CHAPTER 6 Auditing-Theory-MCQs-by-Salosagcol-with-answers

CHAPTER 6: b.
there is enough of it to afford a reasonable basis for an

1. Which of the following statements is most correct regarding the opinion on financial statements.
primary purpose of audit procedures? c. it has the qualities of being relevant, objective and free
a. To detect all errors or fraudulent activities as well as from unknown bias.
illegal activities d. it has been obtained by random selection.
b. To comply with the SEC
c. To gather corroborative audit evidence about 10. Appropriateness of evidence is a measure of the:
management’s assertions regarding the client’s a. quantity of evidence.
financial statements b. quality of evidence.
d. To determine the amount of errors in the balance sheet c. sufficiency of evidence.
accounts in order to adjust the accounts to actual d. meaning of evidence.
2. A procedure designed to test for monetary misstatements 11. The sufficiency and appropriateness of evidential matter
directly affecting the validity of the financial statement balances ultimately is based on the
is a: a. availability of corroborating data.
a. Test of controls b. Philippine Standard on Auditing.
b. Substantive test c. pertinence of the evidence.
c. Test of attributes d. judgment of the auditor.
d. Monetary-unit sampling test
12. An example of an external document that provides reliable
3. You are auditing the company’s purchasing process for goods information for the auditor is:
and services. You are primarily concerned with the company not a. employees time reports.
recording all purchase transactions. Which audit procedure b. bank statements.
below would be the most effective audit procedure in this case? c. purchase order for company purchases.
a. Vouching from the accounts payable account to the d. carbon copies of checks.
vendor invoices.
b. Tracing vendor invoices to recorded amounts in the 13. An example of a document that the auditor receives from the
accounts payable account. client, but which was prepared by someone outside the client’s
c. Confirmation of accounts payable recorded amounts. organization, is a:
d. Reconciling the accounts payable subsidiary ledger to a. confirmation.
the accounts payable account. b. sales invoice.
c. vendor invoice.
4. The information obtained by the auditor in arriving at the d. bank reconciliation.
conclusions on which the audit opinion is based is called: 14. To be considered reliable evidence, confirmations must be
a. Audit working papers controlled by:
b. Audit assertions a. a client employee responsible for accounts receivable.
c. Audit evidence b. a financial statement auditor.
d. Audit standards c. a client’s internal audit department.
d. a client’s controller or CFO.
5. The major reason an independent auditor gathers evidence is to
a. form an opinion on the financial statements. 15. Given the economic and time constraints in which auditors can
b. detect fraud. collect evidence about management assertions about the
c. evaluate management. financial statements, the auditor normally gathers evidence that
d. evaluate internal control. is:
a. irrefutable.
6. Which of the following is the best example of a corroborating b. conclusive.
evidence? c. persuasive.
a. General journal d. completely convincing.
b. Worksheet cost allocation
c. Vendor’s invoice 16. It refers to the material (working papers) prepared by and for, or
d. Cash receipts journal obtained and retained by the auditor in connection with the
performance of the audit.
7. Which of the following statements about audit evidence is a. Documentation
correct? b. Audit report
a. Appropriateness is the measure of the quantity of audit c. Accounting data
evidence. d. Corroborative evidence
b. Sufficiency is the measure of the quality of audit
evidence and its relevance to a particular assertion and 17. Which of the following best describes one of the primary
its reliability. objectives of audit documentation?
c. Audit evidence is more persuasive when items of a. Defend against claims of a deficient audit.
evidence from different sources or of different nature b. Provide a principal support for the income taxation
are consistent. return.
d. There should be a one-to-one relationship between c. Provide documentation that the audit was conducted in
audit objective and audit procedure. accordance with auditing standards.
d. Provide additional support or recorded amounts to the
8. Evidence is generally considered appropriate when: client.
a. it has been obtained by random selection.
b. there is enough of it to afford a reasonable basis for an 18. Which of the following is not an expert upon whose work an
opinion on financial statements. auditor may relay?
c. it has the qualities of being relevant, objective, and a. Actuary
free from known bias. b. Internal auditor
d. it consists of written statements made by managers of c. Appraiser
the enterprise under audit. d. Engineer
9. Evidence are generally considered sufficient when: 19. An expert whose expertise is used by the entity in preparing
a. it is appropriate. financial statements is called a(n):
a. Financial expert
b. Management expert
c. Auditor’s expert
d. Specialist
20. External auditors must obtain evidence regarding what attributes

of an internal audit department if the external auditors intend to
rely on internal auditor’s work?
a. Integrity
b. Objectivity
c. Competence
d. All of the above

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CHAPTER 6: b.

there is enough of it to afford a reasonable basis for an

20. External auditors must obtain evidence regarding what attributes

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