SOCPA Saudi CPA Exam Prep Exam Questions & Answers 2026 (21–30)

Question 1

Under IAS 21, non-monetary items measured at historical cost in a foreign currency are translated using:

TheoryPractice · Accepted Answer

The exchange rate at the date of the transaction. IAS 21.23(b): non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction.

Question 2

Under IFRS 9, a hedge relationship must meet certain qualifying criteria. Which of the following is NOT a qualifying criterion?

TheoryPractice · Accepted Answer

There is zero expected hedge ineffectiveness. IFRS 9.6.4.1: qualifying criteria include formal designation/documentation, an economic relationship between hedged item and instrument, credit risk does not dominate, and hedge ratio consistent with actual hedging. IFRS 9 removed the 80-125% effectiveness test and does not require zero ineffectiveness.

Question 3

Under IAS 33, treasury shares (own shares held) are excluded from the EPS denominator. The weighted average shares for EPS purposes treat treasury shares as:

TheoryPractice · Accepted Answer

Dilutive potential shares. IAS 33.19: the weighted average number of shares used for basic EPS excludes treasury shares (own shares repurchased and held).

Question 4

Under IFRS 5, what happens to depreciation of a non-current asset once it is classified as held for sale?

TheoryPractice · Accepted Answer

Depreciation continues at its normal rate. IFRS 5.25: assets classified as held for sale are not depreciated after classification.

Question 5

In diminishing Musharakah, what is the key feature that distinguishes it from standard Musharakah?

TheoryPractice · Accepted Answer

The financier's ownership share is gradually bought out by the customer over time. In diminishing Musharakah, the customer progressively purchases the financier's ownership share over time until the customer becomes the sole owner. This structure is commonly used in real estate and home financing.

Question 6

Under IFRS 8 Operating Segments, what threshold triggers separate segment disclosure?

TheoryPractice · Accepted Answer

Revenue, profit, or assets represent 10% or more of combined totals. Under IFRS 8, a segment must be reported separately if any ONE of the following 10% tests is met: its reported revenue is 10%+ of combined revenues, its profit/loss is 10%+ of combined profit/loss, or its assets are 10%+ of combined assets.

Question 7

The payback period method for capital investment appraisal calculates:

TheoryPractice · Accepted Answer

The time required to recover the initial investment from net cash inflows. Payback period = time taken for cumulative net cash inflows to recover the initial investment. It is simple but ignores the time value of money and cash flows beyond the payback period.

Question 8

In financial analysis, 'earnings quality' refers to:

TheoryPractice · Accepted Answer

The degree to which reported earnings accurately reflect the entity's true operating performance and are sustainable over time, with a close relationship to operating cash flows. Earnings quality: high-quality earnings are sustainable, reflect real economic performance, and are closely correlated with operating cash flows. Low-quality earnings involve non-recurring items, accounting choices that boost reported income, or aggressive revenue recognition.

Question 9

Under ISA 230, a working paper that is crucial to understanding audit conclusions must be retained for at least:

TheoryPractice · Accepted Answer

At least 5 years from the date of the audit report. ISA 230.14: the auditor shall assemble audit documentation in a file and complete the assembly process within 60 days after the audit report date. Retention periods typically meet regulatory minimums of at least 5 years (ISQC 1.54: 5 years from the report date).

Question 10

Under ISA 320, when the auditor sets a lower level of materiality for a specific class of transactions because misstatements below overall materiality would still influence user decisions, this is called:

TheoryPractice · Accepted Answer

Inherent materiality. ISA 320.10: the auditor may set specific materiality amounts for particular classes of transactions, account balances, or disclosures if they are lower than overall materiality.

SOCPA Saudi CPA Exam Prep Exam Questions & Answers 2026 (21–30)

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