Professional Documents
Culture Documents
7. Which of the following has the primary responsibility for the fairness of the
representations made in the financial statements?
a. Clients management
b. Audit committee
c. Independent auditor
d. Board of accountancy
a. Self-review threat.
b. Advocacy threat.
c. Intimidation threat.
d. Self-interest threat.
18. In which of the following situations would a public accounting firm have
violated the code of ethics in determining its fee?
22. The risk that the audit will fail to uncover a material misstatement is
eliminated
24. In rare cases auditors have been held liable for criminal acts. A criminal
conviction against an auditor can result only when it is demonstrated that the
auditor
a. Was negligent.
b. Was grossly negligent.
c. Intended to deceive or harm others.
d. Caused a financial loss to an innocent third-party.
a. Business failure.
b. Audit failure.
c. Audit risk.
d. All of these.
26. The primary reason why a CPA firm establishes quality control policies
and procedures for human resources is to
28. The accounting firm should establish policies and procedures assigned to
promote an internal culture based on the recognition that quality is essential
in performing engagements. This may be communicated through the
following means except
a Training seminars.
.
d Mission statements.
.
29. The primary factor that should be considered in determining the extent of
supervision needed by an assistant is the assistants
b. Competence
c. Professional certification
d. Independence
31.This involves developing an overall strategy for the expected conduct and
scope of the examination; the nature, extent, and timing of which vary
with the size and complexity, and experience with and knowledge of the
entity
a. Audit planning
b. Audit procedure
c. Audit program
d. Audit working pen
34.The audit team gathers information about a new clients business and
industry in order to obtain
a. An understanding of the clients internal control system for financial
reporting
b. An understanding of how economic events and transactions affect the
companys financial statements
c. Information about engagement risk
d. Information regarding whether the company is engaging in financial
statement fraud
35.The risk that a material misstatement in an assertion will not be prevented
or detected on a timely basis by internal control is
a. Detection risk
b. Control risk
c. Inherent risk
d. Audit risk
36.Which of the following may represent the bigger challenge smaller public
companies face in implementing effective control?
a. lack of expertise
b. Reduced importance
c. Limited resources
d. Limited available guidance
37.A small entity may use less formal means to ensure that internal control
objectives are achieved. For example, extensive accounting procedures,
sophisticated accounting records, or formal controls are least likely to be
needed if
a. Management is closely involved in operations
b. The entity is involved in complex transactions
c. The entity is subject to legal or regulatory requirements, also found in
larger entities
d. Financial reporting objectives have been established
43.The responsibility for the detection and prevention of errors, fraud and
noncompliance with laws and regulations rests with
a. Auditor
b. Clients legal counsel
c. Client Management
d. Internal auditor
44.When the auditor assesses inherent risk, he considers among others the
following factors except
a. Integrity of management
b. Nature of the entitys business
c. Unusual pressures on management
d. Results of the interim tests
a. Boards of director approve stock option plans that did not align
management and shareholder objectives.
b. Audit committees met infrequently, often for only an hour at a time.
c. Boards of directors were often dominated by management.
d. Accounting rules became more specific to address the complexities
that existed in new transaction.
48.Which of the following is an appropriate description of managements role
in preparing financial statements and reports on internal control over
financial reporting? Management has the primary responsibility for:
a. Determining the scope of internal and external audit activities.
b. Preparing financial statements that are fairly presented in accordance
with PFRS.
c. Selecting accounting principles that best portray the economic reality
of the organizations transaction and current state.
d. Developing, implementing, and assessing the internal control
processes over financial reporting.
49.Which of the following would not be required to be communicated to the
audit committee by the outside auditor?
a. Significant audit adjustments made during the course of the audit.
b. Significant disagreement with management regarding accounting
principles
c. The auditors knowledge of managements consultation with other
public accounting firms regarding the proposed treatment of a
controversial accounting item.
d. The extent to which the internal auditors assisted in the conduct of the
audit.
50.The applications of due professional care means that the auditors work
conforms with all of the following except:
a. Current auditing standards as defined by Philippine standards on
auditing (PSAs).
b. The work that a reasonable prudent auditor would have performed in
the same situation.
c. The work that would have been performed by a reasonable person who
was not necessarily trained in auditing.
d. The work was at least equal to that which had been performed on the
audit engagement during the preceding year.
53.The auditor will most likely to perform extensive tests for possible
understatement of
a. Revenues
b. Assets
c. Liabilities
d. Capital
54.Which of the following elements ultimately determines the specific
auditing procedures necessary under the circumstances to afford a
reasonable basis for an opinion?
a. Auditor judgment
b. Materiality
c. Relative risk
d. Reasonable assurance
55.In testing the existence assertion for an asset, an auditor ordinarily works
from the
a. Financial unrecorded items to the financial statement
b. Potentially unrecorded items to the financial statement
c. Accounting records to the supporting evidence
d. Supporting evidence to the accounting records
65.Which of the following elements in the audit risk model is/are a product of
the auditors professional judgment?
a Control risk,
b Analytical procedure risk.
c Test of details risk of incorrect acceptance.
d All of the above.
68.The deviation rate the auditor will permit in the population and still be
willing to reduce the assessed level of control risk is called the
a. Tolerable deviation rate c. Acceptable risk of over-
reliance
b. Estimated population deviation rate d. Sample deviation rate
70.For which of the following audit tests would an auditor most likely use
attribute sampling?
a. Making an independent estimate of the amount of a FIFO inventory.
b. Examining invoices in support of the valuation of fixed asset additions.
c. Selecting accounts receivable for confirmation of account balances.
d. Inspecting employee time cards for proper approval by
supervisors
71.Which of the following would be the best protection for a company that
wishes to prevent the lapping of trade accounts receivable?
74.When goods are received, the receiving clerk should match the goods with
the
a. purchase order and the requisition form
b. vendors invoice and the receiving report
c. vendors shipping document and the purchase order
d. receiving report and the vendors shipping document
76.Effective internal control procedures over the payroll function may include
a. Reconciliation of totals on job time tickets with job reports by
employees responsible for those specific jobs.
b. Verification of agreement of job time tickets with employee clock card
hours by a payroll department employee.
c. Preparation of payroll transaction journal entries by an employee who
reports to the supervisor of the personnel department.
d. Custody of rate authorization records by the supervisor of the payroll
department.
77.A sales clerk at Schackne Company correctly prepared a sales invoice for
$5,200, but the invoice was entered as $2,500 in the sales journal and
similarly posted to the general ledger and accounts receivable ledger. The
customer remitted only $2,500, the amount on his/her monthly statement.
The most effective procedure for preventing this type of error is to
a. Use predetermined totals to control posting routines.
b. Have an independent check of sales invoice serial numbers, prices,
discounts, extensions, and footings.
c. Have the bookkeeper prepare monthly statements that are verified and
mailed by a responsible person other than the bookkeeper.
d. Have a responsible person who is independent of the accounts
receivable department promptly investigate unauthorized remittance
deductions made by customers or other matters in dispute.
80.Which of the following controls most likely would help ensure that all
credit sales transactions of an entity are recorded?
a. The billing department supervisor sends copies of approved sales
orders to the credit department for comparison to authorized credit
limits and current customer account balances.
b. The accounting department supervisor independently reconciles the
accounts receivable subsidiary ledger to the accounts receivable
control account monthly.
c. The accounting department supervisor controls the mailing of
monthly statements to customers and investigates any differences
reported by customers.
d. The billing department supervisor matches pre-numbered shipping
documents with entries in the sales journal
82.For efficiency, tests of controls are frequently done at the same time as:
a Analytical Procedure
b Compliance test
c Test of transaction
d Test of balances
83.Which of the following procedures are frequently performed in response to
the auditors assessment of the risk of material misstatement?
a Ratio Analysis
b Test of controls
c Test of details of balances
d Risk assessment procedure
86.A listing of all the things which the auditor will do to gather sufficient,
competent evidence is the:
a Audit strategy
b Audit program
c Audit procedure
d Audit risk model
89.It include symbols in the working paper that describe the audit procedures
performed
a Heading
b Tick Marks
c Cross referencing
d Indexing
90.The following are circumstances where professional accountants are or
may be required to disclose confidential information. Which of the
following is not included?
a Disclosure is required by law
b There is a professional duty or right to disclose, when not prohibited
by law
c Disclosure is required by third party
d Disclosure is permitted by law and is authorized by the client or the
employer
a. Real-time processing
b. Batch processing
c. Random Access Processing
d. Integrated data Processing
92.All activity related to a particular application in a manual system is
recorded in a journal. The name of the corresponding item in a
computerized system is a
a. Master file c. transaction file
b. Year-to-date file d. current balance file
95.Which of the following is not a major reason for maintaining an audit trail
for a computer system
a. Deterrent to fraud c. analytical procedures
b. Monitoring purposes d. query answering
a. The sum of the cash deposits plus the discounts less the sales
returns.
b. The sum of the cash deposits.
c. The sum of the cash deposits less the discounts taken by
customers.
d. The sum of the cash deposits plus the discounts taken by
customers.