Republic of the Philippines

DON HONORIO VENTURA STATE UNIVERSITY

Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

Tracing number: ________

Instructions: Choose the best answer for each question. Write the letter of your
answer on the corresponding answer sheet on the last page. If you believe that
the correct answer is not given among the choices, write letter “E”. Break a leg!
1. Which of the following statements is an example of an assertion made by
management in an entity's financial statements?

a. The financial statements were prepared in an unbiased manner.

b. Reported inventory balances reflect all related transactions for the period.
c. Reported accounts receivable does not include any uncollectible accounts.
d. The scope of the auditors' investigation was not limited in any way by
management.

2. The primary purpose of an independent financial statement audit is to

a. Provide a basis for assessing management's performance.
b. Comply with state and federal regulatory requirements.
c. Assure management that the financial statements are unbiased and free from
material error.
d. Provide users with an unbiased opinion about the fairness of information
reported in the financial statements.

3. Independent auditing can best be described as a

a. Branch of accounting.
b. Discipline that attests to the results of accounting and other operations
and data.
c. Professional activity that measures and communicates financial and business
data.
d. Regulatory function that prevents the issuance of improper financial
information.

4. An independent audit aids in the communication of economic data because the

audit
a. Confirms the accuracy of management's financial representations.
b. Lends credibility to the financial statements.
c. Guarantees that financial data are fairly presented.
d. Assures the readers of financial statements that any fraudulent activity has
been corrected.

5. Which of the following types of audits are most similar?

a. Operational audits and compliance audits.
b. Independent financial statement audits and operational audits.
c. Compliance audits and independent financial statement audits.
d. Internal audits and independent financial statement audits.

6. The essence of the attest function is to

a. Detect fraud.
b. Examine individual transactions so that the auditor can certify as to their
validity.
c. Determine whether the client's financial statements are fairly stated.
d. Ensure the consistent application of correct accounting procedures.

7. Which of the following criteria is unique to the independent auditor's attest

function?
a. General competence.
b. Familiarity with the particular industry of each client.
c. Due professional care.
d. Independence.

8. The audit process is

a. A special application of the scientific method of inquiry.
b. Regulated by the AICPA.
c. The only service a CPA is allowed to perform by law.
d. Performed only by CPAs.

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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

9. The reason an independent auditor gathers evidence is to
a. Form an opinion on the financial statements.
b. Detect fraud.
c. Evaluate management.
d. Evaluate internal controls.

10. The single feature that most clearly distinguishes auditing, attestation, and
assurance is
a. Type of service.
b. Training required to perform the service.
c. Scope of services.
d. CPA’s approach to the service.

11. Internal auditing often extends beyond examinations leading to the

expression of an opinion on the fairness of financial presentation and includes
audits of efficiency, effectiveness, and
a. Internal control.
b. Evaluation.
c. Accuracy.
d. Compliance.

12. The auditor's judgment concerning the overall fairness of the presentation of
financial position, results of operations, and changes in financial position is
applied within the framework of
a. Generally accepted accounting principles.
b. Generally accepted auditing standards.
c. Internal control.
d. Information systems control.

13. Which of the following is not considered an assertion as formulated by the

Auditing Standards Board?
a. Valuation or allocation.
b. Mathematical accuracy.
c. Rights and obligations.
d. Presentation and disclosure.

14. To maximize independence, the director of internal auditing should report to

the
a. Audit committee.
b. Controller.
c. Chief financial officer.
d. Director of information systems.

15. A typical objective of an operational audit is to determine whether an

entity's
a. Financial statements fairly present financial position and cash flows.
b. Financial statements present fairly the results of operations.
c. Financial statements fairly present financial position, results of
operations, and cash flows.
d. Specific operating units are functioning efficiently and effectively.

16. The four major steps in conducting an audit are:

a. Testing internal controls
b. Audit report
c. Planning
d. Testing transactions and balances

The proper sequence in applying the above steps is:

a. cadb
b. cdab
c. bcda
d. adcb

17. As used in auditing, which of the following statements best describes

"assertions"?
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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

a. Assertions are the representations of management as to the reliability of
the information system.
b. Assertions are the auditor's findings to be communicated in the audit
report.
c. Assertions are the representations of management as to the fairness of the
financial statements.
d. Assertions are found only in the footnotes to the financial statements.

18. Which of the following statements is not a distinction between independent

auditing and internal auditing?
a. Independent auditors represent third party users external to the auditee
entity, whereas internal auditors report directly to management.
b. Although independent auditors strive for both validity and relevance of
evidence, internal auditors are concerned almost exclusively with validity.
c. Internal auditors are employees of the auditee, whereas independent auditors
are independent contractors.
d. The internal auditor's span of coverage goes beyond financial auditing to
encompass operational and performance auditing.

19. Assurance services differ from consulting services in that they

I. Focus on providing advice.
II. Involve monitoring of one party by another.
A. I only C. Both I and II
B. II only D. Neither I nor II

20. The subject matter of an assurance engagement may include

Financial Information Internal Controls Compliance with Regulation

A. Yes Yes Yes

B. No No No
C. Yes No Yes
D. No Yes No

21. PSRE 2400 (Engagements to Review Financial Statements), as amended by the

AASC in February 1008, applies to
A. Reviews of any historical financial information of an audit client.
B. Reviews of any historical financial information by a practitioner other than
the entity’s auditor.
C. Reviews of historical financial or other information by a practitioner other
than the entity’s auditor.
D. Reviews of historical financial or other information of an audit client.

22. What assurance is provided by the auditor in an agreed-upon procedures

engagement?
A. Reasonable
B. Absolute
C. Moderate
D. No assurance

23. The review of a company’s financial statements by a CPA firm

A. Is substantially less in scope of procedures than an audit.
B. Required detailed analysis of the major accounts.
C. Is of similar scope as an audit and adds similar credibility to the
statements.
D. Culminates in issuance of a report expressing the CPA’s opinion as to the
fairness of the statements.

24. Independence is not a requirement for which of the following engagements?

Compilation Review Agreed-upon Procedures
A. No Yes No
B. No No No
C. Yes No Yes
D. Yes Yes Yes

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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

25. The auditor is required to maintain professional skepticism throughout the
audit. Which of the following statements concerning professional skepticism is
false?
A. A belief that management and those charged with governance are honest and
have integrity relieves the auditor of the need to maintain professional
skepticism.
B. Maintaining professional skepticism throughout the audit reduces the risk of
using inappropriate assumptions in determining the nature, timing, and extent of
the audit procedures and evaluating the results thereof.
C. Professional skepticism is necessary to the critical assessment of audit
evidence.
D. Professional skepticism is an attitude that includes questioning
contradictory audit evidence obtained.

26. Which of the following terms best describes the audit of a taxpayer’s return
by a BIR auditor?
A. Operational audit.
B. Internal audit.
C. Compliance audit.
D. Government audit.

27. Which of the following services, if any, may a practitioner who is not
independent provide?
A. Compilations but not reviews.
B. Reviews but not compilations.
C. Reviews but not financial statement audits.
D. Agreed-upon procedures but not compilations.

28. The word audit comes from the word “audire” which means
A. To check
B. To validate.
C. To hear.
D. To look closely at.

29. Competence as a certified public accountant includes all of the following

except
a. Having the technical qualifications to perform an engagement.
b. Possessing the ability to supervise and evaluate the quality of staff work.
c. Warranting the infallibility of the work performed.
d. Consulting others if additional technical information is needed.

30. Which of the following is mandatory if the auditor is to comply with

generally accepted auditing standards?
a. Possession by the auditor of adequate technical training.
b. Use of analytical review on audit engagements.
c. Use of statistical sampling whenever feasible on an audit engagement.
d. Confirmation by the auditor of material accounts receivable balances.

31. As a guidance for measuring the quality of the performance of an auditor, the
auditor should refer to
a. Statements of the Financial Accounting Standards Board.
b. Generally Accepted Auditing Standards.
c. Interpretations of the Statements on Auditing Standards.
d. Statements on Quality Control Standards.

32. Under which of the following circumstances may a CPA agree with a departure
from an accounting principle promulgated by that body designated by AICPA Council
to formulate such principles?
a. When the principle was one formulated by the Accounting Principles Board
inasmuch as the APB is no longer the body so designated by Council.
b. When the CPA can demonstrate that application of the principle in question
would make the financial statements materially misleading.
c. When the disputed principle is contrary to industry practice.
d. When adoption of the principle would cause the financial statements to be
inconsistent with prior years.

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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

33. An auditor who accepts an audit engagement and does not possess the industry
expertise of the business entity, should
a. Engage financial experts familiar with the nature of the business entity.
b. Obtain a knowledge of matters that relate to the nature of the entity's
business.
c. Refer a substantial portion of the audit to another CPA who will act as the
principal auditor.
d. First inform management that an unqualified opinion cannot be issued.

34. The exercise of due professional care requires that an auditor

a. Examine all available corroborating evidence.
b. Critically review the judgment exercised at every level of supervision.
c. Reduce control risk below the maximum.
d. Attain the proper balance of professional experience and formal education.

35. A CPA who has never audited a commercial bank

a. May not accept such an engagement.
b. May accept the engagement only if the accounting firm specializes in the
audit of commercial banks.
c. May accept the engagement after attaining a suitable level of understanding
of the transactions and accounting practices unique to commercial banking.
d. May accept the engagement because training as a CPA transcends unique
industry characteristics.

36. A CPA, while performing an audit, strives to achieve independence in

appearance in order to
a. Reduce risk and liability.
b. Comply with the generally accepted standards of field work.
c. Become independent in fact.
d. Maintain public confidence in the profession.

37. The third general standard states that due care is to be exercised in the
performance of the examination. This standard means that a CPA who undertakes an
engagement assumes a duty to perform each audit
a. As a professional possessing the degree of skill commonly possessed by
others in the field.
b. In conformity with generally accepted accounting principles.
c. With reasonable diligence and without fault or error.
d. To the satisfaction of governmental agencies and investors who rely upon the
audit.

38. Due professional care requires

a. A critical review of the work done at every level of supervision.
b. The examination of all corroborating evidence available.
c. The exercise of error-free judgment.
d. A consideration of internal control structure that includes tests of
controls.

39. Adequate technical training and proficiency as an auditor encompasses an

ability to understand a computer system sufficiently to identify and evaluate
a. The processing and imparting of information.
b. Essential accounting control features.
c. All control procedures.
d. The degree to which programming conforms to the application of generally
accepted accounting principles.

40. Ultimately, the decision about whether or not an auditor is independent must
be made by the
a. Auditor.
b. Client.
c. Audit committee.
d. Public.

41. Madison Corporation has a few large accounts receivable that total
Php1,000,000. Nassau Corporation has a great number of small accounts receivable
that also total Php1,000,000. The importance of an error in any one account is,

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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

therefore, greater for Madison than for Nassau. This is an example of the
auditor's concept of
a. Account bias.
b. Audit risk.
c. Materiality.
d. Reasonable assurance.

42. There is an inverse relationship between the effectiveness of an entity's

internal control structure and the
a. Reliability of financial statements.
b. Extent of detailed audit tests required.
c. Degree of staff supervision required in the performance of an audit.
d. Fairness of management assertions in the financial statements.

43. The generally accepted standards of fieldwork relate to

a. The competence, independence, and professional care of persons performing
the audit.
b. Criteria for the content of the auditor's report on financial statements.
c. Audit planning and evidence gathering.
d. The need to maintain independence in mental attitude.

44. The least important evidence of a public accounting firm's evaluation of its
system of quality controls would concern the firm's policies and procedures with
respect to
a. Employment (hiring).
b. Confidentiality of audit engagements.
c. Assigning personnel to audit engagements.
d. Determination of audit fees.

45. The "hallmark" of auditing is

a. Available audit technology.
b. Generally accepted auditing standards.
c. Professional judgment.
d. Materiality and audit risk.

46. A firm should establish and maintain a system of quality control to provide
it with reasonable assurance that:
I. The firm and its personnel comply with professional standards and applicable
legal and regulatory requirements.
II. Reports issued by the firm or engagement partners are appropriate in the
circumstances.
A. I only C. Both I and II
B. II only D. Neither I nor II

47. Which of the following are elements of a CPA firm’s quality control that
should be considered in establishing its quality control policies and procedures?
Ethical Requirements Human Resources Engagement Performance
A. No Yes No
B. Yes No No
C. Yes Yes Yes
D. No No Yes

48. In pursuing a firm’s quality control objectives, a firm should adopt policies
and procedures to enable it to identify and evaluate circumstances and
relationships that create threats to independence, and to take appropriate action
to eliminate those threats or reduce them to an acceptable level by applying
safeguards, or, if considered appropriate, to withdraw from the engagement. Which
quality control element would this be most likely to satisfy?
A. Ethical requirements
B. Monitoring
C. Human resources
D. Leadership responsibilities for quality within the firm

49. For audits of financial statements of listed entities, the engagement partner
should not issue the auditor’s report until the completion of the
A. Engagement Quality Control Review
B. Management Review
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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

C. Engagement Team Review
D. Engagement Partner Review

50. Who should take responsibility for the overall quality on each audit
engagement?
A. Engagement quality control reviewer
B. Engagement partner
C. Engagement team
D. CPA firm

51. The engagement partner should take responsibility for the direction,
supervision, and performance of the audit engagement in compliance with
professional standards and regulatory and legal requirements, and for the
auditor’s report that is issued to be appropriate in the circumstances.
Supervision includes the following except,
A. Tracking the progress of the audit engagement.
B. Addressing significant issues arising during the audit engagement,
considering significance, and modifying the planned approach appropriately.
C. Informing the members of the engagement team of their responsibilities.
D. Identifying matters for consultation or consideration by more experienced
team members during the audit engagement.

52. The audit work performed by each assistant should be reviewed to determine
whether it was adequately performed and to evaluate whether the
A. Auditor’s system of quality control has been maintained at a high level.
B. Results are consistent with the conclusions to be presented in the auditor’s
report.
C. Audit procedures performed are approved in the professional standards.
D. Audit has been performed by persons having adequate technical training and
proficiency as auditors.

53. Which of the following is generally more important in a review than in a

compilation?
a. Determining the accounting basis on which the financial statements are to be
presented.
b. Gaining familiarity with industry accounting principles and practices.
c. Obtaining a signed engagement letter.
d. Obtaining a signed representation letter.

54. An accountant's compilation report should be dated as of the date of

a. Completion of fieldwork.
b. Completion of the engagement.
c. Transmittal of the compilation report.
d. The latest subsequent event referred to in the notes to the financial
statements.

55. A CPA has been engaged to compile financial statements for a nonpublic
client. Which of the following statements best describes this engagement?
a. The CPA must perform the basic accepted auditing procedures necessary to
determine that the statements are in conformity with GAAP.
b. The CPA is performing an accounting service rather than an examination of
financial statements.
c. The financial statements are representations of both management and the CPA.
d. The CPA may prepare the statements from the books but may not assist in
adjusting and closing the books.

56. Which of the following would not be included in an accountant's review report
on the financial statements of a nonpublic entity?
a. A statement that the review was made in accordance with generally accepted
auditing standards.
b. A statement that all information included in the financial statements is the
representation of management.
c. A statement describing the principal procedures performed.
d. A statement describing the auditor's conclusions based on the results of the
review.

57. An accountant who is not independent may issue a

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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

a. Compilation report.
b. Review report.
c. Comfort letter.
d. Qualified opinion.

58. An auditor has been engaged to audit financial statements that were prepared
on a cash basis. The auditor
a. Must ascertain that there is proper disclosure of the fact that the cash
basis has been used, the general nature of material items omitted, and the net
effect of the omissions.
b. May not be associated with statements that are not in accordance with GAAP.
c. Must render a qualified report explaining the departure from GAAP in the
opinion paragraph.
d. Must restate the financial statements on an accrual basis and then issue the
standard report.

59. A CPA firm studies its personnel advancement experience to ascertain whether
individuals meeting stated criteria are assigned increased degrees of
responsibility. This is evidence of the firm's adherence to prescribed standards
of
a. Supervision and review.
b. Continuing professional education.
c. Professional development.
d. Quality control.

60. Which one of the following, if present, would support a finding of

constructive fraud on the part of a CPA?
a. Privity of contract.
b. Intent to deceive.
c. Reckless disregard.
c. Ordinary negligence.

61. Of the following statements, which best distinguishes ordinary negligence

from gross negligence?
a. Failure to detect material errors, whether internal control is strong or
weak, suggests gross negligence.
b. Failure to exercise reasonable care denotes ordinary negligence, whereas
failure to exercise minimal care indicates gross negligence.
c. Gross negligence is most probable when the auditor fails to detect errors
that occurred under conditions of strong internal control.
d. The more material the undetected error the greater the likelihood of
ordinary negligence.

62. The objective of quality control mandates that a public accounting firm
should establish policies and procedures for professional development which
provide reasonable assurance that all entry-level personnel
a. Prepare working papers which are standardized in form and content.
b. Have the knowledge required to enable them to fulfill responsibilities
assigned.
c. Will advance within the organization.
d. Develop specialties in specific areas of public accounting.

63. Mix and Associates, CPAs, issued an unqualified opinion on the financial
statements of Glass Corp. for the year ended December 31, 2022. It was
determined later that Glass' treasurer had embezzled Php300,000 from Glass during
2022. Glass sued Mix because of Mix's failure to discover the embezzlement. Mix
was unaware of the embezzlement. Which of the following is Mix's best defense?
a. The audit was performed in accordance with GAAS.
b. The treasurer was Glass' agent and, therefore, Glass was responsible for
preventing the embezzlement.
c. The financial statements were presented in conformity with GAAP.
d. Mix had no actual knowledge of the embezzlement.

64. In connection with the element of professional development, a CPA firm's

system of quality control should ordinarily provide that all personnel

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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

a. Have the knowledge required to enable them to fulfill responsibilities
assigned.
b. Possess judgment, motivation, and adequate experience.
c. Seek assistance from persons having appropriate level of knowledge,
judgment, and authority.
d. Demonstrate compliance with peer review directives.

65. “Error” includes

A. Engaging in complex transactions that are structured to misrepresent the
financial position or financial performance of the entity.
B. Concealing, or not disclosing, facts that could affect the amounts recorded
in the financial statements.
C. An incorrect accounting estimate arising from oversight or misinterpretation
of facts.
D. Intentional misapplication of accounting policies relating to amounts,
classification, manner of presentation, or disclosure.

66. Which of the following conditions or events may create incentives/pressures

to commit fraud?
A. Inadequate system of authorization and approval of transaction.
B. Lack of mandatory vacations for employees performing key control functions.
C. Excessive pressure on management or operating personnel to meet financial
targets established by those charged with governance, including sales or
profitability incentive goals.
D. Inadequate access controls over automated records.

67. Fraud involving one or more members of management or those charged with
governance is referred to as
A. Management fraud. C. Fraudulent financial reporting.
B. Employee fraud D. Misappropriation of assets.

68. Fraudulent financial reporting involves intentional misstatements including

omissions of amounts or disclosures in financial statements to deceive financial
statement users. It may be accomplished in a number of ways, including
A. Embezzling receipts.
B. Stealing physical assets or intellectual property.
C. Using an entity’s assets for personal use.
D. Manipulation, falsification, or alteration of accounting records or
supporting documentation from which the financial statements are prepared.

69. Which of the following conditions are generally present when misstatements
due to fraud occur?
I. Incentive or pressure.
II. Perceived opportunity.
III. Rationalization.
A. I and II only. C. I and III only.
B. II and III only. D. I, II, and III.

70. When obtaining an understanding of the entity and its environment, including
its internal control the auditor may identify events or conditions that indicate
an incentive or pressure to commit fraud or provide an opportunity to commit
fraud. Such events or conditions are referred to as
A. Fraud conditions. C. Fraudulent activities.
B. Fraud risk factors. D. Fraud environment.

71. Opportunities to misappropriate assets increase when there are

A. Known or anticipated future employee layoffs.
B. Promotions, compensation, or other rewards inconsistent with expectations.
C. Recent or anticipated changes to employee compensation or benefit plans.
D. Inventory items that are small in size, of high value, or in high demand.

72. As used in PSA 250 (Consideration of Laws and Regulations in an Audit of

Financial Statements), this term refers to acts of omission or commission by the
entity being audited, either intentional or unintentional, which are contrary to
prevailing laws or regulations.
A. Noncompliance C. Erotic acts
B. Illegal acts D. Unforgivable acts
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AUDTHEO REV PRE-TEST 4 - SET A

73. If the auditor concludes that the noncompliance has a material effect on the
financial statements, and has not been properly reflected in the financial
statements, the auditor should express
A. A qualified or an adverse opinion.
B. A qualified opinion or a disclaimer of opinion.
C. A disclaimer of opinion.
D. A qualified opinion.

74. A CPA may accept an engagement to apply agreed-upon procedures to prospective

financial statements provided
a. All parties have agreed on the procedures to be applied.
b. The CPA has previously audited the entity for which the agreed-upon
procedures are to be applied.
c. Users have participated in establishing the nature and scope of the
engagement, distribution of the report is limited to the users involved, and the
prospective statements include a summary of significant assumptions.
d. The set of agreed-upon procedures include, at a minimum, a study and
evaluation of the existing internal control.

75. The statement that "nothing came to our attention which would indicate that
these statements are not fairly presented" expresses which of the following?
a. Disclaimer of an opinion. b. Negative assurance.
c. Negative confirmation. d. Piecemeal opinion.

76. Which of the following is not a distinction between a compilation and a

review?
a. The CPA must be independent as a prerequisite to performing a review
engagement, but need not be independent to perform a compilation.
b. In conducting a review, the CPA must obtain an understanding of the client's
internal control system; but this is not necessary for a compilation engagement.
c. Analytical procedures are applied in a review engagement, but are not
required in a compilation.
d. A compilation offers no assurance, whereas a review provides limited
assurance.

77. Which of the following statements best distinguishes a forecast from a

projection?
a. A forecast contains one or more hypothetical
assumptions, whereas a projection reflects conditions expected to exist.
b. A projection is appropriate for general distribution to third parties,
whereas a forecast is more tentative and should be restricted to those parties
with whom the client is negotiating directly.
c. The CPA may review a financial forecast, but may only compile a projection.
d. A forecast reflects conditions expected to exist, whereas a projection
presents financial position, results of operations, and cash flows given one or
more hypothetical assumptions.

78. An accountant who reviews the financial statements of a non-public entity

should issue a report stating that a review
a. Is substantially less in scope than an audit.
b. Provides negative assurance that the internal control system is functioning
as designed.
c. Provides only limited assurance that the financial statements are fairly
presented.
d. Is substantially more in scope than a compilation.

79. In which of the following reports should a CPA not express negative or
limited assurance?
a. A standard compilation report on financial statements of a non-public
entity.
b. A standard review report on financial statements of a non-public entity.
c. A standard review report on interim financial statements of a public entity.
d. A standard comfort letter on financial information included in a
registration statement of a public entity.

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DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

80. The CPA is asked to audit financial statements prepared on a modified cash
basis. This is acceptable provided the CPA
a. Converts the financial statement to an accrual basis before rendering an
audit report.
b. Qualifies the audit opinion for a departure from GAAP.
c. Issues an adverse opinion.
d. States clearly in the audit report that fairness was evaluated within the
framework of the other basis rather than GAAP.

81. Which of the following procedures would most likely be included in a review
engagement of a non-public entity?
a. Preparing a bank transfer schedule.
b. Inquiring about related party transactions.
c. Assessing the internal control structure.
d. Performing cutoff tests on sales and purchases transactions.

82. A CPA in public practice must be independent in fact and appearance when
providing which of the following services?
Compilation Compilation
Preparation of a of personal
of a financial financial
tax return forecast statements
____________ ____________ ______________
a. Yes No No
b. No Yes No
c. No No Yes
d. No No No

83. In an assurance engagement, the person or class of persons for whom the
professional accountant prepares the report for a specific use or purpose is the
A. Intended user
B. Responsible party
C. Management
D. Client

84. In an assurance engagement, the outcome of the evaluation or measurement of a

subject matter against criteria is called
A. Subject matter information
B. Subject matter
C. Assurance
D. Conclusion

85. In some assurance engagements, the evaluation or measurement of the subject

matter is performed by the responsible party, and the subject matter information
is in the form of assertion by the responsible party that is made available to
intended users. These engagements are called
A. Direct reporting engagements
B. Assertion-based engagements
C. Non-assurance engagements
D. Recurring engagements

86. What type of assurance engagement is involved when the practitioner expresses
a negative form of conclusion?
A. Reasonable assurance engagement
B. Negative assurance engagement
C. Assertion-based assurance engagement
D. Limited assurance engagement

87. Assurance engagement risk is the risk

A. That the practitioner expresses an inappropriate conclusion when the subject
matter information is materially misstated.
B. Of expressing an inappropriate conclusion when the subject matter
information is not materially misstated.
C. Through loss from litigation, adverse publicity, or other events arising in
connection with subject matter reported on.
D. Of expressing an inappropriate conclusion when the subject matter
information is either materially misstated or not materially misstated.
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Auditing and Assurance Principles – Chapters 1, 12, 2 and 3
 Republic of the Philippines
DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

88. Which of the following fundamental ethical principles requires a professional

accountant to be straightforward and honest in all professional and business
relationships?
A. Objectivity
B. Professional behavior
C. Professional competence and due care
D. Integrity

89. Whenever there is a scope limitation, the appropriate response is to issue a

/an

A. Qualified opinion
B. Adverse opinion
C. Disclaimer of opinion
D. Unmodified report, a qualification of scope and opinion, or a disclaimer,
depending on materiality.

90. If there has been a significant limitation on the practitioner’s review of an

entity’s financial statements, the practitioner should describe the limitation
and
I. Express a qualification of the negative assurance.
II. Provide no assurance.

A. I only
B. II only
C. Either I or II
D. Neither I nor II

91. Which of the following procedures ordinarily should be applied when an

independent auditor conducts a review of interim financial information of an
entity?

A. Verify the changes in key account balances.

B. Perform cut-off tests for cash receipts and disbursements.
C. Read the minutes of the board of director’s meetings.
D. Inspect the open purchase order file.

92. A practitioner’s review of an entity’s financial statements does not provide

assurance that he /she will become aware of all significant matters that would be
disclosed in an audit. However, if the practitioner has become aware that
information coming to his/her attention may be materially misstated, the
practitioner should

A. Carry out additional or more extensive procedures as are necessary to

achieve limited assurance.
B. Withdraw immediately from the engagement.
C. Perform a complete audit and issue a modified auditor’s report.
D. Downgrade the engagement to a compilation and issue the appropriate report.

93. For the purpose of expressing negative assurance in the review report, the
practitioner should obtain sufficient appropriate evidence primarily through

A. Inquiry and confirmation

B. Analytical procedure and substantive test of details of transactions and
account balances
C. Confirmation and tests of controls
D. Inquiry and analytical procedures

94. Which of the following procedures most likely would not be included in a
review engagement of an entity?

A. Assessing control risk.

B. Considering whether the financial statements are in accordance with
Philippine Financial Reporting Standards.
C. Obtaining a management representation letter.
D. Inquiring about subsequent events.
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Auditing and Assurance Principles – Chapters 1, 12, 2 and 3
 Republic of the Philippines
DON HONORIO VENTURA STATE UNIVERSITY
Villa de Bacolor, Pampanga
College of Business Studies

AUDTHEO REV PRE-TEST 4 - SET A

95. Which of the following professional services would be considered an assurance

engagement?
A. A management consulting engagement to provide IT advice to a client.
B. An engagement to report on compliance with statutory requirements.
C. An income tax engagement to prepare tax returns.
D. A compilation of financial statements from a client’s accounting records.

-------------------------------END OF EXAMINATION--------------------------------
Prepared by:

Camille Garcia, CPA, MBA

Faculty

ANSWER SHEET
Tracing Number: _________
1.____ 17. ____ 33.____ 49.____ 65.____ 81.____
2. ____ 18. ____ 34. ____ 50. ____ 66. ____ 82. ____
3. ____ 19. ____ 35. ____ 51. ____ 67. ____ 83. ____
4. ____ 20. ____ 36. ____ 52. ____ 68. ____ 84. ____
5. ____ 21. ____ 37. ____ 53. ____ 69. ____ 85. ____
6. ____ 22. ____ 38. ____ 54. ____ 70. ____ 86. ____
7. ____ 23. ____ 39. ____ 55. ____ 71. ____ 87. ____
8. ____ 24. ____ 40. ____ 56. ____ 72. ____ 88. ____
9. ____ 25. ____ 41. ____ 57. ____ 73. ____ 89. ____
10. ___ 26. ____ 42. ____ 58. ____ 74. ____ 90. ____
11. ___ 27. ____ 43. ____ 59. ____ 75. ____ 91. ____
12. ___ 28. ____ 44. ____ 60. ____ 76. ____ 92. ____
13. ___ 29. ____ 45. ____ 61. ____ 77. ____ 93. ____
14. ___ 30. ____ 46. ____ 62. ____ 78. ____ 94. ____
15. ___ 31. ____ 47. ____ 63. ____ 79. ____ 95. ____
16. ___ 32. ____ 48. ____ 64. ____ 80. ____

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