Select the best answer for each of the 4. Which of the following is not normally 8.

normally 8. An auditor's working papers will generally 12. What is the primary difference between
following questions. performed in the pre-planning or pre- be least likely to include documentation financial reporting risk and audit risk?
engagement phase? showing how the a) The application of accounting principles
a) Deciding whether to accept or reject an a) Client's schedules were prepared b) Responsibilities of the respective parties
audit engagement b) Engagement had been planned involved
1. Broadly defined, the subject matter of any
b) Inquiring from predecessor auditor c) Client's system of internal control had been c) Demands of users of financial statements
audit consists of
c) Preparing an engagement letter reviewed and evaluated d) Risks of being sued by third parties
a) Financial statements
d) Making a preliminary estimate of d) Unusual matters were resolved
b) Economic data
materiality 13. Relationship between control risk and
c) Assertions
detection risk is ordinarily
d) Operating data 9. Which of the following sampling methods a) Parallel
5. On the basis of the audit evidence gathered would be most appropriate in performing b) Inverse
and evaluated, an auditor decides to increase tests of controls over authorization of cash c) Direct
2. The third standard of field work states that
the assessed level of control risk from that disbursements d) Equal
sufficient competent evidential matter may in
originally planned. To achieve an overall audit a) Attributes
part be obtained through the following
risk level that is substantially the same as the b) Variables
methods except
planned audit risk level, the auditor would c) Ratio 14. A representation letter issued by a client
a) Inspection
a) Decrease substantive testing d) Stratified a) Is essential for the preparation of the audit
b) Observation
b) Increase inherent risk program
c) Confirmation
c) Decrease detection risk b) Is a substitute for testing
d) Reconciliation 10. Analytical procedures used in the overall
d) Increase materiality levels c) Does not reduce the auditor's responsibility
review stage of an audit generally include d) Reduces the auditor's responsibility only to
a) Considering unusual or unexpected account the extent that it is relied upon
3. If an auditor believes that material error or
6. An effective internal control balances that were not previously identified
fraud exist, the auditor should
a) Cannot be circumvented by management b) Performing test of transactions to 15. The recruitment of senior management
a) Consider the implications and discuss the
b) Can reduce the cost of an external audit corroborate management's financial for an assurance client, such as those in a
matter with appropriate levels of
c) Can prevent collusion among employees statement assertions position to affect the subject of the assurance
management
d) Eliminates risks and potential loss to the c) Gathering evidence concerning account engagement may least likely create
b) Make the investigation necessary to
organization balances that have not changed from the a) Self-interest threat
determine whether errors or fraud have in
prior year b) Advocacy threat
fact occurred
d) Re-testing control procedures that c) Intimidation threat
c) Request that management investigate 7. In auditing through a computer, the test appeared to be ineffective during the d) Familiarity threat
whether errors or fraud have in fact occurred data method is used by auditors to test the assessment of control risk
d) Consider whether errors or fraud where a) Accuracy of input data
the result of employee's failure to comply b) Validity of the output 11. Results of the financial statement audit
with specific controls c) Procedures contained within the program are communicated to users through
d) Normalcy of distribution of test data a) Financial statement
b) Written management assertion
c) Audit report
d) None of the above
16. In reviewing the audit work performed,
the engagement partner
a) Must review all audit documentation
b) Need not review all audit documentation,
but may do so
c) Need not review all audit documentation
d) Must ask the staff performing the audit
work to sign the audit report
17. The independent auditor lends credibility
to client’s financial statements by
a) Maintaining a clear-cut distinction between
management’s representations and the
auditor’s representation
b) Testifying under oath about client’s
financial statements
c) Stating in the auditor’s management letter
that the examination was made in accordance
with generally accepted auditing standards
d) Attaching an auditor’s opinion to the
client’s financial statements
18. The most difficult type of misstatement to
detect is fraud based on
a) The over-recording of transactions
b) The non-recording of transactions
c) Recorded transactions in subsidiaries
d) Related party receivables
19. Assuming a recurring audit, in which of
the following situations would the auditor be
unlikely to send a new engagement letter to
the client?
a) A recent change in partner and/or staff
involved in the audit engagement
b) A change in the terms of engagement
c) A recent change of client management
d) A significant change in the nature or size of
the client's business
20. When an auditor expresses an adverse
opinion, he/she should disclose the
substantive reasons for such an opinion in an
explanatory paragraph
a) Within the notes to the financial
statements
b) Preceding the opinion paragraph
c) Following the opinion paragraph
d) Preceding the introductory paragraph
21. Tolerable error means
a) An error that arises from an isolated event
that has not recurred other than on
specifically identifiable occasions and is
therefore not representative of errors in the
population
b) An error that the auditor expects to be
present in the population
c) The maximum error in a population that
the auditor is willing to accept
d) The possibility that the auditor's
conclusion, based on a sample may be
different from the conclusion reached if the
entire population were subjected to the same
audit procedure
22. Examples of events or conditions, which
individually or collectively, may cast
significant doubt about the going concern
assumption include the following except
a) Net liability or net current liability position
b) Change from credit to cash-on-delivery
transactions with suppliers
c) Labor difficulties or shortages of important
supplies
d) Compliance with capital or other statutory
requirements
23. Which of the following procedures is not
included in a review engagement on a
nonpublic entity
a) Inquiries of management
b) Inquiries regarding events subsequent to
the balance sheet date
c) Any procedures designed to identify
relationships among data that appear to be
unusual
d) A study and evaluation of internal control
structure
24. In planning the audit engagement, the
auditor should consider each of the following
except
a) The kind of opinion that will likely be given
b) Matters relating to the entity’s business
and the industry in which it operates
c) The entity’s accounting policies and
procedures
d) Anticipated levels of control risk and
materiality
25. What assurance is provided by the
practitioner in an agreed-upon procedures
engagement?
a) Reasonable
b) Absolute
c) Moderate
d) No assurance
26. To test for unsupported entries in the
journal, the direction of audit testing should
be from the
a) Journal entries
b) Ledger entries
c) Original source documents
d) Externally generated documents
27. For good internal control, the purchasing
department should not be responsible for
a) Authorizing the acquisition of goods
b) Finding the lowest cost vendor
c) Reviewing the vendors catalog descriptions
and prices for standardized items
d) Designing the purchase order form
28. Involves tracing a few transactions
through the accounting system
a) Test of controls
b) Walk-through test
c) Analytical procedures
d) Substantive procedures
29. This exists, when other information, not
related to matters appearing in the financial
statements, is incorrectly stated or presented
a) Material inconsistency
b) Material misstatement
c) Material misstatement of fact
d) Material error affecting the other
information
30. Who appoints the members of the Board
of Accountancy
a) The chairman of BOA
b) The president of the Philippines
c) The chairman of the PRC
d) The president of PICPA
31. An auditor is required to obtain an
understanding of the entity's business,
including business cycles and reasons for
business fluctuations. What is the audit
purpose most directly served by obtaining this
understanding?
a) To enable the auditor to accurately identify
significant deficiencies in internal control
b) To assist the auditor in accurately
interpreting information obtained during an
audit
c) To allow the auditor to more accurately
perform tests of controls
d) To decide whether it will be necessary to
perform analytical procedures
32. Which of the following is not true about
the report release date?
a) It is defined as the date after which existing
documentation must not be deleted, and
additions to the documentation file must be
documented as such
b) It is often the date on which the report is
delivered to the client
c) It is the date on which the auditor grants
the client permission to use the report
d) It is used to define the beginning of the
retention period
33. An auditor should not issue a report on
a) Quarterly financial information
b) Internal control
c) Management performance
d) The achievability of forecasts
34. Which of the following procedures would
an auditor most likely perform to obtain
evidence about the occurrence of subsequent
events?
a) Confirming a sample of material accounts
receivable established after year-end
b) Comparing the financial statements being
reported on with those of the prior period
c) Investigating personnel changes in the
accounting department occurring after year-
end
d) Inquiring as to whether any unusual
adjustments were made after year-end
35. To which of the following matters would
materiality limits not apply when obtaining
written client representations?
a) Violations of state labor regulations
b) Disclosure of line-of-credit arrangements
c) Information about related party
transactions
d) Instances of fraud involving management
36. Who ultimately determines the scope of
the audit?
a) The auditor
b) The client
c) Both a and b
d) Neither a nor b
37. Financial statements prepared in
accordance with a financial reporting
framework designed to meet the financial
information needs of specific users are
referred to as
a) Special purpose financial statements
b) Special purpose framework
c) General purpose financial statements
d) Specific purpose financial statements
38. An auditor plans to apply substantive tests 42. The management's assessment of the
to the details of asset and liability accounts as entity's ability to continue as a going concern
of an interim date rather than as of the covers a period of
balance sheet date. The auditor should be a) Not longer than 12 months from balance
aware that this practice sheet date
a) Eliminates the use of certain statistical b) At least 12 months from the balance sheet
sampling methods that would otherwise be date
available c) Not longer than 12 months from the date
b) Presumes that the auditor will reperform of audit report
the tests of the balance sheet date d) At least 12 months from the date of audit
c) Should be especially considered when there report
are rapidly changing economic conditions
d) Potentially increases the risk that errors 43. To obtain evidential matter about control
that exist at the balance sheet date will not risk, an auditor selects tests from a variety of
be detected techniques including
a) Inquiry
39. Close family include the following, except b) Analytical procedures
a) Parent c) Calculation
b) Sibling d) Confirmation
c) Non-dependent child
d) Spouse 44. The need for independent audits of
financial statements can be attributed to all of
40. A computer-assisted audit technique that the following conditions except
is most likely to be effective in a continuous a) Remoteness
auditing environment is b) Consequence
a) Parallel simulation c) Complexity of subject matter
b) Controlled reprocessing d) Validity
c) Embedded audit modules
d) Transaction tripping
41. Which of the following is not prohibited
by the Code of Professional Ethics for CPAs?
a) Advertising and solicitation of clients
b) Payment of commissions to obtain a client
c) Receiving a contingent fee on a tax case
before the Bureau of Internal Revenue
d) Offering employment to a staff member of
another CPA without first informing the CPA
45. After issuing a report an auditor includes
that an auditing procedure considered
necessary at the time of the examination was
omitted from the examination. The auditor
should first
a) Undertake to apply the omitted procedure
or alternative procedures that would provide
a satisfactory basis for the auditor's opinion
b) Assess the importance of the omitted
procedure to the auditor's ability to support
the opinion expressed on the financial
statements taken as a whole
c) Notify the audit committee or the board of
directors that the auditor's opinion can no
longer be relied upon
d) Review the results of other procedures that
were applied to compensate for the one
omitted or to make its omission less
important
46. This quality control element requires a
CPA firm to establish policies and procedures
to provide it with reasonable assurance that
engagements are performed in accordance
with professional standards and regulatory
and legal requirements, and that the firm or
the engagement partner issue reports that
are appropriate in the circumstances
a) Ethical requirements
b) Engagement performance
c) Monitoring
d) Human resources
47. Communication with a predecessor
auditor is initiated by
a) Management
b) The successor auditor
c) The audit committee of the board of
directors
d) The chair of the board of directors
48. In which of the following may confidential
information not be disclosed?
a) To comply with the quality review of a
member body or professional body
b) To submit evidence in the course of legal
proceedings
c) Acquiring information in the course
performing professional services and use that
information for personal advantages
d) When consent to disclose information is
given by the client
49. The auditor should perform the following
risk assessment procedures to obtain an
understanding of the entity and its
environment, including its internal control,
except
a) Inquiries of management and others within
the entity
b) Reperformance
c) Analytical procedures
d) Observation and inspection
50. The auditor should determine overall
responses to address the risks of material
misstatement at the financial statement level.
Such responses most likely include
a) Assigning less experienced staff
b) Performing predictable further audit
procedures
c) Performing substantive procedures at an
interim date instead of at period end
d) Emphasizing to the audit team the need to
maintain professional skepticism in gathering
and evaluating audit evidence
51. The need for assurance services arises for
all of the following reason except
a) Potential bias in providing information
b) Closeness between a user and the
organization
c) Complexity of the processing systems
d) Remoteness between a user and the
organization
52. Which one of the following is not a key
attribute needed to perform assurance?
a) Subject matter knowledge
b) Independence
c) Established criteria or standards
d) Accounting skills
53. Which one of the following is not part of
the attest process?
a) Providing the accuracy of the books and
records
b) Gathering evidence about assertions
c) Evaluating evidence against objective
criteria
d) Communicating the conclusions reached
54. Users of the audit report can reasonably
expect the audited financial statements to be
a) Complete and contain many of the
important financial disclosures
b) Presented fairly according to the substance
of GAAP
c) Free from all errors
d) All of the above
55. Which of the following services is the
broadest and most inclusive
a) Audit
b) Attestation
c) Assurance
d) Compliance
56. One reason why an auditor makes an
analytical review of the client’ s operations is
to identify
a) Improper separation of accounting and
other financial duties
b) Weakness of a material nature in the
system of internal accounting control
c) Unusual transactions
d) Non-compliance with prescribed control
procedures
57. Analytical procedures used in planning an
audit should focus on identifying
a) Material weaknesses in the internal control
structure
b) The predictability of financial data from
individual transactions
c) The various assertions that are embodied in
the financial statements
d) Areas that may represent specific risk
relevant to audit
58. An integrated test facility (ITF) would be
appropriate when the auditor needs to
a) Trace a complex logic path through an
application system
b) Verify processing accuracy concurrently
with processing
c) Monitor transactions in an application
system continuously
d) Verify load module integrity for production
programs
59. The rotation of senior accounting
personnel can be regarded as a safeguard
a) Created by the profession
b) Within the client’ s systems and procedures
c) In the work environment
d) Created within the business community
60. If certain forms are not consecutively
numbered
a) Systematic sampling may be appropriate
b) Selection of a random sample probably is
not possible
c) Stratified sampling should be used
d) Random number tables cannot be used
61. A cash shortage may be concealed by
transporting funds from one location to
another or by converting negotiable assets to
cash. Because of this, which of the following is
vital?
a) Simultaneous confirmations
b) Simultaneous bank reconciliations
c) Simultaneous verification
d) Simultaneous surprise cash count
62. Which of the following is most likely to
indicate a significant deficiency relating to a
client's anti-fraud programs?
a) A broad scope of internal audit activities
b) A "whistle-blower" program that
encourages anonymous submissions
c) Audit committee passivity when conducting
oversight functions
d) Lack of performance of criminal
background investigations for likely customer
63. Which of the following is not an
attestation standard?
a) Sufficient evidence shall be obtained to
provide a reasonable basis for the conclusion
that is expressed in the report
b) The report shall identify the subject matter
on the assertion being reported on and state
the character of the engagement
c) he work shall be adequately planned and
assistants, if any, shall be properly supervised
d) A sufficient understanding of internal
control shall be obtained to plan the
engagement
64. Proper segregation of functional
responsibilities calls for separation of the
functions of
a) Authorization, execution, and payment
b) Authorization, recording, and custody
c) Custody, execution, and reporting
d) Authorization, payment, and recording
65. Control risk should be assessed in terms of
a) Specific controls
b) Types of potential fraud
c) Financial statement assertions
d) Control environment factors
66. Which of the following is not a step in an
auditor's assessment of control risk?
a) Evaluate the effectiveness of internal
control with tests of controls
b) Obtain an understanding of the entity's
information system and control environment
c) Perform tests of details of transactions to
detect material misstatements in the financial
statements
d) Consider whether controls can have a
pervasive effect on financial statement
assertions
67. Which of the following procedures would
an auditor ordinarily perform first in
evaluating management's accounting
estimates for reasonableness?
a) Develop independent expectations of
management's estimates
b) Consider the appropriateness of the key
factors or assumptions used in preparing the
estimates
c) Test the calculations used by management
in developing the estimates
d) Obtain an understanding of how
management developed its estimates
68. An entity's income statements were
misstated due to the recording of journal
entries that involved debits and credits to an
unusual combination of expense and revenue
accounts. The auditor most likely could have
detected this fraudulent financial reporting by
a) Tracing a sample of journal entries to the
general ledger
b) Evaluating the effectiveness of internal
control
c) Investigating the reconciliations between
controlling accounts and subsidiary records
d) Performing analytical procedures designed
to disclose differences from expectations
69. Which of the following is most likely to be
unique to the audit work of CPAs as
compared to work performed by practitioners
of other professions?
a) Due professional care
b) Competence
c) Independence
d) Complex body of knowledge
70. Which of the following would an auditor
most likely use in determining the auditor's
preliminary judgment about materiality?
a) The anticipated sample size of the planned
substantive tests
b) The entity's annualized interim financial
statements
c) The results of the internal control
questionnaire
d) The contents of the management
representation letter
71. Which of the following conditions
identified during fieldwork of an audit is most
likely to affect the auditor's assessment of the
risk of misstatement due to fraud?
a) Checks for significant amounts outstanding
at year-end
b) Computer generated documents
c) Missing documents
d) Year-end adjusting journal entries.
72. An auditor ordinarily uses a working trial
balance resembling the financial statements
without footnotes, but containing columns for
a) Cash flow increases and decreases
b) Audit objectives and assertions
c) Reclassifications and adjustments
d) Reconciliations and tick marks
73. The risk that an auditor will conclude,
based on substantive tests, that a material
misstatement does not exist in an account
balance when in fact such misstatement does
exist is referred to as
a) Detection risk
b) Sampling risk
c) Non-sampling risk
d) Inherent risk
74. The usefulness of the standard bank
confirmation request may be limited because
the bank employee who completes the form
may
a) Be unaware of all the financial relationships
that the bank has with the client
b) Not believe that the bank is obligated to
verify confidential information to a third party
c) Sign and return the form without inspecting
the accuracy of the client's bank
reconciliation
d) Not have access to the client's cutoff bank
statement
75. A material weakness is a significant
deficiency (or combination of significant
deficiencies) that results in a reasonable
possibility that a misstatement of at least
'what amount will not be prevented or
detected?
a) An amount greater than zero
b) An amount greater than zero, but at least
inconsequential
c) An amount greater than inconsequential
d) A material amounts
76. The existence of audit risk is recognized by
the statement in the auditor's standard report
that the auditor
a) Obtains reasonable assurance about
whether the financial statements are free of
material misstatement.
b) Assesses the accounting principles used
and also evaluates the overall financial
statement presentation.
c) Realizes some matters either individually or
in the aggregate, are important while other
matters are not important.
d) Is responsible for expressing an opinion on
the financial statements, which arc the
responsibility of management.
77. Which of the following services would be
most likely to be structured as an attest
engagement?
a) Advocating a client's position in tax matter.
b) A consulting engagement to develop a new
database system for the revenue cycle.
c) An engagement to issue a report
addressing an entity's compliance with
requirements of specified laws.
d) The compilation of a client's forecast
information.
78. Which of the following is ordinarily
considered to be a fraud risk factor?
a) The company's financial statements include
a number of last-minute material
adjustments.
b) Management regularly informs investors of
forecast information.
c) The company has experienced increasing
earnings over the previous five years.
d) The company's president is included as a
member of the board of directors.
79. Which is least likely to be a question asked
of client personnel during a walk-through in
an audit of the internal control of an issuer
(public) company?
a) What do you do when you find an error'?
b) Who is most likely to commit fraud among
your coworkers?
c) What kind of errors have you found?
d) Have you ever been asked to override the
process or controls?
80. An auditor who uses the work of a
specialist may refer to and identify the
specialist ill the auditor's report if the
a) Specialist is also considered to be a related
party.
b) Auditor indicates a division of responsibility
related to the work of the specialist.
c) Specialist's work provides the auditor
greater assurance of reliability.
d) Auditor expresses an "except for" qualified
opinion or an adverse opinion related to the
work of the specialist.
81. Which of the following statements
concerning evidential matter is correct?
a) Appropriate evidence supporting
management's assertions should be
convincing rather than merely persuasive.
b) Effective internal control contributes little
to the reliability of the evidence created
within the entity.
c) The cost of obtaining evidence is not an
important consideration to an auditor in
deciding what evidence should be obtained.
d) A client's accounting data cannot be
considered sufficient audit evidence to
support the financial statements.
82. Confirmations of accounts receivable
address which assertion most directly?
a) Completeness
b) Existence
c) Valuation
d) Classification
83. When performing a review of an issuer
company, which is least likely to be included
in the CPA's inquires of management
members with responsibility for financial and
accounting matters?
a) Subsequent events
b) Significant journal entries and other
adjustments
c) Communications with related parties
d) Unusual or complex situations affecting the
financial statements
84. The adverse effects of events causing an
auditor to believe there is substantial doubt
about an entity's ability to continue as a going
concern would most likely be mitigated by
evidence relating to the
a) Ability to expand operations into new
product lines in the future.
b) Feasibility of plans to purchase leased
equipment at Jess than market value.
c) Marketability of assets that management
plans to sell.
d) Committed arrangements to convert
preferred stock to long-term debt.
85. One reason that an auditor only obtains
reasonable, and not absolute, assurance that
financial statements are free from material
misstatement is
a) Comprehensive basis reporting
b) Employee collusion
c) Material misstatements
d) Professional skepticism
86. When an auditor concludes there is
substantial doubt about a continuing audit
client's ability to continue as a going concern
for a reasonable period of time, the auditor's
responsibility is to
a) Issue a qualified or adverse opinion,
depending upon materiality, due to the
possible effects on the financial statements.
b) Consider the adequacy of disclosure about
the client's possible inability to continue as a
going concern.
c) Report to the client's audit committee that
management's accounting estimates may
need to be adjusted.
d) Reissue the prior year's auditors report and
add an explanatory paragraph that specifically
refers to "substantial doubt" and "going
concern."
87. The accountant who is not independent
may perform which of the following types of
engagements?
a) Audit
b) Agreed-upon procedures
c) Compilation
d) Review
88. Which of the following should an auditor
obtain from the predecessor auditor prior to
accepting an audit engagement?
a) Analysis of balance sheet accounts
b) Analysis of income statement accounts
c) All matters of continuing accounting
significance
d) Facts that might bear on the integrity of
management
89. Which is least likely to be a response
when an auditor has obtained evidence
indicating a risk of material misstatement in
the area of inventory?
a) Request inventory counts at the end of
each month.
b) Discuss questions of inventory valuation
with any other auditors involved with the
audit.
c) Make oral inquiries of major suppliers in
addition to written confirmations.
d) Perform inventory observations on an
unannounced basis.
90. The independent auditor selects several
transactions in each functional area and
traces them through the entire system,
paying special attention to evidence about
whether or not the controls are in operation.
This is an example of a(n)
a) Application test
b) Test of controls
c) Substantive test
d) Test of a function
91. Accounting control procedures within
computer processing may leave no visible
evidence indicating that the procedures were
performed. In such instances, the auditor
should test these controls by
a) Making corroborative inquiries.
b) Observing the separation of duties of
personnel.
c) Reviewing transactions submitted for
processing and comparing them to related
output.
d) Reviewing the run manual.
92. If information is for management's use
only, which of the following forms of CPA
association with financial information is most
likely to result in no report being issued?
a) An agreed-upon procedures engagement
b) An audit
c) A compilation
d) A review
93. In obtaining an understanding of a
manufacturing entity's internal control over
inventory balances, an auditor most likely
would
a) Review the entity's descriptions of
inventory policies and procedures.
b) Perform test counts of inventory during the
entity's physical count.
c) Analyze inventory turnover statistics-to
identify slow-moving and obsolete items.
d) Analyze monthly production reports to
identify variances and unusual transactions.
94. When auditing merchandise inventory at
year-end, the auditor performs a purchase
cutoff test to obtain evidence that
a) All goods owned at year-end are included
in the inventory balance.
b) All goods purchased before year-end are
received before the physical inventory count.
c) No goods held on consignment for
customers are included in the inventory
balance.
d) No goods observed during the physical
count are pledged or sold.
95. A company has changed its method of
inventory valuation from an unacceptable one
toone in conformity with generally accepted
accounting principles. The auditor's report on
the financial statements of the year of the
change should include
a) No reference to consistency.
b) A reference to a prior period adjustment in
the opinion paragraph.
c) An explanatory paragraph explaining the
change.
d) A justification for making the change and
the impact of the change on reported net
income.
96. 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) Tests of transactions and balances
b) A preliminary review of internal control
c) Specialized audit programs
d) Analytical procedures
97. Which of the following statements best
describes the ethical standard of the
profession pertaining to advertising and
solicitation?
a) All forms of advertising and solicitation are
prohibited.
b) There are no prohibitions regarding the
manner in which CPAs may solicit new
business.
c) A CPA may advertise in any manner that is
not false, misleading, or deceptive.
d) A CPA may only solicit new clients through
mass mailings.
98. A note to the financial statements of a
bank indicates that all of the records relating
to its business operations are stored on
magnetic disks; and that there are no
emergency back-up systems or duplicate disks
stored since the bank and their auditors
consider the occurrence of a catastrophe to
be remote. Based upon this, one would
expect the auditor's report to express
a.) An adverse opinion
b) An "except for" opinion
c) An unqualified opinion
d) A qualified opinion
99. Which of the following is not typically
performed when accountants are performing
a review of the financial statements of a
nonissues?
a) Analytical procedures applied to financial
data
b) Inquiries about significant subsequent
events
c) Inquiries of the client's attorney about legal
matters
d) Obtaining an understanding of the
accounting principles followed by the client's
industry
100. Which of the following is least likely to
be a restricted use report?
a) A report on financial statements prepared
following a comprehensive basis of
accounting other than generally accepted
accounting principles.
b) A report on internal control significant
deficiencies noted in an audit.
c) A required communication with the audit
committee.
d) A report on compliance with aspects of
contractual agreements.
101. Which of the following is always present
in an attestation engagement?
a) Subject matter
b) Assertion about the subject matter
c) Generally accepted assurance principles
d) An examination report
102. Which of the following is least likely to
be a test of a control?
a) Inquiries of appropriate personnel.
b) Inspection of management's engagement
letter.
c) Observation of the application of a policy.
d) Reperformance of the application of a
policy.
103. When one auditor succeeds another, the
successor auditor should request the
a) Client to instruct its attorney to send a
letter of audit inquiry concerning the status of
the prior year's litigation, claims, and
assessments.
b) Predecessor auditor to submit a list of
internal control weaknesses that have not
been corrected.
c) Client to authorize the predecessor auditor
to respond to inquiries.
d) Predecessor auditor to update the prior
year's report to the date of the change of
auditors.
104. A difference of opinion concerning
accounting and auditing matters relative to a
particular phase of the audit arises between
an assistant auditor and the auditor
responsible for the engagement. After
appropriate consultation, the assistant
auditor asks to be disassociated from the
resolution of the matter. The working papers
would probably be
a) Silent on the matter since it is an internal
matter of the auditing firm
b) Expanded to note that the assistant auditor
is completely disassociated from
responsibility for the auditor's opinion
c) Expanded to document the additional work
required, since all disagreements of this type
will require expanded substantive testing
d) Expanded to document the assistant
auditor's position, and how the difference of
opinion was resolved
105. On the audit of a nonissuer (nonpublic)
company, the purpose of performing risk
assessment procedures is to
a) Obtain an understanding of the entity and
its environment
b) Reduce detection risk
c) Evaluate management ability
d) Determine the operating effectiveness of
controls