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A.
B.
C.
D.
2.
A.
An auditor is engaged to carry out those procedures of an audit nature to which the
auditor and the entity and any appropriate third parties have agreed and to report
on factual findings.
B.
The recipients of the report must form their own conclusions from the report by the
auditor.
C.
The report is restricted to those parties that have agreed to the procedures to be
performed.
D.
3.
Which of the following engagements provides third parties the highest level of
assurance about the clients financial statements?
A.
Audit
B.
Review
C.
Agreed-upon procedures
D.
Compilation
4.
In which of the following situations can third parties assume responsibility of the
auditor regarding association with financial information?
A.
B.
When the auditor consents to the use of the auditor's name in a professional
connection.
C.
Either a or b.
D.
Neither a nor b.
5.
Engagement risk is the risk that the practitioner will express an inappropriate
conclusion that the subject matter conforms in all material respects with suitable
criteria.
B.
All components of the engagement risk model will be significant for all assurance
engagements.
C.
D.
Business risk is not part of engagement risk and does not affect the application of
Philippine Standard on Assurance Engagements.
6.
A concept relating to the accumulation of the audit evidence necessary for the
auditor to conclude that there are no material misstatements in the financial
statements taken as a whole.
A.
Reasonable assurance
B.
Positive assurance
C.
Moderate assurance
D.
Negative assurance
7.
A.
The external auditor should consider the activities of internal auditing and their
effect, if any, on external audit procedures.
B.
C.
During the course of planning the audit, the external auditor should perform a
preliminary assessment of the internal audit function when it appears that internal
auditing is relevant to the external audit of the financial statements in specific audit
areas.
D.
When the external auditor intends to use specific work of internal auditing, the
external auditor need not evaluate and test that work to confirm its adequacy for
the external auditor's purposes.
8.
A.
B.
C.
Stating in the auditors management letter that the examination was made in
accordance with generally accepted auditing standards.
D.
9.
A.
The independent auditor.
B.
C.
D.
10.
The exposure period allowed for each exposure draft of PSA to be considered by the
organizations and persons to whom it is sent for comment is generally
A.
Four months
B.
Three months
C.
Two months
D.
Six months
11.
A.
The PSAs and Interpretations may also have application, as appropriate, to other
related activities of auditors.
B.
PSAs contain basic principles and essential procedures (identified in bold type black
lettering) together with related guidance in the form of explanatory and other
material.
C.
PSAs need only be applied to material matters.
D.
12.
A.
Any position in any business or company in the private sector which requires
supervising the recording of financial transactions.
B.
Any position in any business or company in the private sector which requires
preparation of financial statements.
C.
Any position in any business or company in the private sector which requires
coordinating with the internal auditors for the audit of financial statements.
D.
The position of the dean that supervises the BSA program of an educational
institution.
13.
Which of the following is not represented in the Auditing and Assurance Standards
Council?
A.
Board of Accountancy
B.
C.
D.
A.
Peer review
B.
Quality review
C.
Analytical review
D.
Administrative review
15.
Emong, CPA is applying for renewal of his professional license. He is exempted from
the CPE requirements
A.
B.
If he is working abroad and he has been out of the country for at least two years
immediately prior to the date of renewal.
C.
Either a or b.
D.
Under no circumstances.
16.
A.
The Professional Regulation Commission has the authority to remove any member
of the Board of Accountancy for negligence, incompetence, or any other just cause.
B.
C.
D.
After three years, subject to certain conditions, the Board of Accountancy may order
the reinstatement of a CPA whose certificate of registration has been revoked.
17.
There is a need for assurance that all services obtained from a professional
accountant are carried out to the highest standards of performance. This statement
relates to
A.
Credibility
B.
Professionalism
C.
Quality of Services
D.
Confidence
18.
A.
I, II, III
B.
II, III, I
C.
III, II, I
D.
II, I, III
19.
A.
Intimidation threat
B.
Self-review threat
C.
Advocacy threat
D.
Familiarity threat
20.
A.
B.
C.
Assisting an audit client in matters such as preparing accounting records or financial
statements.
D.
21.
This process may include, particularly in the case of large complex audits,
requesting personnel not otherwise involved in the audit to perform certain
additional procedures.
A.
Direction
B.
Supervision
C.
Review
D.
All of these
22.
Which of the following is least likely a factor that affects the extent of quality control
procedures?
A.
B.
C.
D.
23.
Which statement is incorrect regarding the auditors responsibility to consider fraud
and error in the audit of financial statements?
A.
B.
The auditor is may be held responsible for the prevention of fraud and error.
C.
The auditor should consider the risk of material misstatements in the financial
statements resulting from fraud or error.
D.
The risk of not detecting a material misstatement resulting from error is lower than
the risk of not detecting a material misstatement resulting from fraud.
24.
A.
Using the auditors knowledge of the business, the auditor may identify events or
conditions that provide an opportunity, a motive or a means to commit fraud, or
indicate that fraud may already have occurred.
B.
C.
Fraud risk factors indicate the existence of fraud because they often have been
present in circumstances where frauds have occurred.
D.
The presence of fraud risk factors may affect the auditors assessment of inherent
risk or control risk.
25.
Cash receipts from sales on account have been misappropriated. Which of the
following acts would conceal this defalcation and least likely to be detected by an
auditor?
A.
B.
C.
D.
26.
Example of the type of information that may come to the auditor's attention that
may indicate that noncompliance with laws or regulations has occurred most likely
include
A.
B.
Payments for goods or services made to the country from which the goods or
services originated.
C.
D.
27.
When the auditor knows that an illegal act has occurred, the auditor must
A.
Issue an adverse opinion.
B.
C.
D.
28.
A.
B.
C.
The auditors communications with those charged with governance may be made
orally or in writing.
D.
29.
It is in the interest of both client and auditor that the auditor sends an engagement
letter, preferably before
A.
B.
D.
30.
When a change in the type of engagement from higher to lower level of assurance
is reasonably justified, the report based on the revised engagement (choose the
incorrect one)
A.
Should not contain a separate paragraph that refers to the original engagement.
B.
Should not refer to any procedures that may have been performed in the original
engagement.
C.
D.
31.
A basic tool used by the auditor to control the audit work and review the progress of
the audit.
A.
Audit program
B.
Progress flowchart
C.
Engagement letter.
D.
A.
Assess the conclusions reached and the evaluation of the overall financial
statement presentation through the use analytical procedures.
B.
C.
D.
33.
An understanding of the clients business and industry and knowledge about the
companys operations are essential for doing an adequate audit. For a new client,
most of this information is obtained
A.
B.
C.
D.
34.
A.
C.
D.
35.
Which of the following would an auditor most likely use in determining the auditors
preliminary judgment about materiality?
A.
B.
C.
D.
36.
How can the audit program best be described at the beginning of the audit process?
A.
Tentative.
B.
Comprehensive.
C.
Conclusive.
D.
Optional.
37.
A.
B.
There is an inverse relationship between detection risk and the combined level of
inherent and control risk.
C.
The assessed level of inherent and control risk can be sufficiently low, thus resulting
to eliminating the need for substantive tests.
D.
Audit risk may be more appropriately determined by assessing inherent and control
risk separately.
38.
A.
B.
C.
D.
A client fails to discover employee fraud on a timely basis because bank accounts
are not reconciled monthly.
39.
Which of the following is a valid statement about the assessment of control risk?
A.
There is a positive relationship between detection risk and the combined level of
inherent and control risk.
B.
The auditor should consider the assessed levels of inherent and control risks in
determining the nature, timing, and extent of substantive procedures required to
eliminate audit risk.
C.
D.
The assessed level of inherent and control risks can be sufficiently low in order to
eliminate the auditors need to perform substantive tests on some assertions.The
assessed level of inherent and control risks can be sufficiently low in order to
eliminate the auditors need to perform substantive tests on some assertions.
40.
The auditor should perform which of the following as risk assessment procedure?
A.
Analytical procedures
B.
Confirmation
C.
Recalculation
D.
Reperformance
41.
A.
Enhance the ability to monitor the performance of the entitys activities and its
policies and procedures.
C.
D.
42.
Control environment
A.
Consists of the policies and procedures that help ensure that management
directives are carried out.
B.
Includes the governance and management functions and the attitudes, awareness,
and actions of those charged with governance and management concerning the
entitys internal control and its importance in the entity.
C.
Is the entitys process for identifying business risks relevant to financial reporting
objectives and deciding about actions to address those risks, and the results
thereof.
D.
Consists of the procedures and records established to initiate, record, process, and
report entity transactions (as well as events and conditions) and to maintain
accountability for the related assets, liabilities, and equity.
43.
Which of the following situations will normally result to increase in the extent of
audit procedures?
A.
C.
D.
44.
The auditor should determine overall responses to address the risks of material
misstatement at the financial statement level. Such responses most likely include
A.
B.
C.
D.
45.
Which statement is incorrect regarding the nature, timing and extent of tests of
controls?
A.
B.
If the auditor plans to rely on controls that have not changed since they were last
tested, the auditor should test the operating effectiveness of such controls at least
once in every third audit.
C.
D.
The more the auditor relies on the operating effectiveness of controls in the
assessment of risk, the greater is the extent of the auditors tests of controls.
46.
A.
The primary objective is to provide the auditor with an evaluation of the consistency
of application of managements policies.
B.
The primary objective is to provide the auditor with knowledge necessary for audit
planning.
C.
The primary objective is to provide the auditor with evidential matter to use in
assessing inherent risk.
D.
The primary objective is to provide the auditor with a basis for modifying tests of
controls.
47.
Which of the following would most likely indicate internal control deficiency for the
revenue cycle (including cash receipts)?
A.
B.
D.
Cash disbursements over P100,000 does not require two signatures on the check.
48.
A.
B.
Setting the planned assessed level of control risk at the maximum will eliminate
these tests.
C.
D.
Inquire of the accounts receivable clerk regarding the effectiveness of the computer
program in updating accounts receivable balances.
49.
A.
B.
C.
D.
The report of the service organization auditor on the suitability of design (Type A)
will not ordinarily include an opinion by the service organization auditor that:
A.
B.
C.
The accounting and internal control systems are operating effectively based on the
results from the tests of control.
D.
The accounting and internal control systems are suitably designed to achieve their
stated objectives.