6/18/2021 AUDIT THEORY PRE-TEST

AUDIT THEORY PRE-TEST

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1801100709@buksu.edu.ph

Directors, management, external auditors, and internal auditors all play important
roles in creating proper control processes. Senior management is primarily
responsible for *

Implementing and monitoring controls designed by the board of directors

Ensuring that external and internal auditors oversee the administration of risk
management and control processes

Reviewing the reliability and integrity of financial and operational information

Establishing risk management and control processes

Inherent risk and control risk differ from planned detention risk in that they *

Arise from the misapplication of auditing procedures

May be assessed in either quantitative or non-quantitative terms

Exist independently of the financial statements audit

Can be changed at the auditor's descretion

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6/18/2021 AUDIT THEORY PRE-TEST

Which of the following services provides the lowest of assurance on a financial

statement *

An audit

A review

Neither service provides assurance on financial statements

Each service provides the same level of assurance on financial statements

Which of the following statements applies to consultation services

engagements? *

A practitioner should obtain an understanding of the internal control to assess

control risk

A practitioner is not permitted to compile a financial forecast

A practitioner is to maintain an appearance of independence

A practitioner should obtain sufficient relevant data to complete the engagement

An auditor's engagement letter most likely will include. *

Management's acknowledgment of its responsibility for maintaining effective control

A request for permission to contract the client's lawyer for assistance in identifying
litigation, claims, and assessments

A reminder that management is responsible for illegal acts committed by employees

The auditor's preliminary assessment of the risk factors relating to misstatements

arising from fraudulent financial reporting

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6/18/2021 AUDIT THEORY PRE-TEST

Which of the following presumptions is correct about the reliability of audit

evidence *

Information obtained indirectly from outside sources is the most reliable audit
evidence

To be reliable, audit evidence should be convincing rather than persuasive

Reliability of the audit evidence refers to the amount of corroborative evidence

obtained

Effective internal control provides more assurance about the reliability of audit
evidence

Which of the following circumstances would permit an independent auditor to

accept an engagement after the close of the fiscal year? *

Receipt of an assertion from the preceding auditor that the entity will be able to
continue as a going concern

An expectation of the effectiveness of internal control

Issuance of a disclaimer of opinion as a result of inability to conduct certain tests

required by PSAs due to the timing of the acceptance of the engagement.

Remedy of limitations resulting from accepting the engagement after the close of the
end of the year, such as those to the existence of physical inventory.

Which of the following should an auditor do when control risk is assessed at the
maximum level? *

Perform fewer substantive tests of details

Perform more tests of controls

Document the assessments

Documents the internal control system more extensively

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6/18/2021 AUDIT THEORY PRE-TEST

The auditor's best defense when existing material misstatements in the financial
statements are not uncovered in the audit is *

The client is guilty of fraudulent misrepresentation

The audit was conducted in accordance with PSAs

The financial statements are the client's responsibility

The client is guilty of contributory negligence

Which of the following is required documentation in an audit in accordance with

auditing standards *

A flowchart or narrative of the information system describing the recording and

classification of transaction for financial reporting

An audit plan documenting the procedures to be used to reduce audit risk

An internal control questionnaire identifying policies and procedures that assure

specific objectives will be achieved

A planning memorandum establishing the timing of the audit procedures and

coordinating the assistance of entity personnel.

The auditor looks for an indication on duplicate sales invoices to see if the
invoices have been verified. This is an example of *

A test of details of balances

A test of control

A substantive test of transactions

Both a test of control and a substantive test of transactions

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6/18/2021 AUDIT THEORY PRE-TEST

Internal controls are designed to provide reasonable assurance that *

Material errors or fraud will be prevented, or detected and corrected, within a timely
period by employees on the course or performing their assigned duties

Management's planning, organizing, and directing processes are properly evaluated

Management's plans have not been circumvented by worker collusion

The internal auditing department's guidance and oversight of management's

performance is accomplished economically and efficiently

Evidence is generally considered appropriate when *

It has been obtained by random selection

There is enough of it to afford a reasonable basis for an option on financial

statements

It has the qualities of being relevant, objective, and free from known bias

It consists of written statements made by managers of the enterprise under audit.

In an audit based on Philippine Standards on Auditing (PSAs), a successor auditor

would normally become satisfied with opening balances by *

Auditing the prior year's financial statements

Interviewing the client

Reviewing the predecessor's working papers

Performing analytical procedures

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6/18/2021 AUDIT THEORY PRE-TEST

An examination of part of an organization's procedures and methods for the

purpose of evaluating efficiency and effectiveness is what type of audit? *

Operational audit

Production audit

Compliance audit

Financial statements audit

A procedure that involves tracking a transaction from its origination through the
company's information systems until it is reflected in the company's financial
report is referred to as a(n) *

Analytical analysis

Substantive procedure

Test of a control

Walk-through

The auditor faces a risk that the audit will not detect material misstatements that
occur in the accounting process. In regard to minimizing this risk, the auditor
relies primarily on *

Substantive test

Tests of control

Internal control

Statistical analysis

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6/18/2021 AUDIT THEORY PRE-TEST

Why do auditors generally use a sampling approach to evidence gathering? *

Auditors are experts and do not need to look at much to know whether the financial
statements are correct or not

Auditors must balance the cost of the audit with the need for precision

Auditors must limit their exposure to their client to maintain independence

The auditor's relationship with the client is generally adversarial, so the auditor will
not have the access to all of the financial information of the company

Three conditions are generally present in the client's organization when fraud
occurs. Those conditions include each of the following except a/an *

Incentive or pressure to commit fraud

Professional skepticism about the likelihood of fraud

Attitude or rationalization about the act of fraud

Opportunity to commit fraud

Upon discovering material misstatements in a client's financial statements that

the client would not revise, a predecessor auditor withdrew from the
engagement. If asked by the auditor about the termination of the engagement,
the predecessor auditor should *

suggest that the auditor obtain the client's permission to discuss the reasons.

Suggest that the auditor ask the client

Indicate that a misunderstanding occurred

State that (s)he found material misstatements that the client would not revise

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6/18/2021 AUDIT THEORY PRE-TEST

The primary audit objective regarding the purchasing of materials by the client is
to *

Observe the annual physical count

Ascertain that materials paid are on hand

Investigate the recording of unusual transactions regarding materials

Determine the reliability of financial reporting by the purchasing function

The negative form of accounts receivable confirmation request is useful except

when *

Internal control surrounding accounts receivable is considered to be effective

A large number of small balances are involved

The auditor has reason to believe the persons receiving the requests are likely to give
them consideration

Individual account balances are relative large

The overall attitude and awareness of an entity's board of directors concerning

the importance of internal control usually is reflected in its *

Computer-based controls

System of segregation of duties

Control environment

Safeguards over access to assets

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6/18/2021 AUDIT THEORY PRE-TEST

Which of the following types of risk increases when an auditor performs

substantive analytical audit procedures for financial statement accounts at an
interim date? *

Inherent

Control

Detection

Sampling

A CPA firm is reasonably assured of meeting its responsibility to provide

services that conform with professional standards by *

Maintaining an attitude of independence in its engagements

Adhering to Philippine Standards of Auditing (PSAs)

Having an appropriate system of quality control

Joining professional societies that enforce ethical conduct

Surname, First name *

DO NOT EDIT this field or your score will not recorded.

Hayag, Ethel

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6/18/2021 AUDIT THEORY PRE-TEST

The objective of assurance services is to *

Improve the firms outcome

Compare internal information and policies to those of other forms

Enhance decision making

provide more timely information

Which of the following services, if any, may a practitioner who is not

independent provide? *

Reviews but not compilations

Compilations but not reviews

Both compilations and reviews

No services

ExtendedForms Id (skip this field)

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Your answer

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6/18/2021 AUDIT THEORY PRE-TEST

The auditor should perform tests of controls when the auditor's risk assessment
includes an expectation *

That the controls are not being applied

That the controls are not suitably designed

Of the operating effectiveness of internal control

Of a low level of internal risk

Which of the following factors most likely would cause an auditor to decline a
new engagement? *

Failure of management to satisfy the preconditions for an audit

An inability to perform preliminary analytical procedures before assessing control risk

The close proximity to the end of the entity's fiscal year.

An inadequate understanding of the entity's internal control

Which of the following is not an assertion tested in an audit of trading

securities? *

The securities are authentic

The securities are properly classified on the statement of financial position

The securities actually exist

The securities are the property of the client

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