Multiple Choice Questions From Cpa Examinations

MULTIPLE CHOICE QUESTIONS FROM CPA EXAMINATIONS
114 (Objectives 11, 13, 15) The following questions deal with audits by CPA firms.
Choose the best response.
a. Which of the following best describes why an independent auditor is asked to express
an opinion on the fair presentation of financial statements?
(1) It is difficult to prepare financial statements that fairly present a company’s financial
position, operations, and cash flows without the expertise of an independent auditor.
(2) It is management’s responsibility to seek available independent aid in the
appraisal of the financial information shown in its financial statements.
(3) The opinion of an independent party is needed because a company may not be
objective with respect to its own financial statements.
(4) It is a customary courtesy that all stockholders of a company receive an independent
report on management’s stewardship of the affairs of the business.
b. Independent auditing can best be described as

(1) a branch of accounting.
(2) a discipline that attests to the results of accounting and other functional operations
and data.
(3) a professional activity that measures and communicates financial and business data.
(4) a regulatory function that prevents the issuance of improper financial information.
c. Which of the following professional services is an attestation engagement?

(1) A consulting service engagement to provide computerprocessing advice to a client.
(2) An engagement to report on compliance with statutory requirements.
(3) An income tax engagement to prepare federal and state tax returns.
(4) The preparation of financial statements from a client’s financial records.
d. Which of the following attributes is likely to be unique to the audit work of CPAs as
compared to the work performed by practitioners of other professions?
(1) Independence.
(2) Competence.
(3) Due professional care.
(4) Complex body of knowledge.
115 (Objectives 16, 17) The following questions deal with types of audits and auditors.
Choose the best response.
a. Operational audits generally have been conducted by internal auditors and governmental audit
agencies but may be performed by certified public accountants.
A primary purpose of an operational audit is to provide

(1) a means of assurance that internal accounting controls are functioning as planned.
(2) a measure of management performance in meeting organizational goals.
(3) the results of internal examinations of financial and accounting matters to a
company’s top level management.
(4) aid to the independent auditor, who is conducting the audit of the financial
statements.
b. In comparison to the external auditor, an internal auditor is more likely to be concerned with
(1) internal administrative control.
(2) cost accounting procedures.
(3) operational auditing.
(4) internal control.
c. Which of the following best describes the operational audit?
(1) It requires the constant review by internal auditors of the administrative controls as they relate to the
operations of the company.
(2) It concentrates on implementing financial and accounting control in a newly
organized company.
(3) It attempts and is designed to verify the fair presentation of a company’s results
of operations.
(4) It concentrates on seeking aspects of operations in which waste could be reduced
by the introduction of controls.
d. Compliance auditing often extends beyond audits leading to the expression of
opinions on the fairness of financial presentation and includes audits of efficiency,
economy, effectiveness, as well as
(1) accuracy.
(2) adherence to specific rules or procedures.
(3) evaluation.
(4) internal control.
Unit 2
a. In a common law action against an accountant, lack of privity is a

viable defense if
the plaintif
(1) is the client’s creditor who sues the accountant for negligence.
(2) can prove the presence of gross negligence that amounts to a reckless
disregard
for the truth.
(3) is the accountant’s client.
(4) bases the action upon fraud.
b. The 1136 Tenants case was important chiefly because of its

emphasis on the legal
liability of the CPA when associated with
(1) an SEC engagement.

(2) an audit resulting in a disclaimer of opinion.
(3) letters for underwriters.
(4) unaudited financial statements.
d. Which of the following statements about the Securities Act of

1933 is not true?
(1) The thirdparty user does not have the burden of proof that she/he relied
on the
financial statements.
(2) The third party has the burden of proof that the auditor was either
negligent or
fraudulent in doing the audit.
(3) The thirdparty user does not have the burden of proof that the loss was
caused
by the misleading financial statements.
(4) The auditor will not be liable if he or she can demonstrate due diligence in
performing the audit.

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What is the primary purpose of an operational audit?

What is the main difference between an internal auditor and an external auditor?

MULTIPLE CHOICE QUESTIONS FROM CPA EXAMINATIONS

b. Independent auditing can best be described as

c. Which of the following professional services is an attestation engagement?

A primary purpose of an operational audit is to provide

a. In a common law action against an accountant, lack of privity is a

b. The 1136 Tenants case was important chiefly because of its

(1) an SEC engagement.

d. Which of the following statements about the Securities Act of

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