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Aud Theo Dept. MIDTERM EXAM
Aud Theo Dept. MIDTERM EXAM
5. Which of the following has the power to 9. According to the Code of Ethics, professional
conduct an oversight into the quality of audits competence may be divided into two phases:
of FS through the review of the quality control attainment of professional competence and
measures instituted by auditors maintenance of professional competence. The
A. Bureau of Internal Revenue attainment of professional competence
B. Securities and Exchange Commission requires the following except
C. Board of Accountancy A. A high standard of general education
D. Insurance Commission B. Specific education, training, and examination
in professionally relevant subjects
6. The audited FS to be filed with the SEC shall C. Whether prescribed or not, a period of work
be accompanied by a experience
A. Management Report D. A continuing awareness and an
B. Registration Statement understanding of relevant technical
C. Statement of Management’s Responsibility professional and business developments
for Financial Statements
10. Safeguards created by the profession, 14. The following statements relate to the
legislation or regulation include the following engagement partner’s responsibility to conduct
except timely reviews of the audit documentation to
A. Continuing professional development be satisfied that sufficient appropriate evidence
requirements has been obtained to support the conclusions
B. Professional standards reached and for the auditor’s report to be
C. Firm-wide and engagement specific issued. Which is false?
safeguards A. The engagement partner’s review of the
D. Educational, training and experience audit documentation allows significant matters
requirements for entry into the profession to be resolved on timely basis to his/her
satisfaction before the auditor’s report is issued
11. Which of the following is not a contingent B. The engagement partner should review all
fee audit documentation
A. A fee that is dependent upon the approval of C. The engagement partner should document
the assurance client’s loan application the extent and timing of the reviews
B. An audit fee that is based on 5% of the D. The reviews cover critical areas of judgment,
client’s adjusted net income for the current especially those relating to difficult or
year contentious matters identified during the
C. A fee that is fixed by a court or other public course of the engagement, significant risks, and
authority other areas the engagement partner considers
D. An arrangement whereby no fee will be important
charged unless a specified finding or result is
attained 15. The engagement partner should take
responsibility for the direction, supervision and
12. These are fees calculated on a performance of the audit engagement in
predetermined basis relating to the outcome or compliance with professional standards and
result of a transaction or the result of the work regulatory and legal requirements, and for the
performed auditor’s report that is issued to be appropriate
A. Contingent fees in the circumstances. Supervision includes the
B. Fixed fees following, except
C. Predetermined fees A. Tracking the progress of the audit
D. Commissions engagement
B. Addressing significant issues arising during
13. As defined in PSQC 1, the audit engagement, considering their
______________________________ is process significance, and modifying the planned
comprising an ongoing consideration and approach appropriately
evaluation of the firm’s system of quality C. Informing the members of the engagement
control, including periodic inspection of team of their responsibilities
selection of completed engagements, designed D. Identifying matters for consultation or
to provide the firm with reasonable assurance consideration by more experienced
that its system of quality control is operating engagement team members during the audit
effectively engagement
A. Monitoring
B. Inspection 16. The implementation of quality control
C. Engagement quality control review procedures that are applicable to the individual
D. Supervision audit engagement is the responsibility of the
A. CPA firm
B. Engagement quality control reviewer
C. Engagement team B. Make constructive suggestions concerning
D. Expert contracted by the firm in connection improvements to the clients internal control
with the audit engagement C. Evaluate whether the aggregation of known
misstatements causes the FS taken as a whole
17. Which of the following circumstances to be materially misstated
would permit an independent auditor to accept D. Understand the events and transactions that
an engagement after the end of the reporting may have an effect on the client’s FS
period?
A. Expectation of the operating effectiveness of 21. Which of the following should be included in
controls the audit plan?
B. Issuance of a disclaimer of opinion as a result I. The nature, timing and extent of planned risk
of inability to conduct certain tests required by assessment procedures
PSAs due to the timing of the acceptance of the II. The nature, timing and extent of planned
engagement. further audit procedures at the assertion level
C. Remedy the limitations resulting from A. I only
accepting the engagement after the end of the B. II only
reporting period, such as those relating to the C. both I and II
existence of physical inventory D. neither I nor II
D. Receipt of an assertion from the predecessor
auditor that the entity will be able to continue 22. In planning stage of an audit engagement,
as a going concern the auditor is required to perform audit
procedures to obtain an understanding of the
18. If the auditor is unable to agree to a change entity and its environment, including its internal
of the engagement and is not permitted to control. These procedures are called:
continue the original engagement, the auditor A. Risk assessment procedures
should B. Substantive tests
A. Insist on continuing the original engagement C. Tests of controls
B. Express a qualified opinion D. Dual-purpose tests
C. Express an adverse opinion
D. Withdraw from the engagement 23. In planning the audit engagement, the
auditor should consider each of the following
19. Initial audit planning involves the following except:
matters, except A. The type of opinion that is likely to be
A. Identify the client’s reason for the expressed
engagement B. The entity’s accounting policies and
B. Schedule engagement staff and auditor’s procedures
experts C Matters relating to the entity’s business and
C. Develop an overall audit strategy the industry in which it operates
D. Request that bank balances be confirmed D. Materiality level and audit risk
52. The latest CPA board exam was divided into 57. Under this method of billing a client, the
how many subjects. external auditors charges on the basis of actual
A. 7 time spent by principals/partners, supervisors,
B. 8 seniors and juniors at predetermined rates
C. 6 agreed upon with the client, subject to a
D. 5 maximum amount
A. Maximum fee basis
53. Which of the following names illustrates a B. Per diem basis
firm name, as contrasted to the name of an C. Flat fee basis
individual CPA and a partnership name D. Retainer basis
A. Juan D. Cruz, CPA
B. Jose D. Cruz and Associates 58. CPAs may practice under the following
C. Cruz and Reyes, CPAs forms of organization except:
D. Cruz, Reyes and Company A. Sole proprietorship
B. General Partnerships
54. Which of the following is not true C. Limited Partnership
A. A registered professional shall be D. Corporation
permanently exempted from CPD requirements
upon reaching the age 65 years old 59. The familiarity threat that may be created
B. A CPA who studied abroad shall be by using the same senior personnel on an
exempted from compliance with CPD provided assurance engagement over a long period of
he/she has been out of the country for at least time and the safeguards that might be
two years immediately prior to the date of appropriate to address such a threat.
renewal Accordingly, safeguards may include:
C. PRC CPD Council shall accept, evaluate, and A. Rotation of senior personnel
approve applications for accreditation of CPD B. Engagement quality control review
providers C. Both a and b
D. None of the above D. Neither a nor b
55. Regarding advertising, the following are not 60. In relation to completed engagements,
allowed, except: these are proceduraes designed to provide
evidence of compliance by engagement teams A. Accuracy and reliability
with the firm’s quality control policies and B. Promotion of operational efficiency
procedures C. Adherence to prescribed managerial policies
A. Peer review D. Attainment of the organization’s objective
B. Engagement quality control review
C. Inspection 66. An auditor obtains knowledge about a new
D. Monitoring client’s business and its industry to
A. Make constructive suggestions concerning
61. A CPA should maintain objectivity and free improvements to the client’s internal control
of conflicts of interest when performing: B. Develop an attitude of professional
A. All audits, but not any other professional skepticism concerning management’s FS
services assertions
B. All attestation services, but not other C. Evaluate whether the aggregation of known
professional services misstatements causes the FS taken as a whole
C. All attestation and tax services, but not to be materially misstated
other professional services D. Understand the events and transactions that
D. All professional services may have an effect on the client’s FS
62. Les, CPA-Lawyer, has a law practice. Les has 67. One of the following refers to an ethical
recommended one of her clients to Lee, CPA. responsibility of the auditor
Lee has agreed to pay Les 12% of the fee for A. Confirm the cash balances
services rendered by Lee to Les' clients. Who, if B. Exercise due professional care
anyone, is in violation of the Code of Ethics? C. Join professional society
A. Les and Lee D. Destroy confidential relationship with client
B. Les only
C. Lee only 68. Test of controls are used to test whether
D. Neither of them controls are:
A. Operating effectively
63. The rendering of two or more types of B. Placed in operation or implemented
professional services concurrently: C. Properly incorporated in the FS
A. Is a violation of the code of ethics D. Properly documented by the client
B. Does not by itself impair objectivity
C. Would impair independence 69. According to PSA 315, the following
D. Is inconsistent with the practice of public procedures are used to obtain an understanding
accountancy of the entity and its environment, except:
A. Inquiries of management
64. Inherent and control risk differ from B. Confirmation of accounts receivables
detection risk in that detection risk is C. Observation and inspection
A. Elements of audit risk while inherent and D. Analytical procedures
control risks are not
B. Change at the auditor’s discretion while 70. These are the operational approaches by
inherent and control risks are not which management intends to achieve its
C. Functions of the client and its environment objectives
and while inherent and control risks are not. A. Strategies
D. None of the above B. Planning methods
C. Business risk approaches
65. The independent auditor is most concerned D. Operational plans
with which of the following: