Free AUD Practice Questions

Question 1

A covered member's spouse owns 20 shares of an attest client's common stock in a personal brokerage account. The holding is immaterial to the family. What is the effect on the member's independence?

Accepted Answer

Independence is impaired because an immediate-family direct interest is prohibited

Answer

Independence is not impaired because the holding is immaterial and the spouse is not on the engagement team

Answer

Only a familiarity threat exists, so partner review is sufficient

Answer

Disclosure to those charged with governance restores independence

Question 2

A CPA performs monthly bookkeeping for a private company and is therefore not independent. Management asks the CPA to compile the annual financial statements and understands that a compilation provides no assurance. How may the CPA proceed?

Accepted Answer

Accept and disclose the lack of independence in the compilation report

Answer

Convert the engagement to a review after obtaining representations

Answer

Decline because independence is required for every SSARS engagement

Answer

Accept without disclosure because no assurance is provided and management owns the financial statements

Question 3

During a nonissuer audit, management blocks access to inventory records after the auditor identifies a likely material misstatement. Management then asks to change the engagement to a review so that no modified audit opinion will be issued. Which response is appropriate?

Accepted Answer

Reject the change; if the audit cannot continue, communicate and withdraw when permitted

Answer

Accept the change because a review requires less evidence and management requested it before the audit report was released

Answer

Accept the change and omit any reference to the original audit

Answer

Issue a compilation report that describes the inventory limitation

Question 4

A plan administrator elects an ERISA Section 103(a)(3)(C) audit using a written certification from a regulated bank that certifies the investment information as both complete and accurate. The auditor concludes that the election is valid. Which statement correctly characterizes the engagement?

Accepted Answer

It remains an audit under AU-C 703, and the valid election is not a scope limitation

Answer

The certification converts the engagement into a review

Answer

The election is a management-imposed scope limitation

Answer

The auditor may perform the engagement without independence

Question 5

An accounts payable supervisor can create vendors, change vendor bank details, and release electronic payments. A treasury clerk independently reconciles the bank account each month. Which redesign most directly reduces the risk of payments to fictitious vendors?

Accepted Answer

Assign vendor-master changes to someone who cannot release payments

Answer

Require the supervisor to review her own vendor changes weekly

Answer

Replace electronic payments with checks while retaining the same access

Answer

Have internal audit inspect the vendor file once each year

Question 6

A payroll processor's current SOC 1 Type 2 report has an unmodified opinion and identifies quarterly review of privileged payroll access as a complementary user-entity control. The audit client has never performed that review. What is the best conclusion about planned control reliance?

Accepted Answer

Reliance is unsupported unless effective alternative user controls are tested or the audit response is revised

Answer

The Type 2 report alone supports reliance for the full period

Answer

A SOC 2 Type 2 report would eliminate the missing user control

Answer

The payroll balance must be treated as materially misstated

Question 7

An auditor sets acceptable audit risk at 4%. Inherent risk is assessed at 80% and control risk at 50%. Which acceptable detection risk and audit response are consistent with the audit risk model?

Accepted Answer

10%; obtain more persuasive evidence or increase the extent of testing

Answer

2.5%; reduce testing because a low allowable detection risk means the financial statements are less risky

Answer

8%; rely primarily on management inquiry

Answer

20%; move substantive procedures earlier in the year

Question 8

Overall materiality for a nonissuer audit is $500,000. The auditor finds a $45,000 classification error that, if corrected, would cause the company to violate a debt covenant and lose access to its revolving credit line. How should the auditor evaluate the error?

Accepted Answer

Treat the covenant effect as a qualitative indication of materiality

Answer

Ignore it because it is less than overall materiality

Answer

Classify it as clearly trivial because net income is unchanged

Answer

Reduce overall materiality to $45,000 and use that amount as tolerable misstatement for every account

Question 9

A full-population journal-entry analysis identifies twelve round-dollar revenue entries posted by the CFO on Sundays after the period-end close. Each entry reverses in January and bypassed the normal approval workflow. What should the engagement team do next?

Accepted Answer

Inspect support and business purpose, expand journal testing, and reassess override risk

Answer

Conclude that fraud occurred, notify governance immediately, and issue an adverse opinion without further testing

Answer

Ignore the entries because they reversed in the next period

Answer

Obtain a written representation from the CFO and end the test

Question 10

A nonprofit expended $60 million in total federal awards during the year, including $1.75 million under one program. No large loan programs are present. Under the current Uniform Guidance thresholds, which conclusion follows?

Accepted Answer

A single audit is required, and the $1.75 million program is Type B because the Type A threshold is $1.8 million

Answer

No single audit is required because the individual program is below $2 million

Answer

A single audit is required, and every program above $1 million is Type A

Answer

A program-specific audit is mandatory, and the Type A threshold is $3 million

Free AUD Practice Questions

Domain 1: Ethics, Professional Responsibilities and General Principles (15-25%)

Question 1

Question 2

Question 3

Question 4

Domain 2: Assessing Risk and Developing a Planned Response (25-35%)

Question 5

Question 6

Question 7

Question 8

Question 9

Question 10

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