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ICPA PH - Substatantive Testing & Audit Evidence
ICPA PH - Substatantive Testing & Audit Evidence
1. Who signs the confirmation request letter before sending the same to the recipient?
2. Physical examination of tangible assets is an insufficient form of evidence when the auditor wants to
determine the ___
3. The following are descriptions of the assertions about presentation and disclosure. Which one refers
to completeness?
a) All disclosures that should have been included in the financial statements have been included
b) Disclosed events, transactions and other matters have occurred and pertained to the entity
c) Financial information is appropriately presented and described, and disclosures are clearly
expressed
d) Financial and other information are disclosed fairly and at appropriate amounts
5. Which of the following audit procedures is used extensively throughout the audit but does not, by
itself, provide sufficient appropriate evidence?
a) Inquiry
b) Inspection of tangible assets
c) Inspection of records or documents
d) Observation
6. Management assertions drive the auditor’s quest for audit evidence. These assertions are
8. Working papers that record the procedures used by the auditor to gather evidence should be
13. Audit evidence can come in different forms with different degrees of persuasiveness. Which of the
following is the least persuasive type of evidence?
15. Which is a basic approach used by auditors to evaluate the reasonableness of accounting estimates?
16. As the acceptable level of detection risk increases, an auditor may change the
18. The primary source of information to be reported about litigation claims, and assessments is the
a) Client’s management
b) Independent auditor
c) Client’s lawyer
d) Court records
a) Aid seniors in reviewing and supervising the work of managers and partners
b) Provide support for the auditor’s report
c) Aid partners in planning and conducting future audits
d) Documents staff compliance with standards on auditing
20. A distinction must be made between general audit objectives and specific audit objectives for each
account balance
a) The general audit objectives apply to every account balance on the financial statements
b) The specific audit objectives apply to every account balance on the financial statements
c) The general audit objective is stated in terms in term tailored to the engagement
d) The specific audit objectives are stated terms in term tailored to the agreement
21. Which of the following is not a proper match of auditor’s objective with management assertion?
22. Which of the following statements best describe the auditor’s responsibility concerning illegal acts
that do not have a material effect on the client’s financial statements?
a) Generally, the auditor is under no obligation to notify parties other than personnel within the
client’s organization
b) Generally, the auditor is under an obligation to see that stockholders are notified
c) Generally, the auditor is obligated to disclose the relevant facts in the auditor’s report
d) Generally, the auditor is expected to compel the client to adhere to requirement of the Board of
Accountancy
23. When an auditor has a question concerning a client’s ability to continue as a going concern, the
auditor considers management’s plan for dealing with the situation. That consideration is most likely to
include consideration of management’s plans to
25. If interim substantive procedures for an account identified no exceptions, which of the following
would the auditor not perform on that account at year-end?
26. Which of the following procedures would an accountant least likely perform during an engagement
to review the financial statements of an entity?
a) Observing the safeguards over access to and use of asset and records
b) Comparing the financial statements with anticipated results in budgets and forecasting
c) Inquiring of management about actions taken at the board of directors’ meetings
d) Studying the relationships of financial statement elements expected to conform to predictable
patterns
28. Which of the following statements is correct regarding an accountant’s working papers?
a) The accountants own the working papers and generally may disclose them as the accountant
sees fit
b) The client owns the working papers, but the accountant has custody of them until the
accountant’s bill is paid in full
c) The accountants owns working papers but generally may not disclose them without the client’s
consent or a court order
d) The clients own the working papers but, in the absence of the accountant’s consent, may not
disclose them without a court order
29. Which of the following is correct concerning requirements about auditor communications about
fraud?
a) The fraud that involves senior management should be reported directly to the audit committee
regardless of the amount involved
b) Fraud with a material effect on the financial statements should be reported directly by the
auditor to the Securities and Exchange Commission
c) The auditor should ordinarily disclose fraud with a material effect on the financial statements
through use of an “emphasis of a matter” paragraph added to the audit report
d) The auditor has no responsibility to disclose fraud outside the entity under any circumstances
30. Which of the following is the general principle relating to the reliability of audit evidence?
a) Audit evidence obtained from indirect sources rather than directly is more reliable evidence
obtained the auditor directly
b) Audit evidence provided by copies is more reliable than that provided by facsimiles
c) Audit evidence obtained from knowledgeable independent sources outside the client company
is more reliable than audit evidence obtained from non-independent sources
d) Audit evidence provided by original document is more reliable than audit evidence generated
through a system of effective controls
31. Which of the following procedures would an auditor most likely perform in searching for unrecorded
liabilities?
a) Trace a sample of accounts payable entries recorded just before year-end to the unmatched
receiving report file
b) Compare a sample of purchase orders issued just after year-end with the year-end accounts
payable trial balance
c) Vouch for a sample of cash disbursements entries recorded just after year-end to receiving
reports and vendor invoices
d) Scan the cash disbursements entries recorded just before year-end for indications of unusual
transactions
32. In an accountant’s review of interim financial information the accountant typically performs each of
the following, except:
33. When a professional accountant learns of a material error or omission in a tax return of a prior year,
he/she has the responsibility to do the following except
a) Consider discounting association with the client if the client does not correct the error
b) Advise the employer to correct the error and recommend that disclosure is made to the revenue
authorities
c) Promptly advise the client or employer of the error or omission and recommend that
disclosure is made to the revenue authorities
d) Promptly inform the revenue authorities even without permission of the client
35. Which of the following statements regarding analytical procedures is not correct?
36. An auditor is auditing a mutual fund company that uses a transfer agent to handle accounting for
shareholders. Which of the following actions by the auditor would be most efficient for obtaining
information about the transfer agent’s internal controls/?
a) Review reports on internal control placed in operation and its operating effectiveness produced
by the agent’s auditor
b) Review prior year work papers to determine whether the number of transactions processed by
the agent has materially increased
c) Perform an audit on the internal control function of the agent
d) Perform tests of controls on a sample of the audited firm’s transactions through the agent
37. Using laptop computers in conducting financial statement audits may affect the methods used to
review the work of staff assistants because
a) Supervisory personnel may not have an understanding of the capabilities and limitations of
computers
b) Working paper documentation may not contain readily observable details of calculations
c) The overall audit objectives may differ
d) Documenting the supervisory review may require the assistance of management services
personnel
38. Audit documentation should possess certain characteristics. Which of the following is one of the
characteristics?
a) Yes; Yes
b) No; No
c) Yes; No
d) No; Yes
39. A client is a defendant in a patent infringement lawsuit against a major competitor. Which of the
following items would least likely be included in the attorney’s response to the auditor’s letter of
inquiry?
40. Which of the following procedures would an accountant most likely perform during an engagement
to review the financial statements of an entity?
a) A letter was written by the client’s attorney discussing the likely outcome of outstanding
lawsuits
b) The physical count of securities and cash
c) Inquiries of the credit manager about collectability of noncurrent accounts receivable
d) Observation of cobwebs on time inventory bins
42. The most reliable procedure for an auditor to use to test the existence of a client’s inventory at an
outside location would be to
44. In testing the existence assertion for an asset, an auditor ordinarily works from the
45. Which of the following auditor concerns most likely could be so serious that the auditor concludes
that a financial statement audit cannot be conducted?
46. Which of the following is least likely to be comparable between similar corporations in the same
industry line of business?
a) Operating cycle
b) Earnings per share
c) Accounts receivable turnover
d) Return on total assets before interest and taxes