823, 9:12 PM Protest 2 -Answer Keys, Pretest 2 - Answer Keys * Required 1. Which of the following is incorrect regarding engagement period? * (1 Point) The period of the engagement starts when the assurance team begins to perform © assurance services and ends when the assurance report is issued, except when the assurance engagement is of a recurring nature. If the assurance engagement is expected to recur the period of the assurance & sgagement ends with the notification by either party thatthe professional relationship has terminated or the issuance of the final assurance report; whichever is earlier. nthe case ofan audit engagement the engagement period includes the period covered by the financial statements reported on by the firm. When an entity becomes an audit client during or after the period covered by the CO) fancal statements that the fm wil eporton, the fm should consider whether any threats to independence may be created by previous services provided to the audit client. hitps:forms.ofice.com/Pages/DesignPageV2.aspx7subpage=designm2=18romar=18id=DOSKWésWOyXEjajSLZIQARAAAAAAAAAAO_V... 1/19,823, 9:12 PM Protest 2 -Answer Keys, 2. An investor, while reading the financial statements of Silver Corporation, learned that the statements are accompanied by an opinion that the financial statements are fairly stated. From this the investor may conclude that * (1 Point) (Any lsputes over significant counting lsues have been sated to the auditor's satisfaction. The auditor is satisfied that Silver is operationally efficient. to financial statements are to be regarded as reasonably adequate. The auditor has ascertained the Silver's financial statements been prepared © _nformatve disclosures in the financial statements but not necessary inthe notes © sccurately 3, The auditor's judgment concerning the overall faimness of presentation of financial position, results of operation, and changes in cash flow is applied within the framework of * (1 Point) © anality control O generally accepted auditing standards which include the concept of materiality © the auditor's evaluation of the audited company's internal control © Philippine Financial Reporting Standard hitpsforms. office. com/PagesiDesignPageV2.aspx7subpage=designtm2=1&romar=18id=DOSKWésWO)xEjajSLZrQARAAAAAAAAAAO_V... 2/19,823, 9:12 PM Protest 2 -Answer Keys, 4. In all cases audit reports must * (1 Point) © is signed by the individual who performed the audit procedures. © certifies the accuracy of the quantitative information which was audited. & informs readers ofthe degree of correspondence between the quantifiable information and the established criteria © communicate the auditor's findings to the general public 5. In performing attestation services, a CPA will normally * (1 Point) © improve the qualty of information or its context, for better use ofthe decision makers. © recommend how to use the information GD. perform market analyses and cost estimates, states a conclusion about a written assertion hitps:forms.office.com/Pages/DesignPageV2.aspx7subpage=designm2=1&romar=18id=DOSKWésWO)xEjajSLZIQARAAAAAAAAAAO_V... 3/19,823, 9:12 PM Pratest 2 - Answer Keys: 6. Which of the following best describes “high level of assurance"? * (1 Point) oO It refers to the professional accountant having obtained evidence based on procedures agreed upon between the practitioner and the intended users to be satisfied that findings be reported to the intended users It refers to the professional accountant having obtained sufficient external and internal appropriate evidence to be satisfied that the subject matter is plausible in the circumstances. It refers to the professional accountant having obtained sufficient appropriate evidence to conclude that the subject matter conforms in all material respects with identified suitable criteria It refers to the professional accountant having obtained sufficient evidence to conclude that he has no knowledge of any required modifications to be made in the financial statements in order for them to conform of prescribed criteria. 7. Which of the following engagements provides third parties the highest level of assurance about the client's financial statements? * (1 Point) @ O oO O hitps:forms.ofice.com/Pages/DesignPageV2.aspx7subpage=designSim2=1&fromar=18id=DQSkWdsWO)XEjejSLZIGAAAAAAAAAAAAO_V. Audit Agreed-upon procedures Review Compilation ana823, 9:12 PM Protest 2 -Answer Keys, 8. In which of the following situations can third parties assume responsibility of the auditor regarding association with financial information? * (1 Point) C©_ When the auditor attaches a report to that information. When the auditor consents to the use ofthe auditor's name ina professional connection, @ Either a orb. CO Neither a orb 9. A concept relating to the accumulation of the audit evidence necessary for the auditor to conclude that there are no material misstatements in the financial statements taken as a whole. * (1 Point) GD Reasonable assurance © Moderate assurance CO Positive assurance O Negative assurance hitps:forms. office. com/Pages/DesignPageV2.aspx7subpage=designm2=1&romar=18id=DOSKWésWOyxEjajSLZrQARAAAAAAAAAAO_V... 5/19,2123, 9:12 Pw Prtest 2 Answer Keys 10. The independent auditor lends credibility to client's financial statements by * (1 Point) Maintaining a clear-cut distinction between management's representations and the auditor's representation. Testifying under oath about client's financial statements, © Sitting in the auetors management letter thatthe examination was made in accordance with generally accepted auditing standards. Attaching an auditor’s opinion to the client's financial statements. 11. Which of the following is responsible for the fairness of representations made in financial statements? * (1 Point) © The independent auditor, gv The client's management. © The internal auditor. © The audit committee. hitpsforms.ofice.com/Pages/DesignPageV2.aspx7subpage=designm2=1&romar=18id=DOSKWésWOyXEjgjSLZrQARAAAAAAAAAAO_V... 6/19,823, 9:12 PM Protest 2 -Answer Keys, 12. Which statement is incorrect regarding the auditor's responsibility to consider fraud and error in the audit of financial statements? * (1 Point) © The auditor is entitled to accept records and documents as genuine. The auditor is may be held responsible for the prevention of fraud and error. © The mor should consider the risk af atrial misstatements Inthe fianclal statements resulting from fraud or error. The tisk of not detecting a material misstatement resulting from error is lower than the risk of not detecting a material misstatement resulting from fraud, 13. Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and least likely to be detected by an auditor? * (1 Point) @_ Understating the sales journal © Overstating the accounts receivable control account. © Overstating the accounts receivable subsidiary ledger. © Understating the cash receipts journal. hitpsforms. office. com/Pages/DesignPageV2.aspx7subpage=designm2=1&romar=18id=DOSKWésWO)xEjajSLZNQARAAAAAAAAAAO_V... 7/19,823, 9:12 PM Protest 2 -Answer Keys, 14. Itis in the interest of both client and auditor that the auditor sends an engagement letter, preferably before * (1 Point) © The performance of substantive testing, @_ The commencement of the engagement. © The completion of audit. © Before the issuance of audit report. 15. A basic tool used by the auditor to control the audit work and review the progress of the audit. * (1 Point) QD Audit program © Engagement letter. O Progress flowchart © Time and Expense Summary 16. The management's assessment of the entity's ability to continue as a going concern covers a period of: * (1 Point) © Not longer than 12 months from balance date. QD) Atleast 12 months from the balance sheet date. © Notlonger than 12 months from the date of audit report. © Atleast 12 months from the date of audit report. hitpsforms.ofice.com/Pages/DesignPageV2.aspx7subpage=designm2=1&romar=18id=DOSKWésWO)xEjajSLZIQARAAAAAAAAAAO_V... 8/19,318/23, 912 PN Protest 2-Answer Keys 17. Which of the following would most likely indicate internal control deficiency for the revenue cycle (including cash receipts)? * (1 Point) © Credit is granted by a credit department. CO Sssh receipts received inthe mail are received bya secretary with no recordkeeping responsibility @D Cash is deposited weekly. © Gash disbursements over P100,000 does not require two signatures on the check. 18. Which of the following statements is incorrect regarding the reliability of audit evidence? * (1 Point) Doral representation by the client management is not a valid evidence © Ait evidence obtained dlrectly by the auator fs mare rlinble than that one provided by the client management. CE Theeffectiveness of accounting and internal control adds tothe rlability of intemal audit evidence. CO Wile intemal aut evidence is considered to he acceptable, the auctor usually prefers audit evidence form external sources. hitps:forns.ofice.com/Pages/DesignPageV2.aspx7subpage=designtm2=18&romar=18id=DOSKWésWO)xEjajSLZNQARAAAAAAAAAAO_V... 9/19,318/23, 912 PN Protest 2-Answer Keys 19. The detailed instruction for the collection of a type of audit evidence that is to be obtained at some time during the audit: * (1 Point) © Audit program, © Audit technique. QD Audit procedure, © Working papers 20. Which of the following is not an auditor's concern in obtaining sufficient appropriate audit evidence for initial engagements? * (1 Point) CO 2Petng balances do not contain misstatements that materially affect the curent period's financial statements the prior period's closing balances have been correctly brought forward to the current petiod or when appropriate, have been restated policies have been properly accounted for and adequately disclosed O sPPFoprate accounting polices are consistenty applied or changes to accounting D ‘opening balances have been audited by a competent auditor hitps:forms.office.com/Pages/DesignPageV2.aspx7subpage=designtm2=1&romar=18id=DOSKWésWO)xEjajSLZNQARAAAAAAAAAAO__.. 10/19,823, 9:12 PM Protest 2 -Answer Keys, 21. Which of the following best describes the primary purpose of audit procedures? * (1 Point) © To detect errors or irregularities. © To comply with generally accepted accounting principles. YJ To gather corroborative evidence. © To verify the accuracy of account balances. 22. Sampling risk occurs when the auditor * (1 Point) © uses an inappropriate audit procedure CO Bails to recognize exceptions QD) tests less than the entire population C© identifies weaknesses in client's internal control system 23. This refers to the approximation of the amount of the item in the absence of a precise means of measurement * (1 Point) © Allocation O Provision @D Accounting Estimate O Allowance hitps:forms.office.com/Pages/DesignPageV2.aspx7subpage=designtm2=1&romar=18id=DOSKWésWOyXEjajSLZNQARAAAAAAAAAAO_.. 11/19,823, 9:12 PM Protest 2 -Answer Keys, 24, Which of the following is a criteria least likely required of assurance engagements * (1 Point) © asubject matter O anengagement process QD atwo-party relationship © asuitable criteria 25. Which of the following is least likely an objective of an assurance engagement? * (1 Point) (GY The engagements intended to prevent the ssuance of materially misleaing information © Theengagementis intended to enhance the craiblly of information about a subject matter ‘An assurance engagement is intended for a professional accountant to express a © conclusion that provides the intended uses with a level of assurance about the subject matter The engagement is intended to provide a level of assurance to be issued by a © professional accountant about the information of being in conformity, in all material respects, with suitable criteria hitpsforms.office.com/Pages/DesignPageV2.aspx7subpage=designm2=18romar=18id=DOSKWésWO)xEjajSLZNQARAAAAAAAAAAO_.. 12/19,823, 9:12 PM Protest 2 -Answer Keys, 26. Which of the following is least likely a subject matter of an assurance engagement? * (1 Point) © Data © Compliance with regulations © Systems and processes @D_ degree of loyalty of employees to their employer 27. Which is incorrect of the intended user? * (1 Point) the intended useris the person or class of persons for whom the professional accountant prepares the report for a specific use or purpose The intended user is always limited to the addressee of the professional accountant's report The intended user(s) may not be the addressee of the professional accountant’s © The responsible party may also be one of the intended users © report 28. Fraud occurs when * (1 Point) © | the auditor lacks even slight care in the performance in performing the audit CO ’iisstatement is made and there is knowledge ofits falsty but no intent to deceive. © the auditor has an absence of reasonable care in the performance of the audit. Qi misstatement is made and theres both knowledge ofits falsity and the intent to deceive, hitps:forms.ofice.com/Pages/DesignPageV2.aspx7subpage=designm2=18romar=18id=DOSKWésWO)xEjajSLZNQARAAAAAAAAAAO_.. 13/19,823, 9:12 PM Protest 2 -Answer Keys, 29. Which of the following statements about internal control is correct? * (1 Point) CO Properly maintained internal controls reasonably assure that collusion among employees cannot occur. Establishing and maintaining internal control is the internal auditor's responsibility. © Exceptionally strong control allows the auditor to eliminate substantive tests. (J The cost-benefit relationship should be considered in designing internal control 30. Proper segregation of functional responsibilities calls for separation of the functions of * (1 Point) QD Authorization, custody, and recording, © custody, execution, and reporting. © Authorization, execution, and payment. © Authorization, payment, and recording hitps:forms.ofice.com/Pages/DesignPageV2.aspx7subpage=designm2=18romar=18id=DOSKWésWOyXEjajSLZNQARAAAAAAAAAAO_.. 14/19,823, 9:12 PM Protest 2 -Answer Keys, 31. Of the following, the best statement of the CPA's primary objective in considering internal control is that the review is intended to provide * (1 Point) gt basis for reliance on the system and determining the scope of other auditing procedures. Reasonable protection against client fraud and defalcations by client employees. system, A method for ensuring that there is reasonable assurance that the financial CO Abssis for constructive suggestions tothe client for improving his internal contol © statements are reliable 32. Internal control procedures are not designed to provide reasonable assurance that * (1 Point) © Transactions are executed in accordance with management's authorization. CO Access to assets is permitted only in accordance with management's authorization. @D irregularities will be eliminated. The recorded accountability for assets is compared withthe existing assets at reasonable intervals hitps:forms. office. com/Pages/DesignPageV2.aspx7subpage=designtm2=1&romar=18id=DOSKWésWO)xEjajSLZIQARAAAAAAAAAAO_.. 15/19,823, 9:12 PM Protest 2 -Answer Keys, 33. The accountant's report expressing an opinion on an entity's internal controls should state that the * (1 Point) ©) Objectives of the client's internal controls are being met. OP. Consideration ofthe intemal controls was conducted in accordance with generally accepted auditing standards. QD < {stabshment and maintenance of internal contrat is the responsibility of management. © 4. inherent limitations of the client's internal controls were examined. 34, The development of a general strategy and a detailed approach for the expected nature, timing, and extent of audit refers to: * (1 Point) O Supervision © Audit procedures O Directing @D Planning hitpsforms.office.com/Pages/DesignPageV2.aspx7subpage=designm2=1&romar=18id=DOSKWésWO)xEjajSLZIQARAAAAAAAAAAO_.. 16/19,823, 9:12 PM Protest 2 -Answer Keys, 35, The auditor should consider the nature, extent, and timing of the work to be performed and should prepare a written audit program for every audit. Which audit standard is most closely related to this requirement? * (1 Point) © Theaitis to be performed by a person ar persons having adequate technica training and proficiency as an auditor. In all matters relating to the assignment, an independent mental attitude is to be maintained by the auditor(s) audit and preparation of the report: The work is to be adequately planned and assistants, if any, are to be properly Diss professional cae sto be exercised inthe planning and performance ofthe D supenises 36. Which of the following is required documentation in an audit in accordance with generally accepted auditing standards? * (1 Point) ‘A flowchart or narrative of the information system describing the recording and classification of transactions for financial reporting An audit program setting forth in detail the procedures necessary to accomplish the engagement's objectives. o A planning memorandum establishing the timing of the audit procedures and coordinating the assistance of entity personnel. Oo An internal control questionnaire identifying policies and procedures that assure specific objectives will be achieved oO hitpsforms.ofice.com/PagesiDesignPageV2.aspx7subpage=designtm2=1&romar=18id=DOSKWésWO)xEjajSLZNQARAAAAAAAAAAO_.. 17/19,823, 9:12 PM Protest 2 -Answer Keys, 37. Adequate planning of the audit work helps the auditor of accomplishing the following objectives, except: * (1 Point) © Gathering of all corroborating audit evidence. © Ensuring that appropriate attention is devoted to important areas of the audit. ZD Identitying the areas that need a service of an expert. © The audit work is completed efficiently. 38. The objective and scope of the audit and the extent of the auditor's responsibilities to the client are best documented in * (1 Point) © independent auditor's report © Client's representation letter D Audit engagement letter © Audit program 39, Assertion about account balances at period end which means assets, liabilities, and equity interests are included in the financial statements at appropriate amounts is * (1 Point) O Baistence © Completeness © Rights and obligations QD) Valuation and allocation hitpsforms.ofice.com/Pages/DesignPageV2.aspx7subpage=designm2=1&romar=18id=DOSKWésWO)XEjajSLZIQARAAAAAAAAAAO_.. 18/19,2123, 9:12 Pw Prtest 2 Answer Keys 40. Accuracy and valuation assertions about presentation and disclosure means * (1 Point) Disclosed events transactions, and other matters have occurred and pertain to the entity. All disclosures that should have been included in the financial statements have been included. © Finanelal information is appropriately presented and described, and disclosures are clearly expressed Financial and other information are disclosed fairly and at appropriate amounts, This content is neither created nor endorsed by Microsoft. The data you submit will be sent to the form owner. GB Microsoft Forms hitps:forms.ofice.com/PagesiDesignPageV2.aspx7subpage=design’im2=1&fromar |Sid=DOSKWdsWOyxEjaJSLZNQARAAAAAAAAAAO_.. 19/19,