CPA AUD Special Matters, Representations & Subsequent Events Practice Questions
Special Matters, Representations & Subsequent Events makes up 7 of every 50 questions on a Tigertest CPA AUD practice test. Here are 10 of the 28 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. When inventory is material, AU-C 501 requires the auditor to attend the physical count unless it is:
- A.Insured against loss
- B.Impracticable to do so
- C.Tracked on a perpetual system
- D.Counted by the client
Answer: B. If attendance is impracticable, the auditor performs alternative procedures. If those cannot give sufficient evidence, the opinion is modified for a scope limitation.
2. During the inventory count, the auditor traces a sample of tags to the final inventory listing. This tests:
- A.Valuation
- B.Rights and obligations
- C.Existence
- D.Completeness
Answer: D. Going from the floor to the listing shows that counted items made it into the records. Going from the listing to the floor tests existence.
3. Inventory held by a third-party warehouse is material. The auditor would generally:
- A.Confirm it with the warehouse
- B.Count it at the client
- C.Rely on the client's records
- D.Exclude it from testing
Answer: A. AU-C 501 calls for confirmation with the custodian, or inspection or other procedures when the inventory is material.
4. The primary purpose of a letter of inquiry to the client's legal counsel is to:
- A.Find any unrecorded revenue
- B.Test the lawyer's own independence
- C.Corroborate management's information
- D.Estimate the year's legal fees
Answer: C. The letter asks the lawyer to confirm or comment on the information management gave about litigation, claims and assessments.
5. The client's lawyer refuses to respond to the auditor's inquiry about a material lawsuit. This is:
- A.A going concern issue
- B.An other-matter issue
- C.A scope limitation
- D.An emphasis-of-matter
Answer: C. A refusal by legal counsel to respond appropriately is a limitation on the scope of the audit, which may lead to a qualified opinion or a disclaimer.
6. When auditing investments measured at fair value using a pricing service, the auditor should understand:
- A.How the service sets prices
- B.The service's fee
- C.Where the service is based
- D.The service's staff count
Answer: A. The auditor evaluates the methods and inputs the pricing service uses, particularly for securities without active market quotes.
7. Under AU-C 570 for a nonissuer, the auditor evaluates going concern for a period of one year after:
- A.The end of the first quarter
- B.The balance sheet date
- C.The date the auditor's report is released
- D.The date the statements are issued
Answer: D. SAS 132 aligns with U.S. GAAP: the reasonable period is one year after the date the statements are issued, or available to be issued. PCAOB AS 2415 uses one year beyond the balance sheet date.
8. Which condition most likely raises substantial doubt about going concern?
- A.An increase in dividends paid
- B.Default on a loan covenant
- C.Launch of a new product line
- D.A change of the company's auditors
Answer: B. Negative trends, loan defaults, loss of a key customer and legal proceedings are conditions that may indicate substantial doubt.
9. Management's plans alleviate the auditor's substantial doubt about going concern. For a nonissuer, the auditor:
- A.Must add a qualification
- B.Needs no going concern section
- C.Must disclaim an opinion
- D.Must give an adverse opinion
Answer: B. When substantial doubt is alleviated by management's plans, the report has no going concern section, but the auditor considers the adequacy of related disclosures.
10. Substantial doubt about going concern remains after considering management's plans, and disclosure is adequate. For a nonissuer, the opinion is:
- A.Adverse on the statements
- B.A disclaimer in every case
- C.Qualified for the going concern doubt
- D.Unmodified, with a separate section
Answer: D. The opinion remains unmodified, with a separate section titled Substantial Doubt About the Entity's Ability to Continue as a Going Concern.
Practice all 28 special matters, representations & subsequent events 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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