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CPA — Practice Questions, AUD and REG flashcards

6 of 70 questions free to study here · 24 topics · the whole deck is built into Willys

Multiple-choice practice questions, one best answer each, on independence, audit risk, evidence, controls, reports, tax procedure, basis, gains, entities, agency, contracts and debtor-creditor law.

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Practice deck · part of CPA Exam (core) · written against: AICPA CPA Exam Blueprints under CPA Evolution (2024 core: FAR, AUD, REG); no year-indexed tax figures. Updated 2026-10-10.

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The 6 sample questions as a list
  1. On a private-company audit, the engagement manager holds a few shares of the client's stock, worth far less than 1% of her net worth. A staff accountant on the same team holds a mutual fund that owns a small, immaterial stake in the client. Under the AICPA Code, whose holding impairs independence?

    A) The staff accountant's, because fund holdings are attributed in full
    B) Neither, because both holdings are immaterial to their owners
    C) The manager's, because a direct interest impairs regardless of size
    D) Both, because any interest held by a covered member impairs
    C) The manager's, because a direct interest impairs regardless of size

    A direct financial interest held by a covered member impairs independence however small it is. An indirect interest, such as one held through a mutual fund, impairs only if it is material to the covered member.
    Ethics & Independence
  2. In auditing a client's cash balance, which of the following is the most reliable evidence?

    A) A bank reconciliation prepared by the client's accountant
    B) An explanation from the treasurer of the reconciling items
    C) A copy of the year-end bank statement given by the controller
    D) A bank confirmation the bank sent directly to the auditor
    D) A bank confirmation the bank sent directly to the auditor

    Evidence obtained directly by the auditor from an independent outside source is more reliable than client-prepared, copied or oral evidence. A statement copy handed over by the controller passed through the client's hands, which lowers its reliability.
    Audit Evidence
  3. As of what date should management's written representation letter be dated in an audit?

    A) The date the engagement letter was signed
    B) The balance sheet date
    C) The date the statements are sent to lenders
    D) The date of the auditor's report
    D) The date of the auditor's report

    The representations must cover the whole period through the auditor's report, so the letter is dated as of the report date. A letter dated at the balance sheet date would leave the subsequent events period uncovered.
    Representations & Subsequent Events
  4. An offeror mails an offer on June 1. The offeree mails a properly addressed acceptance on June 5. On June 6 the offeror phones the offeree and revokes. The acceptance arrives on June 8. Is there a contract?

    A) No, because the revocation came before the acceptance arrived
    B) Yes, formed on June 5 when the acceptance was mailed
    C) No, because a mailed offer can only be accepted by phone
    D) Yes, formed on June 8 when the acceptance was received
    B) Yes, formed on June 5 when the acceptance was mailed

    Under the mailbox rule an acceptance sent by an authorized means is effective on dispatch, while a revocation is effective only when received. The contract was formed on June 5, before the revocation.
    Contracts & UCC Sales
  5. A donor gives stock with an adjusted basis of 20,000 dollars and a fair value of 15,000 dollars at the date of the gift. The donee later sells it for 12,000 dollars. What is the donee's recognized gain or loss?

    A) A 3,000-dollar loss
    B) A 5,000-dollar loss
    C) No gain or loss
    D) An 8,000-dollar loss
    A) A 3,000-dollar loss

    When fair value at the gift is below the donor's basis, the donee uses that lower fair value (15,000) as basis for loss, so the loss is 3,000 dollars. Using the donor's 20,000 basis, giving an 8,000 loss, would let the donor's decline in value shift to the donee.
    Basis of Property
  6. A partner contributes property with an adjusted basis of 60,000 dollars, subject to a 20,000-dollar mortgage the partnership assumes, for a 25% interest in profits and losses. Assuming she shares the debt in that ratio, what is her outside basis?

    A) 45,000 dollars
    B) 40,000 dollars
    C) 60,000 dollars
    D) 65,000 dollars
    A) 45,000 dollars

    She starts with her 60,000 basis, subtracts the 20,000 of debt she is relieved of, and adds back her 25% share (5,000) of the partnership's new liability. Ignoring her share of the assumed debt gives 40,000.
    Partnerships & LLCs

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About these cards

Review status: Second-reader reviewed, with corrections applied.

Checked against:

  • Checked against the AICPA CPA Exam AUD and REG blueprints (topic lists only; no text copied).
  • Checked against the structure of the AICPA Code of Professional Conduct, clarified SASs (AU-C), SSARS (AR-C), PCAOB AS 3101, SEC independence rules and the COSO 2013 framework; reference only, no standards text copied.
  • Checked against the Internal Revenue Code and Treasury Circular 230 (U.S. government works, public domain), UCC Articles 2 and 9, and the Bankruptcy Code; reference only. Year-indexed thresholds deliberately omitted.

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