AUDITING
AUDITING
1. The concept of materiality will be at least important to the CPA in determining the
ANSWER: D. Effects of the CPA's direct financial interest in a client upon his or her
independence
2. Edison Corporation has a few large accounts receivable that total P1,400,000. Victor Corporation has a
great number of small accounts receivable that also total P1,400,000. The importance of a misstatement in
any one account is therefore greater for Edison than for Victor. This is an example of the auditor’s
concept of
ANSWER: A. Materiality
3. Which of the following elements ultimately determines the specific auditing procedures necessary
under the circumstances to afford a reasonable basis for an opinion?
ANSWER: B. An auditor considers materiality for planning purposes in terms of the largest
aggregate level of misstatements that could be material to anyone of the financial statements.
5. Inherent risk and control risk differ from planned detection risk in that they
6. In considering materiality for planning purposes, an auditor believes that misstatements aggregating P
10, 000 would have a material effect on an entity’s income statement, but that misstatements would have
aggregate P 20,000 to materially affect the balance sheet. Ordinarily, it would be appropriate to design
auditing procedures what would be expected to detect misstatements that aggregate
ANSWER: A. P10,000
7. In planning and performing an audit, auditors are concerned about risk factors for two distinct types of
fraud: fraudulent financial reporting and misappropriation of assets. Which of the following is a risk
factor for misappropriation of assets?
8. Which portion of an audit is least likely to be completed before the balance sheet date?
9. Which of the following should the auditors obtain from the predecessor before accepting an audit
engagement?
10. Which of the following item would typically not be included in an audit program?
11. Which of the following statements describes upper posts of an audit program?
ANSWER: C. An audit program is useful for monitoring the progress of the audit.