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1. The primary purpose of an independent audit of financial statements is to A. Provide a basis for assessing managements performance. B.

Comply with laws and regulations. C. Assure management that the financial statements are unbiased and free from material misstatements. D. Provider users with an un biased opinion about the fairness of information presented in the financial statements 2. Professional skepticism dictates that when management makes a statement to the auditors, the auditors should A. B. C. D. Disregard the statement because it ranks low of the evidence quality scale. Corroborate the evidence with other supporting documentation whenever possible Require that the statement be put in writing Believe on the statement in order to maintain the professional client-auditor relationship

3. In performing a financial statement audit, which of the following would an audit least likely consider? A. B. C. D. Internal control Compliance with GAAP Quality of managements business decisions Fairness of the financial statement amounts

4. The level of assurance provided by an audit of detecting a material misstatement is referred to as: A. B. C. D. Absolute assurance High assurance Negative assurance Reasonable assurance

5. As it relates to an audit, materiality is A. B. C. D. Not taken into consideration Related only to the sufficiency of procedures performed Based upon audit fees Determined based upon the importance to a user of the financial statements

6. An audit of financial statements is conducted in order to determine if the A. Organization is operating efficiently and effectively B. Auditee is following specific procedures of rules set down by some higher authority

C. Overall financial statements are stated in accordance with specified criteria D. Client entity prescribes a good internal control system 7. Why does a company choose to have an independent auditor report on its financial statements? A. Independent auditors will always detect management fraud B. The companys management preparing the statements nay have a vested interest in reporting certain results C. Independent auditors guarantee the accuracy of the financial statements D. An independent audit is designed to search for deficiencies in the companys internal controls 8. Which of the following is responsible for an entitys financial statements? A. B. C. D. The entitys management The entitys audit committee The entitys internal auditors The entitys board of directors

9. Which of the following types of audit is performed in order to determine whether an entitys financial statements are fairly stated, in all materials respects, in conformity with the generally accepted accounting principles? A. B. C. D. Operational audit Financial statement audit Compliance audit Performance audit

10. Which of the following types of audit uses laws and regulations as its criteria? A. B. C. D. Operational audit Financial statement audit Compliance audit Performance audit

11. The primary goal of the CPA in performing the attest function is to A. Detect fraud B. Examine individual transactions so that the auditor may certify as to their validity C. Determine whether the clients assertions as embodied in the financial statements are fairly stated D. Assure the consistent application of correction accounting procedures

12. Which of the following best describes the attest process? A. B. C. D. Proving the accuracy of the books and records Gathering sufficient evidence about specific an known assertions Assisting management in the successful operations of the company Assembling and filing tax returns and related supplemental information

13. Which of the following is an example of an assertion made by the management in an entitys financial statement? A. B. C. D. The financial statements are prepared in an unbiased manner. The reported inventory balances reflect all transactions for the period. The reported accounts receivable do not include any uncollectible accounts. The scope of the auditors investigation is not limited in any way by management.

14. Which of the following attributes is more closely associated with assurance services performed by a CPA firms than with other lines of professional work? A. B. C. D. Integrity Compliance Independence Keeping informed on current professional developments

15. A CPA should maintain objectivity and be free of conflicts of interest when performing: A. B. C. D. Audits, but not any other professional services All attestation services, but not other professional services All attestation and tax services, but not other professional services All professional services

16. The auditors judgment concerning the overall fairness of presentation of financial position, results of operation, and changes in cash flow is applied within the frameworks of A. B. C. D. Quality control General accepted auditing standards which include the concept of materiality The auditors evaluation of the audited companys internal control Philippine Financial Reporting Standard

17. When providing consulting services, the CPA acts primarily as a (n): A. B. C. D. Independent accountant Expert on compliance with industry standards Technology specialist Objective advisor on how to use the information

18. Which of the following best describes an operational audit? A. It requires a consultant review of the administrative controls by internal auditors as they relate to operations of the company. B. It concentrates on implementing financial and accounting control in a newly organized company. C. It attempts of verifying the fair presentation of a company results of operations. D. It concentrates on seeking out aspects of operations in which waste would be reduced by the introduction of controls. 19. An audit which is undertaken in order to determine whether the auditee is following specific procedures or rules laid down by some higher authority is classified as a(n) A. B. C. D. Audit of financial statements Compliance audit Operational audit Production audit

20. Which of the following statements is true concerning a compliance audit? A. Compliance audits are only performed by government auditors. B. Risks such as inherent risk, control risk, and detection risk are not appropriate in the planning and performance of a compliance audit. C. Materiality is difficult to measure in a compliance audit. D. A report on compliance can only include negative assurance. 21. Broadly defined, the subject matter of any audit consists of A. B. C. D. Assertions Operating data Financial statements Economic data

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