CPA AUD Planning, Risk Assessment & Materiality Practice Questions
Planning, Risk Assessment & Materiality makes up 5 of every 50 questions on a Tigertest CPA AUD practice test. Here are 10 of the 20 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on the AICPA's 2026 AUD blueprint. Original multiple-choice questions; simulations not included. Not affiliated with the AICPA, NASBA or the PCAOB.
1. The overall audit strategy for a nonissuer sets:
- A.Management's reporting deadline
- B.The scope, timing and direction
- C.The sample items to test
- D.The wording of the opinion
Answer: B. The strategy sets the scope, timing and direction of the audit and guides the detailed audit plan, which lists the nature, timing and extent of procedures.
2. Analytical procedures used in planning an audit are meant mainly to:
- A.Test the operating controls
- B.Confirm balances externally
- C.Replace tests of details
- D.Identify unusual relationships
Answer: D. Planning analytics help the auditor understand the entity and spot unexpected changes that may point to risks of material misstatement.
3. Under SAS 145, which is an inherent risk factor?
- A.Subjectivity of the measurement
- B.The firm's sampling method
- C.The size of the audit fee
- D.The experience of the staff
Answer: A. SAS 145 lists complexity, subjectivity, change, uncertainty and susceptibility to misstatement from management bias or fraud as inherent risk factors.
4. Under SAS 145, a significant risk is one whose assessed inherent risk is:
- A.Reduced by strong internal controls
- B.Found only in revenue accounts
- C.At the upper end of the spectrum
- D.Below performance materiality
Answer: C. SAS 145 assesses inherent risk on a spectrum. A significant risk is one at or near the upper end, or one that other standards require to be treated as significant.
5. Under SAS 145, when the auditor does not plan to test the operating effectiveness of controls, control risk is assessed:
- A.At a moderate level
- B.At the inherent risk level
- C.At the maximum
- D.At the minimum
Answer: C. If the auditor does not plan to rely on controls, control risk is assessed at the maximum so that the risk of material misstatement equals inherent risk.
6. Using the audit risk model, if the assessed risk of material misstatement rises, the acceptable detection risk:
- A.Falls
- B.Stays the same
- C.Rises then falls
- D.Rises
Answer: A. Audit risk equals the risk of material misstatement times detection risk. To hold audit risk at the planned level, detection risk must fall, so substantive procedures increase.
7. To lower detection risk for an account, an auditor would most likely:
- A.Use more inquiry alone
- B.Test controls at an interim date
- C.Raise performance materiality
- D.Test more items at year-end
Answer: D. Lower detection risk calls for more persuasive substantive evidence: larger samples, more reliable procedures, and testing nearer the period end.
8. Performance materiality is set below overall materiality in order to:
- A.Measure deviations from controls
- B.Allow for undetected misstatements
- C.Increase the audit fee charged
- D.Cover only individually material errors
Answer: B. Performance materiality reduces to an appropriately low level the probability that uncorrected and undetected misstatements together exceed materiality for the statements as a whole.
9. Late in the audit, the auditor learns that actual results differ sharply from the figures materiality was based on. The auditor should:
- A.Restart the audit
- B.Revise materiality
- C.Keep the original amount
- D.Disclaim an opinion
Answer: B. Materiality is revisited when the auditor becomes aware of information that would have led to a different amount initially, and procedures are reconsidered.
10. Misstatements below the clearly trivial threshold:
- A.Are reported to the SEC
- B.Lower materiality
- C.Must be booked by the client
- D.Need not be accumulated
Answer: D. The auditor accumulates misstatements identified during the audit other than those that are clearly trivial, meaning inconsequential individually and in total.
Practice all 20 planning, risk assessment & materiality questions, and the rest of the 200-question bank, in the free CPA AUD training sets. Questions you miss come back until you have mastered them.
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