Part 1 – true or false

1. The professionals standards consider calculating depreciation expense “ routine “ transaction.

; False
2. The auditor is required to determine whether any of the identified accounting estimates give
rise to significant risks.
; True
3. In auditing accounting estimates In the financial statements, the auditor may not identify
whether there are indicators of possible management bias.
; False
4. Where the estimate is complex or involves specialized techniques, the auditor must use the
work of an auditor’s expert.
; False
5. Significant related-party transactions outside the normal course of business would give rise to
significant risks.
; True
6. Negative investing cash flows indicated by historical or prospective financial statements
represent an event or condition that may cast significant doubt on the entity’s ability to
continue as a going concern.
; False
7. The auditor shall obtain management’s assessment and action plans to address any going-
concern issues, or if not provided, request management to make an assessment on the entity’s
ability to continue as going concern.
; True
8. Where inventory is material to financial statements, the auditor would address its existence and
condition.
; True
9. If the auditor assesses a risk of material misstatement regarding litigation or claims that have
been identified, or when audit procedures performed indicate that other material litigation or
claims may exist, the auditor shall seek direct communication with the entity’s external legal
council.
; True
10. The auditor shall perform analytical procedures on segment information to obtain sufficient
appropriate audit evidence.
; True

Part 2 – Multiple choice

1. Which statement is incorrect regarding auditing fair value estimates?

 ;D
2. In evaluating an entity’s accounting estimates, one of an auditor’s objectives is to determine
whether the estimates are.
;D
3. Regarding to fair value measurements and disclosures, the auditor is required to?
;C
4. Which of the following would represent a balance or transaction that would be most
difficult to obtain evidence?
;B
5. Which of the following procedures would an auditor ordinarily perform first in evaluating
management’s accounting estimates for reasonableness?
;D
6. The degree to which a fair value measurement is susceptible to misstatement is?
;C
7. Which of the following is not a basic approach often used by auditors to evaluate the
reasonableness of accounting estimates?
;A
8. In evaluating the assumptions on which the estimate is based, the auditor would need to
pay particular attention to assumptions which are?
;D
9. In evaluating the reasonableness of an accounting estimate, an auditor most likely would
concentrate on key factors and assumptions that are?
;D
10. An auditor developed an estimate for a contingent liability of P85,000 to P95,000. The client
recorded and estimate of P60,000. The auditor noted that earlier in the year, the client had
initially estimated the contingent liability to be P70,000. How should the auditor proceed
with the situation?
;A
Related parties
11. Which statement is incorrect regarding the auditor’s responsibilities and audit procedures
regarding related parties and transactions with such parties?
;C
12. The auditor determines that Matthews Company occupies the 3 rd floor of an office tower for
which it pays no rent. The most likely explanation is?
;C
13. Which of the following least likely indicates the existence of previously unidentified related
parties?
;C
14. After determining that a related-party transaction has, in fact, occurred, an auditor should?
;C
Going concern
15. The following statements relate to going concern assumption when used in the preparation
and presentation of financial statements. Which is incorrect?
;B
16. The following statements relate to responsibilities for determining appropriateness of going
concern assumption. Which is correct?
;D
17. Which of the following audit procedures would most likely assist an auditor in identifying
condition’s and events that may indicate there could be substantial doubt about entity’s
ability to continue as a going concern?
;A
18. Which of the follow conditions or events most likely would cause an auditor to have
substantial doubt about an entity’s ability to continue as going concern?
;A
19. When evens and conditions have been identified which may cast significant doubt on the
entity’s ability to continue as a going concern, the auditor should ( choose the incorrect
statement )
;D

20. After considering an entity’s negative trends and financial difficulties, an auditor has
substantial doubt about the entity’s ability to continue as a going concern. The auditor’s
considerations relating to management’s plans for dealing with the adverse effects of these
conditions most likely would include management plans to?
;C
21. When an auditor has concluded here is substantial doubt about an entity’s ability to
continue as a going concern for a reasonable period of time beyond the current financial
statement date ( 9/30/17), the auditor’s responsibility includes?
;D
22. An independent auditor has concluded that a substantial amount doubt, remains about a
client’s ability to continue as a going concern, but the client’s financial statements have
properly disclosed all of its solvency problems. The auditor would probably issue a ( an )?
;A
23. When an auditor of financial statements has substantial doubt about an entity’s ability to
continue as a going concern because of the probable discontinuance of operation, the
auditor most likely would express qualified opinion if?
;B
24. In extreme cases such as situations involving multiple uncertainties that are significant to
the financial statements, the auditor?
;A
Inventory, Litigation and Claims, and Operating Segment Information
25. The auditor, in attending the physical count conducted by a client in its warehouse to
ascertain existence of inventory, shall perform the following except?
 ;D
26. When requiring a letter of audit inquiry, which is mailed by the auditor after having
prepared by the client and reviewed by the auditor, from the client’s attorney, which of the
following information will be requested?
;C
27. When auditing contingent liabilities, which of the following procedures would be least
effective?
;D
28. The primary source of information to be reported about litigation, claim, and assessments is
the client’s management. The primary reason an auditor requests that letter of inquiry be
sent to a client’s attorney is to provide the auditor with?
;B
29. The appropriate date for the client to specify as the effective date in the audit inquiry to a
lawyer is?
;D
30. In obtaining evidence about presentation and disclosure of operating segment information
in the F/S, the auditor shall perform the following except?
;D