CPA Test

CPA Test practice questions, page 5 of 13, with answer review and explanations.

Question 21

Which of the following statements is a basic element of the auditor's standard report?

  1. The disclosures provide reasonable assurance that the financial statements are free of material misstatement.
  2. The auditor evaluated the overall internal control.
  3. An audit includes assessing significant estimates made by management.
  4. The financial statements are consistent with those of the prior period.

Question 22

An auditor may not issue a qualified opinion when:

  1. An accounting principle at variance with GAAP is used.
  2. The auditor lacks independence with respect to the audited entity.
  3. A scope limitation prevents the auditor from completing an important audit procedure.
  4. The auditor's report refers to the work of a specialist.

Question 23

An auditor most likely would express an unqualified opinion and would not add explanatory language to the report if the auditor:

  1. Wishes to emphasize that the entity had significant transactions with related parties.
  2. Concurs with the entity's change in its method of computing depreciation.
  3. Discovers that supplementary information required by FASB has been omitted.
  4. Believes that there is a probable likelihood of a material loss resulting from an uncertainty that is sufficiently supported and disclosed.

Question 24

An auditor would express an unqualified opinion with an explanatory paragraph added to the auditor's report for:

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Question 25

Digit Co. uses the FIFO method of costing for its international subsidiary's inventory and LIFO for its domestic inventory. Under these circumstances, the auditor's report on Digit's financial statements should express an:

  1. Unqualified opinion.
  2. Opinion qualified because of a lack of consistency.
  3. Opinion qualified because of a departure from GAAP.
  4. Adverse opinion.