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Q1 - Q4 - Prelim Exam ACC5111 - Auditing and Assurance Principles
Q1 - Q4 - Prelim Exam ACC5111 - Auditing and Assurance Principles
2. If you merely inquired and made an analytical procedure, you more likely
performed:If you merely inquired and made an analytical procedure, you more
likely performed:
a. Agreed upon procedures
b. Review
c. Audit
d. Consultancy
6. The letters CPA shall be engraved in what part of the CPA's seal?
a. Upper portion of the seal
b. Center of the seal
c. Lower portion of the seal
d. Upper left portion of the seal
8. The objectives of the Philippine Accountancy Act of 2004 are the following except:
a. The standardization and regulation of accounting education
b. Integrations of accountancy profession
c. Examination and registration of CPAs
d. Supervision, control and regulation of the practice of accountancy
9. The set of rules and regulations promulgated in 2004 for the supervision, control
and regulation of the practice of Accountancy in the Philippines.
a. PFRS
b. PSA
c. Code of Ethics
d. IRR of RA9298
10. S1 A BOA member's term in his capacity as member expires one year after being
elected as Vice Chair. S2 Being charged of crimes involving moral turpitude is a
ground for removal of members in BOA.
a. True False
b. True True
c. False True
d. False False
12. Broadly defined, the subject matter of any audit consists of:
a. Financial statements
b. Financial data
c. Economic data
d. Assertions
13. The need for independent audits of financial statements can be attributed to all of
the following conditions except:
a. Remoteness
b. complexity of subject matter
c. Consequence
d. validity
14. When a CPA is associated with the preparation of forecasts, all of the following
should be disclosed except:
a. Sources of information
b. Major assumptions used
c. Character of work performed
d. Probability of achieving forecasts
15. Which of the following is not one of the elements of an assurance engagement?
a. Sufficient appropriate evidence
b. Suitable criteria
c. Subject matter
d. An opinion about whether the subject matter conform, in all material
respects, with the identified criteria.
16. S1 Only CPE credits earned through master and doctoral degree can be carried
over each year in the three year period S2 You are exempted from earning CPE
once you reach 70 years of age.
a. True False
b. True True
c. False True
d. False False
18. Which of the following shall be issued to a candidate who passes the CPA
licensure examination?
a. Certificate of accreditation to practice public accountancy and PRC ID
b. Personal ID and a certificate of accreditation to practice public accountancy
c. Certificate of registration and professional ID
d. Certificate of full compliance and professional ID
21. Which of the following procedures would normally be included in the review
engagements?
a. Preparing the bank transfer schedule
b. Assessing the internal control structure
c. Asking management about related party transactions
d. Perform cut-off tests
22. If an auditor, using her judgment, departs from a PSA, she should:
a. Correct the issue immediately
b. Ignore it.
c. Be prepared to explain or justify
d. Disclose it in the notes to the financial statements
27. The statement that "nothing came to our attention which would indicate that these
statements are not fairly presented" expresses which of the following?
a. Disclaimer of opinion
b. Adverse opinion
c. Negative assurance
d. Piecemeal opinion
28. When prospective financial statements are prepared, the "responsible party" is
usually the
a. management
b. government entity that requires them
c. CPA who examines them
d. audit committee
32. A CPA should perform analytical procedures to (1) Audit (2) Review (3) Compile
a. Yes YesYes
b. Yes Yes No
c. No Yes Yes
d. No Yes No
35. The independent audit is important to readers of financial statements because it:
Determines the future stewardship of the management of the company whose
financial statements are audited
a. Measures and communicates financial and business data involved in financial
statements.
b. Involves the objective examination of and reporting on management
prepared statements
c. Reports on the accuracy of all information in the financial statements
37. Which of the following statements does not properly describe a limitation of an
audit?
a. Many audit conclusions are made on the basis of examining a sample of
evidence.
b. The work undertaken by the auditor is deprived of judgment.
c. Fatigue and human weakness can cause auditors to overlook pertinent evidence.
Evidence is usually not conclusive.
42. Auditing is based on the assumption that financial data are verifiable. Data are
verifiable when two or more qualified individuals,
a. working together, can prove, beyond doubt, the accuracy of the data.
b. working independently, each reach essentially similar conclusions.
c. working independently, can prove, beyond doubt, the truthfulness of the data
d. working together, can agree upon the accuracy of data.
43. What level of assurance does the CPA provide under the following engagements
a. Audit - reasonable; Review - moderate; Agreed upon procedures - low;
Consultancy - low
b. Audit - reasonable; Review - moderate; Agreed upon procedures - low;
Consultancy - none
c. Audit - high; Review - reasonable; Agreed upon procedures - none; Consultancy
- low
d. Audit - reasonable; Review - moderate; Agreed upon procedures - none;
Consultancy - none
44. Geli, CPA is applying for renewal of her professional license. She is exempted
from CPD requirements
a. If she is at least 70 years old
b. If she is working abroad and she has been out of the country for at least two
months immediately prior to the date of renewal.
c. Either A or B
d. Neither A nor B
45. The difference between what the public expects to get from the audited financial
statements and what the public is actually getting is known as:
a. Credibility Gap
b. Expectation Gap
c. Memory Gap
d. Audit Gap
46. The standard setting body promulgated by the PRC to promulgate accounting
standards.
a. AASC
b. ASPC
c. FRSC
d. IFRIC
48. If the CPA has reason to believe that the information subject to review may be
materially misstated, the CPA should:
a. Express a qualified negative assurance
b. Withdraw from the engagement
c. Express an adverse opinion
d. Carry out additional or more extensive procedures.
49. Ultimately, the decision about whether or not an auditor is independent must be
made by the
a. audit committee
b. auditor
c. Those charged with governance
d. government regulator
Financial statements
Audit report
Audit report
Statement is true
Statement is false
Statement is false
incomplete statement
Remoteness
Validity
complexity of subject matter
Consequence
Validity
The entity
Evidence
Criteria
Assertions
Criteria
Auditing standard
Yes YesYes
Yes Yes No
Yes Yes No
No Yes Yes
No Yes No
I & II
I, II & IV
I, II & IV
I, II & III
II & IV
10 10
12
Line
Sector
Segment
Section
Sector
True False
Both False
Both True
False True
Both False
CPE Council
Review report
Direct report
Compilation report
Sources of information
Probability of achieving
forecasts
Major assumptions used
Line
Sector
Segment
Section
Sector
The practitioner
Business risk
Audit risk
I, II & III
II & III
II & III
I & II
I & III
Professional accountant
Professional accountant
Assurance practitioner
Independent accountant
Financial statements
Assertions
Financial data
Economic data
Assertions
True False
False True
Both True
False True
Both False
Assurance
Assurance Attestation
Audit
Precision
Reasonable
None
Depending on what was agreed
Moderate
None
Systematic process
Department of Finance
Commission on Audit
Management Consultancy
Management Consultancy Services
Services
True False
Both False
Both True
False True
Both False
Philippine Standards on
Auditing Philippine Standards on Auditing
ACPAG
GACPA
ACPA
Review
Review
Audit
Consultancy
Consultancy
Consultancy
Tax consulting
Review engagement
Compilation
detect fraud
Refer to the following items for question: I. Understand the client's operations; II.
Confirm or refute expectations; III. Identify significant unusual fluctuations; IV.
Identify risk areas; V. Reasonably predict results; VI. Confirm conclusions reached.
Which of the items above pertain to the substantive testing phase?
I and II
II and V
I, II and IV
I and IV
II and V
Board of Accountancy
Auditor
Financial information
Efficiency and effectiveness of internal controls Degree of compliance with laws and regulations
True, False
False, True
True, True
False, True
False, False
Detection risk
Control risk
Inherent risk
A BOA member can be removed from office due to a pending case involving
moral turpitude
False
True
False
Inquiry
Recalculation
Terminal
Reasonable Moderate
Absolute
Reasonable
III I, V
III
I, V, VI
III, IV
Independence in mind
Independence in fact
If desired audit risk is 2% while assed risk of material misstatement is at 20%, how
much is acceptable detection risk?
0.4%
10%
2%
5%
10%
Inherent risk
Detection risk
Control risk
Detection risk
Management only needs a reviewed financial statements for quarterly filing to SEC
Management wants to reduce the audit procedures Management originally intended an "Agreed upon engagement" when they
to inquiry and analytical procedures due to mentioned "Audit" in prior meetings
deficiencies in accounting records
The auditing standards require the auditors to assess the risk of material
misstatements at the following levels:
Review of regulatory requirements specific to the Review of regulatory requirements specific to the client's business
client's business
Refer to the following items for the question: I. Understand the client's operations;
II. Confirm or refute expectations; III. Identify significant unusual fluctuations; IV.
Identify risk areas; V. Reasonably predict results; VI. Confirm conclusions reached.
The items above are:
True, True
True, True
True, False
False, True
False, False
Planning
Conclusion
None of these
Increases
Decrease
Refer to the following items for the question: I. Understand the client's operations;
II. Confirm or refute expectations; III. Identify significant unusual fluctuations; IV.
Identify risk areas; V. Reasonably predict results; VI. Confirm conclusions reached.
Which of the items above pertain to the planning stage?
I and II
I and IV
I, II and IV
I and IV
II and V
Refer to the following items for the question: I. Understand the client's operations;
II. Confirm or refute expectations; III. Identify significant unusual fluctuations; IV.
Identify risk areas; V. Reasonably predict results; VI. Confirm conclusions reached.
Which of the items above pertain to the conclusion stage?
I and II
III and VI
I, II, IV and VI
III and VI
II and V
True, False
False, True
True, True
False, True
False, False
The relationship of assessed control risk against acceptable detection risk is?
Linear
Inverse Parallel
Direct
Inverse
Pre-tax income
Total assets
Net loss
I and V
Which of the following is the most appropriate basis for setting the preliminary
materiality for a listed entity with positive net operating trends?
Pre-tax income
Pre-tax income
Revenues
Total assets
Total equity
PFRS, PFRS
PFRS, PSA
PFRS, PAS
Most of the customers of the audit client belong to the top 100 corporations in the
Philippines
Determine acceptable level of detection risk Identify significant account balances and transactions
Accounting for embedded derivatives Valuation of coal inventory held by the client
None of these
Annually
Management's assessment
Responsible party
Expert
Practitioner
The client has a functioning independent audit committee and internal audit
The client has a functioning independent audit department
committee and internal audit department
The client's only customer is the Philippine Government, hence the risk of default is
lower as compared to other private corporations.
Assuming that the acceptable range for setting the preliminary materiality is 5% to
10%, which of the following entity is more likely geared towards the upper range
(i.e., 10%)?
The auditor normally _____ the risk of material misstatement while he/she _______ the
detection risk.
Assesses, Assesses
Assesses, Controls
Controls, Assesses
Assesses, Controls
Controls, Controls
Pre-tax income
Total assets
Revenues
Total assets
Total equity
Sufficiency
Sufficiency Appropriateness
True, False
False, False
True, True
False, True
False, False
II, III, IV
II, IV, V
S1: A BOA member can be a non-resident Filipino citizen; S2: BOA's chairman is
elected among the members appointed by the President of the Republic
True, False
False, True
False, True
True, True
False, False
Staff accountant
I and V I and V
IV, V, VI
I, V, VI
III, IV, V
ACC5111: Auditing and Assurance Principles
PRELIMS
1. Professional skepticism is
a. Necessary for a quality control system
b. Adherence to the professional code of ethics
c. The application of relevant thinking, knowledge and experience, within the
context provided by auditing, accounting and ethical standards, in making
informed decisions about the courses of action that are appropriate in the
circumstance of the audit engagement.
d. An attitude that includes a questioning mind, being alert to conditions
which may indicate possible misstatement due to fraud or error and a
critical assessment of audit evidence.
4. The preliminary judgment about materiality is the ___ amount by which the auditor
believes the statement could be misstated and still not affect the economic
decision of users.
a. Minimum
b. Maximum
c. Mean average
d. Median average
7. The understanding between the client and the auditor as to the degree of
responsibilities to be assumed by each are normally set forth in a/an?
a. Comfort letter.
b. Management letter
c. Engagement letter.
d. Representation letter.
13. Which of the following is the correct order in the audit process?
a. Pre-engagement, Audit Planning, Substantive testing, Completing the audit,
Issuance of opinion
b. Audit Planning, Pre-engagement, Issuance of opinion, Substantive testing
c. Pre-engagement, Audit Planning, Substantive testing, Issuance of opinion,
Completing the audit
d. Substantive testing, Testing of Internal Controls, Completing the audit, Issuance
of opinion
15. The auditor's primary consideration is whether, and how, a specific control
prevents, or detects and corrects, material misstatements:
a. In classes of transactions, account balances or disclosures.
b. In classes of transactions.
c. In disclosures.
d. In account balances.
16. Which of the following components of internal control includes development and
use of training policies that communicate prospective roles and responsibilities to
employees?
a. Control Environment
b. Risk Assessment
c. Control Activities
d. Monitoring
17. An engagement letter should be written before the start of an audit because
a. It may limit the auditor’s legal liability by specifying the auditor’s responsibilities.
b. It specifies the client’s responsibility for preparing schedules and making the
records
c. available to the auditor.
d. It specifies the basis for billing the audit for the upcoming year.
e. All of the choices are correct.
20. Which of the following is not a factor that affects the auditor’s judgment, during
audit planning, as to the quantity, type and content of working papers?
a. The auditor’s preliminary assessment of control risk.
b. The nature of the client’s business.
c. The auditor’s preliminary evaluation of inherent risk based on discussions with
the client.
d. The type of report to be issued by the auditor.
24. Which of the following is the single feature that most clearly distinguishes
auditing, attestation, and assurance
a. Scope of services
b. CPA's approach to the service
c. Training necessary to perform the service.
d. Type of service
25. An abnormal fluctuation in gross profit that might suggest the need for extended
audit procedures for sales and inventories would most likely be identified in the
planning phase of the audit by the use of:
a. An assessment of internal control.
b. Specialized audit programs.
c. Tests of transactions and balances.
d. Analytical procedures.
26. The element of the audit planning process most likely to be agreed upon with the
client before implementation of the audit strategy is the determination of the
a. Schedules and analyses to be prepared by the client’s staff.
b. Methods of statistical sampling to be used inconfirming accounts receivable.
c. Evidence to be gathered to provide a sufficient basis for the auditor’s opinion.
d. Pending legal matters to be included in the inquiry of the client’s attorney.
27. Which of the following factors most likely would cause a CPA to not accept a new
audit engagement?
a. The CPA lacks a thorough understanding of the prospective client's operations
and
b. industry.
c. The CPA is unable to review the predecessor auditor's working papers.
d. The prospective client has fired its prior auditor.
e. The prospective client is unwilling to make financial records available to
the CPA.
28. There are a number of specific elements that usually contribute to a successful
control environment and which may be used as indicators of the quality of the
control environment of a particular organisation. Which of the following is not one
of these elements?
a. Assignment of authority and responsibility.
b. Human resource policies and practices.
c. Segregation of duties in management.
d. Organisational structure.
29. When a CPA is approached to perform an audit for the first time, the CPA should
make inquiries of the predecessor auditor. This is a necessary procedure because
the predecessor may be able to provide the successor with information that will
assist the successor in determining
a. Whether the engagement should be accepted.
b. Whether the predecessor’s work should be utilized.
c. Whether, in the predecessor’s opinion, internal control of the company has been
satisfactory
d. Whether the company follows the policy of rotating its auditors
32. It is the specific organization mandated by the law to promulgate rules and
regulations affecting the practice of Accountancy.
a. Professional Regulatory Board of Accountancy (BoA)
b. Professional Regulation Commission (PRC)
c. Philippine Institute of Certified Public Accountants (PICPA)
d. Accounting Standards Council (ASC)
33. The Board of Accountancy may issue certificate of registration and professional
identification card to any successful examinee
a. Of unsound mind
b. Who has falsely represented himself/herself in his/her application for examination
c. Guilty of immoral or dishonorable conduct
d. Convicted by a court of political offense
36. Bankers who are processing loan applications from companies seeking large
loans will probably ask for financial statements audited by an independent CPA
because
a. Financial statements are too complex to analyze themselves.
b. They are too far away from company headquarters to perform accounting and
auditing
c. themselves.
d. They generally see a potential conflict of interest between company
managers who want to get loans and the bank's needs for reliable financial
statements.
e. The consequences of making a bad loan are very undesirable.
37. Which of the following examinee does not belong to the group?
a. Examinee 3 scores: 85, 90, 77, 74, 73 and 60
b. Examinee 4 scores: 85, 90, 77, 76, 75 and 60
c. Examinee 1 scores: 85, 80, 77, 76, 73 and 60
d. Examinee 2 scores: 85, 80, 77, 76, 64 and 60
40. That companies must comply with many laws and regulations including company
law, tax law and environmental protection regulations requires what category of
internal control objectives?
a. Compliance.
b. Financial reporting.
c. Government reporting.
d. Effective operations.
41. Which one of the following best describes the type of control evidenced by
segregation of duties between computer programmers and computer operators?
a. Systems development and program maintenance control
b. Application control
c. System software control
d. General IT control
42. Having evaluated inherent risk and control risk, the auditor determines detection
risk
a. As the complement of overall audit risk.
b. By performing substantive audit tests.
c. At a level that equates the joint probability of inherent risk, control risk and
detection risk with overall audit risk
d. As a product of further study of the business andindustry and application of
analytical procedures
43. Which of the following is not a situation where an auditor might use an expert?
a. Amortisation of patents.
b. Determination of physical condition of assets.
c. Value of contracts in progress.
d. Actuarial valuation.
44. Understanding the Entity and Its Environment and Assessing the Risks of Material
Misstatement emphasizes:
a. Procedures for sampling audit tests.
b. Obtaining an understanding of control risk.
c. Reports to federal regulators.
d. Obtaining an understanding of business risks and significant risks.
45. Which of the following is true regarding the term of office of the members of the
Professional Regulatory Board of Accountancy?
a. No person who has served two successive complete terms as chairman or
member shall be eligible for reappointment as chairman or member until
the lapse of one year
b. The Chairman and members of the Board shall hold office for a term of three
years and one year respectively
c. Any vacancy occurring within the term of a member shall be filled up for the
unexpired portion of the term and can be extended.
d. A person can serve in the Board for more than twelve (12) years
47. Which one of the following would the auditor not consider in establishing the
overall audit strategy?
a. The legal and regulatory framework applicable to the entity.
b. Audit areas where there is higher risk of material misstatement.
c. Indusrty specific reporting requirements.
d. Testing of key controls which the auditor intends to rely on.
48. What technique should the auditor use in assessing the risk of material
misstatement?
a. The auditor should obtain written representation from the entity’s management.
b. The auditor should relate the identified risks to what can go wrong at the
assertion level.
c. The auditor should familiarize themselves with the client’s industry and current
market conditions.
d. The auditor should consider the implications of the identified risks for the
auditor’s report.
49. Which of the following sets of duties would ordinarily be considered basically
incompatible in terms of good internal control?
a. Custody of unmailed signed checks and maintenance of expense subsidiary
ledgers.
b. Posting to the general ledger and approval of additions and terminations relating
to the payroll.
c. Collection of receipts on account and maintaining accounts receivable
records.
d. Preparation of monthly statements to customers and maintenance of the
accounts receivable subsidiary ledger.
50. Which of the following factors most likely would cause a CPA to decline a new
audit engagement?
a. Management acknowledges that the entity has had recurring operating losses.
b. The CPA is unable to review the predecessor auditor's working papers.
c. Management is unwilling to permit inquiry of its legal counsel
d. The CPA does not understand the entity's operations and industry.
ACC5111: Auditing and Assurance Principles
QUIZ 3
4. Evaluate a CPA licensure exam candidate who obtains the following marks:FAR –
73%, AFAR – 73%, MS – 73%, RFBT – 73%, TAX – 73%, AUD – 100%
a. Passed
b. Failed
c. Conditioned, without removal
d. Conditioned, with removal
9. For variables testing, Using other substantive procedures on top of the primary
substantive procedures in question.
a. will lead to a larger sample size
b. will lead to a smaller sample size
c. will have a negligible effect on the sample size.
10. Evaluate the following pertaining to the audit risk model: I. The risk of material
misstatement can be controlled by the auditor II. The detection can be
controlled/manipulated by the auditor
a. True, True
b. False, False
c. True, False
d. False, True
13. After studying and evaluating a client's existing internal control, an auditor has
concluded that that the policies and procedures are well designed and functioning
as intended. Under these circumstances the auditor would most likely
a. Perform further control tests to the extent outlined in the audit program
b. Determine the control policies and procedures that should prevent or detect
errors and fraud
c. Set detection risk at a higher level than would be set under conditions of
weak internal control
d. Set detection risk at a lower level than would be set under conditions of weak
internal control
14. Classify the following: I. Financial Position, Financial Performance, and Cash
Flows II. Statement of Financial Position, Statement of Profit or Loss and Other
Comprehensive Income, and Statement of Cash Flows
a. Subject Matter, Subject Matter Information
b. Subject Matter Information, Subject Matter
c. Subject Matter, Subject Matter
d. Subject Matter Information, Subject Matter Information
17. In preparation of an audit program which of the following items is not essential?
a. A review of material from prior audits
b. The preparation of a budget identifying the cost of resources needed
c. An understanding of controls established by management
d. Assessment of inherent risk
18. All of the following, except for one, are required to apply for a certificate of
accreditation. Select the exception:
a. CPAs in the academe
b. CPAs in public practice
c. CPAs in commerce and industry (compilers)
d. CPAs in government
19. Evaluate the following statements: I. RA 9298 is the law primarily regulating the
practice of accounting in the Philippines II. Nomination for vacant seats in the
Board of Accountancy starts with the Accredited Integrated Professional
Organization
a. True, True
b. False, False
c. True, False
d. False, True
20. In deciding whether to use the work of the internal auditor, external auditor must
evaluate the internal auditors'
a. Objectivity and competence
b. Independence and professionalism
c. Education and certification
d. Age and gender
22. For variables testing,A very high acceptable sampling risk (risk of incorrect
acceptance)
a. will lead to a larger sample size
b. will lead to a smaller sample size
c. will have a negligible effect on the sample size.
29. Classify the following audit/test objectives to the appropriate procedures: I. Follow
through a completed transaction from start to finish in order to confirm the
understanding of control structures II. Establish the operating effectiveness of
controls
a. Test of controls, test of controls
b. Walkthrough, walkthrough
c. Test of controls, walkthrough
d. Walkthrough, test of controls
34. Determine which is/are reasons(s) why an auditor tests controls: I.To enable
him/her to report (i.e., give an opinion) on the operating effectiveness of controls
II. To enable him/her to assess and respond to the risk of material misstatement
appropriately
a. Both I and II
b. Neither I nor II
c. I only
d. II only
36. For attributes testing, A higher reliance on the control being tested.
a. will lead to a larger sample size
b. will lead to a smaller sample size
c. will have a negligible effect on the sample size.
40. During initial assessment of the risk of material misstatement, if the auditor
determines that control risk is less than high then
a. Auditor will rely on the operating effectiveness of controls
b. Auditor will not test controls
c. Auditor has been satisfied with results of his/her understanding and
walkthrough of controls
d. Auditor will take a reliance approach
43. Which of the following is an appropriate response to the re-assessment of the risk
of material misstatement (i.e., after tests of controls); the re-assessment confirms
the initial assessment of the risk of material misstatement?
a. Controls-reliance approach is to be undertaken
b. Additional test of controls must be performed
c. Substantive approach is to be undertaken
d. Additional risk assessment procedures must be undertaken
44. Which of the following is commonly called "the risk of material misstatement at
first instance"?
a. Inherent Risk
b. Control Risk
c. Detection Risk
d. Audit Risk
45. Which of the following is the primary evidence that the auditor and the client
agreed to the terms of the engagement?
a. Management Letter
b. Management Representation Letter
c. Engagement Letter
d. Prospectus
1. Auditor inquires for any slow moving inventory in the warehouse. What assertions
are being tested by the said procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
2. ABC Foundation was not able to support its revenue from donations. Official
receipts were lost due to a fire. The auditors were able to retrace purported
transactions in the pass book and supporting bank accounts. The issue is very
pervasive. The appropriate report would be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
4. For a small sample size the combination of acceptable sampling risk, tolerable
deviation rate and expected population deviation rate are:
a. Increase, Decrease, Increase
b. Decrease, Increase, Decrease
c. Increase, Increase, Decrease
d. No effect
10. Auditor analyses the last ten entries for the year and first ten entries of the
subsequent year to ensure recording in the proper period. What assertions are
being tested by the said procedures
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
14. The maximum amount of error in the population that the auditor is willing to
accept:
a. Acceptable risk
b. Tolerable deviation rate
c. Expected error
d. Anomalous error
15. Evaluate the following statements: S1: Close calls are items initially considered to
cast significant doubt on going concern but due to Management's plan such is no
longer consider to present a material uncertainty. S2: Auditors are prohibited to
challenge close calls in light of the applicable financial reporting framework
a. True, True
b. False, False
c. True, False
d. False, True
16. All of the following are benefits of using statistical sampling except:
a. Controlling sampling and non-sampling risks
b. Design an efficient sample
c. Provide sufficiency measure of evidence obtained
d. Evaluate objectively the results of testing
17. Auditor performs test counts by testing items in the warehouse to the accounting
records (or count sheets). What assertions are being tested by the said
procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
18. The auditor of Choco failed to observe the inventory count. No appropriate
alternative procedures are available for this very material account. The
appropriate report would be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
19. The group auditor of Choco was not able to audit an immaterial subsidiary. No
appropriate alternative procedures were performed. The appropriate report would
be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
22. Auditor inspects the bond indenture agreement and checks if the issuer of the
bond is the audit client. What assertions are being tested by the said procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
23. Key Audit Matters: S1: Are included in qualified and adverse opinions, S2: Are
included in reports with a disclaimer
a. True, True
b. False, False
c. True, False
d. False, True
24. Mr. A issued an adverse opinion on the complete set of financial statements, due
to the inventories. Mr. A was asked to audit the property, plant and equipment.
Which of the following is true?
a. Mr. A may not issue an unqualified opinion since the opinion on the complete set
is adverse.
b. Mr. A may not issue an unqualified opinion since inventories is an immaterial
component of the F/S.
c. Mr. A may issue an unqualified opinion if the report on both subject matter
information are issued together
d. Mr. A may issue an unqualified opinion since inventory is not related to
PPE.
26. If in case the auditor expects very few deviations, he/she would use:
a. Discovery sampling
b. Sequential sampling
c. Both a or b
d. Neither a nor b
27. Auditor compares the cost of inventories against the related selling prices and
costs to complete and sell. What assertions are being tested by the said
procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
29. Key Audit Matters Section is required for:Publicly Listed Audit Clients,
Foundations, Private Companies
a. Yes, Yes, Yes
b. No, No, No
c. Yes, No, No
d. Yes, Yes, No
30. An assertion that transactions are recorded in the proper accounting period is:
a. classification
b. accuracy
c. occurrence
d. cut-off
31. The group auditor of Choco was not able to audit a material subsidiary. No
appropriate alternative procedures were performed. The appropriate report would
be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
32. Auditor confirms accounts payable with a supplier of the audit client. What
assertions are being tested by the said procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
34. Choco employed corridor approach in accounting for its retirement benefits, as
opposed to the current requirements. The auditor considers this as a material item
due to the amounts of discrepancies. The appropriate report would be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
35. Key Audit Matters Section: S1: Is the first section of the auditor's report S2: Can
replace items presented in the emphasis of the matter section
a. True, True
b. False, False
c. True, False
d. False, True
37. Which of the following sampling risk would result to an erroneous conclusion on
the population?
a. Alpha risk
b. Alpha and beta risks
c. Alpha, beta and delta risks
d. Alpha, beta, gamma and delta risks
39. When obtaining an understanding of the accounting and internal control system
the auditor may trace a few transactions through the accounting system. This
technique is called:
a. reperformance test
b. test of transactions
c. walkthrough test
d. validity test
40. Mr. A issued an adverse opinion on the complete set of financial statements, due
to the inventories. Mr. A was asked to audit the statement of financial position.
Which of the following is true?
a. Mr. A may not issue an unqualified opinion since the opinion on the
complete set is adverse.
b. Mr. A may not issue an unqualified opinion since the SFP is an immaterial
component of the F/S.
c. Mr. A may issue an unqualified opinion if the report on both subject matter
information are issued together
d. Mr. A may issue an unqualified opinion since inventory is not related to PPE.
41. Auditor performs test counts by testing items in the accounting records to the
warehouse. What assertions are being tested by the said procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
42. Auditor inspects the bank statement and checks if the account is named after the
audit client. What assertions are being tested by the said procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations
43. The group auditor of Choco was not able to audit certain subsidiaries. No
appropriate alternative procedures were performed. The effect of this issue is very
material and pervasive in the context of the group financial statements. The
appropriate report would be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
44. Mr. A is being asked to be the auditor of the statement of financial position of ABC
Co. Mr. B, however, is the auditor of the complete set of financial statements. Can
Mr. A accept the engagement?
a. Yes, there is no prohibition to such
b. No, there is a prohibition to such
c. Not enough information is provided
d. None of the above
46. Choco capitalized research expenses for a drug development project. The amount
involved is material. The appropriate report would be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
47. Choco did not perform any inventory count. Inventory is determined to be a very
material account. No alternative procedure was performed for inventories. The
appropriate report would be
a. Unqualified
b. Qualified
c. Adverse
d. Disclaimer
48. Each of the following may be relevant to an auditor when obtaining knowledge
about the client's business and industry except:
a. discussion with people within or outside the entity.
b. publications related to the industry
c. visits of the entity's premises
d. performing a walkthrough test
50. Auditor obtains the management representation letter, specifically disclosures for
litigations, related parties and provisions. What assertions are being tested by the
said procedures?
a. Existence/Occurrence
b. Completeness / Cut off
c. Valuation
d. Rights and Obligations