1.

Which statement is incorrect about sampling risk?

a. Sampling risk arises from the possibility that the auditors conclusion, based on a sample may be different from the
conclusion reached if the entire population were subjected to the same audit procedure.
b. Risk of assessing control risk too low and risk of incorrect acceptance affects audit effectiveness as it would usually
lead to additional work to establish that initial conclusions were incorrect.
c. The mathematical complements of sampling risks are termed confidence levels.
d. Risk of assessing control risk too high is the risk that the auditor will conclude, in the case of a test of control, that
control risk is higher than it actually is.

2.

An auditor is applying mean-per-unit estimation. Assuming estimated audited value is P950,000, the achieved allowance for
sampling risk is P75,000, and recorded book value is P925,000, what is the auditor's conclusion?
a. Recorded book value is not likely misstated by a material amount.
b. Recorded book value is misstated by a material amount.
c. Recorded book value is not likely misstated by a material amount, assuming the client records an adjusting journal
entry equal to the allowance for sampling risk.
d. There is insufficient evidence to reach a conclusion

3.

An auditor wishes to sample 200 sales receipts from a population of 5,000 receipts issued during the last year. The receipts
have preprinted serial numbers and are arranged in chronological (and thus serial number) order. The auditor randomly
chooses a receipt from the first 25 receipts and then selects every 25th receipt thereafter. The sampling procedure described
here is called
a. Systematic random sampling.
b. Monetary-unit sampling.
c. Judgment interval sampling.
d. Variables sampling.

4.

Which of the following is not likely a control over removable storage media to prevent misplacement, alteration without
authorization or destruction?
a. Using cryptography, which is the process of transforming programs and information into an unintelligible form.
b. Placing responsibility for such media under personnel whose responsibilities include duties of software custodians or
librarians.
c. Using a program and data file check-in and check-out system and locking the designated storage locations.
d. Keeping current copies of diskettes, compact disks or back-up tapes and hard disks in a fireproof container, either onsite, off-site or both.

5.

Which statement is incorrect regarding internal controls in a CIS environment?

a. Manual and computer control procedures comprise the overall controls affecting the CIS environment (general CIS
controls) and the specific controls over the accounting applications (CIS application controls).
b. The purpose of general CIS controls is to establish a framework of overall control over the CIS activities and to provide
a reasonable level of assurance that the overall objectives of internal control are achieved.
c. The purpose of CIS application controls is to establish specific control procedures over the application systems in order
to provide reasonable assurance that all transactions are authorized and recorded, and are processed completely,
accurately and on a timely basis.
d. The internal controls over computer processing, which help to achieve the overall objectives of internal control, include
only the procedures designed into computer programs.

6.

Risk of fraud or error in on-line systems may be reduced in the following circumstances, except
a. If on-line data entry is performed at or near the point where transactions originate, there is less risk that the transactions
will not be recorded.
b. If invalid transactions are corrected and re-entered immediately, there is less risk that such transactions will not be
corrected and re-submitted on a timely basis.
c. If data entry is performed on-line by individuals who understand the nature of the transactions involved, the data entry
process may be less prone to errors than when it is performed by individuals unfamiliar with the nature of the
transactions.
d. On-line access to data and programs through telecommunications may provide greater opportunity for access to data
and programs by unauthorized persons.

7.

Which statement is incorrect regarding activities incompatible with the practice of public accountancy?
a. A professional accountant in public practice should not concurrently engage in any business, occupation or activity
which impairs or might impair integrity, objectivity or independence, or the good reputation of the profession.

b.
c.
d.

A professional accountant in public practice should not concurrently engage in any business, occupation or activity
which would be incompatible with the rendering of professional services.
The rendering of two or more types of professional services concurrently does by itself impair integrity, objectivity or
independence.
The simultaneous engagement in another business, occupation or activity unrelated to professional services which has
the effect of not allowing the professional accountant in public practice properly to conduct a professional practice in
accordance with the fundamental ethical principles of the accountancy profession should be regarded as inconsistent
with the practice of public accountancy.

8.

Which of the following is least likely considered to create a threat to independence?

a. The provision of services by a firm or network firm to an audit client which involve either the design or the
implementation of financial information technology systems that are used to generate information forming part of a
clients financial statements.
b. The provision of services in connection with the assessment, design and implementation of internal accounting controls
and risk management controls.
c. The lending of staff by a firm, or network firm, to an audit client when the individual is in a position to influence the
preparation of a clients accounts or financial statements.
d. The provision of litigation support services to an audit client, which include the estimation of the possible outcome and
thereby affects the amounts or disclosures to be reflected in the financial statements.

9.

Which statement is incorrect regarding long association of senior personnel with audit clients that are listed entities?
a. Using the same lead engagement partner on an audit over a prolonged period may create a familiarity threat.
b. The lead engagement partner should be rotated after a pre-defined period, normally no more than seven (7) years.
c. A partner rotating after a pre-defined period should not resume the lead engagement partner role until a further period
of time, normally two years, has elapsed.
d. When audit client becomes a listed entity the length of time the lead engagement partner has served the audit client in
that capacity should be considered in determining when the partner should rotated.

10. The form and content of working papers are affected by matters such as the:
I.
Nature of the engagement.
II.
Form of the auditors report.
III.
Nature and complexity of the business.
IV.
Nature and condition of the entitys accounting and internal control systems.
V.
Needs in the particular circumstances for direction, supervision and review of work performed by assistants.
VI.
Specific audit methodology and technology used in the course of the audit.
a. All of the above

b. All except V and VI

c. I, II and III only

d. All except VI