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Quiz Auditing
Quiz Auditing
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Which of the following should an auditor obtain from the predecessor auditor prior to
accepting an audit engagement?
Analysis of balance sheet accounts All matter of continuing accounting significance
Facts that might bear on the integrity of management Analysis of income statement
Question #2
Normally, who is the maker and the recipient of the management representation letter?
Auditor, management, respectively Auditor, auditor, respectively. Management,
management, respectively Management, auditor, respectively
Question #3
Overall responses to address the risks of material misstatement at the financial statement
include:
Assigning more experienced staff or those with special skills or using experts
All of the answers
Incorporating additional elements of unpredictability in the selection of further audit
procedures
Emphasizing to the audit team the need to maintain professional skepticism in gathering
and evaluating audit evidence
Question #4
The real time feature normally would be least useful when applied to accounting for a firms
Property and equipment Receivables Merchandise inventory Cash in bank
Question #5
Security given by a borrower to a lender as a pledge for repayment of a loan, rarely given in
the case of inter-bank business.
Encumbrance Line of credit Collateral Options
Question #6
Which of the following represents a situation in which the auditors may disclose client
information to outside parties?
Showing the client's bank statement to a neighbor who is a shareholder to emphasize its
cash position. Explaining to the local television news station why the client is likely to miss
payroll in the forthcoming periods. Complying with a validly issued and enforceable
subpoena or summons. Bringing working papers to a professional CPA workshop as an
example of quality work.
Question #8
Which of the following statements is true with regard to the relationship among audit risk,
audit evidence and materiality?
where inherent risk is high and control risk is low, the auditor may safely ignore inherent
risk the lower the inherent risk and control risk, the lower the aggregate materiality
threshold aggregate materiality thresholds should not change under conditions of
changing risk levels. under conditions of high inherent and control risk, the auditor should
place more emphasis on obtaining external evidence and should reduce reliance on internal
evidence
Question #9
Question #10
Question #11
The phrase Accordingly, we do not express an opinion on the financial statements... indicates
adverse opinion unqualified opinion disclaimer of opinion qualified opinion
Question #12
Question #13
If supplementary information that is not required by the applicable financial reporting
framework is presented with the audited financial statements, the auditor shall
issue an adverse opinion due to departure from the applicable financial reporting
framework. issue a qualified opinion due to disagreement with management evaluate
whether such supplementary information is clearly differentiated from the audited financial
statements withdraw from the engagement
Question #14
Which of the following will an auditor least likely discuss with the former auditors of a
potential client prior to acceptance?
Fees charged for services. Disagreements with management regarding accounting
principles. Predecessor auditor understanding of the reasons for the change of auditors.
Integrity of management.
Question #15
Which of the following is not one of the requirements before accepting an assurance
engagement?
The practitioner should be competent and independent
The practitioner should accept the engagement only if the subject matter is identifiable and
in the form that can be subjected to evidence gathering procedures
The responsible party and the intended user of the assurance report should be from
different organizations
The practitioner should accept the engagement only if the subject matter is the
responsibility of another party
Question #16
Question #17
In testing the completeness assertion for an audit, an auditor ordinarily works from the:
Supporting evidence to the accounting records Accounting records to the supporting
evidence. Potentially unrecorded items to the financial statements. Financial
unrecorded items to the financial statements.
Question #18
This terms refers to financial information that is prepared and presented in accordance with
an applicable financial reporting framework and comprises either a complete or a condensed
set of financial statements for a period that is shorter than the entitys financial year.
Historical financial information. Prospective financial information. Interim
financial information. Truncated financial information.
Question #19
This environment exists when a computer of any type or size is involved in the processing by
the entity of financial information of significance to the audit, whether that computer is
operated by the entity or by a third party, such as a service bureau.
CIS environment
Information system
Process alignment
Database areas
Question #20
Question #21
Question #22
Bagyo, Fredie, Gener, CPAs did not finish the audit of Spy-Gamba, Inc. because the senior
auditor was terminated and a new audit lead was not assigned to the engagement. Litigation
against Bagyo, Fredie, Gener, CPAs will most likely result from which claim?
Misappropriation of assets Negligence Fraud Breach of contract
Question #23
This refers to the computer programs designed to perform specific data processing tasks such
as payroll, billing or inventory processing.
Systems software
Application software
Computer software
Dataware
Question #24
Which of the following generalizations is incorrect about the reliability of evidence gathered
by practitioners?
Evidence in the form of documents and written representation is more likely to be reliable
Evidence obtained indirectly by the practitioner is more likely reliable than that obtained
directly
Evidence generated internally is more reliable when subject to appropriate controls within
the entity
Evidence from external sources is more reliable than that generated internally
Question #25
A generic term used to categorize a wide variety of financial instruments whose value depends
on an underlying rate or price, such as interest rates, exchange rates, equity prices, or
commodity prices.
Asset / liability management Hedge Derivatives Commodity
Question #26
Which of the following comments best illustrates the concept of sampling risk?
An auditor may fail to recognize errors in the documents examined for the chosen sample
The documents related to the chosen sample may not be available for inspection A
randomly chosen sample may not be representative of the population as a whole on the
characteristic of interest An auditor may select audit procedures that are not appropriate
to achieve the specific objective
Question #27
An auditor who concludes that a material (but not pervasive) uncertainty is not adequately
disclosed in the financial statements should issue a (an)
qualified opinion disclaimer opinion unqualified opinion adverse opinion
Question #28
An initial (first-time) audit requires more audit time to complete than a reoccurring audit. One
of the reasons for this is that..
A larger proportion of customer accounts receivable need to be confirmed on an initial
audit. Predecessor auditors need to be consulted. New auditors are usually assigned to
an initial audit. The clients business, industry, and internal control are unfamiliar to the
auditor and need to be carefully studied.
Question #29
In determining estimates of fees, an auditor may take into account each of the following,
except the
Attainment of specific findings
Degree of responsibility assumed by undertaking the engagement
Value of the service to the client
Skills required to perform the service
Question #30
In the consideration of internal control, the effectiveness of the design of controls is tested by:
Decision tables Substantive tests Flowcharts Tests of controls
Question #31
Question #32
Question #33
Question #34
The audit risk model consists of: AR=IR x CR x DR. The detection risk is the dependent variable.
What is the acceptable level of detection risk if the assessed level of inherent risk is high and
the control risk is medium?
Lower
Lowest
Higher
Medium
Question #35
The entire set of data about which the auditor wishes to draw conclusions is called
Sampling unit Population Sample Sampling frame
Question #36
According to the Code of Professional Conduct, Rule 101, which activity requires a higher level
of independence for the auditor?
Assurance services Bookkeeping services Tax services Consulting services
Question #37
Question #38
Question #39
Question #40
Question #41
If evidence was obtained in the prior year's audit that indicates a key control was operating
effectively:
The tests of the control will be reduced this year
The extent of tests of that control may be reduced this year if the auditor determines that it
is still in place
The auditor would not test this area gain this year.
It will be unnecessary to test that control this year
Question #42
Question #43
One of the major differences between auditors and other professionals is that most
professionals
Are not expected to act in the best interest of the public
Need not be concerned about independence
Do not have to pass rigorous examination to be admitted in the profession
Do not need the confidence of the public
Question #44
Which of the following ethical principles implies fair dealings and truthfulness?
Integrity
Objectivity
Professional skepticism
Confidentiality
Question #45
Question #46
When computer software or files can be accessed from OL terminals, users should be required
to enter a (n)
A self-diagnosis test
An echo check
Personal identification code
A parity check
Question #47
This means "identifying and capturing the relevant information for transactions or events"
Processing
Recording
Reporting
None of these
Question #48
Auditors often make use of computer programs that perform routing processing functions
such as sorting and merging. These programs are made available be electronic data processing
companies and others are specifically referred to as
use programs compiler programs utility programs supervisory programs
Question #49
Before releasing the audit report, the auditor should perform which of the following?
Review the financial statements analytically for any inconsistencies. Perform planning
for the subsequent period audit. Instruct the client to release the financial statements to
the bank. Secure a deposit from the client to safeguard against lawsuits.
Question #50
Which of the following has the power to prescribe and/or adopt Code of Ethics for the practice
of accountancy?
Board of Accountancy
Congress
President of the Philippines
PICPA
Question #51
The acceptable level of detection risk and the combined level of inherent risk and control risk
are _____ related.
inversely
not
directly
proportionately
Question #52
When positive confirmations are not returned, the auditor is supposed to use alternative
procedures. Which of the following is not an alternative procedure?
Examination of subsequent cash collections. Examination of supporting documents.
None. All of the three above are alternative procedures. Mailing second and third
confirmations.
Question #53
Generally, advertising and publicity in any medium are acceptable provided it is:
Published in billboard advertisements
Not self-laudatory
Not professionally dignified
Not in good taste
Question #54
Question #55
Question #56
Question #57
In which of the following situations would an auditor have violated the Code of Ethics in
determining its fee?
A fee based on whether of not the audit report leads to the approval of client's application
for bank loan
A fee that will be established as a result of a bankruptcy proceedings
A fee which is based upon the nature of the engagement rather than upon the actual time
spent on the engagement
A fee based on the degree of responsibility that the service entails
Question #58
Developing an understanding of the client's business and the industry in which it operates.
Testing specific balances and transactions. Divulging the locations and details of audit
tests to be performed to the client.
Question #60
Question #61
Question #62
Question #63
Question #64
Question #65
Question #66
Question #67
Which one of the following is a key condition indicating doubt regarding an entity's ability to
continue as a going-concern?
Inability to make principal and interest payments as they become due. The company's
auditors were voted out in the most previous shareholder's meeting. Litigation in the
normal course of business. Improvement in key financial ratios.
Question #68
Which of the following fundamental principles would most likely to be threatened when a
professional accountant accepts an engagement before knowing all the pertinent facts about
the new engagement?
Professional competence and due care
Objectivity
Professional behavior
Integrity
Question #69
A firm of CPAs may use policies such as notifying professional personnel as to the names of
audit clients having publicly-held securities and confirming periodically with such personnel
that prohibited relations do not exist. This is done to achieve effective quality control in which
of the following areas?
Inspection Independence Assignment of personnel Acceptance and continuance
of clients
Question #70
When obtaining an understanding of the accounting and internal control system the auditor
may trace a few transactions through the accounting system. This technique is:
Validity test Walk-through Re performance Control test
Question #71
Question #72
General purpose financial statements may be prepared in accordance with the following
framework except:
International Auditing Standards International Financial Reporting Standards for SMEs
International Financial Reporting Standards International Accounting Standards
Question #73
The following are used by the auditor in assessing whether the accounting for assets or
liabilities requiring fair value measurements is appropriate, except.
The auditors understanding of the requirements of the financial reporting framework.
Results of other audit procedures. Knowledge of the business and industry. Number of
personnel involved in the measurement process.
Question #74
A CPA shall not disclose confidential information obtained during an audit engagement in
which one of the following situations?
To a successor auditor without the client's permission
With the consent of the client
In defense of himself when sued by his client
When the security of the state requires
Question #75
The current file of an auditors working papers most likely would include a copy of the:
Current year schedules and analyses. Long-term customer contracts. Articles of
incorporation and by-laws. Long-term debt agreement.
Question #76
Ethical Principles that are applicable to all CPAs no matter the type of services that are
rendered does not include which factor?
Due professional care Integrity and objectivity Professional behavior Planning
and supervision
Question #77
This type of confirmation request asks the respondent to reply only in the event of
disagreement with the information provided in the request:
Negative confirmation request Blank confirmation request Positive confirmation
request Discovery confirmation request
Question #78
Government auditing often extends beyond examinations leading to the expression of opinion
on the fairness of financial statements and includes audits of efficiency, economy, effectiveness
and:
Accuracy Compliance Evaluation Internal control.
Question #79
Which of the following auditor concerns most likely could be so serious that the auditor
concludes that a financial statement audit cannot be conducted?
procedures requiring segregation of duties are subject to management override the
entity has formal written code of conduct the integrity of the entitys management is
suspicious management fails to modify prescribed controls for changes in conditions
Question #80
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