Free CPA: Uniform Certified Public Accountant Examination Exam Questions and Answers

In planning the audit of Brandt Co., an auditor determines materiality for the financial statements as a whole to be $500,000. The auditor expects users to be influenced by misstatements in related-party transactions and disclosures that are well below $500,000. Which of the following is the auditor's most appropriate response?

• AA. Lower materiality for the financial statements as a whole to the amount that sensitive users would accept for related-party disclosures.
• BB. Determine a lower materiality level for related-party items and use it in designing procedures for those items.
• CC. Retain $500,000 for all items and consider the related-party disclosures only when evaluating uncorrected misstatements.
• DD. Lower performance materiality for every account balance by the same percentage, leaving other amounts unchanged.

A retailer's customer table uses CustomerID as its single-column primary key. Each row also stores ZIPCode and SalesRegion, and SalesRegion is determined by ZIPCode rather than by CustomerID. All fields hold single values. What is the lowest normal form that the table violates?

• AA. Third normal form
• BB. Fourth normal form
• CC. Second normal form
• DD. First normal form

A security analyst at Vance Logistics confirms that ransomware is actively encrypting files on a file server and appears to be spreading to systems that have the server's shares mapped. Which of the following actions should the analyst take first?

• AA. Restore the file server from the most recent verified backup.
• BB. Notify the regulators and customers whose data may have been encrypted.
• CC. Analyze system logs to determine how the malware first entered the network.
• DD. Disconnect the affected server and hosts connected to its shares from the network.

An auditor is concerned that accounts payable at December 31 may be understated. Which of the following procedures is most likely to be effective in detecting unrecorded liabilities?

• AA. Vouch a sample of recorded payables to vendor invoices and supporting receiving reports.
• BB. Examine disbursements made after year-end to determine when each obligation was incurred.
• CC. Foot the accounts payable subledger and agree the total to the general ledger.
• DD. Send confirmations to vendors with the largest year-end balances in the subledger.

An auditor plans to select customer balances for confirmation from an accounts receivable aging report generated by the client's accounting system. Which of the following procedures best addresses the completeness and accuracy of the report?

• AA. Obtain a written representation from management that the report is complete and accurate.
• BB. Agree the report total to the general ledger and recompute the aging of a sample of invoices.
• CC. Inquire of the controller about whether the report's programming changed during the year.
• DD. Compare the number of customers on the report to the number on the prior-year report.

Delmar Co. purchased a machine on January 1, Year 1, for $120,000. The machine was depreciated using the straight-line method over a 10-year useful life with no salvage value. On January 1, Year 4, Delmar determined that the machine's total useful life is 8 years and that salvage value remains zero. What amount of depreciation expense should Delmar report for Year 4?

• AA. $10,500
• BB. $12,000
• CC. $15,000
• DD. $16,800

On January 1, Year 1, Kessler Co. entered into a $2,000,000 contract to build a warehouse. Revenue is recognized over time using costs incurred relative to total estimated costs. At December 31, Year 1, costs incurred were $600,000 and total estimated costs were $1,500,000. At December 31, Year 2, cumulative costs incurred were $1,200,000 and total estimated costs were $1,600,000. How much revenue should Kessler recognize in Year 2?

• AA. $600,000
• BB. $700,000
• CC. $800,000
• DD. $1,500,000

Under US GAAP, which of the following costs is included in the cost of inventory?

• AA. Costs of selling goods to customers
• BB. Warehousing costs of finished goods held for sale
• CC. Abnormal spoilage of materials
• DD. Freight-in on goods purchased

A practitioner is engaged to examine Harbor Co.'s compliance with five requirements of a federal grant agreement for the year ended December 31, Year 4. Harbor's records for one requirement were destroyed in a flood, and the practitioner cannot apply alternative procedures to obtain sufficient appropriate evidence about that requirement. The practitioner concludes that the possible effects are material but not pervasive, and that the other four requirements were met. Which of the following opinions should the practitioner express?

• AA. Disclaimer of opinion with a basis for disclaimer paragraph
• BB. Qualified opinion with a basis for qualified opinion paragraph
• CC. Adverse opinion with a basis for adverse opinion paragraph
• DD. Unmodified opinion with an emphasis-of-matter paragraph describing the limitation

In Year 5, Brandt Corp., a calendar-year C corporation, has taxable income of $300,000 before any net operating loss (NOL) deduction. It has a $400,000 NOL carryforward from Year 2 and no other carryforwards. Assuming a 21% corporate tax rate, what is Brandt's Year 5 federal income tax liability?

• AA. $0
• BB. $12,600
• CC. $21,000
• DD. $63,000