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Try Out Audit

Auditor

What does an auditor do ?

a. Provide a guarantee on the ongoing viability of a company

b. Provide an opinion on the financial report
c. Work with management to produce a set of financial statements
d. Ensure that the financial report contains no fraud

Auditors do an audit process to provide an opinion whether the financial

statements are fairly presented and in accordance with the established criteria
such as GAAP or PSAK.
Auditor Opinion

The opinion paragraph of a CPA's report states: “In our

opinion, except for the effects of not capitalizing certain lease
obligations, as discussed in the preceding paragraph, the
financial statements present fairly,” in all material respects,….
This paragraph expresses a(an)

A. unqualified opinion
B. unqualified opinion with explanatory paragraph
C. Disclaimer opinion
D. adverse opinion
Assertion
Valuation and Allocation

An auditor reviews aged accounts receivable to assess likelihood of collection to support

management's assertion about account balances of

A. existence
B. completeness
C. valuation and allocation
D. rights and obligations

Aged accounts are correlated with allowance for doubtful accounts, write-off, also bad debt
expense for A/R, in other words it would affect the contra account for A/R. The contra account will
reduce the valuation of an account. Hence, aged accounts are related with valuation and
allocation of A/R.
Assertion
Completeness

The accounting system will not post a sales transaction to the sales
journal without a valid bill of lading number. This control is most
relevant to which transaction-related objectives for sales?

A. accuracy
B. occurrence
C. completeness
D. post and summary

completeness or completeness is used as one of the control

strategies in the internal control system
Risk

Client business risk Inherent risk

The auditor uses knowledge
The auditor uses knowledge the susceptibility of an account balance or
gained from the understanding
gained from the understanding of class of transactions to material
of the client's business and
the client's business and industry misstatement, assuming that there are no
industry to assess
to assess related controls in place (meaning that
a. client business risk. inherent risk arises assuming no internal
b. control risk control within the company).
c. inherent risk.
d. audit risk Control risk Audit risk

is a risk of material misstatement when the auditor issues an opinion that

that cannot be detected and the financial statements are free from
prevented by the entity's internal misstatement but that there is actually a
control material misstatement.
Audit Procedures
NRV Test

To prevent overstatement in inventory accounts, which test should be

taken by the auditor?

a. Cash count
b. Vouching
c. Sending confirmation letter
d. Do NRV Test

Calculating the NRV of inventory and accounts receivable regularly prevents

overstatement of assets in the Balance Sheet and helps us conform with the
conservatism principle.
Audit Procedures

Stock Opname

Inventory count includes of audit procedure for accounts

a. Stockholders’ Equity
b. Mortgage payable
c. Inventory
d. Cash and cash equivalent

Stock opname is a part of Inventory Audit procedure, it is used to ensure the

existence and rights and obligation assertion for Inventory account.
Audit Procedures
Confirmation Letter

Confirmation letters can be used in auditing the following accounts,

except...

a. Stockholders equity
b. Account payable
c. Accounts receivable
d. Accumulated depreciation

Confirmation letter usually used for confirming the balance of cash,

accounts receivable, accounts receivable, and stockholders’ equity
accounts
Confirmation

This/these types of confirmation will be used when the

total sample is small.

a. Positive confirmation
b. Negative confirmation
c. Both of them are true
d. Both of them are wrong

Positive Confirmation Negative Confirmation

The total sample is small The total sample is big

The balance/amount is big The balance/amount is small

Need answer Do not need answer

Sampling

Confirmation Letter

What is the impact on sample size if the auditor wants a low level of
sampling risk?

A. The required sample size should be determined by a statistical

approach.
B. The sample size cannot be determined by a statistical
approach.
C. The required sample size is getting bigger.
D. The required sample size is getting smaller.

Because the less risk the auditor is willing to take accept it, the larger the
sample size required.
Audit Planning
In what order should the following steps occur:

A. Set preliminary judgment of materiality and performance materiality.

B. Understand the client's business and industry.
C. Perform preliminary analytical procedures.
D. Accept the client and perform initial audit planning.

a. D, B, C, A
b. B, A, C, D
c. B, C, A, D
d. D, C, B, A

The correct order for audit planning are D, B, C, A

Audit Procedures

Which of the following audit procedures provides the most reliable audit evidence?
A. Conducting questions and answers with the company's internal audit staff
personally
B. Inspect the client's pre-numbered purchase orders stored by the accounts payable
department
C. Analytical procedures performed by the auditor on the entity's trial balance
D. Inspection of bank statements obtained directly from the company's financial
institutions

This is because financial institutions will provide a chronological description of

various transactions carried out by companies that can be traced to their origin and
destination and already have credible procedures.
Internal Control

The following are the actions of an employee regarding inventory that require internal
verification because there are risks that could lead to misstatements

a. Employees issue raw materials, obtain material requests for each expense,
and prepare daily totals for materials issued.
b. Employees compare existing records of goods on hand with physical
quantities, but he/she does not maintain records or keep inventories.
c. Employees compare goods records or keep inventories.
d. Employees are not involved in issuing production orders and do not update
records from completed order cost sheets.

because there is no segregation of duties.

Engagement Letter

The purpose of an engagement letter is to

a. document the CPA firm's responsibility to external users of the

audited financial statements.
b. document the terms of the engagement
c. notify the audit staff of an upcoming engagement so that
personnel scheduling can be facilitated
d. emphasize management's responsibility for approving the audit
program
Engagement Letter
A written understanding detailing what the auditor expects from the client in
performing an audit will normally be expressed in the

a. management letter requested by the auditor

b. engagement letter
c. audit Plan
d. audit Strategy for the client
Thank you!
Q&A Session