Are you preparing for the CPA AUD exam and struggling with Task-Based Simulations (TBS)? You’re not alone—TBS questions are often the most challenging part of the CPA exam. In this post, we bring you Part 4 (Questions 31–40) of our CPA AUD TBS series. These scenarios cover critical topics such as audit evidence reliability, internal controls, sampling, going concern, subsequent events, fraud risk assessment, and audit documentation. Each question comes with a clear answer and explanation, designed to help you practice smarter and perform better on exam day.
📘 CPA AUD TBS – Part 4 (Questions 31–40)
Question 31: Audit Evidence Reliability
Scenario:
As an external auditor, you receive confirmation letters directly from a bank regarding a client’s outstanding loan balance. The client also provides internally prepared schedules of the same loan.
Task:
Which evidence is considered more reliable, and why?
Answer & Explanation:
Bank confirmation letters are more reliable because they are independent external evidence obtained directly from a third party. Auditor reliance increases when evidence is from external, knowledgeable sources, reducing management bias.
Question 32: Internal Control Deficiency
Scenario:
During testing, you find that one employee both approves purchase orders and records accounts payable.
Task:
What type of control deficiency exists, and what should the auditor recommend?
Answer & Explanation:
This is a segregation of duties deficiency (control weakness). The auditor should recommend separating authorization and recording responsibilities to prevent fraud or error.
Question 33: Audit Sampling
Scenario:
An auditor uses statistical sampling to test revenue transactions and finds several errors in the sample.
Task:
How should the auditor project these errors to the population?
Answer & Explanation:
The auditor should extrapolate errors from the sample to the entire population, adjusting for tolerable error and risk, and consider whether the projected misstatements are material.
Question 34: Going Concern Evaluation
Scenario:
A client has recurring losses and negative operating cash flows. Management believes additional financing will be secured but has no signed agreement.
Task:
What should the auditor’s conclusion include?
Answer & Explanation:
The auditor should assess substantial doubt about going concern. If no mitigating evidence exists, the auditor must include a going concern explanatory paragraph in the report.
Question 35: Subsequent Events
Scenario:
A major customer declared bankruptcy after year-end but before issuance of the financial statements.
Task:
How should this event be treated?
Answer & Explanation:
It is a Type II subsequent event (condition arose after year-end). The event should be disclosed in the notes, but no adjustment to financial statements is required.
Question 36: Audit Report Modification
Scenario:
The client refuses to provide access to important board meeting minutes relevant to audit evidence.
Task:
What modification should the auditor consider?
Answer & Explanation:
This is a scope limitation. The auditor may issue either a qualified opinion or a disclaimer of opinion, depending on materiality and pervasiveness of the limitation.
Question 37: Fraud Risk Assessment
Scenario:
An auditor identifies unusual journal entries made at the end of the reporting period by the CFO.
Task:
What audit procedures should be performed?
Answer & Explanation:
The auditor should perform journal entry testing, review supporting documentation, confirm unusual adjustments, and discuss with those charged with governance to assess potential fraud.
Question 38: Inventory Observation
Scenario:
Due to travel restrictions, the auditor cannot attend the client’s physical inventory count.
Task:
What alternatives are available?
Answer & Explanation:
The auditor may use alternative procedures, such as reviewing perpetual records, testing subsequent sales, and relying on third-party confirmations. If inadequate, a scope limitation may result in a qualified/disclaimer opinion.
Question 39: Analytical Procedures
Scenario:
During final review, the auditor notices gross margin fluctuated from 40% last year to 20% this year without explanation.
Task:
What is the appropriate auditor response?
Answer & Explanation:
The auditor should investigate unusual fluctuations by inquiring with management, performing additional substantive testing, and verifying supporting documentation for sales and cost of goods sold.
Question 40: Audit Documentation
Scenario:
The audit senior suggests deleting preliminary notes and drafts that contain errors from the final audit file.
Task:
Is this acceptable?
Answer & Explanation:
No. Audit documentation must be retained, including preliminary notes. Auditors may add clarifications but cannot delete information after report issuance. Alteration may violate professional ethics and PCAOB/ISA rules.https://tayarimcqs.com/cpa-aud-task-based-simulations-part-1/
This concludes CPA AUD Task-Based Simulations (TBS) Part 4 (Q31–40). Practicing these real-world scenarios builds not only exam confidence but also practical auditing skills. Don’t forget to check our full series:
- Part 1 (Q1–10) – Basics of Audit Simulations
- Part 2 (Q11–20) – Internal Controls & Risk Assessment
- Part 3 (Q21–30) – Reporting & Ethics
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