ACC 656 PRINCIPLES OF AUDITING LEVEL 300

1…is the difference between what the users of financial statements and other members of the
public think that the auditors should do, and what the auditors are actually required by the law
and the
profession to do
A. Engagement gab
B Expectations gap
C. Reasonable Assurance
D. Reasonable gap

2…refers to the examination of the financial Statement by an auditor who is free from any
influence by the client or any other party, but allowing him to act with integrity, and exercise
objectivity and professional skepticism.
A. Independence Examination
B. Interim Examination
C. Private Audit
D. Statutory Audit
3.Ghana Republic Bank a listed in Ghana Stock Exchange published their audited financial
statement every year. The audits carry out on the financial, compliance and operational
activities of Ghana Republic Bank can be termed us...
A. Interim audit
B. Internal audit
C. Private audit
D. Statutory audit

4.Which of the following IFAC fundamental ethical requirements will be breached when
auditors act in favor of directors instead of acting in the interest of shareholders and the
general public?
A. Confidentiality
B. Independence
C. Objectivity
D. Professional competence

5. Which of the following is NOT included in the principal content of the engagement letter?
A. Arrangement to meet previous auditor
B. Objective of the audit
C. Responsibility of the auditor
D. Responsibility of the management

6. The highest level of assurance given, as in the case of statutory audit because of inherent
limitations of the audit is called...
A. Absolute Assurance
B. Limited Assurance
C. Reasonable Assurance
D. Review

7. Which of the following is not IFAC ethical principle

A Not being bias
B. Not being skeptical
C. Not disclose information to a third party
D. Trustworthy

8. The main object of an audit is…

A Detection and Prevention of fraud
B. Establish effective internal control
C. Expression of opinion
D. Prevention of risks
9. Which of the following is not true about the auditor's responsibility on a financial
statement?
A The auditor should express an opinion on financial statements
B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in financial statements
D. He should examine whether recognized accounting principle have been consistently

10 It is appropriate for internal auditors to report

A. Finance Director
B. Account Clerk
C. Those charged with governance
D. Chief Accountant

11 Which of the following is not a similarity between external and internal auditors?
A. Both must be independent of the company
B. Both must be exercise professional competent and due care
C. Both exercise professional skepticism when conducting the audit
D. Both should detect and prevent fraud.

12 The Ethical principle that states that auditors comply with the relevant laws and regulations
in accordance with 1SA 250 and also avoid any action that discredits the profession is called.
A. Objectivity
B Integrity
C. Professional behavior
D. Professional due care

13. An audit designed to evaluate the economy, efficiency and effectiveness of an

organization or some part of an organization operations would be called a(n):
A Compliance audit
B Management audit.
C Operational audit.
D Performance audit

14. Priscilla, a partner of O & E business, was not convinced about her share of profit for the
year. She was expecting more profit than she actually received from the business, and for this
reason, she requested for the financial statement to be audited. The audit engagement is what
A. Private Audit
B. Statutory Audit
C Interim Audit
D. Independence Audit
see the information to answer questions 15 to 16
Gidimador Limited Liability Company commenced business on 1 January, 2011. The
management of the company has over the years had difficult times detecting fraud, assessing
risks and preparing Financial statements of the Business due to recent expansion. PWC is an
audit firm who has been given an offer to audit companies
on 28 February 2019 for the third time. Mr. In-Charge, the Director of the Company has made
clear to the firm that it is their responsibility to assess risk and prepare the financial statement
should they sept the offer.
15. Whose responsibility is to prepare the financial statement of Gidimadjoe Limited
Liability?
A. The Audit committee of Gidimajor Limited Liability
B The Internal Auditor of Gidimadjor Limited Liability
C. The director of Gidimadjor Limited Liability
D. PWC engagement team for the audit of Gidimudjor Limited Liability

16. Which of the following procedures would you recommend for PWC us perform when
accepting a client?
A Seeking reference from client director
B Speaking to previous auditors
C. Considering the independence of stuff
D. Seek re-election
17.... is an attitude of an auditor to make critical assessment, with a questioning mind, of the
validity of audit evidence obtained and alert to audit evidence that contradicts or brings into
question the reliability of document and response to inquiries
A. Judgement
B. Expression an opinion
C. Professional Skeptical
D. Independence

18. At what stage of the audit is professional skepticism necessary?

A Planning stage
B Risk assessment stage
C Performance stage
D Throughout the whole audit process

19. inherent limitations in audit prevent the auditor from…

A detecting immaterial misstatement
B. giving reasonable assurance
C. giving an absolute assurance-
D. detecting insignificant misstatement

20. The written confirmation of auditors' acceptance of the appointment refers to

A Letter of Engagement
B. Post Accepting Letter
C. Post-Accepting Condition
D. Pre-Accepting condition
2022
1. Audit is founded on... theory?
A. Agency
B. Independency
C. Resource-based
D. Stewardship
2. If a partner of partnership personally requested for an audit of the financial statement of the
partnership for which he is a partner, the type of audit requested for is... audit.
A. Continuous
B. Interim
C. Private
D. Statutory
3. A client internal control system displays fundamental and material weaknesses, and hence,
will require a check of a higher proportion of transactions than would otherwise be necessary.
The type of audit suitable for such client is... audit
A. Continuous
B. Interim
C. Private
D. Statutory
4. An objective of audit is to...
A. detect immaterial misstatement.
B. detect misstatements which are significant.
C. ensure that management reports disclose any information.
D. Prepare a financial statement.

5. The mismatch of the role of the auditor and what auditing is meant for creates....
A. audit gap.
B. expectation gap.
C. Loss of confidence in the audit report.
D. opinion gap.
6. The inherent limitation in audit prevents the auditor from...
A. detecting immaterial misstatement.
B. detecting material misstatement.
C. giving an absolute assurance
D. giving reasonable assurance.

7. The inherent limitations in an audit arise from the fact that, audit...
A. does not cover the entire operations of the entity.
B. evidence is not conclusive.
C. is based on judgment
D. procedures are not exhaustive.

8. An auditor exercise professional skepticism during

A. formation of opinion based on the conclusion drawn.
B. planning and performance of the audit.
C. reporting to shareholders.
D. removal from office as an auditor.

9. Which quality of an auditor requires the auditor to make a critical assessment, with a
questioning mind, of the validity of an audit evidence?
A. Professional competence
B. Independence
C. Objectivity
D. professional skepticism

10. Management responsibility covers all these areas except...

A designing, implementing and maintaining internal control.
B. gathering of audit evidence
C making accounting estimates that are reasonable in the circumstances.
D. selecting and applying appropriate accounting policies

11. Internal Auditor reports to...

A. Board of director
B. Government
C. Shareholders
D. Tax authorities.

12. Evaluation of the background of the client's business by an incoming auditor in the pre
acceptance stage of audit appointment is meant to...
A. decide on the kind of staff and resource
needed to perform the audit.
B. Determine the amount of the audit fee to be charged.
C. identifies risks associated with accepting the offer.
D. plan the audit.

13. Which audit principle is compromised, if an auditor knowingly associated himself with
reports or returns where the auditor believes that information contains materially false?
A. Due competence
B. Integrity
C. Objectivity
D. Professional behavior

14. An auditor acted in favor of directors instead of acting in the interest of shareholders and
the general public. Which of the following principles has been breached?
A. Confidentiality
B. Independence
C. Objectivity
D. Professional behaviour
15. The ethical principle that requires auditors to comply with the relevant laws and
regulations and also avoid
any action that discredits the profession is called...
A. Objectivity.
B. Integrity.
C. Professional behavior.
D. Professional due care.
16. A new auditor needs to communicate with the previous auditors before accepting
engagement because, it helps to
A. decide on the kind of staff and resource needed to perform the audit.
B. identify if there are professional reasons for terminating the offer.
C. obtain their permission to audit the business
D. protect the shareholders as means of professional courtesy.

17. A formal confirmation of auditors' acceptance of audit engagement is a ...

A Letter of Engagement
B. Post Accepting Letter
C. Post-Accepting Condition Letter
D. Pre-Accepting Condition Letter

18. The first auditor of a company is casually appointed by...

A. Audit committee
B: Directors
C. Management
D. Shareholders

19. The right of the auditor does not extend to the…

A. bidding for an asset of the client.
B. inquiry from management, any information needed for the audit work.
C. Receipt of notice relating to general meeting
D. request for documentations needed to assist the audit.

20. An audit designed to evaluate value for money of the organization's operations is known
as...audit.
A. Compliance
B. Management
C. Operational
D. Performance

21. Control system put in place to ensure that risks do not occur is called...control.
A. Corrective
B. Detective
C. External
D. Preventive

22. 0.5% - 1 % is used by most audit firm as a starting point for the consideration of Gross
profit as material. This consideration is based on professional...
A. due care
B. experience
C. judgment
D. Skepticism

23. International Standard of Audit Board (ISAB)... external auditors to use the internal
auditors for direct assistance on the audit.
A. discourage
B. encourage
C. prohibit
D. requires
24. Whose responsibility is to examine the adequacy and effectiveness of the entity's internal
controls and make recommendations where control improvements are needed?
A. Board of Directors
B. External Auditor
C. Internal Auditor
D. Managers and supervisory personnel

25. Peace firm is an audit firm of BBB Company limited. Which of the following is not a
major area in the BBB Company limited for Peace to obtain business knowledge when
planning the audit?
A. Financial records including related party transactions.
B. Industry-specific guidance.
C. Regulatory framework.
D. Warehouse Inventory counts and plant premises.

26. Which of the following activities would you recommend an auditor to perform at the
beginning of a current audit engagement?
A. Determine the complexity of the client business.
B. Evaluate compliance of ethical requirements.
C. Form an opinion.
D. The involvement of an expert.

27. An audit plan contains...

A. Documentation of the assertions under audit, the evidence obtained, and the conclusions
reached.
B. Reconciliation of the account balances in the financial statements with the account balances
in the client's general ledger.
C. Specifications of audit standards relevant to the financial statements being audited.
Specifications of procedures the auditors believe
D. appropriate for the financial statements under audit.
28. Generally accepted auditing standards require that auditors always prepare and use a/the
written…
A. audit plan.
B. client consent to discuss audit matters with prospective auditors.
C. planning memorandum explaining the auditor's understanding of the client's business.
D. time budgets and schedules for performing each audit.

29. Which of the following is not an aim of planning audit work?

A. Assisting in the direction of the work
B. Ensure that the work is completed expeditiously
C. Evaluate the objective of the audit work D. Facilitating review of the audit work

30. The following are the reasons for an auditor to have knowledge of the client business
except...
A. Plan the Audit.
B. Develop an efficient approach to meet the letters of laws in the business.
C. Assessing risks and identifying problems
D. Evaluate audit evidence.

31. The difference in materiality levels or thresholds depend on the following except...
A. legal and regulatory requirement.
B. class of transactions and disclosures.
C. compliance requirement.
D. the aspect of the financial statement being audited.

32. The three main types of corruption fraud are... bribery, and extortion
A. abetting
B. conflicts of interest
C. misappropriation
D. stealing

33. When planning an audit, which of the following is not a factor that affects auditors'
decisions about the quantity, type, and content of audit documentation"?
A. Auditors' need to verify the existence of new sales contracts important for the client's
business
B. The auditors' judgment about their independence with regard to the client.
C. The auditors' judgments about materiality.
D. The auditors' need to document compliance with generally accepted auditing standards.

34. Which of the following procedures would most likely be performed during planning?
A. Identifying related parties
B. Performing a search for unrecorded liabilities.
C. Reporting internal control deficiencies to the audit committee.
D. Surprise counts of the client's petty cash fund.

35. Which of the following is not a benefit claimed for the practice of determining materiality
in the initial planning stage of an audit?
A. Being able to fine-tune the audit work for effectiveness and efficiency.
B. Avoiding the problem of doing more work than necessary (over auditing).
C. Being able to decide early what type of audit opinion to issue
D. Avoiding the problem of doing too little work (under auditing)

36. Which of the following engagement planning procedures would most likely assist the
auditor in identifying related-party transactions before the balance-sheet date?
A. Inspecting communications with the client's legal counsel regarding recorded contingent
liabilities.
B. Interviewing internal auditors about their reporting responsibilities. Reviewing accounting
records for recurring
C. transactions occurring near year-end.
D. Scanning the minutes for significant transactions with members of the board of directors.

37. An auditor's permanent file audit documentation most likely will contain...
A. excerpts of the corporate charter and bylaws.
B. internal control analysis for the current year.
C. memoranda of conference with management.
D. the most recent engagement letter.

Use the following information to answer question 38 to 40

APK is an audit firm, who has been given an offer to audit Otabil's company Limited on 30
November, 2021. APK is planning to use Risk-Based Audit Strategy for the audit engagement
when they accept the offer.
38. As an audit student, which of the following advice would you give to APK prior to
acceptance of the audit work?
A. APK should make sure their opinion
on the financial statement reflect true and fair view
B. APK should plan the audit by gathering sufficient and appropriate evidence including
identification of risk and its impact on the business
C. APK should obtain sufficient and detailed knowledge about the client's business
D. APK should draw appropriate audit programme for testing transactions and balances

39. Which of the following procedures would you recommend to APK for their Risk-Based
Audit plan?

A. Understanding the business, detect and prioritize is and develop risk register
B. Performing detailed audit test and identifying the risk associated with the business
C. Drawing appropriate audit programme for testing transactions and balances
D. Evaluating the compliance of ethical requirement and Performing detailed audit test

40. What do you think will make APK use such a strategy for their audit work?
A. To perform detailed audit test to identify all related risks
B. To focus on high risks areas
C. To understands in detailed the components of risks
D. To Prioritize the risk and develop a risk register