What are the CPA Exam Pretest Questions?

The CPA Exam Pretest Questions serve as an optional diagnostic tool to gauge your readiness for the actual exam. These questions are not part of the scored exam but provide valuable insights into your strengths and areas requiring further preparation.

By taking the pretest, you can identify specific topics or concepts where you excel and those that demand additional attention. This feedback enables you to customize your study plan, allocate more time to challenging areas, and improve your chances of success on the main exam.

How Many CPA Questions Are The Pretest?

The CPA Exam Pretest Questions typically consist of 15-20 multiple-choice questions per section. This equates to a total of approximately 75-100 pretest questions across all four exam sections:

• Financial Accounting and Reporting (FAR)
• Auditing and Attestation (AUD)
• Business Environment and Concepts (BEC)
• Regulation (REG)

It's important to note that the pretest questions are not scored and do not count towards your final exam grade. Their primary purpose is to provide diagnostic feedback and help you identify areas where you may need additional preparation before taking the actual CPA Exam.

What Are The Pretest Questions On the CPA Exam?

CPA Exam Pretest Questions are a set of optional, diagnostic questions that provide insights into your readiness for the actual exam. These questions are not scored and do not count towards your final grade. Instead, they serve as a valuable tool to:

• Identify strengths and weaknesses: By taking the pretest, you can assess your understanding of specific topics and concepts, helping you identify areas where you excel and those requiring further preparation.
• Customise study plan: The feedback from the pretest enables you to tailor your study plan, allocate more time to challenging areas, and focus on improving your overall performance.
• Reduce test anxiety: Familiarising yourself with the exam format and question types through the pretest can help reduce anxiety and improve your confidence on the actual exam day.

Overall, CPA Exam Pretest Questions are a valuable resource to help you prepare effectively and increase your chances of success on the main exam.

Is A 75% On The CPA Exam Passing?

No, a 75% on the CPA Exam is not passing. The CPA Exam is scored on a scale of 0 to 99, and a score of 75% falls below the passing threshold. To pass each section of the CPA Exam, you must achieve a scaled score of 75 or higher.

The CPA Exam is rigorous and challenging, and it requires extensive preparation and a thorough understanding of the exam content. While a score of 75% on the CPA Exam

Pretest Questions may indicate a good level of preparedness, it's important to note that the pretest questions are not scored and do not directly translate to your performance on the actual exam.

To increase your chances of passing the CPA Exam, it's crucial to:

• Dedicate sufficient time to studying and preparing.
• Use high-quality study materials and resources.
• Practice regularly and take mock exams.
• Identify and focus on areas where you need improvement.

Remember, passing the CPA Exam requires consistent effort, dedication, and a commitment to excellence.

How Many People Pass All 4 CPA Exams On The First Attempt?

The percentage of individuals who pass all four CPA exams on their first attempt varies from year to year. According to the American Institute of CPAs (AICPA), the pass rates for the CPA Exam in 2022 were as follows:

• FAR: 47.2%
• AUD: 54.1%
• BEC: 62.2%
• REG: 58.4%

Based on these pass rates, the probability of passing all four CPA exams on the first attempt can be calculated as follows:

Probability = (FAR pass rate) x (AUD pass rate) x (BEC pass rate) x (REG pass rate)

Probability = 0.472 x 0.541 x 0.622 x 0.584

Probability ≈ 0.096 or 9.6%

Therefore, approximately 9.6% of individuals who take all four CPA exams on their first attempt pass all four exams.

It's important to note that passing the CPA Exam requires significant preparation, dedication, and a strong understanding of the exam content. Many candidates make multiple attempts to pass all four sections.

CPA Exam Pretest Questions and Answers 2025

The CPA Exam Pretest Questions for 2025 are not yet available, as the AICPA typically releases them closer to the exam date. However, you can prepare for the pretest and the actual exam by:

• Reviewing the CPA Exam Blueprints: These documents outline the content covered in each section of the exam.
• Using high-quality study materials: Choose study materials that are comprehensive, up-to-date, and align with the CPA Exam Blueprints.
• Practicing regularly: Solve practice questions, take mock exams, and review your performance to identify areas where you need improvement.
• Taking the AICPA Practice Exam: This exam simulates the actual CPA Exam and provides valuable insights into your strengths and weaknesses.

Once the CPA Exam Pretest Questions for 2025 are released, it's advisable to take them to assess your readiness and identify areas that require additional focus. Remember, the pretest questions are not scored and serve as a diagnostic tool to help you prepare more effectively for the main exam.

Sample CPA Exam Questions and Answers PDF

The AICPA provides a variety of sample CPA Exam questions and answers in PDF format to help candidates prepare for the exam. These sample questions are designed to give you a sense of the format, difficulty, and content of the actual exam.

To access the sample CPA Exam questions and answers PDF, you can visit the AICPA's website. Once you have downloaded the PDF, you will find multiple-choice questions from all four sections of the exam:

• Financial Accounting and Reporting (FAR)
• Auditing and Attestation (AUD)
• Business Environment and Concepts (BEC)
• Regulation (REG)

Each sample question includes the correct answer and an explanation. By reviewing these sample questions, you can assess your understanding of the exam content and identify areas where you may need additional study.

It's important to note that the sample CPA Exam questions and answers PDF are not a comprehensive list of all possible questions that may appear on the actual exam. However, it provides valuable insights into the types of questions you can expect and helps you prepare more effectively.

Practice Free with Accessible CPA Exam Sample Tests From Dumpsarena

Dumpsarena offers a range of free, accessible CPA Exam sample tests to help candidates prepare for the exam. These sample tests are designed to provide a realistic preview of the actual exam, allowing you to assess your knowledge and identify areas for improvement.

To access the free CPA Exam sample tests from Dumpsarena, you can visit their website and select the relevant section of the exam you wish to practice. Each sample test typically consists of multiple-choice questions covering various topics within that section.

The benefits of using Dumpsarena's free CPA Exam sample tests include:

• Realistic practice: The sample tests simulate the format and difficulty of the actual CPA Exam, helping you become familiar with the types of questions you can expect.
• Comprehensive coverage: The sample tests cover a wide range of topics within each section of the exam, ensuring that you have a well-rounded understanding of the content.
• Immediate feedback: After completing each sample test, you will receive immediate feedback on your performance, allowing you to identify your strengths and weaknesses.

By practicing with Dumpsarena's free CPA Exam sample tests, you can enhance your preparation, build confidence, and increase your chances of success on the actual exam.

Is the CPA Exam Very Hard?

The CPA Exam is widely regarded as one of the most challenging professional exams in the world. It requires a deep understanding of accounting principles, auditing procedures, business regulations, and other related topics. The exam is designed to test candidates' knowledge, skills, and judgment in various areas of accounting and finance. It consists of four sections:

• Financial Accounting and Reporting (FAR)
• Auditing and Attestation (AUD)
• Business Environment and Concepts (BEC)
• Regulation (REG)

Each section covers a broad range of topics, and candidates are expected to demonstrate a high level of proficiency in all areas. The exam is also known for its rigorous time constraints, which add to the challenge.

While the CPA Exam is undoubtedly difficult, it is not impossible to pass. With proper preparation, dedication, and a strong work ethic, candidates can increase their chances of success. This includes studying from high-quality materials, practicing regularly, and seeking support from experienced professionals.

What Are the 4 Types Of CPA Exams?

The CPA Exam consists of four sections, each covering a distinct area of accounting and finance:

• Financial Accounting and Reporting (FAR): This section tests candidates' knowledge of financial accounting principles, including the preparation and analysis of financial statements.
• Auditing and Attestation (AUD): This section covers auditing procedures, risk assessment, and the reporting of audit findings.
• Business Environment and Concepts (BEC): This section assesses candidates' understanding of the business environment, including economics, corporate governance, and information systems.
• Regulation (REG): This section covers federal and state regulations related to accounting, auditing, and taxation.

Each section of the CPA Exam is designed to test candidates' knowledge and skills in a specific area of accounting and finance. To earn the CPA credential, candidates must pass all four sections of the exam within 18 months.

Is CPA Harder Than the MCAT?

Comparing the difficulty of the CPA Exam and the MCAT (Medical College Admission Test) is subjective and depends on individual strengths and weaknesses. However, both exams are widely recognized as challenging and require extensive preparation. The CPA Exam is a four-part exam that tests candidates' knowledge and skills in accounting, auditing, business environment, and regulation. It is designed to assess the competencies required for professional accountants and auditors.

The MCAT is a standardized exam required for admission to medical schools in the United States and Canada. It tests candidates' knowledge and skills in the natural sciences, verbal reasoning, and critical thinking.

Both exams require a significant investment of time and effort to prepare. Candidates typically spend several months studying and practicing before taking either exam.

Ultimately, the difficulty of the CPA Exam and the MCAT depends on the individual taking the exam and their background and preparation. Both exams are challenging, but they test different areas of knowledge and skills.

How Long is the Test To Become A CPA?

The CPA Exam is a four-part exam that tests candidates' knowledge and skills in accounting, auditing, business environment, and regulation. Each section of the exam is four hours long, for a total of 16 hours of testing.

In addition to the exam time, candidates should also factor in time for preparation. Most candidates spend several months studying and practicing before taking the exam. The amount of time needed to prepare will vary depending on the individual's background and experience.

Once candidates have passed all four sections of the CPA Exam, they will need to meet the experience requirement set by their state board of accountancy. This typically involves working under the supervision of a licensed CPA for some time.

The entire process of becoming a CPA can take several years, but it is a rewarding career path for those who are interested in accounting and finance.

CPA Exam Registration

To register for the CPA Exam, candidates must meet the following requirements:

• Be at least 18 years old
• Have a high school diploma or equivalent
• Have completed the required college coursework

Candidates can register for the CPA Exam online through the AICPA's website. The registration process involves creating an account, providing personal and educational information, and paying the registration fee.

Once candidates have registered for the exam, they will need to schedule their exam appointments. Exam appointments are available at Prometric testing centers throughout the United States and internationally.

Candidates are encouraged to register for the CPA Exam early, as exam appointments can fill up quickly. The AICPA recommends that candidates register six months before their desired exam date.

Which Study Material Is Best For CPA USA?

The best study material for the CPA Exam depends on the individual candidate's learning style and preferences. However, some of the most popular and well-regarded study materials include:

• Becker CPA Review: Becker is a leading provider of CPA Exam review courses and materials. Their materials are comprehensive and well-organized, and they offer a variety of study options to fit different learning styles.

• Gleim CPA Review: Gleim is another popular provider of CPA Exam review materials. Their materials are known for their depth and detail, and they offer a variety of study aids, including practice questions, flashcards, and simulations.

• Wiley CPAexcel: Wiley is a well-established provider of accounting and finance education materials. Their CPA Exam review materials are known for their clear and concise explanations, and they offer a variety of study options, including online courses, books, and practice questions.

In addition to these commercial study materials, candidates may also find it helpful to use materials from the AICPA, such as the CPA Exam Blueprints and the CPA Exam Practice Exam. These materials can help candidates to understand the content and format of the exam.

Ultimately, the best way to choose study materials for the CPA Exam is to research different options and find materials that fit the individual candidate's learning style and needs.

Why Choose This Test Prep CPA-Test Certification?

There are many reasons to choose CPA-Test Certification as your test prep provider for the CPA Exam. Here are a few of the benefits that we offer:

• Expert instructors: Our instructors are all experienced CPAs who have a deep understanding of the CPA Exam and the accounting profession.
• Comprehensive materials: Our study materials are comprehensive and up-to-date, and they cover all of the topics tested on the CPA Exam.
• Personalized learning: We offer a variety of study options to fit different learning styles and schedules, and we provide personalized feedback to help you track your progress and identify areas where you need improvement.
• Proven results: Our students have a high pass rate on the CPA Exam, and we are confident that we can help you achieve your goals.

In addition to these benefits, we also offer several features that make our test prep program unique:

• CPA Exam Pretest Questions: Our CPA Exam Pretest Questions are a valuable tool to help you assess your readiness for the exam and identify areas where you need additional study.
• Unlimited practice questions: We offer unlimited practice questions so that you can get the practice you need to succeed on the exam.
• Money-back guarantee: We are so confident in our test prep program that we offer a money-back guarantee.

If you are serious about passing the CPA Exam, then CPA-Test Certification is the right choice for you. We have the experience, the materials, and the support to help you achieve your goals.

What You'll Learn with DumpsArena CPA Exam Pretest Questions?

With DumpsArena CPA Exam Pretest Questions, you'll learn:

• The format and difficulty of the actual CPA Exam
• The specific topics and concepts that are tested on each section of the exam
• Your strengths and weaknesses so that you can focus your studies more effectively

Our CPA Exam Pretest Questions are designed to give you a realistic preview of the actual exam. They are written by experienced CPAs who have a deep understanding of the exam content and format.

By taking our CPA Exam Pretest Questions, you can identify areas where you need additional study. This will help you to focus your studies more effectively and increase your chances of passing the exam on your first attempt.

In addition to our CPA Exam Pretest Questions, we also offer a variety of other study materials, including:

• Full-length practice exams
• Unlimited practice questions
• Detailed video explanations
• Personalized study plans

With our comprehensive study materials and support, you can be confident that you're well-prepared to pass the CPA Exam.

CPA Exam Pretest Questions Sample

Certified Public Accountant Test: Auditing and

Attestation, Business Environment and

Concepts, Financial Accounting and Reporting, Regulation

Test Prep CPA-Test

Version Demo

Total Demo Questions: 20

Total Premium Questions: 1241

Buy Premium PDF: https://dumpsarena.com/test-prep-dumps/cpa-test/

Topic Break Down

Topic No. of Questions

Topic 1, Auditing and Attestation 500

Topic 2, Business Environment and Concept 527

Topic 3, Financial Accounting and Reporting 145

Topic 4, Regulation 69 Total 1241

QUESTION NO: 1

ABC Co. changed from the cash basis of accounting to the accrual basis of accounting in 1994. The cumulative effect of this change should be reported in ABC's 1994 financial statements as a:

A. Prior period adjustment resulting from the correction of an error.

B. Prior period adjustment resulting from the change in accounting principle.

C. Component of income before extraordinary item.

D. Component of income after extraordinary item.

Explanation:

Choice "a" is correct. The cash basis for financial reporting is not a generally accepted accounting basis of accounting (GAAP); therefore, it is an error. Correction of an error from a prior period is a reported as prior period adjustment to retained earnings.

Choice "b" is incorrect. Cash basis reporting is not an accounting principle under accrual accounting principles. Thus, the change from cash basis is not reported as a change in accounting principle. In addition, changes in accounting principles are not prior period adjustments; instead, they are treated retrospectively. Choices "c" and "d" are incorrect. Correction of prior period errors does not affect the current year's income statement.

QUESTION NO: 2

Karen Parker wants to establish an environmental testing company that would specialize in evaluating the quality of water found in rivers and streams. However, Parker has discovered that she needs either certification or approval from five separate local and state government agencies before she can commence business. Also, the necessary equipment to begin would cost several million dollars. However, Parker believes that if she can obtain capital resources, she can gain market share from the two major competitors. The large capital outlay necessary for the equipment is an example of a(n):

A. Entry barrier.

B. Minimum efficiency scale.

C. Created barrier.

D. External cost.

Explanation:

Choice "a" is correct. Large capital (money) requirements are the basic example of barriers to entry. A barrier to entry effectively prevents firms from entering the market to compete against existing firms.

Choice "b" is incorrect. The minimum efficient scale is the output level at which long-run average costs are minimized. Here, Parker has not even been able to enter the industry.

Choice "c" is incorrect. A created barrier is made by firms already in the industry. Here, Parker's barrier was not created.

Choice "d" is incorrect. An external cost is a cost that the company does not account for but passes on to the detriment of society.

QUESTION NO: 3

Which of the following controls would an entity most likely use in safeguarding against the loss of marketable securities?

A. An independent trust company that has no direct contact with the employees who have recordkeeping responsibilities has possession of the securities.

B. The internal auditor verifies the marketable securities in the entity's safe each year on the balance sheet date.

C. The independent auditor traces all purchases and sales of marketable securities through the subsidiary ledgers to the general ledger.

D. A designated member of the board of directors controls the securities in a bank safe deposit box.

Explanation:

Choice "a" is correct. The control most likely to be used by an entity in safeguarding against the loss of marketable securities is that an independent trust company that has no direct contact with the employees who have recordkeeping responsibilities, has possession of the securities. For good internal control over the safeguarding of any asset, the individual who has the record-keeping responsibilities over that asset should never have access to it.

Choice "b" is incorrect. Verifying the securities held in the entity's safe would detect that the loss occurred, but it would not prevent the loss.

Choice "c" is incorrect. Tracing purchases and sales of marketable securities would verify that the transactions were properly recorded, but would not safeguard against loss.

Choice "d" is incorrect. Having one person control the securities in a bank safe deposit box is a weakness in internal control because that one person can steal the securities. A better system requires that at least two employees have joint control over the securities in a bank safe deposit box.

QUESTION NO: 4

Which of the following would an auditor most likely use in determining the auditor's preliminary judgment about materiality?

A. The anticipated sample size of the planned substantive tests.

B. The entity's annualized interim financial statements.

C. The results of the internal control questionnaire.

D. The contents of the management representation letter.

Explanation:

Choice "b" is correct. The auditor's preliminary judgment about materiality is generally based on either annualized interim financial statements or annual financial statements from a prior period.

Choice "a" is incorrect. The anticipated sample size for substantive tests is irrelevant in making a preliminary judgment about materiality.

Choice "c" is incorrect. The results of the internal control questionnaire would be relevant for making a preliminary assessment of control risk; however, these results are irrelevant for determining a preliminary level of materiality.

Choice "d" is incorrect. The management representation letter is obtained at the end of the audit and would not be available when preliminary assessments of materiality are made during planning.

QUESTION NO: 5

Clark bought Series EE U.S. Savings Bonds after 1989. Redemption proceeds will be used for payment of college tuition for Clark's dependent child. One of the conditions that must be met for tax exemption of accumulated interest on these bonds is that the:

A. Purchaser of the bonds must be the sole owner of the bonds (or joint owner with his or her spouse).

B. Bonds must be bought by a parent (or both parents) and put in the name of the dependent child.

C. Bonds must be bought by the owner of the bonds before the owner reaches the age of 24.

D. Bonds must be transferred to the college for redemption by the college rather than by the owner of the bonds.

Explanation:

Choice "a" is correct. One of the conditions that must be met for tax exemption of accumulated interest on the bonds is that the purchaser of the bonds must be the sole owner of the bonds (or joint owner with his or her spouse).

Choice "b" is incorrect. The bonds must be bought and put in the name of the owner or co-owner, not in the name of the dependent child.

Choice "c" is incorrect. The owner must be at least 24 years old before the bond issue date.

Choice "d" is incorrect. There is no requirement that the bonds must be transferred to the college for redemption by the college rather than by the owner of the bonds.

QUESTION NO: 6

ABC Co. is considering the acquisition of a new, more efficient press. The cost of the press is $360,000, and the press has an estimated six-year life with zero salvage value. ABC uses straight-line depreciation for both financial reporting and income tax reporting purposes and has a 40 percent corporate income tax rate. In evaluating equipment acquisitions of this type,

ABC uses a goal of a four-year payback period. To meet ABC's desired payback period, the press must produce a minimum annual before-tax, operating cash savings of:

A. $90,000

B. $110,000

C. $114,000

D. $150,000

Explanation:

Choice "b" is correct. $110,000 minimum annual before-tax operating cash savings.

Step 1: Determine the after-tax annual cash savings. The question provides the cash outflow and the desired payback period (which is calculated using after-tax cash flows). The $90,000 annual after-tax cash flow is calculated as follows:

Step 2: Determine the amount of the annual depreciation expense. Because the question asks for annual before-tax cash savings, we will need to convert the $90,000 after-tax cash savings we calculated in Step 1, above, to a before-tax amount.

The depreciation tax shield plays a role in the after-tax cash flows, so the annual depreciation of $60,000 must be calculated, as follows:

Step 3: Use algebra to determine the before-tax cash savings. Before-tax cash savings are equal to the after-tax cash savings plus the taxes paid. So: Let B = annual before-tax operating cash savings

$90,000 after tax cash savings + [(B − $60,000 depreciation expense ) (.40 tax rate)] = B

$90,000 + [(B − $60,000) (.40)] = B

$90,000 + [.40B − $24,000] = B

$90,000 − $24,000 = .60B

$66,000 = .60B

$110,000 = B = annual before-tax operating cash savings

QUESTION NO: 7

Which of the following events occurring in the year under audit would most likely indicate that internal controls utilized in previous years may be inadequate in the year under audit?

A. The entity announced that the internal audit function would be eliminated after the balance sheet date.

B. The audit committee chairperson unexpectedly resigned during the year under audit.

C. The chief financial officer waived approvals on all checks to one vendor to expedite payment.

D. The frequency of accounts payable check runs was changed from biweekly to weekly.

Explanation:

Choice "c" is correct. Vouchers should be approved before payment occurs. Overriding this control to expedite payment may result in unauthorized payments being made. The auditor would need to consider this change in evaluating current controls and determining the nature, timing, and extent of testing.

Choice "a" is incorrect. If the internal audit function is eliminated after the balance sheet date, there would be little effect on the current year's audit.

Choice "b" is incorrect. Resignation of the audit committee chairperson would not imply that internal controls are less adequate than in the past, as long as a new, competent person steps up to become chair.

Choice "d" is incorrect. Changing the frequency of the accounts payable check runs from biweekly to weekly would not automatically imply that controls are inadequate. The auditor would need to review the new procedures to determine whether adequate controls were still in place.

QUESTION NO: 8

If consumption is $70b, investment $50b, government spending $20b, exports $7b, and imports $5b, what is GDP?

A. $152b.

B. $138b.

C. $140b.

D. $142b.

Explanation:

Choice "d" is correct. By the expenditure approach to measuring GDP, GDP equals: Consumption + Investment + Government Spending + Exports - Imports. Thus, GDP = 70 + 50 + 20 + 7 - 5 = 142b.

QUESTION NO: 9

The ABC Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has identified a source of funds which is given below:

Pay a factor to buy the company's receivables, which average $125,000 per month and have an average collection period of 30 days. The factor will advance up to 80 percent of the face value of receivables at 10 percent and charge a fee of 2 percent on all receivables purchased. The controller estimates that the firm would save $24,000 in collection expenses over the year. Assume the fee and interest are not deductible in advance.

Assume a 360-day year in all of your calculations. The cost of factoring is:

A. 12.0 percent.

B. 14.8 percent.

C. 16.0 percent.

D. 20.0 percent.

Explanation:

QUESTION NO: 10

In a decision analysis situation, which one of the following costs is generally not relevant to the decision?

A. Incremental cost.

B. Avoidable cost.

C. Historical cost.

D. Opportunity cost.

Explanation:

Choice "c" is correct. Historical cost is generally not relevant in a decision analysis situation. All of the following costs are relevant in a decision analysis situation:

A. Incremental cost

B. Avoidable cost

D. Opportunity cost

QUESTION NO: 11

An audit supervisor reviewed the work performed by the staff to determine if the audit was adequately performed. The supervisor accomplished this by primarily reviewing which of the following?

A. Checklists.

B. Working papers.

C. Analytical procedures.

D. Financial statements.

Explanation:

Choice "b" is correct. Audit documentation, or working papers, comprises the principal record of audit procedures performed, evidence obtained, and conclusions reached. Reviewing the working papers allows a supervisor to understand the work performed and the evidence obtained, and to evaluate whether the audit was adequately performed.

Choice "a" is incorrect. Checklists might be used within the audit documentation, but checklists alone would not provide a comprehensive record of the audit procedures performed, the evidence obtained, and the conclusions reached.

Choice "c" is incorrect. Analytical procedures might be documented within the working papers, but such procedures alone would not provide a comprehensive record of the audit procedures performed, the evidence obtained, and the conclusions reached.

Choice "d" is incorrect. Reviewing the financial statements would provide no information regarding the audit procedures performed, the evidence obtained, or conclusions reached, and therefore would provide no basis on which to review the work performed by the staff.

QUESTION NO: 12

According to the FASB conceptual framework, the process of reporting an item in the financial statements of an entity is:

A. Allocation.

B. Matching.

C. Realization.

D. Recognition.

Explanation:

Choice "d" is correct. Recognition is the process of recording an item in the financial statements of an entity. SFAC 5 para. 6.

Choice "a" is incorrect. Allocation is the accounting process of assigning or distributing an amount according to a plan or a formula. SFAC 6 para. 142.

Choice "b" is incorrect. Matching of costs and revenues is simultaneous or combined recognition of the revenues and expenses that result directly and jointly from the same transactions or other events. SFAC 6 para. 146.

Choice "c" is incorrect. Realization is the process of converting noncash resources and rights into money. SFAC 6 para. 143.

QUESTION NO: 13

When an auditor increases the planned assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase the:

A. Extent of tests of details.

B. Level of inherent risk.

C. Extent of tests of controls.

D. Level of detection risk.

Explanation:

Choice "a" is correct. When an auditor increases the planned assessed level of control risk because certain control activities were determined to be ineffective, detection risk must be reduced accordingly. This may be accomplished by increasing the extent of tests of details.

Choice "b" is incorrect. The level of inherent risk is not directly related to the planned level of control risk.

Choice "c" is incorrect. The auditor performs tests of controls to evaluate the operating effectiveness of those controls. Once they have been determined to be ineffective, there would be no reason to perform further tests of those controls.

Choice "d" is incorrect. The level of detection risk that the auditor could accept would decrease if the planned level of control risk increased.

QUESTION NO: 14

In which type of business entity is the entire ownership interest most freely transferable?

A. General partnership.

B. Limited partnership.

C. Corporation.

D. Limited liability company.

Explanation:

Choice "c" is correct. Among the business entities listed, entire ownership interests are most freely transferable in a corporation. Unless transferability is restricted by contract (restricted shares or voting trusts or voting agreements), there are no restrictions on the sale of corporate stock (the common stock represents the stockholders' ownership interest). The right to transfer ownership interests freely is one of the advantages of the corporate form of business.

Choice "a" is incorrect. A general partner in a general partnership may assign his or her right to receive profits or surplus. A general partner cannot assign his interest and confer partnership status on the assignee without the unanimous consent of all other partners.

Choice "b" is incorrect. Both general partners and limited partners in a limited partnership may assign the right to receive profits and surplus. Neither general nor limited partners can confer general or limited partnership status on the assignee without the unanimous consent of all general and limited partners.

Choice "d" is incorrect. In most states, limited liability company (LLC) members may not sell and confer ownership interest without the consent of all LLC members.

QUESTION NO: 15

According to the FASB conceptual framework, the usefulness of providing information in financial statements is subject to the constraint of:

A. Consistency.

B. Cost-benefit.

C. Reliability.

D. Representational faithfulness.

Explanation:

Choice "b" is correct. The pervasive constraint on providing information in financial statements is that the cost should be outweighed by the benefit to be derived from providing the information.

SFAC 1 para. 23, SFAC 2 para. 133.

Choice "a" is incorrect. Consistency is an underlying concept for financial statements (and a secondary quality of accounting information), but it is not a constraint on providing information. SFAC 2 para. 120.

Choice "c" is incorrect. Reliability is a primary quality of accounting information and an underlying concept for financial statements, but it is not a constraint on providing information. SFAC 2 para. 58.

Choice "d" is incorrect. Representational faithfulness is an underlying concept for financial statements (as an element of reliability), but it is not a constraint on providing information.

QUESTION NO: 16

Symbol A most likely represents:

A. Remittance advice file.

B. Receiving report file.

C. Accounts receivable master file.

D. Cash disbursements transaction file.

Explanation:

Choice "c" is correct. The accounts receivable master file is the file most likely to be affected by sales and cash receipts transactions, as noted immediately above symbol "A" in the flowchart. Choice "a" is incorrect. Remittance bits of advice are used to update the accounts receivable file, but a separate "remittance advice file" generally is not created. Choice "b" is incorrect.

The inventory/purchase/cash disbursements cycle would include a receiving report file, not the revenue cycle. Choice "d" is incorrect. Cash disbursements are not part of the revenue cycle.

QUESTION NO: 17

An auditor most likely would introduce test data into a computerized payroll system to test internal controls related to the:

A. Existence of unclaimed payroll checks held by supervisors.

B. Early cashing of payroll checks by employees.

C. Discovery of invalid employee I.D. numbers.

D. Proper approval of overtime by supervisors.

Explanation:

Choice "c" is correct. Test data allows the auditor to determine whether adequate controls exist over data processing. Test data consists of fictitious entries or inputs that are processed through the client's computer system under the control of the auditor. The client's computerized payroll system should have adequate controls to prevent input of invalid employee ID numbers. Choice "a" is incorrect. This control does not involve the client's computer system and therefore cannot be tested using test data.

Choice "b" is incorrect. This control does not involve the client's computer system and therefore cannot be tested using test data. Choice "d" is incorrect. This control does not involve the client's computer system and therefore cannot be tested using test data.

QUESTION NO: 18

A project's net present value, ignoring income tax considerations, is normally affected by the:

A. Proceeds from the sale of the asset to be replaced.

B. Carrying amount of the asset to be replaced by the project.

C. Amount of annual depreciation on the asset to be replaced.

D. Amount of annual depreciation on fixed assets used directly on the project.

Explanation:

Choice "a" is correct. A project's net present value is a function of current and future cash flows, including proceeds from the sale of the old asset.

Choice "b" is incorrect. A project's net present value is a function of current and future cash flows. The carrying amount of the asset does not affect cash flows. Choice "c" is incorrect. A project's net present value is a function of current and future cash flows. Depreciation is a noncash item and does not affect cash flows.

Choice "d" is incorrect. A project's net present value is a function of current and future cash flows. Depreciation is a noncash item and does not affect cash flows.

QUESTION NO: 19

Analytical procedures used in planning an audit should focus on:

A. Evaluating the adequacy of evidence gathered concerning unusual balances.

B. Testing individual account balances that depend on accounting estimates.

C. Enhancing the auditor's understanding of the client's business.

D. Identifying material weaknesses in internal control.

Explanation:

Choice "c" is correct. The purpose of applying analytical procedures in planning the audit is to assist in planning the nature, timing, and extent of auditing procedures that will be used to obtain audit evidence for specific account balances or classes of transactions. To accomplish this, the analytical procedures used in planning the audit should focus on (a) enhancing the auditor's understanding of the client's business and the transactions and events that have occurred since the last audit date, and (b) identifying areas that may represent specific risks relevant to the audit.

Choice "a" is incorrect. Analytical procedures to assess the adequacy of evidence would be used in the final review stage.

Choice "b" is incorrect. Testing individual account balances that depend on accounting estimates would be a substantive application of analytical procedures and would not be used in the planning stages of an audit.

Choice "d" is incorrect. Analytical procedures are generally not useful in detecting material weaknesses in the client's internal control.

QUESTION NO: 20

There are multiple active markets for a financial asset with different observable market prices:

There is no principal market for the financial asset. What is the fair value of the asset?

A. $71

Fair value does not include transaction costs.

Choice "b" is incorrect. This is the net price in the Market

B. $72

This net price indicates that Market B is the most advantageous market, but the net price is not the fair value because fair value does not include transaction costs.

Choice "d" is incorrect. If Market A were the principal market for the asset, then this would be the fair value of the asset.

However, because there is no principal market, the price in the most advantageous market (Market B) is the price of the asset.

C. $74

D. $76

Explanation:

Choice "c" is correct. When there is no principal market, the price in the most advantageous market is the fair value measurement. Although transaction costs are not included in the fair value measurement, they are used to determine the most advantageous market, as follows:

Market A: Net Price = Quoted Price - Transaction Costs = $76 - 5 = $71

Market B: Net Price = Quoted Price - Transaction Costs = $74 - 2 = $72

Because the net price in Market B is higher than the net price in Market A, Market B is the most advantageous market and the quoted price in Market B ($74) is the fair value of the asset.

Choice "a" is incorrect. This is the net price in the Market

A. Fair value does not include transaction costs.

Choice "b" is incorrect. This is the net price in the Market

B. This net price indicates that Market B is the most advantageous market, but the net price is not the fair value because fair value does not include transaction costs.

Choice "d" is incorrect. If Market A were the principal market for the asset, then this would be the fair value of the asset.

However, because there is no principal market, the price in the most advantageous market (Market B) is the price of the asset.

FAQs

What are CPA Exam Pretest Questions?

CPA Exam Pretest Questions are a set of optional, diagnostic questions that provide insights into your readiness for the actual exam. These questions are not scored and do not count towards your final grade. Instead, they serve as a valuable tool to help you:

• Identify strengths and weaknesses
• Customise study plan
• Reduce test anxiety

How many CPA questions are the pretest?

The CPA Exam Pretest Questions typically consist of 15-20 multiple-choice questions per section. This equates to a total of approximately 75-100 pretest questions across all four exam sections.

What are the pretest questions on the CPA Exam?

CPA Exam Pretest Questions cover various topics and concepts tested on the actual exam. By taking the pretest, you can assess your understanding of specific areas and identify where you may need additional preparation.

Is a 75% passing the CPA Exam?

No, a 75% on the CPA Exam is not passing. The CPA Exam is scored on a scale of 0 to 99, and a score of 75% falls below the passing threshold. To pass each section of the CPA Exam, you must achieve a scaled score of 75 or higher.

How many people pass all 4 CPA exams on the first attempt?

Approximately 9.6% of individuals who take all four CPA exams on their first attempt pass all four exams.

Where can I find CPA Exam Pretest Questions?

The AICPA releases CPA Exam Pretest Questions closer to the exam date. You can also find practice questions and other study materials from reputable providers such as Becker, Gleim, and Wiley.

Are CPA Exam Pretest Questions important?

While not mandatory, CPA Exam Pretest Questions are a valuable resource to help you prepare effectively and increase your chances of passing the actual exam.

Final Thoughts

CPA Exam Pretest Questions are a valuable tool for CPA candidates. They provide insights into your strengths and weaknesses, helping you to customize your study plan and focus your efforts where they are most needed. While the CPA Exam is challenging, it is not impossible to pass. With proper preparation and a commitment to success, you can achieve your goal of becoming a CPA.

Here are a few tips for success on the CPA Exam:

• Start studying early and create a realistic study schedule.
• Use high-quality study materials and practice regularly.
• Take practice exams to assess your progress and identify areas of improvement.
• Get enough sleep exercise, and take breaks when needed.
• Stay positive and motivated throughout your studies.

With hard work and dedication, you can achieve your goal of passing the CPA Exam and becoming a successful CPA.