CHAPTER 1 9.
An audit involves ascertaining the degree of correspondence between
1. When auditing financial statements, the primary concern is with
Determining whether recorded information properly reflects the economic
events that occurred during the accounting period.
2. Recording, classifying, and summarizing economic events in a logical manner
for the purpose of providing financial information for decision making is
commonly called
Accounting
3. The trait that distinguishes auditors from accountants is the
Auditor’s accumulation and interpretation of evidence related to the
company’s financial statements.
4. The subject matter of any audit consists of
Assertions about economic actions and events
5. An audit involves ascertaining the degree of correspondence between
assertions and established criteria. In the case of a financial statement audit,
which of the following is not a valid criterion?
Philippine Standard on Auditing
6. The criteria for evaluating quantitative information vary. For example, in the
case of an independent audit of financial statements by CPA firms, the criteria are
usually the
Philippine Financial Reporting Standards
7. Most of the independent auditor’s work in formulating an opinion on the
financial statements consists of
Obtaining and examining evidence
8. An audit of financial statements is conducted to determine if the
Overall financial statements are stated in accordance applicable financial
reporting framework.
assertions and established criteria. In the case of an audit of financial statements,
which of the following would be a valid criterion?
Philippine Standards on Auditing
10. In financial statement audits, the audit process should be conducted in
accordance with
The Philippine Standards on Auditing
11. Which of the following types of audit uses laws and regulations as its criteria?
Compliance audit
12. An audit designed to provide reasonable assurance of detecting violations of a
specific provisions of contracts or grant agreements would be called a(n):
Compliance audit
13. An audit that involves obtaining and evaluating evidence about the efficiency
and effectiveness of an entity’s operating activities in relation to specified
objectives is a(n):
Operational audit
14. Which of the following is more difficult to evaluate objectively?
Efficiency and effectiveness of operations
15. Which of the following best describes an operational audit?
It concentrates on seeking out aspects of operations in which waste would be
reduced by the introduction of controls.
16. A typical objective of an operational audit is to determine whether an entity’s
Internal control structure is adequately operating as designed
17. One objective of an operational audit is to:
Make recommendations for improving performance.
18. The auditor communicates the results of his or her work through the medium All of the above could be involved.
of the
27. Which of the following statements is not a distinction between external
Audit report auditors and internal auditors?

19. When performing an operational audit, the internal audit team must first B. Although external auditors strive for both validity and relevance of evidence,
determine that internal auditors are concerned almost exclusively with validity.

20. Which of the following types of auditing is performed most commonly by 28. The objective of the ordinary examination by the independent auditor is the
CPA’s on a contractual basis? expression of an opinion on

External auditing The fairness of the financial statements

21. An examination of part of an organization’s procedures and methods for the 29. Auditors accumulate evidence to
purpose of evaluating efficiency and effectiveness is what type of audit?
Enable them to reach conclusions about the fairness of the financial statements
Operational audit. and issue an appropriate audit report.

22 Which of the following is not one of the major differences between financial 30. The responsibility for the preparation of the financial statements and the
and operational auditing? accompanying notes belongs to

The financial audit report has widespread distribution, but the operational audit The management
report has limited distribution o Financial audits deal with the information on the
31. Independent auditing can best be described as a
financial statements, but operational audits are concerned with the information
in the ledgers and journals Professional activity that attests to the fair presentation of the financial
statements.
23. The overall objective of internal auditing is to
32 An audit of the financial statements of JMV Corporation is being conducted by
Assist members of the organization in the effective discharge of their
an external auditor. The external auditor is expected to
responsibilities.
Express an opinion as to the fairness of JMV's financial statements.
24. Internal auditing is an independent appraisal function-established within an
organization to examine and evaluate its activities. To that end, internal auditing 33. Which of the following statements about independent financial statement
provides assistance to audit is correct?
Management and the board of directors The auditor's opinion is not an assurance as to the future viability of the entity as
well as the effectiveness and efficiency with which management has conducted
25. Internal auditors’ independence is enhanced when they report to
the affairs of the entity.
The audit committee of the board of directors.
34. The primary purpose of an independent financial statement audit is to
26. Which of the following groups could not be involved in an operational audit?
Provide users with an unbiased opinion about the fairness of information
reported in the financial statements.
35. The level of assurance provided by an auditor when expressing an opinion on
the financial statements is
Reasonable
36. By providing high level of assurance on audit reports on financial statements,
the auditor
Enhances the credibility of the financial statements.
37. The reason an independent auditor gathers evidence is to Form an opinion on
the financial statements.
38. Theoretically, it is possible to provide an infinite range of assurance from a
very low level of assurance to an absolute level of assurance. In practice, the
professional accountants cannot provide absolute assurance because of the
following except,
39. Which of the following is not one of the limitations of an audit?
40. Which of the following statements does not properly describe a limitation of
an audit? Many financial statement assertions cannot be audited.
41. Which of the following is one of the limitations of an audit?
The fact that most audit evidence is persuasive rather than conclusive in nature.
42. The primary reason for an audit by an external audit firm is
To provide increased assurance to users as to the fairness of the financial
statements.
43. The independent audit is important to readers of financial statement because
it
Involves the objective examination of and reporting on management prepared
statements.
44. The best statement of the responsibility of the auditor with respect to
audited financial statement is
The auditor’s responsibility is confined to the expression of opinion on the
financial statements audited
45. Which of the following is incorrect about the responsibility for financial
statements?
The fair presentation of financial statements is an implicit part the auditor’s
responsibility.
46. Which of the following statements about independent financial statement
audit is incorrect?
The risk that the auditor will fail to uncover material misstatement is eliminated
when the auditor conducts the audit in accordance with the PSAs.
47. Which of the following statements does not properly describe a limitation of
an audit? Most of the items in the financial statements do not have supporting
evidence.
48. Which of the following is one of the limitations of an audit?
Nature of evidence obtained
49. The assumption underlying an audit of financial statements is that they will be
used by Different groups for different purposes.
50. The procedures deemed necessary in the circumstances to achieve the
objective of a financial statement audit shall be determined by the
Independent auditor
51. Which one of the following is an example of management expectations from
the independent auditors?
An expert providing a written communication as the product of the engagement.
52. Which of the following is not one of the general principles governing an audit
of financial statements?
 The auditor should obtain sufficient appropriate evidence primarily through
inquiry and analytical procedures to be able to draw reasonable conclusions.
53. Which one of the following is not among the conditions that give rise to a
demand by external users for independent audits of financial statements?
Complexity of making economic decisions
54 Which of the following would not represent one of the primary problems that
would lead the users to demand for independent audits of a company’s financial
statements?
The downsizing of business and financial markets.
55. The need for independent audits of financial statements can be attributed to
all of the following conditions except
Validity
56. Which of the following best describes the reason why an independent auditor
reports on financial statements?
Different interests may exist between the company preparing the statements and
the persons using the statements.
57. Which of the following statements does not describe a condition that creates
a demand for auditing?
Users can directly assess the quality of information.
58. There are four conditions that give rise to the need for independent audits of
financial statements. One of these conditions is consequence. In this context,
consequence means that the
Financial statements are used for making important decisions.
59. One of the conditions that give rise to a demand for an external audit of
financial statements is expertise. Which of the following best describes the
meaning of expertise as used in this context? Users usually lack the necessary
expertise to verify the reliability of the financial information.
60. Upon completion of a financial statement audit, the auditor has Reasonable
assurance that all material errors and fraud affecting the financial statements
have been detected.
61. An auditor should recognize that the application of auditing procedures may
produce evidential matter indicating the possibility of errors or fraud and
therefore should
Plan and perform the engagement with an attitude of professional skepticism.
62. An attitude that includes a questioning mind and a critical assessment of audit
evidence is referred to as
Professional skepticism.
63. Professional skepticism requires that an auditor assume that management is
Neither honest nor dishonest.
64. Which of the following is not one of the reasons why auditors cannot provide
absolute assurance when auditing financial statements?
The auditors are usually prevented by the client from verifying certain accounts in
the financial statements.
65. Which of the following is not one of the major assumptions when auditing
financial statements? Effective internal control system contributes little to the
reliability of financial statements.
66. Which of the following statements does not properly describe an element of
theoretical framework of auditing?
Auditors act on behalf of the management
67. Auditing is based on the assumption that financial data are verifiable. Data
are verifiable when two or more qualified individuals,
Working independently, each reach essentially similar conclusions.
68. Which of the following statements is true when the CPA has been engaged to
do an audit engagement?
 The CPA firm is engaged and paid by the client, but the primary beneficiaries of
the audit are the statement users.
69. In determining the primary responsibility of the external auditor for an audit
of a company’s financial statements, the auditor owes primary allegiance to:
Stockholders, creditors and the investing public.
70. Which of the following has the primary responsibility for the fairness of the
representations made in the financial statements?
Client’s management and those charged with governance
71. Which of the following statements is correct concerning an auditor’s
responsibilities regarding financial statements?
CHAPTER 2 THE PROFESSIONAL STANDRDS
1. Which of the following best describes what is meant by generally
accepted accounting standards?
 measures of the quality of the auditor’s performance.
2. In the auditing environment, failure to meet auditing standards is
often
 Conclusive evidence of negligence
3. Audit standards require the auditor to
 Provide reasonable assurance that the financial
statements are not materially misstated.
4. Which of the following underlies the application of generally
accepted auditing, particularly the standards of fieldwork and
reporting?
 Elements of materiality and risk
5. Requirements for training, independence and due professional care
are included in which group of the generally accepted auditing
standards?
 General
6. The general standards of the generally accepted auditing standards
include a requirement that
 Due professional care be exercised by the auditor.
7. Which of the following reflects a concept from the general standard
of GAAS?
 The assignment of audit personnel to an engagement
where they have no financial interest.
8. What is the general character of the 3 generally accepted auditing
standards classified as general standards?
 Criteria for competence, independence, and professional
care of individuals performing the audit.
9. Which of the following does not pertain to the standards of
fieldwork?
 Technical training and proficiency
10. While performing audit services for their clients, professional
accountants have a duty to provide a level of care which is
 Reasonable
11. The standards of due audit care requires the auditor to
 Apply judgment in a conscientious manner, carefully
weighing the relevant factors before reaching a decision.
12. Which of the following is most likely to be unique to the audit work
of CPA’s as compared to work performed by practitioners of other
profession?
 Independence
13. The third general standard states that due care is to be exercised in
the performance of an audit. This standard is ordinarily interpreted
to require
 Critical review of the judgment exercised at every level of
supervision.
14. What is the general character of the 3 generally accepted auditing
standards classified as standards of field work?
 The criteria of audit planning and evidence gathering.
 15. The third standard of field work states that sufficient competent
evidential matter may in part be obtained through the following
methods except
 Reconciliation
16. The generally accepted standards of reporting encompasses all of
the following except
 Informative disclosure
17. The third generally accepted standards of reporting in auditing
refers to
 Adequacy of disclosures
18. The objective of the consistency standards is to provide assurance
that
 The comparability of financial statements between periods
in not materially affected by changes in accounting
principles without disclosure.
19. The fourth generally accepted standards of reporting requires an
auditor to render a report whenever an auditor’s name is
associated with financial statements. The overall purpose of the
fourth standard of reporting is to require that reports:
 Indicate the character of the auditor’s examination and
the degree of responsibility assumed by the auditor.
20. The fourth reporting standards requires the auditor’s report to
contain an expression of opinion regarding the financial statements
taken as a whole, or an assertion to the effect that an opinion
cannot be expressed. The objective of the fourth standard is to
prevent
 Misinterpretations regarding the degree of responsibility
the auditor is assuming.
21. The auditor is not liable to his client for
 Errors in application of judgment
THE PHILIPPINES STANDARDS ON AUDITING (PSA)
22. The Philippines standards on auditing (PSA) issued by the Auditing
and Assurance Standards Council:
 Are interpretations of generally accepted auditing
standards.
23. According to Philippines Standard On Auditing, because there are
inherent limitations in an audit that affect the auditor’s ability to
detect material misstatements, the auditor is:
 Neither a guarantor nor an insurer of financial statements.
24. An auditor does not have to comply with a specific requirements of
the PSA if the auditor believes that:
 Any of the given three choices is correct.
25. The Philippines standards on auditing can be describes as
 Defining the minimum standards of performance for an
auditor.
26. Which of the following best describes the function of Auditing and
Assurance Standards Council (AASC) ?
 To promulgate auditing standards, practices, and
procedures that shall be generally accepted by the
accounting profession in the Philippines.
27. Pronouncements issued by AASC may be in the form of
 Philippine Standards on Auditing
 Philippine Standards on Assurance Engagements
 Philippine Standards on Review Engagements
 Philippine Standards on Related Services
28. Which of the following is correct about the Philippine Auditing
Practices (PAPS)?
 These statements are issued to provide practical assistance
to auditors in implementing PSAs or to promote good
practice.
29. Which of the following pronouncements issued by the AASC is
designed to resole issues relating to PSAs?
 Interpretations
 30. Based on the structure of AASC pronouncements, related services
include?
 Agreed-upon Procedures
 Compilation
31. The risk that an auditor will fail to uncover a material
misstatements is eliminated
 Under no circumstances
32. the auditor’s best defense when material misstatements are not
uncovered is to have conducted the audit
 In accordance with PSA
33. the failure of the auditor to meet the requisites of PSA is
 An evidence of negligence.
QUALITY CONTROL SYSTEM
34. one of a CPA firm’s basic objectives is to provide professional
services that conform with professional standards. Reasonable
assurance of achieving this basic objective is provided through
 Standards within a system of quality control
35. A firm of independent auditors must established and follow quality
control policies and procedures because these standards
 Give reasonable assurance that the firm as a whole will
comply with professional standards.
36. The main purpose of implementing a system of quality control is to
provide the firm with reasonable assurance that:
 All of the given choices.
37. The nature and extent of a CPA firm’s quality control policies and
procedures depend on
 CPA Firm’s Size
 Nature of the Firm’s Practice
 Cost-Benefit Consideration
38. Which of the following is not an essential component of quality
control?
 Policies and procedures to ensure that firm personnel are
actively engaged in marketing strategies.
39. The objective of the quality control policies to be adopted by an
audit firm will ordinarily incorporate all of the following except?
 Risk assessment
40. the person is responsible for audit engagement and its
performance, and for the auditor’s report that is issued in behalf of
the firm is the?
 Engagement partner
41. Which of the following is an element of a CPA firm’s quality control
system that should be considered in establishing its quality control
policies and procedure?
 Independence
42. Elements of a CPA firm’s quality control that should be consider in
establishing its quality control policies and procedures must
include?
 Monitoring
 Ethical Requirements
 Engagement Performance
43. Which of the following is one of the elements of a CPA firm’s
quality control system?
 Leadership responsibilities
44. Which of the following quality control objectives would be last
important to the auditor?
 Determination of audit fee
45. A quality control policy that requires personnel in the firm to
adhere to independence, integrity, objectivity, confidentiality and
professional behavior, relates to?
 Ethical requirements
46. Which of the following quality control policies and procedures docs
not relate to human resources ang assignment?
  Emphasize independence of mental attitude in training
programs and in supervision and review of the audits
47. In pursuing a CPA firm’s quality control objectives, a CPA firm may
maintain records indicating which partners or employees of the
CPA firm were previously employed by the CPA firm’s clients.
Which quality control element would this be most likely to satisfy?
 Independence
48. A procedure in which a quality control partner periodically tests the
application of quality control procedures is most directly related to
which quality control element?
 Monitoring
49. In connection with the element of engagement performance, a CPA
firm’s system of quality control should ordinarily provide that all
personnel?
 Seek assistance from persons having appropriate levels of
knowledge, judgment, and authority
50. Maintaining or providing access to adequate reference libraries and
other authoritative sources is a procedure that is most likely
performed to comply with the policy of?
 Consultation
51. Which of the following quality control procedures relates to
engagement performance?
 Direction
52. Within the context of the quality control, the primary purpose of
continuing professional education and training activities is to
enable a CPA firm to provide its personnel within?
 Knowledge required to fulfill assigned responsibilities.
53. In compliance with the element of human resources, the firm
should address issues relating to?
 Assignment of engagement teams
54. In pursuing the firm’s quality control objectives with respect to
assigning personnel to engagements, the auditors may use policies
and procedures such as?
 Requiring timely identification of the staffing requirements
of specific engagements so that enough qualified
personnel can be made available.
55. In connection with the element of assignment, a CPA firm’s system
of quality control should ordinarily establish procedures that?
 Require preparation of time budgets for audits to
determine manpower requirements and to schedule the
audit work
56. Which of the following is the policy that must be established to
comply with the quality control engagement performance?
 There is a sufficient direction supervision, and review of
work performed at all levels to provide reasonable
assurance that the work performed meets appropriate
standards of quality.
57. The work perform by the assistants should be reviewed by
personnel of at least equal competence to consider all of the
following except?
 Whether the engagement personnel maintained
independence.
58. The primary factor that should be consider in determining the
extent of supervisor needed by an assistants?

59. The auditor with the final responsibility for an engagement and one
of the assistants have a difference of opinion about the results of
an auditing procedure. if the assistant believe it is necessary to be
disassociated from the matter’s resolution. the CPA’s firm
procedures should enable the assistant to
 Document the details of the disagreement with the
conclusion reached
60. The primary purpose of the quality control policies and procedures
for deciding whether to accept a new client is to?
 Minimize the likelihood of association with clients whose
management lacks integrity.
61. In making a decision to accept or retain a client, the firm should
consider?
 Its competence
 Its ability to comply with ethical requirements
 The integrity of the client’s management
62. A CPA firm’s quality control procedures pertaining to the
acceptance of a prospective audit client would most likely include?
 Inquiry of third parties, such as the prospective client’s
bankers and attorneys, about information regarding the
prospective client and its management.
63. Quality control policies and procedures should be provide the firm
reasonable assurance that the policies and procedures relating to
the other elements of quality control are being effectively applied.
This statement defines the quality control element of?
 Monitoring
64. In connection with the element of monitoring, a CPA firm’s system
of quality control should ordinarily provide for the maintenance of?
 Documentation to demonstrate compliance with its
policies and procedures
65. A deficiency in the firm’s system of the quality control is an
indication that?
 Neither a not b
66. It involves a study or appraisal by the board or its duly authorized
representatives, of the quality of audit of financial statements
through an evaluation of the quality control measures instituted by
the CPA firm to ascertain compliance with ethical and technical
standard of public practice?
 Quality review
67. Which of the following is responsible for establishing auditing
standard that will become generally accepted in the Philippines?
 Auditing and Assurance Standards Council
CHAPTER 3
1. Material misstatements may emanate from all of the following except
2. Which of the following factors is most important concerning an auditor’s
responsibility to detect errors and fraud?
3. An intentional act by one or more individuals among management,
employees, or third parties which results in misrepresentation of financial
statements refers to
4. Which of the following statements is correct regarding errors and fraud?
5. The primary factor that distinguishes errors from fraud is
6. In the context of financial statement presentation, fraud occurs when;
7. Which of the following statements best identifies the two types of fraud?
8. Fraudulent financial reporting is often called
9. Fraudulent financial reporting is most likely to be committed by whom?
10. The auditor has considerable responsibility for notifying users as to
whether or not the statements are properly stated. This imposes upon the
auditor a duty to
11. Which of the following statements is true?
12. In comparing management fraud with employee fraud, the auditor’s risk
of failing to discover the fraud is
13. If there is fraud involving top management, the probability that the fraud
would be uncovered in a financial statement audit is
 14. The term “error” refers to unintentional misrepresentation of financial
information. Examples of errors are when
I. Assets have been misappropriated
II. Transactions without substance have been recorded
III. Records and documents have been manipulated and falsified
IV. The effects of the transactions have been omitted from the records
15. Which of the following is an example of an error?
16. Which of the following is an “error” as distinguished from “fraud”?
17. Which of the following could be an example of fraud?
18. Which of the following is an example of fraudulent financial reporting?
19. Which one of the following terms relates to the embezzling of receipts?
20. Which of the following statements best describes an a:
21. The auditor gives an audit opinion on the fair presentation of the financial
statements and associates his or her name with it when, on the basis of
adequate evidence, the auditor concludes that the financial statements are
unlikely to mislead
22. The level of assurance provided by an audit of detecting a material
misstatement is
23. The responsibility for the detection and prevention of errors, fraud and
noncompliance with laws and regulations rests with the
24. The responsibility for adopting sound accounting policies, maintaining
adequate internal control, and making fair representation in the financial
statement rests
25. The management responsibility to detect and prevent fraud and error is
accomplished by
26. Which of the following statements best describes the auditor’s
responsibility regarding the detection of material errors and frauds?
27. The auditor’s best defense when material misstatements in the financial
statements are not uncovered in the audit is that
28. The following statements relate to the auditor’s responsibility for the
detection of errors and fraud. Identify the correct statements.
I. Due to the inherent limitations of the audit, there is a possibility that
material misstatements in the financial statements may not be detected.
II. The subsequent discovery of material misstatement of the financial
information resulting from fraud or error does not, in itself, indicate that the
auditor failed to follow the basic principles and essential procedures of an
audit
29. The auditor's responsibility for failure to detect fraud arises
30. In connection with the audit of financial statements, an independent
auditor could be responsible for failure to detect a material fraud if
31. An auditor should recognize that the application of auditing procedures
may produce evidential matter indicating the possibility of errors or fraud and
therefore should
32 “The auditor should not assume that management is dishonest, but the
possibility of dishonesty must be considered.” This is an example of
33. Professional skepticism requires auditors to possess a ________ mind.
34. Professional skepticism dictates that when management makes a
statement to the auditors, the auditors should
35. Which of the following statements is not true?
36. In comparing management fraud with employee fraud, the auditor’s risk
of failing to discover the fraud is:
37. The most difficult type of misstatement to detect is fraud based on
38. If several employees collude to falsify documents, the chance a normal
audit would uncover such acts is:
39. If an auditor conducted an audit in accordance with auditing standards, 52 Which of the following characteristics most likely would heighten an
which of the following would the auditor likely detect? auditor’s concern about the risk of intentional manipulation of financial
statements?
40. If an auditor was engaged to discover errors and fraud and the auditor
performed extensive detail work, the auditor is expected to detect: 53. Individuals who commit fraud are ordinarily able to rationalize the act
and also have an
41. Which of the following statements is incorrect?
54. Which of the following most likely to be considered a risk factor relating
42 Which of the following statements about fraud or error is incorrect?
to fraudulent financial reporting?
43. In performing a financial statement audit, which of the following would an
55. Which of the following is most likely to be presumed to represent fraud
auditor least likely consider?
risk on an audit?
44. Which of the following is not an assurance that the auditors give to the
56. Which of the following conditions or events would least likely increase
parties who rely on the financial statements?
the risk of fraud or error?
45. The risk of not detecting material misstatement resulting from fraud is
57. Which of the following conditions identified during fieldwork of an audit
greater than the risk of not detecting a material misstatement arising from
is most likely to affect the auditor’s assessment of the risk of misstatement
error, because:
due to fraud?
46. When performing a financial statement audit, auditors are required to
58. Which of the following would be least likely to suggest to an auditor that
explicitly assess the risk of material misstatement due to
the client’s financial statements are materially misstated?
47. Audits of financial statements are designed to obtain assurance of
59. Which of the following circumstances would least likely cause an auditor
detecting misstatement due to
to consider whether material misstatements exist in an entity’s financial
48. Which of the following best describes what is meant by the term “fraud statements?
risk factor?
60. Which of the following circumstances would least likely cause an auditor
49. Which of the following is a category of risk factors that should be to consider whether a material misstatement exists?
considered when assessing risk of misstatements arising from
61. Which of the following circumstances most likely would cause an auditor
misappropriation of assets?
to believe that material misstatements exist in an entity’s financial
50. When considering fraud risk factors relating to management’s statement?
characteristics, which of the following is least likely to indicate a risk of
62 Which of the following conditions would not normally cause the auditor to
possible misstatement due to fraud?
question whether material errors or possible fraud exists?
51. Which of the following is most likely to be a response to the auditor’s
63. Which of the following characteristics most likely would heighten an
assessment that the risk of material misstatement due to fraud for the
auditor’s concern about the risk of material misstatements in an entity’s
existence of inventory is high?
financial statements?
64. Which of the following conditions or events increases the risk of error or
fraud?
65. All of the following conditions are indicators of possible pressures on an
entity except
66. Which of the following is most likely to be an overall response to fraud
risks identified in an audit?
67. During the course of an audit engagement, the CPA discovers specific
circumstances that led him to the belief that employee fraud that has
material effect on the financial statements may have occurred. In such a case
the CPA should
68. If an auditor believes that material errors or fraud exist, the auditor
should
69. When the auditor believes a misstatement is or may be the result of fraud
but that the effect of the misstatements is not material to the financial
statements, which of the following steps is required?
70. Which of the following is an incorrect statement?
71. If the auditor believes that the fraud or error has a material effect on the
financial statements but the client is not willing to correct the misstatement,
the auditor would most likely issue a(n)
72. If the auditor is precluded by the entity from obtaining evidence to
evaluate whether fraud or error that may be material to the financial
statements has occurred, the auditor should issue a report that contains
73. When a user sees that an unmodified opinion has been expressed by an
external auditor, he or she may correctly infer that:
74. When comparing the auditor’s responsibility for detecting employee fraud
and for detecting errors, the profession has placed the responsibility:
75. Judgments about the increased risk of misstatement of the financial
statements due to fraud may influence the auditor’s professional judgments
in the following ways except
76. What is an auditor’s responsibility who discovers that management is
involved in a potentially immaterial fraud?
77. Which of the following statements best describes the auditor’s
responsibility regarding the detection of fraud?
78. The auditor’s evaluation of the likelihood of material employee fraud is
normally done initially as a part of
79. When is the auditor responsible for detecting fraud?
80. These are acts of omission or commission by the entity being audited,
either intentional or unintentional, which are contrary to the prevailing laws
and regulations.
81. Most noncompliance affect the financial statements
82. When then auditor knows that a noncompliance with laws and regulation
has occurred, the auditor must
83. Generally the decision to notify parties outside the client’s organization
regarding noncompliance with laws and regulations is the responsibility of the
84. Which of the following is the auditor least likely to do when aware of a
noncompliance?
85. Which of the following statements about noncompliance is incorrect?
86. Which of the following circumstances is not an indication of possible
noncompliance?
87. Which of the following conditions would least likely indicate the
occurrence of noncompliance?
88. Which of the following conditions would most likely indicate a possible
noncompliance with laws and regulations?
89. According to PSA 250, the risk of not detecting material misstatement due
to noncompliance is high. This can be attributed to all of the following factors,
except:
90. When the auditor becomes aware of information concerning a possible
instance of noncompliance, the auditor should

91. An auditor who discovers that client has not complied with laws and
regulations that has a material effect on the financial statements most likely
would withdraw from the engagement if the

92. If specific information comes to an auditor’s attention that implies an

existence of noncompliance with laws that could result in a material, but
indirect effect on the financial statements, the auditor should next

93. Which of the following does not properly describe a procedure that the
auditor normally performs in connection with noncompliance?

94. Which of the following procedures would an auditor be unlikely to

perform when obtaining a general understanding about the law’s and
regulations affecting the client’s business?

95. After obtaining sufficient level of understanding about the client’s legal
and regulatory framework, the auditor should

96. Which of the following procedures would assist the auditor in identifying
noncompliance with laws and regulations?

97. If the client refuses to accept an audit report that is qualified due to
noncompliance with laws and regulations, the auditor should

98. During the annual audit of Joax Corp., a publicly held company, Joy, CPA,
a continuing auditor, determined that illegal political contributions had been
made during each of the past seven years, including the year under audit. Joy
notified the board of directors about the illegal contributions, but they
refused to take any action because the amounts involved were immaterial to
the financial statements. Joy should reconsider the intended degree of
reliance to be placed on the

99. An auditor who discovers that a client's employees have paid small bribes
to public officials most likely would withdraw from the engagement if the

100. When planning the audit, if the auditor has no reason to believe that
non-compliance exists, the auditor should