Short Quiz

READ THE INSTRUCTIONS CAREFULLY.

• ¼ Yellow paper
• First Name, Middle Initial, Last Name
• No erasures, no pencil
• 15 seconds each question
• 3 Sets 10 TF, 5MCQ, 5Chrono
• Strictly NO CHEATING 
 TRUE OR FALSE

1. Analytical procedures involve analysis

of significant ratios and trends, including
the resulting investigation of fluctuations
and relationships that are consistent with
other relevant information.
 TRUE OR FALSE

2. Audit risk refers to the risk that the

auditor gives an appropriate audit
opinion on the financial statements.
 TRUE OR FALSE

3. There is an inverse relationship

between materiality and the level of
audit risk, that is the lower the materiality
level, the higher the audit risk and vice
versa.
 TRUE OR FALSE

4. A time budget is an estimate of the

time that will be spent in planning the
audit procedures listed in the audit
program.
 TRUE OR FALSE

5. One of the requirements of PSA 310 where

the auditor obtain sufficient appropriate
evidence is that appropriate accounting
policies are consistently applied.
 TRUE OR FALSE

6. When planning the audit, the auditor

considers what would make the financial
statements materially stated.
 TRUE OR FALSE

7. As the acceptable level of detection

risk decreases, the assurance directly
provided from subjective tests increases.
 TRUE OR FALSE

8. Assessment of control risk would involve

reviewing and evaluating the effectiveness of
the client’s accounting and internal control
system.
 TRUE OR FALSE

9. Materiality is defined in the Philippine

Standards on Auditing Council’s in the
following terms:
“Information is material if its omission or
misstatement could influence the
economic decision of users taken on the
basis of the financial statements”
 TRUE OR FALSE

10. When developing an audit strategy, the

auditor must consider carefully the appropriate
levels of materiality and credit risk.
 MULTIPLE CHOICE

1. The following are the

understanding of the auditor to
obtain knowledge about the entity
except:

a. Nature of the entity

b. Internal Control
c. Degree of judgment
d. Measurement of the entity’s
performance
e. None of the above
 MULTIPLE CHOICE

2. Using information appropriately assists

the auditor except:

a. Providing better service to the client

b. Evaluating audit evidence
c. Discussion with people within and outside
the entity
d. Assessing risks
e. None of the above
 MULTIPLE CHOICE

3. Which of the following is a source of

information?

a. Tour of client’s house

b. Reading partnership documents
c. Reading books related to client’s industry
d. Discussion with people within the entity
e. None of the above
 MULTIPLE CHOICE

4. It is a function of the effectiveness of

the auditor’s substantive procedures.

a. Control Risk
b. Inherent Risk
c. Detection Risk
d. Audit Risk
e. Choice not given
 MULTIPLE CHOICE

5. Which of the following steps in using

the audit risk model, will assess the Level
of Control Risk?

a. Step 1
b. Step 2
c. Step 3
d. Step 4
e. Step 5
 CHRONOLOGICAL
(1-5)
Steps in using the Audit Risk Model:

6. Assess the Level of Control Risk

7. Set the desired Level of Audit Risk
8. Design Substantive Tests
9. Determine the Acceptable Level
of Detection Risk
10. Assess the Level of Inherent Risk
 Answer Key
TRUE or FALSE Multiple Chronological
Choice
FALSE –inconsistent C 3
FALSE –affects C 1
FALSE –appropriate C 5
FALSE –higher;lower C 4
FALSE –executing C 2
FALSE –PSA 510 C
FALSE –misstated C
FALSE –substantive C
FALSE –studying C
FALSE –audit risk C