Audtheo Part 3

36. In performing a financial statement audit, which of the following would an auditor least likely consider?
a. Compliance with GAAP.

b. Quality of managements' business decisions.
c. Internal control.
d. Fairness of the financial statement amounts.
37. The Philippine Standards on Auditing issued by AASC:

a. Require that in no circumstances would an auditor may judge it necessary to depart from a PSA, even
though such a departure may result to more effective achievement of the objective of an audit.
b. Apply to independent examination of financial statements of any entity when such an
examination is conducted for the purpose of expressing an opinion.
c. Need to be applied on all audit related.
d. Must not apply to other related activities of auditors.
38. Which of the following is not an assurance that the auditors give to the parties who rely on the
financial statements?
a. Auditors know how the amounts and disclosures in the financial statements were produced.
b. Auditors give assurance that the financial statements are accurate.
c. Auditors gathered enough evidence to provide a reasonable basis for forming an opinion.
d. If the evidence allows the auditors to do so, auditors give assurance in the form of opinion, as to
whether the financial statements taken as a whole are fairly presented in conformity with GAAP.
39. The term that describes the role of persons entrusted with the supervision, control and direction of
an entity is
a. Management.
b. Administration.
c. Governance.
d. Government.
40. An audit involves ascertaining the degree of correspondence between assertions and established criteria. In
the case of an audit, of financial statements, which of the following would not be a valid criterion?
a. International Accounting Standards

b. Philippine Standards on Auditing
c. Philippine Financial Reporting Standards
d. Philippine Accounting Standards
41. Which of the following statements about independent financial statement audit is correct?
a. The audit of financial statements relieves management of its responsibilities for die financial
statements.
b. The auditor's opinion is not an assurance as to the future viability of the entity as well as
the effectiveness and efficiency with which management has conducted the affairs of the
entity.
c. An audit is designed to provide limited assurance that the financial statements taken as a whole are
free from material misstatement.
d. The procedures required to conduct an audit in accordance with PSAs should be determined by the
client who engaged the services of the auditor.
42. The reason an independent auditor gathers evidence is to

a. Detect fraud
b. Form an opinion on the financial statements
c. Evaluate management
d. Evaluate internal controls
43. The auditor communicates the results of his or her work through the medium of the
a. Engagement letter.
b. Audit report.
c. Management letter.
d. Audited financial statements.
44. The auditor's judgment concerning the overall fairness of presentation of financial position, results of
operation, and changes in cash flow is applied within the framework of
a. Quality control
b. Generally accepted auditing standards which include the concept of materiality
c. The auditor's evaluation of the audited company's internal control.
AT – Introduction to Audit Red Sirug Page 5

d. Generally accepted accounting principles.
45. The expertise that distinguishes auditors from accountants is in the

a. Ability to interpret generally accepted accounting principles.
b. Requirement to possess education beyond the bachelor's degree.
c. Accumulation and interpretation of evidence.
d. Ability to interpret PAS/PFRS.
46. The need for independent audits of financial statements can be attributed to all of the following conditions
except:
a. Validity
b. Remoteness
c. Consequence
d. Complexity of subject matter
47. The underlying conditions that create demand by users for reliable information include the following
except:
a. Transactions that are numerous and complex.
b. Users separated from accounting records by distance and time.
c. Financial decisions that are important to investors and users.
d. Decisions are not time-sensitive.
48. Why does a company choose to have an independent auditor report on its financial statements?
a. Independent auditors will always detect management fraud.
b. The company preparing the statements may have a vested interest in reporting certain
results.
c. Independent auditors guarantee the accuracy of the financial statements.
d. An independent audit is designed to search for deficiencies in the company's internal controls.
49. Which of the following statements does not describe a condition that creates a demand for auditing?
a. Information can have substantial economic consequences for a decision maker.
b. Expertise is often required for information preparation and verification.
c. Users can directly assess the quality of information.
d. Conflict between an information preparer and a user can result in biased information.
50. Information risk refers to the risk that

a. The auditor may express an unqualified opinion on financial statements that are material misstated.
b. The client may not be able to remain in business.
c. The client's financial statements may be materially false and misleading.
d. Errors and frauds would not be detected by the auditor's procedures.
51. Which of the following is a cause of information risk?

a. Voluminous data.
b. Biases and motives of the provider of information.
c. Remoteness of the information.
d. Each of the above is a cause of information risk.
52. In financial statement audits, the audit process should be conducted in accordance with
a. Philippine Accounting Standards
b. The audit program
c. Philippine Standards on Auditing
d. Philippine Financial Reporting Standards
53. Which of the following is not one of the general principles governing the audit of financial statements?
a. The auditor should obtain sufficient appropriate evidence primarily through inquiry and
analytical procedures to be able to draw reasonable conclusions.
b. The auditor should plan and perform the audit with an attitude of professional skepticism.
c. The auditor should conduct the audit in accordance with PSA.
d. The auditor should comply with the Philippine Code of Professional Ethics.
54. Which of the following statements does not properly describe an element of the theoretical framework of
auditing?
a. The data to be audited can be verified.
b. Short-term conflicts may exist between managers who prepare data and auditors who examine the
data.
c. Auditors act on behalf of management.
AT – Introduction to Audit Red Sirug Page 6

d. An audit benefits the public.

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36. In performing a financial statement audit, which of the following would an auditor least likely consider?

a. Compliance with GAAP.

37. The Philippine Standards on Auditing issued by AASC:

a. International Accounting Standards

42. The reason an independent auditor gathers evidence is to

AT – Introduction to Audit Red Sirug Page 5

45. The expertise that distinguishes auditors from accountants is in the

50. Information risk refers to the risk that

51. Which of the following is a cause of information risk?

AT – Introduction to Audit Red Sirug Page 6

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