IKeDA: The Review School of Accountancy What is the cash shortage as of December a. 12,270 ©. 30,915 A b. 5,730 a. 55,270 3. What. is) the net adjustment to cash as of iy a. 186,230 c. 190,235 4 b. 228,230 d. 175,735 4. What is the toval cash shortage from Janu. 0 a. None 15,520 b. 5,100 a. 17,370 In validating the bank reconciliation sta: elignt, the auditor should teace back th transits to the: a. Hank statement of the current month. b. Accounts payable voucher. ©, Cancelled checks returned by the ban| 4. Cut-off bank statement of the subsea| PROBLEM 2: You are auditing the Accounts Receivable of ‘low December 31, 2017. You found the following. int genoral journal: Accounts Less Accounts receivable net receivable The accounts receivable subsidiary ledger had th detaile: Page 2 of 14 12 jecember 31? ry 2 to January 15? ements of the ent month. Inc. as of rmation in the P2,455,440 Allowance for doubtful accounts (93,440) 2,326,000 1 following Thyaice Customer Maes Roane Gort 13/25/2017 % ae SSS Ge fb 8/i2/20i7 LP He Tangs 12/12/2017 27 -Tel, 860.9 12/2/2017. rv 178, 490 2.50% 6/22/2017 $425,490 Uiy300 fice MAT/20:7 027, 194,040. 9a 8/25/2017 Ih 195,690 2 IPH RS AA ah BS/4/2017 ter BBS, BONN hiss Nancy 12/8/2017 3. 340,000 ~ v.rw 9/25/2017 Wn. 109,60 rOyated 5/20/2027 5%, 100,0q0° Py HEE Tian ay, 46,000 # 4/26/2017 45,008 7 Bravo 10/18/2017, 26.195, 60} 6/20/2017 + Victory 2/24/2017 . ae ales le 4. a 3300, Additional! information: A a he a. You discovered based on your review of etbsequent events agqojar 4. that Victory recently went bankrupt, thus, upon your 4903 Feconmendati @ client agreed to the write-off of the Me outstanding receivable from the said custone:. b. You also discovered that the invoice dated 6/12/2017 has already been settled by Golf per Ox numbdr 34675. ‘This amount however has been erroneously posted against Bravo's subsidiary ledger as a setzlemen: dated 12/05/2017 for the same amount. AUDITING ~ FINAL PRE-BOARD EXAMINATION (BATCH 35) for an invoiceReSA: The Review School of Accountancy Page 4 of 14 Invoice Selling cost Terms Shipment Received Number price Date by customers “o1094 14,200 12,500 Shipped to 2/29/2017 61/02/2078 \ consignee joross, 9,000 7,500 FOB shipping 2/30/2017 01/02/2018 point < jotes6 10,000 y 7,750 FOB destination | 42/31/2017 01/03/2018 gi [01097 21,000 18,200 FOB shipping > 12/31/2017_ 01/03/2018 EE eae point a en 1098 10,500 8,800 FOB destination | 12/31/2017 01/03/2018 aw 4,500 3,200 FOB destination “91/02/2017 01/03/2018 \p1100 6,500 5,000 FOB shipping 1/02/2018 91/05/2018 point - Purchases Cutoff: Receiving Amount Shipment shipment Terms Report Date } No. ap { 180855. 8,100 12/21/2011+ FOB Shipping Point 2X | 78086 9,100 12/27/2017" on Consignment Basis ey | 78057 10, 200 - 12/28 /2017+ FOB Destination | 78058 8,200 12/29/2017 “FOB Shipping Point ye) 78055. —9,700 12/29/2017 FOB Destination _ 78060 ) 10,700 12/30/2017 FOB Shipping Point 78061, 11,200 12/31/2017 FOR Destination 78062 12,800 1/31/2018 FOB shipping Point 4 A couat of all inventories within the premises was made on oy, December 31, 2017. A documents cut-off on the same date revealed that the lest sales invoice recorded as sales o} December is Sales Invoice number 01097 while thi report used (with physical receipt of gcous)—an| purchases on eccount is Receiving Report number, cost of the count was recorded as inventories a 78059. The total 2017. ‘The goods shipped to consignees are stilh unsold at December 31. St a The unadjusted ledger balances show the fellowihg: Accounts receivables P2776, 500 Accounts payable 212, 900 Inventories 475,000 Sales 1,320, 000 Purchases 842,000 Determine the adjusted balances of the following: a b ss > A 11. Accounts receivable 252,300 229,620 | 261,120 239,320 12. Accounts payable 203,800 214,500 | 223,600 249,500 C13. Inventories 456,800 440,650 | 455,650 446,850 & 44, What is the for the yea: a. 4,850 B. 4,250 effect of errors in cut-off to) under © over 4,850 3,950 over 95) 19.6 gain assurance ¢ inventory listing s likely would trace @. Items listed in the inventory listin inventory tags and the auditor’s rec - sheets. b. Inventory tags noted during the audit, to items listed int eh inventory List hat all inventory items! edule ere valid, en a & the net income in 2 client's ditor most schedule to irded count ex's observation ing schedule. AUDITING ~ FINAL PRE-BOARD EXAMINATION (BATCH 35)& c gy P- In January 2017Amita Corp. incurred Pl, 500,000 in the ‘wy A ReSA: The Review School of Accountancy method in measuring its investment propert! value of the building on June 30, 2017 was December 31, 2017the fair value of the bui v Required: 16. What is the correct carrying value of the bonds as of becember 31, 20172 i ding is at Page 6 of 14 . The fair at P3.2M. on P3M. nvestment in a. 1,615,707 c. 7,729,582 be) 8,145,145 @. 8,277; 085 17. What is the retroective adjustment to the fotained earnings, beginning as a result of your au investment. in bonds? it of the a. 576,164 270,408 b, 485,976 d. -384,293 if.What is the correct carrying value of the investment in Stocks as of December 31, 20167 a. €,840,000 ©. 6,972,500 b. 7,077,500 4. 7,407, 500 19.What 46 the retroactive adjustment to the tetained earnings, beginning a8 a result of your audi: of the investment in stocks? | a. 262,500 € 430,000 | b. 162,500 d. 172,500 20. How much should be recognized’ in the state: bt of comprehensive income upon the reclassification of the building from PPE to Investment? a. 300,000 c. b. 100,000 8 500,000 None PROBLEM 5: Anita Corp. presented to you the ol lowing Prépefty, plant and equipment schedule as of December 31, 2016, in line with your audit of the same for 2017 buy Qeue cost Accumulated aS Depreciation 6. band / 41200, 000 - Building 9,000,000 3,095, 100 Machinery and 15, 000, 060 ©, 000,060 a, equipment ae ott Furniture and 6,000, 000 3,709,001 —*| fixture SEN: Chests nH Audit notes: a. The assets were acquired at’ the beginning o| company started its operations. Useful Life/ jpreciation Method Double Declining years! Straight line 10 years/ SYD f €013} vnen the construction of a new wing of the building, Wigs tino G ; i ©. On June 30, 2017 an old machinery which originally costs ho a0 A P2,400,000 was exchanged for a machinery of|Colon Company. yay Solon Company acquired the said machinery at. 25,000,000 on dquo duly 1, 2012. The fair value of Amita Corp.ts machinery on ws tary the exchange date was at Pl,250,000. Amita Corp. paid ea te additional cash at 200,000 on the exchange |wnich was _ ws deemed to have the necessary commercial substance. m-15 + Qe aa 4 Qnitlarsh 1, 2017 gone fueniturs aa cixtures were seid tor Chia) \e400,000> these furniture were originally acquired at \ hid PT,800,000. Replacement furniture were. acqyired on June =e Uae 2001 te Ve AUDITING - FINAL PRE-BOARD EXAMINATION (BATCH 35) ca sy zs au aS wen say 3 ee ar feReSA: The Review School of Accountancy Page 8 of 14 Based on the above information and on your audit, answer the following requirements Derwidt tive linpa Tenienh sas Gaile Heduehse 4 One a. None c. 160,000, 27. What is the correct carrying value of the franchise as of December 31, 20172 p a. 1,200,000 - 1,260,000 b. 1,250,000 a. 1,310,.0p0 28.What is the correct carrying value of the Patent as of December 31, 20112 | wv 4. 1,998, 000 + 1,900, 900 b. 1,800,000 4. 1,880,000 29. What is the total retroactive adjustment to retained earnings beginning in 2017 as a result cf your audit? . a. 585,000 ¢. 900,000 ih b. 480,000 a. 429,000 30.What ie the total amount chargeable to expense for the current year (2017) as @ result of your audit? A a. 1,479,500 e. 1,049, 560 i b. 861,500 d. 1,059,590 PROBLEM 7: Rose Company has the following selected accountd in its shareholders’ equity section as of December 31, 2016: Preference shares, P100 par, 10 percent cumulative, 100,000 shares issued and outstanding 210,000, 000 Grdinary shares, ¥20 par, 1,000,000 shares authorized, 790,000 Shares issued and outstanding 14, 000, 060 Share premium } 5,000,000 Accumulated profits 30-000, 000 There are no dividends in arrears on the preference shares. ee During 2017, the following transactions occurred) bw 4. The board of directors asciared 4 cash dividend totaling to CO 2 ge P2, 800,009 to be paid t6 preference and ordinary Shareholders. Later, a share dividend of 100,000 ordinary W& W4 - Shares were declared on ordinary shares. ‘The market valto op lay ay |" OF ordinary shires TS P6B)por sharo.on the date the share SPD e dividends were declare. aq | iy ud b. Sometine after the above dividends were dedlared and LY ( settled, the board of directors declaed ad property dividends one shares of its investment in sige Corp. stocks being held by the company as financilal asset at fair market value through profit or losses for every . okdinary share outstanding. Bingo Corp. stocks wefe we originaliy purchased by the company at @12.per share and ten have 4 carrying value based on theic falt value as per the opt 14 last balance sheet date, at P20 per share. | Binge Corp. slarea weie selling at €i\whon the property disidends wore declared and were seiling at (P23) when the proparty Hs dividends were settled. the tompany ad a total of 600,000 shares of Bingo Corp. shares. | es 0S ty ©. At the end of 2017, the board declares a for-for-one share split. With the split, the number of ordinpry shares authorized to be issued increased to 4,000,000. At the AUDITING — FINAL PRE-BOARD EXAMINATION (BATCH 35) &ReSA: The Review School of Accountancy | Page 10 of 14 40. Evaluate the following situations; | T. An auditor is concerned with estimating the numerical Measurement of a population” | TT. An auditor is concerned with akout a specific characteristic of the population p, HIE. Bi auditor believes thet deviation vate ig zero or f tuat sero, When would the auditor use atratification? V4u-e% a. I only ¢ TIT only ih Un ianty dc Xe tt ana ra 41, Baluate the sollowing statements: ABC Co. operates across the ASEAN regidn TI. ABC Co.*s accounts include those that require ii significant judgment and estimates (y__wnich of the above is a source of information risk? a. I only e- 1 and |rr b. 1 only a. Neither 1 nor 11 42. Evaluate the following statements: I. ,A foreign accountant may practice in the Philippines, subject to existing treaties, laws and regulations (My Agcountants who want to be public pradritioners (under ) yhis/hex name), compilers (in commerce |and industry) and teachers (e.g., in Universities) need to be accredi a. True, False &. ‘True, True b. False, True a. False,|False - Classify the following engagements: | I. Audic a | TI. Review * | III. Compilation | 3. Assurance, ance, Non~Assurance 9. Assurance, Non-Assurance, Assurance | ©. Assurance, Non-Assurance, Non-Resurance d. Non-Assurance, Non-Assurance, Non-Assurance 44. svaluate the following’ statements: T. In tien of practicing uncer the MRA, a foreign CPA nay instead take the licensure exam for accountants pi" A t£. Continuing Professional Development units are only ( required for accountants in public practice a. True, ra << False, False~ b. True, True d. False, True be 45. Evaluate the following statements: 7. The auditor's assertion of concern ig existence hence he/she confirmed the accounts receivable. + The accountant records, approves and documents r receivable write offa./ \Y fin. the auditor assesses that the risk of material fee misstatement for accounts receivable is high hence he/she tested them on an interim period and rolled forward the account. Which of the above directly pertains to detection risk? e. Ionly — « IIE only rh &. fF and rr only ds I, IL and TI1 46. Evaluate the following statemon I. CDE Company operates as a mining company in the Philippines; mining companies are highly regulated If. Checks, regardlesa of amount, are solely signed by the Pres iden sis : AUDITING - FINAL PRE-BOARD EXAMINATION (BATCH 35)4 ReSA: The Review School of Accountancy Page 12 of 14 53. Pp C 58 59 When an auditor determines that the level of acceptable detection risk is high, then Pap a. More testing is to be performed ¥ b. Less testing is to be performed c. Risk of material misstatement is high d. Sample size is larger Evaluate the following components of the fraud triangle T, ‘Incentive Ii. Opportunity ITZ. Rationalization q To what component of the risk of material imi they related? a. Inherent Risk, Toherent Risk, Inherent Risk b.fControl Risk, Control Risk, Control Risk <. Inherent Risk, Control Risk, Inherent Risk d. Control Risk, Control Risk, Inherent Risk tatement are valuate the following statements: T. Obtain more (corroborating) evidence|™ aan It, Consult with auditor's own, counser UY II, Discuss the frsua With the suspected] fraudster Which are appropr ate responses to identified/suspected fraud? a. J only ¢, Tand jn b. IL only 4. I, Tang 11t aluate the following statements: I Auditor assesses that revenue recognition’s risk of material misstatement is high — TT. Auditor determine that impairment testing of goodwill is inherently complex and judgmental Ill. Auditor determines that 4 disclaimer|of an opinion is appropriate in which of the above may a Key Audit Matter be presented in the auditor’s report? a a. Ionly - Tana Tt B. i1 oniy d-—, 4t pnd rar Under PSA 701, audirors ere required to (for listed entities): I. Determine those matters which are to be regarded as 5AM II. Communicate KAM in the auditor's report TII. Determine a categorical opinion_op the KAM a. f only &. T and fz b. II only Al 1, I and arr Tf an anditer fails to observe the inventory count of the client at the end of the reporting period whicn of the following are considered in determining the appropriaze opinion: + Maberiality of tne issue 22, Performance of alternative procedures HII. Effect of the issue to other components of the financial statement 7 a. Tf only cs TT only b. I only AG i, 1 dnd rir Bvaluate the following situation: pa eee Td. A materiel scove limitation 5 1, 4 material misstatement / Til. A pervasive misstatement y AUDITING — FINAL PRE-BOARD EXAMINATION (BATCH 35)4 R@SA: The Review School of Accountancy Page 14 of 14 a. True, False c. True,| True 5) False, True A. (betes), False 66. Contirmation primarily eddresses which assertion(s)? T. Completeness ~ IE. Existence a. Ionly c. Land) a b. 11 only d. Neither nor 11 67. When an auditor traces reconciles recorded receipts back to Sfficial receipts, the auditor most likely is concerned ¢. Risk of material misstatement d. Risk of misleading in zmation 68. Segregation i. 4nguiry II. Analytical Procedu: Vint! observation a. Loaly c. I and II only b. 11 only at I and IT only incompatible duties is normally tested by: When an auditor physicaily reconciles a high value inventory in the warehouse to the accounting records then he/she is concerned wit! a. Risk of overstatement 5. Risk of understatement ©, Risk of material misstatement Mado aly ae 5 8G. Rish-of misleading information came Jo-wilch Sf the following snourd sign the management representation letter? T. Senior Executive Officer Ww Ii. Senior Finance Officer (es oe Vis Fee ee ee M 2. Tenly TI and IIT only by IT only at and| It only --7 end of examination --~ (AUDITING — FINAL PRE-BOARD EXAMINATION (BATCH 35) cm)