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Auditing Theory
PRTC

Chapter 9
1. Which of the following pairs of accounts would an auditor most likely analyze on
the same working paper?
a. Notes receivable and interest income.
b. Accrued interest receivable and accrued interest payable.
c. Notes payable and notes receivable.
d. Interest income and interest expense.
2. With well-developed internal control, employees in the same department most
likely would approve purchase orders, and also
a. Reconcile the open invoice file.
c.
Authorize requisition
of goods.
b. Inspect goods upon receipts.
d. Negotiate terms with
vendors.
3. To strengthen the system of internal accounting control over the purchase of
merchandise, a companys receiving department should
a. Accept merchandise only if a purchase order or approval granted by the
purchasing department is on hand.
b. Accept and count all merchandise received from the usual company
vendors.
c. Rely on shipping documents for the preparation of receiving reports.
d. Be responsible for the physical handling of merchandise but not for the
preparation of receiving reports
4. Alpha Company uses its sales invoices for posting perpetual inventory records.
Inadequate controls over the invoicing function allow goods to be shipped that
are not invoiced. The inadequate controls could cause an
a. Understatement of revenues, receivables, and inventory.
b. Overstatement of revenues and receivables, and an understatement of
inventory.
c. Understatement of revenues and receivables, and an overstatement of
inventory.
d. Overstatement of revenues, receivables, and inventories.
5. To determine whether the system of internal accounting control operated
effectively to minimize errors of failure to invoice a shipment, the auditor would
select a sample of transactions from the population represented by the
a. Customer order file.
c. Open invoice file.
b. Bill of lading file.
d. Sales invoice file.
6. Which of the following audit procedures would an auditor most likely perform to
test controls relating to managements assertion concerning the completeness
of sales transactions?
a. Verify that extensions and footings on the entitys sales invoices and
monthly customer statements have been recomputed.

Auditing Theory
PRTC
b. Inspect the entitys reports of prenumbered shipping documents that
have not been recorded in the sales journal.
c. Compare the invoiced prices on prenumbred sales invoices to the entitys
authorized price list.
d. Inquire about the entitys credit granting policies and the consistent
application of credit checks.

7. An auditor tests an entitys policy of obtaining credit approved before shipping

goods to customers in support of managements financial statement assertion
of
a. Valuation or allocation.
c. Existence or occurrence.
b. Completeness.
d. Rights and obligations
8. An auditor observes the mailing of monthly statements to a clients customers
and reviews evidence of follow-up on errors reported by the customers. This
test of controls most likely is performed to support managements financial
statement assertion(s) of
a.
b.
c.
d.
Presentation

and Yes

Yes

No

No

No

Yes

No

disclosure
Existence or occurrence

Yes

9. At which point in an ordinary sales transaction of a wholesaling business would a

lack of specific authorization least concern the auditor conducting an audit?
a. Determining discounts.
c. Granting credit.
b. Selling goods for cash.
d. Shipping goods.
10.Proper authorization of write-offs of uncollectible accounts should be approved
in which of the following departments?
a. Accounts receivable.
c. Accounts payable.
b. Credit.
d. Treasurer.
Chapter 10
1. If internal control is well designed, two tasks that should be performed by
different persons are
a. Approval of bad debt write-offs, and reconciliation of the accounts
payable subsidiary ledger and controlling account.
b. Distribution of payroll checks and approval of sales returns for credit.
c. Posting of amounts from both the cash receipts journal and cash
payments journal to the general ledger.
d. Recording of cash receipts and preparation of bank reconciliations.

Auditing Theory
PRTC

2. Internal control should follow certain basic principles to achieve its objectives.
One of these principles is the segregation of functions. Which one of the
following examples does not violate the principle of segregation of functions?
a. The treasurer has the authority to sign checks but gives the signature
block to the assistant treasurer to run the check-signing machine.
b. The warehouse clerk, who has the custodial responsibility over inventory
in the warehouse, may authorize disposal of damaged goods.
c. The sales manager has the responsibility to approve credit and the
authority to write off accounts.
d. The department time clerk is given the undistributed payroll checks to
mail to absent employees.
3. Audit risk consists of inherent risk, control risk, and detection risk. Which of the
following statements is true?
a. Cash is more susceptible to theft than an inventory of coal because it has
a greater inherent risk.
b. The risk that material misstatement will not be prevented or detected on
a timely basis by internal control can be reduced to zero by effective
controls.
c. Detection risk is a function of the efficiency of an auditing procedure.
d. The existing levels of inherent risk, control risk, and detection risk can be
changed at the discretion of the auditor
4. Lapping is
a. Making the financial statements indicate a more favorable position by
giving effect to transactions is a period other than that in which these
actually occurred.
b. Done to inflate the cash position or cover the theft of cash by depositing
at the end of the accounting period a check drawing on one bank account
in another bank account without making the necessary deduction in the
balance of the first bank.
c. An irregularity that conceals cash shortages by a delay in recording cash
collections, retaining a customer's payment on credit sales and covering
up the shortage with subsequent cash receipts.
d. A kind of fraud committed by making entry of fictitious payments or
failure to enter receipts.
5. In general, material fraud perpetrated by which of the following are most
difficult to detect?
a. Cashier.
c. Internal auditor.
b. Keypunch operator.
d. Controller.
6. Which of the following information discovered during an audit most likely would
raise a question concerning possible illegal acts?
a. Related party transactions, although properly disclosed, were pervasive
during the year.
b. The entity prepared several large checks payable to cash during the year.

Auditing Theory
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c. Material internal control weaknesses previously reported to management

were not corrected.
d. The entity was a campaign contributor to several local political
candidates during the year.
7. Which of the following circumstances most likely would cause an auditor to
believe that material misstatements may exist in an entitys financial
statements?
a. Accounts receivable confirmation requests yield significantly fewer
responses than expected.
b. Audit trails of computer-generated transactions exist only for a shorttime.
c. The chief financial officer does not sign the management representation
letter until the last day of the auditors fieldwork.
d. Management consults with other accountants about significant
accounting
matters.
8. Those procedures specifically outlined in an audit program are primarily
designed to
a. Gather evidence.
b. Detect errors or irregularities.
c. Test internal systems.
d. Protect the auditor in the event of litigation.
9. The concept of materiality will be least important to the CPA in determining the
a. Scope of his audit of specific accounts.
b. Specific transactions that should be reviewed.
c. Effects of audit exceptions upon his opinion.
d. Effects of his direct financial interest in a client upon his independence.
10.In considering materiality for planning purposes, an auditor believes that
misstatements aggregating P100,000 would have a material effect on an
entitys income statement, but the misstatements would have to aggregate
P200,000 to materially affect the balance sheet. Ordinarily, it would be
appropriate to design auditing procedures that would be expected to detect
misstatements that aggregate
a. P100,000
b. P200,000
c. P150,000
d.P300,000
Chapter 11
1. Which of the following statements relates to the ownership assertion?
a. Inventory listings are accurately included in the inventory accounts
b. Inventory excludes items billed to customers
c. Inventory is properly classified as current asset
d. Inventory is properly stated at cost.
2. Which one of the following assertions regarding an inventory of ski equipment
for Matterhorn Inc. would be considered an incorrect statement?

Auditing Theory
PRTC
a. The inventory exists at the balance sheet date
b. The inventory is owned by Matterhorn
c. Footnote disclosures concerning inventory are not required given the
objective nature of this account
d. The inventories are properly valued

3. In a properly designed accounts payable system, a voucher is prepared after the

invoice; purchase order, requisition, and receiving report are verified. The next
step in the system is to
a. Cancel the supporting documents
b. Enter the check amount in the check register
c. Approve the voucher for payment
d. Post the voucher amount to the expense amount
4. Which of the following would prevent a paid disbursement from being paid a
second time?
a. Individuals responsible for signing checks should prepare vouchers
b. Disbursements should be approved by at least two responsible officials
c. The disbursement date should be within a few days of the date the
voucher is presented for payment.
d. The official signing the check should cancel the supporting documents
5. For appropriate segregation of duties, journalizing and posting summary payroll
transactions should be assigned to
a. The treasurers department
b. General accounting
c. Payroll accounting
d. The timekeeping department
6. Appropriate control over obsolete materials requires that they be
a. Sorted, treated, and packaged before disposition takes place, in order to
obtain the best selling price
b. Determine by an approved authority to be lacking in regular usability
c. Retained with the regular storage area
d. Carried at cost in the accounting records until the actual disposition takes
place
7. Which of the following assertions is the primary assertion that is satisfied by
physically observing the clients count of inventory
a. Rights.
c. Completeness
b. Valuation.
d. Existence
8. An auditor most likely would make inquiries of production and sales personnel
concerning possible obsolete or slow-moving inventory to support
managements financial statement assertion of
a. Valuation
c. Existence.
b. Rights
d. Presentation.

Auditing Theory
PRTC

9. Employees in the same department most likely would approve purchase orders,
and also
a. Reconcile the open invoice file
b. Negotiate terms with the vendors
c. Authorize requisitions of goods
d. Inspect goods upon receipt
10.The accounts payable department receives a purchase order form to accomplish
all of the following except:
a. Comparing invoice price to purchase order price
b. Ensuring that the purchase had been properly authorized
c. Comparing quantity ordered to quantity purchased
d. Ensuring that the goods had been received by the party requesting the
goods
Chapter 12
1. Property, plant, and equipment is typically judged to be one of the accounts
least susceptible to fraud because
a. The amounts recorded on the balance sheet for most companies are
immaterial
b. The inherent risk is usually low.
c. The depreciated values are always smaller than cost.
d. Internal control is inherently effective regarding this account.
2. Determining that proper amounts of depreciation are expensed provides
assurance about managements assertions of valuation and
a. Presentation and disclosure
b. Rights and obligations
c. Completeness
d. Existence or occurrence
3. The auditor may conclude that depreciation charges are insufficient by noting
a. Insured values greatly in excess of book values.
b. Large numbers of fully depreciated assets.
c. Continuous trade-in of relatively new assets.
d. Excessive recurring losses on assets retired.
4. When few property and equipment transactions occur during the year the
continuing auditor usually obtains an understanding of internal control and
performs
a. Test of controls
b. Analytical procedures to verify current year additions to property and
equipment
c. A thorough examination of the balances at the beginning of the year.
d. Extensive tests of current year property and equipment transactions
5. Which of the following combinations of procedures is an auditor most likely to
perform to obtain evidence about fixed assets addition?

Auditing Theory
PRTC
a. Inspecting documents and physically examining assets.
b. Re-computing
calculations
and
obtaining
written
management
representations.
c. Observing operating activities and comparing balances to prior period
balances.
d. Confirming ownership and corroborating transactions through inquiries of
client personnel.

6. If an auditor tours a production facility, which of the misstatements or

questionable practices is most likely to be detected by the audit procedures
specified?
a. Depreciation expense on fully depreciated machinery has been
recognized.
b. Overhead has been over-applied.
c. Necessary facility maintenance has not been performed.
d. Insurance coverage on the facility has lapsed.
7. In testing for uncorrected retirements of equipment, an auditor is most likely to
a. Select items of equipment from the accounting records and then locate
them during the plant tour.
b. Compare depreciation journal entries with similar prior-year entries in
search of fully depreciated equipment.
c. Inspect items of equipment observed during the plant tour and then trace
them to the equipment subsidiary ledger.
d. Scan the general journal for unusual equipment additions and excessive
debits to repairs and maintenance expense.
8. The auditor is least likely to learn of retirements of equipment through which of
the following?
a. Review of the purchase return and allowances account.
b. Review of depreciation.
c. Analysis of the debits to the accumulated depreciation account.
d. Review of insurance policy.
9. Additions to equipment are sometimes understated. Which of the following
accounts would be reviewed by the auditor to gain reasonable assurance that
additions are not understated?
a. Accounts payable
b. Depreciation expense
c. Gain on disposal of equipment
d. Repair and maintenance expense
10.In violation of policy, Coat Company erroneously capitalized the cost of painting
its warehouse. An auditor would most likely detect this when
a. Discussing capitalization policies with controller.
b. Examining maintenance expense accounts.
c. Observing that the warehouse has been painted.

Auditing Theory
PRTC
d. Examining construction work orders that support items capitalized during
the year.

Chapter 13
1. The auditor will most likely perform extensive tests for possible understatement
of
a. Revenues
b. Assets
c. Liabilities
d. Capital
2. A registrar/transfer agent system relating to capital stock is most likely used by:
a. A small, nonpublic company.
b. A large, publicly traded company.
c. All companies must use this type of system.
d. No companies use this system anymore
3. A company holds bearer bonds as a short-term investment. Responsibility for
custody of these bonds and submission of coupons for periodic interest
collections probably should be delegated to the
a. Chief accountant
b. Internal auditor
c. Cashier
d. Treasurer
4. Internal control over bonds payable is best when:
a. The company utilizes the services of a bond trustee.
b. The company segregates approval from issuance of the bonds.
c. Bonds are countersigned by two officers.
d. Bonds are serially numbered.
5. The audit approach for acquired treasury stock will normally include:
a. Confirmation with shareholders.
b. Inspection of certificates.
c. Inspection of cash receipts entries.
d. Recomputation of all gains and losses
6. Changes in capital stock accounts should normally be approved by:
a. The board of directors.
b. The audit committee.
c. The stockholders.
d. The president.
7. An auditor should trace corporate stock issuances and treasury stock
transactions to the:
a. Numbered stock certificates.
b. Articles of incorporation.
c. Transfer agent's records.

Auditing Theory
PRTC
d. Minutes of the board of directors

8. For audit purposes, a corporation's articles of incorporation are normally:

a. Copied and placed on the owners' equity lead schedule.
b. Copied and placed in the permanent file.
c. Confirmed with the transfer agent.
d. Ignored since they are not normally considered to be related to the
internal control structure.
9. When no independent stock transfer agent is employed and the corporation
issues its own stocks and maintains stock records, canceled stock certificates
should:
a. Be defaced to prevent reissuance and attached to their corresponding
stubs.
b. Not be defaced but segregated from other stock.
c. Be destroyed to prevent fraudulent reissuance.
d. Be defaced and sent to the Secretary of State.
10.Bond
a.
b.
c.
d.

transactions are normally confirmed with:

Individual holders of retired bonds.
Recomputation procedures performed using interest expense.
The bond trustee.
Comparisons of retired bonds with those outstanding.

CHAPTER 14
1. An auditor finds several errors in the financial statements that the client prefers
not to correct. The auditor determines that the errors are not material in the
aggregate. Which of the following actions by the auditor is most appropriate?
a. Document the errors in the summary of uncorrected errors, and
document the conclusion that the errors do not cause the financial
statements to be misstated.
b. b. Document the conclusion that the errors do not cause the financial
statements to be misstated, but do not summarize uncorrected errors in
the working papers.
c. Summarize the uncorrected errors in the working papers, but do not
document whether the error cause the financial statements to be
misstated.
d. Do not summarize the uncorrected errors in the working papers, and do
not document a conclusion about whether the uncorrected errors cause
the financial statements to be misstated.
2. Which of the following audit procedures most likely would assist an auditor in
identifying conditions and events that may indicate there could be substantial
doubt about an entity's ability to continue as a going concern?
a. Confirmation of accounts receivable from principal customers.
b. Reconciliation of interest expense with debt outstanding.
c. Confirmation of bank balances.

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d. Review of compliance with terms of debt agreements.

3. An auditor should consider which of the following when evaluating the ability of
a company to continue as a going concern?
a. Audit fees.
b. Future assurance services.
c. Management's plans for disposal of assets.
d. A lawsuit for which judgment is not anticipated for 18 months.
4. Which of the following matters is most likely to be included in a management
representation letter as a specific representation?
a. Length of a material contract with a new customer.
b. Information concerning fraud by the CFO.
c. Reason for a significant increase in revenue over the prior year.
d. The competency and objectivity of the internal audit department.
5. Which of the following procedures most likely would assist an auditor to identify
litigation, claims, and assessments?
a. Inspect checks included with the client's cutoff bank statement.
b. Obtain a letter of representations from the client's underwriter of
securities.
c. Apply ratio analysis on the current-year's liability accounts.
d. Read the file of correspondence from taxing authorities.
6. Which of the following is an analytical procedure that an auditor most likely
would perform during the final review stage of an audit?
a. Comparing each individual expense account balance with the relevant
budgeted amounts and investigating any significant variations.
b. Testing the effectiveness of internal control procedures that appear to be
suitably designed to prevent or detect material misstatements.
c. Reading the financial statements and considering whether there are any
unusual or unexpected balances that were not previously identified.
d. Calculating each individual expense account balance as a percentage of
total entity expenses and comparing the results with industry averages.
7. A CPA firm is completing the fieldwork for an audit of Swenson Co. for the
current year ended December 31. The manager in charge of the audit is
performing the final steps in the evidence accumulation phase of the audit and
notes that there have been several changes in Swenson during the year under
audit. Which of the following items would indicate there could be substantial
doubt about Swenson's ability to continue as a going concern for a reasonable
period of time?
a. Cash infusion by a venture capital firm.
b. Recurring working capital shortages.
c. A lack of significant contracts with new customers.
d. Term debt refinanced with a new bank.
8. Which of the following statements is correct regarding accounting estimates?

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a. The auditor's objective is to evaluate whether accounting estimates are
reasonable in the circumstances.
b. Accounting estimates should be used when data concerning past events
can be accumulated in a timely, cost-effective manner.
c. An important accounting estimate is management's listing of accounts
receivable greater than 90 days past due.
d. Accounting estimates should not be used when the outcome of future
events related to the estimated item is unknown.

9. Which of the following events least likely would indicate the existence of related
party transactions?
a. Making a loan with no scheduled date for the funds to be repaid.
b. Maintaining compensating balance arrangements for the benefit of
principal stockholders.
c. Borrowing funds at an interest rate significantly below prevailing market
rates.
d. Writing off obsolete inventory to net realizable value just before year end.
10.Which of the following procedures would an accountant most likely perform
during an engagement to review the financial statements of a nonissuer?
a. Review the predecessor accountant's working papers.
b. Inquire of management about related party transactions.
c. Corroborate litigation information with the entity's attorney.
d. Communicate internal control deficiencies to senior management.
CHAPTER 15
1. An audit report should be dated as of
a) the date the report is delivered to the entity audited
b) the date of the last day of fieldwork
c) the balance sheet date of the latest period reported on
d) the date a letter of audit inquiry is received from the entitys attorney of
record
2. When an auditor encounters a material GAAP departure that is unresolved at
the conclusion of the audit, which of the following opinions are possible?
a) Qualified or adverse
b) Unqualified or qualified
c) Only adverse is possible
d) Qualified, denial, or adverse
3. Which of the following opinions is most likely appropriate when a company faces
a material loss contingency that is fully disclosed in the financial statements?
a) Normal unqualified opinion
b) Denial of opinion
c) Qualified (scope) opinion
d) Unqualified opinion with an explanatory paragraph
4. An auditor is unable to determine the amounts associated with illegal acts
committed by a client. The auditor would most likely
a) Issue either qualified opinion or a disclaimer opinion
b) Issue an adverse opinion
c) Issue either a qualified opinion or an adverse opinion

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d) Issue a disclaimer of opinion

5. The opinion paragraph of the audit report for Schnook Co. states that the
financial statements do not present fairly. Which type of audit report is this?
a) Improper
c) Disclaimer
b) Adverse
d) Qualified
6. In which one of the following instances would an auditor most likely issue a
disclaimer of opinion?
a) Management will not sign a management representation letter
b) Management declines to provide a statement of cash flow
c) The auditor is independent of the client
d) The auditor is unable to confirm receivables but performs alternative
procedures
7. When an auditor lacks independence with respect to a client, the auditor should
issue
a) Disclaimer of opinion
b) An adverse opinion
c) A qualified opinion with explanatory paragraph
d) An unqualified opinion
8. When there is uncertainty about a companys ability to continue as a going
concern, the auditors concern is the possibility that the client may not be able
to continue its operations or meet its obligations for a reasonable period of
time. For this purpose, a reasonable period of time is considered not to exceed:
a) Six months from the date of the financial statements
b) One year from the date of the financial statements
c) Six months from the date of the audit report
d) One year from the date of the audit report
9. It is the term that caused confusion and controversy on its meaning the PCAOB
uses to identify cases in which the auditing firm failed to obtain sufficient
appropriate evidence to support its audit opinion
a) Audit risk.
b) Disclaim of opinion.
c) Audit deficiency
d) Audit failure
10.Comfort letters ordinarily are addressed to
a) Credit financial institutions
b) The clients audit committee
c) The Securities and Exchange Commission
d) Underwriters of securities

Chapter 16
1. In which of the following cases would an auditor not need the services of an
expert?
a. The measurement of work completed and to be completed on contracts in
progress
b. Legal opinions concerning interpretations of agreements, statutes and
regulations
c. Valuations of certain types of assets like land and buildings

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d. Evaluating the companys internal control

2. Which statement is correct regarding auditing fair value measurements and

disclosures?
a. Many measurements based on estimates, including fair value
measurements, are inherently precise.
b. Assumptions used in fair value measurements are similar in nature to
those required when developing other accounting estimates.
c. Underlying the concept of fair value measurements is a presumption that
the entity will be liquidated.
d. The measurement of fair value may be relatively complex for assets that
are bought and sold in active and open markets.
3. Which statement is incorrect regarding fair value measurements?
a. Underlying the concept of fair value measurements is a presumption that
the entity is a going concern.
b. Fair value is normally the amount that an entity would receive or pay in a
forced transaction, involuntary liquidation, or distress sale.
c. The measurement of fair value may be relatively simple for assets that
are bought and sold in active and open markets.
d. The estimation of fair value may be achieved through the use of a
valuation model or through the assistance of an expert, such as an
independent appraiser.
4. Complex judgments are found in what types of accounts?
i. Asset accounts.
ii. Liability accounts.
iii. Income statement accounts
a. I only.
b. II only.
c. I and II.
d. I, II, and III.
5. Which of the following statements is true about accounts requiring management
estimates?
a. Because these amounts are estimates, the auditor likely just accepts
whatever management determines to be appropriate.
b. Only a limited number of accounts on the balance sheet require
management estimates.
c. Net accounts receivable is an account that does not require a
management estimate.
d. None of the above is true.
6. Which of the following statements is not correct about materiality?
a. The concept of materiality recognizes that some matters are important
for fair presentation of financial statements in conformity with GAAP,
while other matters are not important.

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b. An auditor considers materiality for planning purposes in terms of the
largest aggregate level of misstatements that could be material to any
one of the financial statements.
c. Materiality judgments are made in light of surrounding circumstances and
necessarily involve both quantitative and qualitative judgments.
d. An auditor's consideration of materiality is influenced by the auditor's
perception of the needs of a reasonable person who will rely on the
financial statements.

7. For which of the following judgments may an independent auditor share

responsibility with an entity's internal auditor who is assessed to be both
competent and objective?
Materiality of misstatements
Evaluation
of
accounting
estimates
a.
Yes
No
b.
No
Yes
c.
No
No
d.
Yes
Yes
8. For which of the following judgments may an independent auditor share
responsibility with an entity's internal auditor who is assessed to be both
competent and objective?
Materiality of misstatements
Evaluation
of
accounting
estimates
a. Yes
Yes
b. Yes
No
c. No
Yes
d. No
No
9. 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 auditor's preliminary evaluation of inherent risk based on discussions
with the client.
c. The nature of the clients business.
d. The type of report to be issued by the auditor.
10.Which of the following statements concerning materiality thresholds is
incorrect?
a. Aggregate materiality thresholds are a function of the auditor's
preliminary judgments concerning audit risk.
b. In general, the more misstatements the auditor expects, the higher
should be the aggregate materiality threshold.
c. The smallest aggregate level of errors or fraud that could be considered
material to any one of the financial statements is referred to as a
"materiality threshold."

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d. Materiality thresholds may change between the planning and review
stages of the audit. These changes may be due to quantitative and/or
qualitative factors.

Chapter 17
1. Which statement is incorrect regarding the general principles of a review
engagement?
a. The auditor is not required to comply with the Code of Professional Ethics
for Certified Public Accountants promulgated by the Board of
Accountancy.
b. The auditor should conduct a review in accordance with PSA 910.
c. The auditor should plan and perform the review with an attitude of
professional skepticism recognizing that circumstances may exist which
cause the financial statements to be materially misstated.
d. For the purpose of expressing negative assurance in the review report,
the auditor should obtain sufficient appropriate evidence primarily
through inquiry and analytical procedures to be able to draw conclusions.
2. Which of the following is required to be performed in an audit but not in review
engagement?
a. Complying with the Code of Professional Ethics for Certified Public
Accountants promulgated by the Board of Accountancy.
b. Planning the engagement.
c. Agreeing on the terms of engagement.
d. Studying and evaluating internal control structure
3. In a review engagement, the independent accountants procedures include:
a. Examining bank reconciliation.
b. Confirming accounts receivable with debtors.
c. Reading the financial statements to consider whether they appear to
conform with GAAP.
d. Obtaining a letter of audit inquiry from all attorneys of record
4. Which of the following is not a basic element of a review report?
a. Title of the report
b. Clients address
c. Introductory paragraph
d. Auditors address
5. The statement that nothing came to our attention which would indicate that
these statements are not fairly presented expresses which if the following?
a. Disclaimer of opinion
b. Negative confirmation
c. Negative assurance
d. Piecemeal opinion
6. An accountants compilation report should be dated as of the date of
a. Completion of fieldwork.
b. Completion of the engagement.

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c. Transmittal of the compilation report.
d. The latest subsequent event referred to in the notes to the financial
statements.

7. The following are special purpose audit engagements, except

a. Financial statements prepared in accordance with a comprehensive basis
of accounting
b. other than generally accepted accounting principles in the Philippines.
c. Specified accounts, elements of accounts, or items in a financial
statement.
d. Compliance with contractual agreements.
e. Compiled financial statements.
8. When the auditor believes that the presentation and disclosure of the
prospective financial information is not adequate, the auditor should
a. Express a qualified or adverse opinion in the report on the prospective
financial information.
b. Withdraw from the engagement.
c. Disclaim the opinion in the report on the prospective financial
information.
d. Either a or b.
9. On each page of the financial information or on the front of the complete set of
financial statements, the financial information compiled by the accountant
should contain a reference such as
a. "Unaudited"
b. "Compiled without Audit or Review"
c. "Refer to Compilation Report"
d. Any of the above.
10.If the accountant becomes aware of material misstatements, the accountant
should try to agree appropriate amendments with the entity.
If such
amendments are not made and the financial information is considered to be
misleading, the accountant should
a. Do nothing.
b. Withdraw from the engagement.
c. Issue a qualified or adverse opinion.
d. Issue a negative assurance.