audit Problems, Accounting Estimates & Group Audits

Auditing accounting estimates under Standard 540 and fair value measurement and disclosure under Standard 545 and IFRS 13, using the work of an auditor's expert under Standard 620, auditing related party transactions and controlling shareholder approvals under Companies Law sections 270 and 275, Purchase Price Allocation (IFRS 3), goodwill impairment testing (IAS 36), Expected Credit Losses (IFRS 9), lease accounting audits (IFRS 16), deferred tax asset recovery (IAS 12), and reliance on other auditors in consolidated financial statements under תקן ביקורת (ישראל) 600.

15%

Professional Ethics, Auditor Independence & Quality Management

Disciplinary offences under section 12 of the Auditors Law and the measures available to the Disciplinary Committee under section 12S, the Conduct Unbecoming Regulations, the Conflict of Interest and Impairment of Independence Regulations, prohibited non-audit services, the five-year partner rotation and two-year cooling-off rule for auditors of institutional bodies, the prohibition on contingent fees, fee concentration and economic dependence, professional secrecy and its statutory exceptions, the auditor's civil liability in tort to third parties, and firm-level and engagement-level quality management.

Preparing for the CPA Advanced Auditing Exam

What You Need to Know

  • Passing score: 60 points (a candidate scoring under 60 in a subject fails that subject, under the Auditors Regulations, 5716-1955)
  • Assessment: Four-hour computerised examination sat in two parts with a break between them, held at Binyanei Ha'Uma in Jerusalem starting at 11:00
  • Time limit: 4 hours (240 minutes)
  • Exam / certification fees: 979 ILS per Final Part B subject (Auditors Council notice for the Autumn 2026 sitting) Official sources

Using Our Practice Resources

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

CPA Advanced Auditing: Suggested Study Strategy

1Master the technical decision matrix between Qualified Opinion ('except for'), Adverse Opinion, and Disclaimer of Opinion under ISA 705 based on materiality and pervasiveness.
2Thoroughly understand the distinct sections of the modern Israeli audit report: Opinion section first, Basis for Opinion immediately following, followed by Material Uncertainty Related to Going Concern and Key Audit Matters.
3Keep תקן ביקורת (ישראל) 910 and תקן ביקורת (ישראל) 911 apart: 910 is the integrated audit for entities whose legislation adopts SOX section 404, while 911 covers the audit of specified control components for other reporting corporations under regulation 9B — and learn the four appendix report formats in 911.
4Review the Israeli Companies Law provisions regarding controlling shareholder transactions (Sections 270, 275) and related party auditing.
5Study quality management at firm and engagement level alongside the Conflict of Interest and Independence Regulations, the rotation rules that apply to auditors of institutional bodies, and prohibited non-audit services.

Frequently Asked Questions

How long is the exam, and where is it held?

The Auditors Council's notice for the Autumn 2026 sitting sets the paper at four hours, sat on computer in two parts with a break between them, at Binyanei Ha'Uma in Jerusalem starting at 11:00. The Autumn 2026 sitting of this paper falls on 10 January 2027, with registration closing on 20 December 2026.

What is the passing score, and what does the exam cost?

Under the Auditors Regulations, 5716-1955, a candidate who scores fewer than 60 points in a subject is regarded as having failed that subject. The Council's Autumn 2026 notice sets the fee at 979 ILS per Final Part B subject, against 522 ILS for each intermediate and Final Part A subject.

Is this practice bank in the same language and format as the official exam?

No. The official paper is set and sat in Hebrew, and its questions are open written questions marked by the Council's examiners. This bank is an independent English-language study adaptation in four-option multiple-choice form, written by OpenExamPrep to the topics on the Council's published focus list. It is not an official translation, not a simulation of the examination's format, and no substitute for practising full open written answers on past papers, which the Council publishes with solutions.

Which standard governs the audit of internal control over financial reporting in Israel?

Two standards apply. תקן ביקורת (ישראל) 910 covers an integrated audit of internal control for entities whose legislation adopts section 404 of Sarbanes-Oxley — banking corporations, insurers and other institutional bodies, and health funds — applying the PCAOB standards as adopted in Israel. תקן ביקורת (ישראל) 911, which consolidated the former תקן ביקורת 104, covers the audit of specified components of internal control for all other reporting corporations under regulation 9B of the Securities Regulations (Periodic and Immediate Reports), 5730-1970.

What is the 'Triple Approval' requirement under Israeli Companies Law?

Under Section 275 of the Israeli Companies Law, an extraordinary transaction between a public company and its controlling shareholder requires three cumulative approvals: (1) the Audit Committee (or Compensation Committee); (2) the Board of Directors; and (3) the General Meeting of shareholders with a special majority of non-interested shareholders. External auditors must verify this governance sequence.

What are the rules regarding Key Audit Matters (KAM) in Israel?

Under ISA 701, Key Audit Matters are mandatory for all public reporting corporations in Israel. They represent matters of most significance in the audit communicated with governance, reflecting areas of high risk of material misstatement, significant management estimates, and significant unusual transactions. A KAM cannot be used as a substitute for modifying the audit opinion under ISA 705.