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CPA-TEST Online Practice Questions and Answers

Questions 4

Which of the following procedures is usually the first step in reviewing the financial statements of a nonissuer?

A. Make preliminary judgments about risk and materiality to determine the scope and nature of the procedures to be performed.

B. Obtain a general understanding of the entity's organization, its operating characteristics, and its products or services.

C. Assess the risk of material misstatement arising from fraudulent financial reporting and the misappropriation of assets.

D. Perform a preliminary assessment of the operating efficiency of the entity's internal control activities.

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Questions 5

In using the work of a specialist, an auditor of a nonissuer may refer to the specialist in the auditor's report if, as a result of the specialist's findings, the auditor:

A. Becomes aware of conditions causing substantial doubt about the entity's ability to continue as a going concern.

B. Desires to disclose the specialist's findings, which imply that a more thorough audit was performed.

C. Is able to corroborate another specialist's earlier findings that were consistent with management's representations.

D. Discovers significant deficiencies in the design of the entity's internal control that management does not correct.

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Questions 6

On dissolution of a general partnership, distributions will be made on account of:

I. Partners' capital accounts.

II. Amounts owed partners with respect to profits.

III. Amounts owed partners for loans to the partnership.

In the following order:

A. III, I, and II.

B. I, II, and III.

C. II, III, and I.

D. III, II, and I.

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Questions 7

Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell Lark's interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission to the partnership, Ward:

A. Acquired only the right to receive Ward's share of DSJ profits.

B. Has the right to participate in DSJ's management.

C. Is personally liable for partnership liabilities arising before and after being admitted as a partner.

D. Must contribute cash or property to DSJ to be admitted with the same rights as the other partners.

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Questions 8

Initially the nominal interest rate is 8 percent and the inflation rate is 6 percent. One year later, the nominal interest rate rises to 12 percent while the inflation rate rises to 10 percent. It follows that the real rate of interest:

A. Has remained the same.

B. Has fallen.

C. Has risen.

D. Insufficient information given for an answer.

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Questions 9

Stagflation refers to:

A. A combination of rising unemployment and rising real GDP.

B. A combination of rising unemployment and a rising price level.

C. High inflation rates.

D. High unemployment rates.

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Questions 10

If a product has a price elasticity of demand of 2.0, the demand is said to be:

A. Perfectly elastic.

B. Perfectly inelastic.

C. Relatively elastic.

D. Relatively inelastic.

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Questions 11

In situations when management must decide on accepting or rejecting one-time-only special orders, where there is sufficient idle capacity, which one of the following is not relevant to the decision?

A. Absorption costs.

B. Direct costs.

C. Variable costs.

D. Incremental costs.

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Questions 12

When the Economic Order Quantity (EOQ) model is used for a firm, which manufactures its inventory, ordering costs consist primarily of:

A. Insurance and taxes.

B. Storage and handling.

C. Production set-up.

D. Cost of funds.

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Questions 13

According to the FASB conceptual framework, which of the following relates to both relevance and reliability?

A. Comparability.

B. Feedback value.

C. Verifiability.

D. Timeliness.

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Exam Code: CPA-TEST
Exam Name: Certified Public Accountant Test: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, Regulation
Last Update: Mar 25, 2024
Questions: 1241
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