iCPA PH

1. Who signs the confirmation request letter before sending the same to the recipient?

a) The appropriate level of management

b) Audit partner
c) CEO or CFO of the client
d) Both management and auditor

2. Physical examination of tangible assets is an insufficient form of evidence when the auditor wants to
determine the ___

a) Ownership of the asset

b) Condition or quality of the asset
c) The existence of the asset
d) Quality and description of the asset

3. The following are descriptions of the assertions about presentation and disclosure. Which one refers
to completeness?

a) All disclosures that should have been included in the financial statements have been included
b) Disclosed events, transactions and other matters have occurred and pertained to the entity
c) Financial information is appropriately presented and described, and disclosures are clearly
expressed
d) Financial and other information are disclosed fairly and at appropriate amounts

4. Complete the statement: “The evidence gathering technique of observation….”

a) Is limited to what the auditor sees

b) Requires the gathering of corroborative evidence
c) Is useful in most part of the audit
d) Is rarely sufficient by itself

5. Which of the following audit procedures is used extensively throughout the audit but does not, by
itself, provide sufficient appropriate evidence?

a) Inquiry
b) Inspection of tangible assets
c) Inspection of records or documents
d) Observation

6. Management assertions drive the auditor’s quest for audit evidence. These assertions are

a) Directly related to generally accepted accounting principles

b) Indirectly related to generally accepted auditing standards
c) Indirectly related to generally accepted accounting standards
d) Directly related to generally accepted auditing standards

7. Test of controls, for efficiency, is frequently done at the same time as

a) Substantive tests of transactions

b) Substantive test of balances
c) Compliance tests
d) Analytical procedures

8. Working papers that record the procedures used by the auditor to gather evidence should be

a) Designed to meet the circumstances of the particular engagement

b) Destroyed when the audited entity ceases to be a client
c) Considered the primary support for the financial statements being examined
d) Viewed as the connecting link between the books of account and the financial statements
9. The permanent life section of the working papers that are kept for each audit client most likely
contains

a) Narrative description of the client’s accounting procedures

b) Correspondence with the client’s legal counsel concerning pending litigation
c) A schedule of time spent on the engagement by each auditor
d) Review notes about questions and comments regarding the audit work performed

10. The primary emphasis in a most test of details of balances is on the

a) Balance sheet accounts

b) Income statement accounts
c) Cash flow statement accounts
d) All of the choices

11. Confirmation is the process of obtaining a representation of information or an existing condition

directly from a third party. Traditionally, confirmations are used to verify

a) Bank balances and accounts receivable

b) Individual transaction between organizations, such as sales transactions
c) Fixed asset additions
d) All of the choices are used

12 Management assertions are

a) Directly related to financial reporting standards

b) Directly related to standards on auditing
c) Indirectly related to standards on auditing
d) Indirectly related to financial reporting standards

13. Audit evidence can come in different forms with different degrees of persuasiveness. Which of the
following is the least persuasive type of evidence?

a) Pre-numbered client sales invoices

b) Vendor’s invoice
c) Bank statement obtained from the client
d) Computations made by the auditor

14. To be competent, evidence must be both

a) Valid and relevant

b) Useful and objective
c) Timely and substantial
d) Reliable and documented

15. Which is a basic approach used by auditors to evaluate the reasonableness of accounting estimates?

a) Reviewing subsequent events

b) Observation
c) Confirmation
d) Analyze corporate organizational structure

16. As the acceptable level of detection risk increases, an auditor may change the

a) The timing of substantive tests from year-end to an interim date

b) Nature of substantive tests from a less effective to a more effective procedure
c) Assessed level of control risk from below the maximum to the maximum level
d) Assurance provided by tests of controls by using a larger sample size than planned
17. In testing the existence assertion for an asset, an auditor ordinarily works from the

a) Accounting records to the supporting evidence

b) Supporting evidence to the accounting records
c) Financial statements to the potentially unrecorded items
d) Potentially unrecorded items to the financial statements

18. The primary source of information to be reported about litigation claims, and assessments is the

a) Client’s management
b) Independent auditor
c) Client’s lawyer
d) Court records

19. Which of the following is not a function of working paper?

a) Aid seniors in reviewing and supervising the work of managers and partners
b) Provide support for the auditor’s report
c) Aid partners in planning and conducting future audits
d) Documents staff compliance with standards on auditing

20. A distinction must be made between general audit objectives and specific audit objectives for each
account balance

a) The general audit objectives apply to every account balance on the financial statements
b) The specific audit objectives apply to every account balance on the financial statements
c) The general audit objective is stated in terms in term tailored to the engagement
d) The specific audit objectives are stated terms in term tailored to the agreement

21. Which of the following is not a proper match of auditor’s objective with management assertion?

a) Classification matches with the presentation

b) Ownership matches with rights and obligations
c) Completeness matches with completeness
d) Validity matches with existence/occurrence

22. Which of the following statements best describe the auditor’s responsibility concerning illegal acts
that do not have a material effect on the client’s financial statements?

a) Generally, the auditor is under no obligation to notify parties other than personnel within the
client’s organization
b) Generally, the auditor is under an obligation to see that stockholders are notified
c) Generally, the auditor is obligated to disclose the relevant facts in the auditor’s report
d) Generally, the auditor is expected to compel the client to adhere to requirement of the Board of
Accountancy

23. When an auditor has a question concerning a client’s ability to continue as a going concern, the
auditor considers management’s plan for dealing with the situation. That consideration is most likely to
include consideration of management’s plans to

a) Decrease ownership equity

b) Dispose of assets
c) Increase expenditures on key products
d) Invest in derivative securities

24. A practitioner may perform an agreed-upon procedures engagement on prospective financial

statements provided that which of the following is met?

a) Use of agreed-upon procedures report is not restricted

 b) The practitioner sets the criteria to be used in the determination of findings
c) The client agrees that the practitioner will decide appropriate procedures to be performed
d) The prospective financial statements include a summary of significant assumptions

25. If interim substantive procedures for an account identified no exceptions, which of the following
would the auditor not perform on that account at year-end?

a) Tests of details for the entire year under audit

b) Tests of details of activity during the period since the interim testing date
c) Reconciliation of year-end balances to interim balances
d) Substantive analytical procedures of the period since the interim testing date

26. Which of the following procedures would an accountant least likely perform during an engagement
to review the financial statements of an entity?

a) Observing the safeguards over access to and use of asset and records
b) Comparing the financial statements with anticipated results in budgets and forecasting
c) Inquiring of management about actions taken at the board of directors’ meetings
d) Studying the relationships of financial statement elements expected to conform to predictable
patterns

27. An examination of a financial forecast is a professional service that involves

a) Compiling or assembling a financial forecast that is based on management’s assumptions

b) Limiting the distribution of the accountant’s report to management and the board of directors
c) Assuming responsibility to update management on key events for one year after the reports
date
d) Evaluating the preparation of a financial forecast and the support underlying management’s
assumptions

28. Which of the following statements is correct regarding an accountant’s working papers?

a) The accountants own the working papers and generally may disclose them as the accountant
sees fit
b) The client owns the working papers, but the accountant has custody of them until the
accountant’s bill is paid in full
c) The accountants owns working papers but generally may not disclose them without the client’s
consent or a court order
d) The clients own the working papers but, in the absence of the accountant’s consent, may not
disclose them without a court order

29. Which of the following is correct concerning requirements about auditor communications about
fraud?

a) The fraud that involves senior management should be reported directly to the audit committee
regardless of the amount involved
b) Fraud with a material effect on the financial statements should be reported directly by the
auditor to the Securities and Exchange Commission
c) The auditor should ordinarily disclose fraud with a material effect on the financial statements
through use of an “emphasis of a matter” paragraph added to the audit report
d) The auditor has no responsibility to disclose fraud outside the entity under any circumstances

30. Which of the following is the general principle relating to the reliability of audit evidence?

a) Audit evidence obtained from indirect sources rather than directly is more reliable evidence
obtained the auditor directly
b) Audit evidence provided by copies is more reliable than that provided by facsimiles
c) Audit evidence obtained from knowledgeable independent sources outside the client company
is more reliable than audit evidence obtained from non-independent sources
 d) Audit evidence provided by original document is more reliable than audit evidence generated
through a system of effective controls

31. Which of the following procedures would an auditor most likely perform in searching for unrecorded
liabilities?

a) Trace a sample of accounts payable entries recorded just before year-end to the unmatched
receiving report file
b) Compare a sample of purchase orders issued just after year-end with the year-end accounts
payable trial balance
c) Vouch for a sample of cash disbursements entries recorded just after year-end to receiving
reports and vendor invoices
d) Scan the cash disbursements entries recorded just before year-end for indications of unusual
transactions

32. In an accountant’s review of interim financial information the accountant typically performs each of
the following, except:

a) Reading the available minutes of the latest stockholders meeting

b) Applying financial ratios to the interim financial information
c) Inquiring of the accounting departments management
d) Confirming major receivables accounts

33. When a professional accountant learns of a material error or omission in a tax return of a prior year,
he/she has the responsibility to do the following except

a) Consider discounting association with the client if the client does not correct the error
b) Advise the employer to correct the error and recommend that disclosure is made to the revenue
authorities
c) Promptly advise the client or employer of the error or omission and recommend that
disclosure is made to the revenue authorities
d) Promptly inform the revenue authorities even without permission of the client

35. Which of the following statements regarding analytical procedures is not correct?

a) Analytical tests emphasize comparison of internal client controls to PFRS

b) Analytical procedures are required on all audits
c) Analytical procedures can be used as substantive tests
d) For certain accounts with small balances, analytical procedures alone may be sufficient evidence

36. An auditor is auditing a mutual fund company that uses a transfer agent to handle accounting for
shareholders. Which of the following actions by the auditor would be most efficient for obtaining
information about the transfer agent’s internal controls/?

a) Review reports on internal control placed in operation and its operating effectiveness produced
by the agent’s auditor
b) Review prior year work papers to determine whether the number of transactions processed by
the agent has materially increased
c) Perform an audit on the internal control function of the agent
d) Perform tests of controls on a sample of the audited firm’s transactions through the agent

37. Using laptop computers in conducting financial statement audits may affect the methods used to
review the work of staff assistants because
 a) Supervisory personnel may not have an understanding of the capabilities and limitations of
computers
b) Working paper documentation may not contain readily observable details of calculations
c) The overall audit objectives may differ
d) Documenting the supervisory review may require the assistance of management services
personnel

38. Audit documentation should possess certain characteristics. Which of the following is one of the
characteristics?

I. Audit documentation should be indexed and cross-referenced

II. Audit documentation should be organized to benefit the client’s staff

a) Yes; Yes
b) No; No
c) Yes; No
d) No; Yes

39. A client is a defendant in a patent infringement lawsuit against a major competitor. Which of the
following items would least likely be included in the attorney’s response to the auditor’s letter of
inquiry?

a) A description of potential litigation in other matters or related to an unfavorable verdict in the

patent infringement lawsuit
b) A discussion of case progress and the strategy currently in place by client management to
resolve the lawsuit
c) An evaluation of the probability of loss and a statement of the amount or range of loss if an
unfavorable outcome is reasonably possible
d) An evaluation of the ability of the client to continue as a going concern if the verdict is
unfavorable and maximum damages are awarded

40. Which of the following procedures would an accountant most likely perform during an engagement
to review the financial statements of an entity?

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

41. Which of the following is the most objective type of evidence?

a) A letter was written by the client’s attorney discussing the likely outcome of outstanding
lawsuits
b) The physical count of securities and cash
c) Inquiries of the credit manager about collectability of noncurrent accounts receivable
d) Observation of cobwebs on time inventory bins

42. The most reliable procedure for an auditor to use to test the existence of a client’s inventory at an
outside location would be to

a) Observe physical counts of the inventory items

b) Trace the total on the inventory listing to the general ledger inventory account
c) Obtain a confirmation from the client indicating inventory ownership
d) Analytically compare the current-year inventory balance to the prior-year balance

43. The completeness assertion would be violated if

 a) Fictitious sales transactions were included in accounts receivable
b) The allowance for doubtful accounts was understated
c) Unbilled shipments had occurred during the period
d) Disclosure in the statements of pledged receivables

44. In testing the existence assertion for an asset, an auditor ordinarily works from the

a) Financial statements to the potentially unrecorded items

b) Potentially unrecorded items to the financial statements
c) Accounting records to the supporting evidence
d) Supporting evidence to the accounting records

45. Which of the following auditor concerns most likely could be so serious that the auditor concludes
that a financial statement audit cannot be conducted?

a) The entity has a formal written code of conduct

b) The integrity of the entity’s management is suspect
c) Procedures requiring segregation of duties are subject to management override
d) Management fails to modify prescribed controls for changes in conditions

46. Which of the following is least likely to be comparable between similar corporations in the same
industry line of business?

a) Operating cycle
b) Earnings per share
c) Accounts receivable turnover
d) Return on total assets before interest and taxes