SEATWORK IN AUDITING

1. An auditor is applying the difference estimation sampling plan. Recorded book

value is P1,000,000 and the auditor estimates a P75,000 understatement
difference. In this case, the auditor’s estimated population value is
a. P1,000,000
b. P1,025,000
c. P1,075,000
d. P925,000
2. Which of the following is ordinarily the best evidence of fair value?
a. Published price quotations in an active market.
b. None of the above.
c. Comparative transaction model.
d. Discounted cash flow analysis.
3. Gathering evidence in a scientific experiment is most similar in an audit to:
a. Evaluating whether financial statement are presented fairly.
b. Planning an engagement
c. Hypothesizing that financial statements are presented fairly
d. Assessing risk and designing audit procedures
4. Which of the following statements is true about non-statistical sampling in test
of controls?
a. The calculated non-statistical sample should never be altered judgmentally
b. The auditor’s judgment in non-statistical sampling is guided by classical
statistical sampling concepts
c. The auditor considers the same parameters when determining a non-
statistical simple size as when determining a statistical sample size
d. Non-statistical sampling plans provide a quantitative measure of sampling
risk
5. Working papers that record the procedures used by the auditor to gather
evidence should be
a. Destroyed when the audited entity cease to be a client
b. Considered the primary support for the financial statements being examined
c. Viewed as the connecting link between the books of account and the financial
statements
d. Designed to meet the circumstances of the particular engagement
6. In evaluating the assumptions on which the estimate is based, the auditor would
need to pay particular attention to a assumptions which are
a. Consistent with those used for other accounting estimates.
b. Consistent with management’s plans which appear appropriate.
c. Reasonable in light of actual result in prior periods.
d. Subjective or susceptible to material misstatement.
7. In a PPS sampling plan with a P10,000 sampling interval, an auditor discovered
that a selected accounts receivable with a recorded amount of P5,000 had an
audited value of P2,000. The project error for the sample is:
a. P6,000
b. P8,000
c. P3,000
d. P4,000

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8. Which of the following is least considered in determining the sufficiently and
appropriateness of the audit evidence that the auditor will obtain regarding
opening balance?
a. The accounting policies adopted by the entity.
b. The length of years in operations of the entity.
c. The materiality of the opening balance relative to the current period’s
financial statements.
d. The risk of misstatements of accounts
9. Which of the following factors most likely would affect an auditor’s judgment
about the quantity, type, and content of the auditor’s working papers?
a. The number of personnel assigned to the audit.
b. The likelihood of a review by a concurring (second) partner.
c. The content of the management representation letter.
d. The assessed level of control risk.
10. Which of the following sampling plans varies sample sixe?
a. Attribute estimation
b. Stratified sampling
c. Sequential sampling
d. Systematic sampling
11. The risk of incorrect acceptance relates to the:
a. Allowable risk of tolerable error
b. Effectiveness of the audit
c. Preliminary estimate of materiality
d. Efficiency of the audit
12. The primary reason an auditor request that letters of inquiry be sent to a
client’s attorneys is to provide the auditor with
a. A description and evaluation on litigation, claims, and assessments that
existed at the balance sheet date.
b. Corroboration of the information furnished by management about litigation,
claims, and assessments.
c. The probable outcome of asserted claims and pending or threatened
litigation.
d. The attorneys’ opinions of the client’s historical experiences in recent similar
litigation.
13. An auditor should perform alternative procedures to substantiate the
existence of accounts receivable when
a. Collectability of the receivables is in doubt.
b. No reply to a negative confirmation request is received.
c. Pledging of the receivables is probable.
d. No reply to a positive confirmation request is received.
14. Describe substantive audit test in the context of an audit of financial
statements.
a. Substantive test are audit procedures that will increase proportionately with
the auditor’s reliance on internal control.
b. Substantive test are audit procedures that are designed to discover
significant subsequent events.
c. Substantive test are audit procedures that may be either test of transactions,
direct test of financial balances, or analytical tests.

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 d. Substantive test are audit procedures that may be eliminated under certain
conditions.
15. Which of the following statements is correct?
a. The expected population deviation rate has little or no effect on sample size
b. As the population size doubles, the sample size also should double
c. For a given tolerate rate, a larger sample size should be selected as the
expected population deviation rate decreases
d. The population size has little or no effect on sample size except for a very
small populations.

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