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Toaz - Info Feedback Your Answer Is Correct PR
Toaz - Info Feedback Your Answer Is Correct PR
Toaz - Info Feedback Your Answer Is Correct PR
Select one:
a. both statements are incorrect
b. both statements are correct
c. only statement 1 is correct
d. only statement 2 is correct
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Question 2
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Select one:
a. the client only
b. the public
c. the auditor only
d. both the client and the auditor
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Question 3
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Select one:
a. i, iv, iii, ii, v, vi
b. i, ii, iii, iv, v, vi
c. i, iv, ii, iii, vi, v
d. i, iv, ii, iii, v, vi
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Question 4
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The objective and scope of the audit and the extent of the auditor’s responsibilities to the
client are best documented in
Select one:
a. Independent auditor’s report
b. Audit engagement letter
c. Audit program
d. Client’s representation letter
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Question 5
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Engagement letter that documents and confirms the auditor's acceptance of the
engagement would normally be sent to the client
Select one:
a. before the commencement of the engagement
b. at the end of the fieldwork
c. before the auditor report is issued
d. after the audit report is issued
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Question 6
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Before accepting an audit engagement, a successor auditor should make specific inquiries
of the predecessor auditor regarding the predecessor’s
Select one:
a. Opinion of any subsequent events occurring since the predecessor’s audit report was
issued.
b. Understanding as to the reasons for the change of auditors
c. Awareness of the consistency in the application of GAAP between periods.
d. Evaluation of all matters of continuing accounting significance.
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Question 7
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According to PSA 210, the auditor and the client should agree on the terms of engagement.
The agreed terms would need to be recorded in
Select one:
a. memo placed in the permanent section of the working papers
b. engagement letter
c. comfort letter
d. client representation letter
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Question 8
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If permission from client to discuss its affairs with the proposed auditor is denied by the
client, the predecessor auditor should:
Select one:
a. Keep silent of the denial.
b. Seek legal advice before responding to the proposed auditor
c. Disclose the fact that the permission to disclose is denied by the client.
d. Disclose adequately to proposed auditor all noncompliance made by the client.
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Question 9
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Arrangements concerning with which of the following are least likely to be included in the
engagement letter?
Select one:
a. CPA investment in client securities
b. A predecessor auditor
c. Fees and billing
d. Other services to be provided in addition to the audit
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Question 10
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The form and content of the audit engagement letters may vary for each client, but they
would generally include reference to except:
Select one:
a. management's responsibility for all the financial statements
b. the form of any reports or any communication of results of engagement.
c. unrestricted access to whatever records, documentation and other information requested
in connection with the audit.
d. the scope of the audit, excluding reference to applicable legislation, regulations, or
pronouncements of professional bodies to which the auditor adheres.
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Question 11
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Select one:
a. A reference to the inherent limitation of an audit that some material misstatements may
remain undiscovered.
b. Description of any letters or reports that the auditor expects to submit to the client.
c. Arrangements concerning the involvement of internal auditors and other client’s staff.
d. Identification of specific audit procedures that the auditor needs to undertake.
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Question 12
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Select one:
a. The objective of financial reporting.
b. Arrangement concerning the involvement of other auditors or experts in some aspects of
the audit.
c. The form of any reports or other communication of the results of the engagement.
d. Management responsibility for the financial statements.
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Question 13
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Select one:
a. related services only
b. audits only
c. assurance engagements only
d. professional engagements of all types
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Question 14
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Which of the following should an auditor obtain from the predecessor auditor prior to
accepting an audit engagement?
Select one:
a. Analysis of income statement accounts
b. Analysis of balance sheet accounts
c. All matters of continuing accounting significance
d. Facts that might bear on the integrity of management
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Question 15
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A successor auditor most likely would make specific inquiries of the predecessor auditor
regarding
Select one:
a. Specialized accounting principles of the client’s industry.
b. The competency of the client’s internal audit staff.
c. Disagreements with management as to auditing procedures.
d. The uncertainty inherent in applying sampling procedures.
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Which of the following least likely requires the auditor to send a new engagement letter?
Select one:
a. Any revised or special terms of the engagement.
b. A recent change in the audit firm’s management.
c. An indication that the client misunderstands the objective and scope of the audit.
d. Legal requirements and other government agencies’ pronouncements.
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Question 17
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Prior to the acceptance of an audit engagement with a client who has terminated the
services of the predecessor auditor, the CPA should
Select one:
a. Contact the predecessor auditor without advising the prospective client and request a
complete report of the circumstance leading to the termination with the understanding that
all information disclosed will be kept confidential.
b. Accept the engagement without contacting the predecessor auditor since the CPA can
include audit procedures to verify the reason given by the client for the termination.
c. Advise the client of the intention to contact the predecessor auditor and request
permission for the contact.
d. Not communicate with the predecessor auditor because this would in effect be asking the
auditor to violate the confidential relationship between auditor and client.
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Question 18
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On recurring audit engagements, the auditor may decide not to send a new engagement
letter each period. In which of the following situations will there be no need to send a new
letter?
Select one:
a. indications of misunderstanding of the objective and scope of the audit
b. revisions or special terms of the engagement
c. significant change in nature or size of the client's business
d. recent change of middle management and rank and file organizational structure
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Question 19
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When an independent auditor is approached to perform an audit for the first time, he or she
should make inquiries of the predecessor auditor. Inquiries are necessary because the
predecessor may be able to provide the successor with information that will assist the
successor in determining whether
Select one:
a. The predecessor’s work should be used.
b. The engagement should be accepted.
c. The company rotates auditors.
d. In the predecessor’s opinion, control risk is low.
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Question 20
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When a CPA is the auditor of a parent entity and also the auditor of its subsidiary, branch or
division (component), which of the following are least likely to be included in the
engagement letter?
Select one:
a. who appoints the auditor of the component
b. legal requirements
c. whether a separate audit report is to be issued on the component
d. number of reports to be prepared during the peak audit season
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Select one:
a. An internal control questionnaire identifying policies and procedures that assure specific
objectives will be achieved.
b. An audit program setting forth in detail the procedures necessary to accomplish the
engagement’s objectives.
c. A planning memorandum establishing the timing of the audit procedures and
coordinating the assistance of entity personnel.
d. A flowchart or narrative of the information system describing the recording and
classification of transactions for financial reporting.
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Question 2
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Which of the following would a successor auditor normally perform after acceptance of an
audit client?
Select one:
a. Inquiry of predecessor auditor regarding the client.
b. Review of predecessor auditor working papers.
c. Inquiry of bankers regarding the client.
d. Review the SEC filings of the client.
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Question 3
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The auditor should determine overall responses to address the risks of material
misstatement at the financial statement level. Such responses least likely include
Select one:
a. Performing substantive procedures at an interim date instead of at period end.
b. Incorporating additional elements of unpredictability in the selection of further audit
procedures to be performed.
c. Assigning more experienced staff or those with special skills or using experts.
d. Emphasizing to the audit team the need to maintain professional skepticism in gathering
and evaluating audit evidence.
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Question 4
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The auditor should plan the audit work so that the audit will be performed in an effective
manner. The extent of planning will vary according to any of the following, except:
Select one:
a. size of the audit client
b. auditor's experience with the entity and knowledge of the business
c. the nature and complexity of the audit engagement
d. the assessed level of control risk
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Question 5
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Select one:
a. both statements are correct
b. only statement 1 is correct
c. both statements are incorrect
d. only statement 2 is correct
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Question 6
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Select one:
a. procedures for handling large numbers of transactions are processed by information
technology (IT) equipment
b. the effectiveness of procedures depends on the segregation of employee duties
c. procedures are designed to assure the execution and recording of transactions in
accordance with management's authorization
d. in the performance of most control procedures, there are possibilities of errors arising
from mistakes in judgment
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Question 7
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It is the process designed and effected by those charged with governance, management,
and other personnel to provide reasonable assurance about the achievement of the entity's
objectives.
Select one:
a. accounting process
b. internal control
c. internal auditing
d. business strategy
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Question 8
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Select one:
a. access to assets is permitted only in accordance with management's authorization
b. irregularities will be eliminated
c. transactions are executed in accordance with management's authorization
d. the recorded accountability for assets is compared with the existing assets at reasonable
intervals
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Question 9
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The assessment of the risks of material misstatement at the financial statement level is
affected by the auditor’s understanding of the control environment. Weaknesses in the
control environment ordinarily will lead the auditor to
Select one:
a. Modify the nature of audit procedures to obtain more persuasive audit evidence.
b. Conduct some audit procedures at an interim date rather than at period end.
c. Decrease the number of locations to be included in the audit scope.
d. Have more confidence in internal control and the reliability of audit evidence generated
internally within the entity.
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Question 10
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In planning the audit engagement, the auditor should consider each of the following, except
Select one:
a. materiality level and audit risk
b. the kind of opinion that is likely to be expressed
c. matters relating to the entity's business and the industry in which it operates
d. the entity's accounting policies and procedures
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Question 11
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Select one:
a. The auditor should obtain an understanding of the accounting and internal control
systems sufficient to plan the audit and develop an effective audit approach.
b. The auditor is an insurer, and his or her report constitutes a guarantee.
c. The subsequent discovery that a material misstatement exists in the financial statements is
evidence of inadequate planning, performance, or judgment on the part of the auditor.
d. The auditor should use professional judgment to assess audit risk and to design audit
procedures to ensure it is eliminated.
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Question 12
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The auditor should design and perform further audit procedures whose nature, timing, and
extent are responsive to the assessed risks of material misstatement at the assertion level.
Which of the following is the most important consideration in responding to the assessed
risks?
Select one:
a. The timing of the audit procedures.
b. The extent of the audit procedures.
c. The nature of the audit procedures.
d. All of these are equally important.
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Question 13
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Internal control can only provide reasonable, not absolute, assurance of achieving entity
control objectives. One of the factors limiting the likelihood of achieving those objectives is
that:
Select one:
a. the auditor's primary responsibility is the detection of fraud
b. The cost of internal control should not exceed its benefits
c. the board of directors is active and independent
d. management monitors internal control
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Question 14
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Select one:
a. provide reasonable assurance that the objectives of the organization are achieved.
b. have a basis for planning the audit
c. ensure the accuracy, reliability and timeliness of information
d. encourage compliance with organizational objectives
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Question 15
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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?
Select one:
a. The work is to be adequately planned and assistants, if any, are to be properly
supervised.
b. Due professional care is to be exercised in the planning and performance of the audit and
preparation of the report.
c. The audit is to be performed by a person or persons having adequate technical training
and proficiency as an auditor.
d. In all matters relating to the assignment, an independent mental attitude is to be
maintained by the auditor(s).
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Question 16
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Select one:
a. Read specialized industry journals.
b. Perform tests of details of transactions and balances.
c. Reevaluate client’s internal control environment.
d. Review prior-year working papers and the permanent file for the client.
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Question 17
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There is an inverse relationship that exists between the acceptable level of detection risk
and the
Select one:
a. preliminary judgments about materiality levels
b. assurance provided by substantive tests
c. risk of misapplying audit process
d. risk of falling to discover material misstatement
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Question 18
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The development of a general strategy and a detailed approach for the expected nature,
timing, and extent of audit refers to :
Select one:
a. Supervision
b. Planning
c. Directing
d. Audit procedures
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Question 19
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The auditor’s assessment of the identified risks at the assertion level provides a basis for
considering the appropriate audit approach for designing and performing further audit
procedures. Which of the following is incorrect?
Select one:
a. The auditor may determine that only by performing tests of controls may the auditor
achieve an effective response to the assessed risk of material misstatement for a particular
assertion.
b. The auditor designs and performs substantive procedures for each material class of
transactions, account balance, and disclosure only when the auditor uses the substantive
approach.
c. The auditor may determine that performing only substantive procedures is appropriate
for specific assertions and, therefore, the auditor excludes the effect of controls from the
relevant risk assessment.
d. The auditor needs to be satisfied that performing only substantive procedures for the
relevant assertion would be effective in reducing the risk of material misstatement to an
acceptably low level.
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Question 20
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It involves establishing the overall audit strategy for the engagement and developing an
audit plan in order to reduce audit risk to an acceptably low level.
Select one:
a. field work
b. planning
c. reporting
d. organizing
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Your answer is correct.
Engagement letter that documents and confirms the auditor's acceptance of the
engagement would normally be sent to the client
Select one:
a. before the commencement of the engagement
b. before the auditor report is issued
c. after the audit report is issued
d. at the end of the fieldwork
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Question 2
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When an independent auditor is approached to perform an audit for the first time, he or she
should make inquiries of the predecessor auditor. Inquiries are necessary because the
predecessor may be able to provide the successor with information that will assist the
successor in determining whether
Select one:
a. The predecessor’s work should be used.
b. In the predecessor’s opinion, control risk is low.
c. The engagement should be accepted.
d. The company rotates auditors.
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Question 3
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Which of the following procedures would an auditor most likely perform in planning a
financial statement audit?
Select one:
a. Searching for unauthorized transactions that may aid in detecting unrecorded liabilities.
b. Comparing the financial statements to anticipated results.
c. Inquiring of the client’s legal counsel concerning pending litigation.
d. Examining computer generated exception reports to verify the effectiveness of internal
controls.
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Question 4
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Select one:
a. Increasing the extent of an audit procedure is effective only if the audit procedure itself is
relevant to the specific risk.
b. Extent includes the quantity of a specific audit procedure to be performed.
c. The auditor ordinarily decreases the extent of audit procedures as the risk of material
misstatement increases.
d. The extent of an audit procedure is determined by the judgment of the auditor after
considering the materiality, the assessed risk, and the degree of assurance the auditor plans
to obtain.
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Question 5
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On recurring audit engagements, the auditor may decide not to send a new engagement
letter each period. In which of the following situations will there be no need to send a new
letter?
Select one:
a. significant change in nature or size of the client's business
b. indications of misunderstanding of the objective and scope of the audit
c. revisions or special terms of the engagement
d. recent change of middle management and rank and file organizational structure
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Question 6
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The auditor should plan the audit work so that the audit will be performed in an effective
manner. The extent of planning will vary according to any of the following, except:
Select one:
a. the nature and complexity of the audit engagement
b. the assessed level of control risk
c. size of the audit client
d. auditor's experience with the entity and knowledge of the business
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Question 7
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Select one:
a. evidence to use in reducing detection risk
b. a basis for modifying test of controls
c. knowledge necessary to plan the audit
d. information necessary to prepare flowcharts
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Question 8
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It is the process designed and effected by those charged with governance, management,
and other personnel to provide reasonable assurance about the achievement of the entity's
objectives.
Select one:
a. internal auditing
b. accounting process
c. business strategy
d. internal control
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Question 9
Correct
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There is an inverse relationship that exists between the acceptable level of detection risk
and the
Select one:
a. preliminary judgments about materiality levels
b. risk of falling to discover material misstatement
c. assurance provided by substantive tests
d. risk of misapplying audit process
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Question 10
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Prior to the acceptance of an audit engagement with a client who has terminated the
services of the predecessor auditor, the CPA should
Select one:
a. Advise the client of the intention to contact the predecessor auditor and request
permission for the contact.
b. Accept the engagement without contacting the predecessor auditor since the CPA can
include audit procedures to verify the reason given by the client for the termination.
c. Contact the predecessor auditor without advising the prospective client and request a
complete report of the circumstance leading to the termination with the understanding that
all information disclosed will be kept confidential.
d. Not communicate with the predecessor auditor because this would in effect be asking the
auditor to violate the confidential relationship between auditor and client.
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Question 11
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Which of the following is an effective audit planning and control procedures that helps
prevent misunderstandings and inefficient use of audit personnel?
Select one:
a. Make copies, for inclusion in the working papers, of those client supporting documents
examined by the auditor.
b. Arrange a preliminary conference with the client to discuss audit objectives, fees, timing,
and other information.
c. Arrange to have the auditor prepare and post any necessary adjusting or reclassification
entries prior to final closing.
d. Provide the client with copies of the audit programs to be used during the audit.
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Select one:
a. The absence of misstatements detected by a substantive procedure provides audit
evidence that controls related to the assertion being tested are effective.
b. As the planned level of assurance increases, the auditor seeks more reliable audit
evidence.
c. Those controls subject to testing by performing inquiry combined with inspection or
reperformance ordinarily provide more assurance than those controls for which the audit
evidence consists solely of inquiry and observation.
d. A material misstatement detected by the auditor’s procedures that was not identified by
the entity ordinarily is indicative of the existence of a material weakness in internal control.
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Question 13
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Select one:
a. assurance engagements only
b. related services only
c. professional engagements of all types
d. audits only
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Question 14
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The objective and scope of the audit and the extent of the auditor’s responsibilities to the
client are best documented in
Select one:
a. Independent auditor’s report
b. Audit program
c. Client’s representation letter
d. Audit engagement letter
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Question 15
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Select one:
a. Assessing the adequacy of the available evidential matter.
b. Providing assurance that potential material misstatements will be identified.
c. Reducing the scope of tests of controls and substantive tests.
d. Enhancing the auditor’s understanding of the client’s business.
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Question 16
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Select one:
a. Certain audit procedures may be more appropriate for some assertions than others.
b. The higher the auditor’s assessment of risk, the less reliable and relevant is the audit
evidence sought by the auditor from substantive procedures.
c. The auditor is required to obtain audit evidence about the accuracy and completeness of
information produced by the entity’s information system when that information is used in
performing audit procedures.
d. The nature of further audit procedures refers to their purpose and their type.
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Question 17
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Question 18
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When a CPA is the auditor of a parent entity and also the auditor of its subsidiary, branch or
division (component), which of the following are least likely to be included in the
engagement letter?
Select one:
a. who appoints the auditor of the component
b. legal requirements
c. whether a separate audit report is to be issued on the component
d. number of reports to be prepared during the peak audit season
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Question 19
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Select one:
a. have a basis for planning the audit
b. provide reasonable assurance that the objectives of the organization are achieved.
c. encourage compliance with organizational objectives
d. ensure the accuracy, reliability and timeliness of information
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Question 20
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If permission from client to discuss its affairs with the proposed auditor is denied by the
client, the predecessor auditor should:
Select one:
a. Seek legal advice before responding to the proposed auditor
b. Keep silent of the denial.
c. Disclose the fact that the permission to disclose is denied by the client.
d. Disclose adequately to proposed auditor all noncompliance made by the client.
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Question 21
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As part of a periodic planning exercise, AAA Company discovers that a political dispute may
interfere with the company's supply sources. This is an example of:
Select one:
a. monitoring of controls
b. control environment
c. risk assessment
d. control activities
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Question 22
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Select one:
a. procedures are designed to assure the execution and recording of transactions in
accordance with management's authorization
b. in the performance of most control procedures, there are possibilities of errors arising
from mistakes in judgment
c. the effectiveness of procedures depends on the segregation of employee duties
d. procedures for handling large numbers of transactions are processed by information
technology (IT) equipment
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Question 23
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Select one:
a. reflects management's philosophy and operating style.
b. affects management's financial statement assertions.
c. provides adequate safeguards over access to assets.
d. enhances management's decision-making processes.
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Question 24
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Select one:
a. control environment, risk assessment process, control activities, information system
and communication, and monitoring of controls.
b. organizational structure, management philosophy, and planning.
c. legal environment of the firm, management philosophy, and organizational structure.
d. risk assessment process, backup facilities, responsibility accounting and natural laws.
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Question 25
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The primary purpose of the auditor's consideration of internal control is to provide a basis
for
Select one:
a. determining whether procedures and records that are concerned with the safeguarding of
assets are reliable.
b. the expression of an opinion.
c. determining the nature, timing and extent of audit tests to be applied.
d. constructive suggestions to clients concerning deficiencies in internal control.
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Question 26
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Select one:
a. Analytical procedures are more efficient, but not more effective, than tests of details and
transactions.
b. Analytical procedures used in planning an audit generally use data aggregated at a high
level.
c. Analytical procedures can replace tests of controls in gathering evidence to support the
assessed level of control risk.
d. Analytical procedures usually involve comparisons of ratios developed from recorded
amounts to assertions developed by management.
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Question 27
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Before accepting an audit engagement, a successor auditor should make specific inquiries
of the predecessor auditor regarding the predecessor’s
Select one:
a. Understanding as to the reasons for the change of auditors
b. Evaluation of all matters of continuing accounting significance.
c. Awareness of the consistency in the application of GAAP between periods.
d. Opinion of any subsequent events occurring since the predecessor’s audit report was
issued.
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Question 28
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An engagement letter is prepared with the interest(s) of
Select one:
a. the auditor only
b. the public
c. both the client and the auditor
d. the client only
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Question 29
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According to PSA 210, the auditor and the client should agree on the terms of engagement.
The agreed terms would need to be recorded in
Select one:
a. client representation letter
b. memo placed in the permanent section of the working papers
c. comfort letter
d. engagement letter
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Question 30
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PSA 315 Redrafted requires the auditor to obtain an understanding of the client's internal
controls
Select one:
a. whenever it would be appropriate
b. for first-time audits
c. sufficient to find any frauds which may exist
d. for every audit
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Question 31
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Select one:
a. A reference to the inherent limitation of an audit that some material misstatements may
remain undiscovered.
b. Description of any letters or reports that the auditor expects to submit to the client.
c. Arrangements concerning the involvement of internal auditors and other client’s staff.
d. Identification of specific audit procedures that the auditor needs to undertake.
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Question 32
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The form and content of the audit engagement letters may vary for each client, but they
would generally include reference to except:
Select one:
a. unrestricted access to whatever records, documentation and other information requested
in connection with the audit.
b. the form of any reports or any communication of results of engagement.
c. the scope of the audit, excluding reference to applicable legislation, regulations, or
pronouncements of professional bodies to which the auditor adheres.
d. management's responsibility for all the financial statements
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Question 33
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Which of the following should an auditor obtain from the predecessor auditor prior to
accepting an audit engagement?
Select one:
a. Analysis of income statement accounts
b. All matters of continuing accounting significance
c. Facts that might bear on the integrity of management
d. Analysis of balance sheet accounts
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Question 34
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Analytical procedures, which means the analysis of significant ratios and trends including
the resulting investigation of fluctuations and relationships that are inconsistent with other
relevant information or which deviate from predicted amounts, are not required to be
applied
Select one:
a. As substantive procedures
b. At the planning stage of the audit
c. Overall review stage of the audit
d. None of the above
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Question 35
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Control activities constitute one of the five components of internal control. Which of the
following is not included in this internal control component?
Select one:
a. authorization
b. performance reviews
c. segregation of duties
d. an internal audit function
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Question 36
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To obtain an understanding of the relevant policies and procedures of internal control, the
auditor performs all of the following except:
Select one:
a. make inquiries
b. inspect documents and records
c. design substantive tests
d. make observations
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Question 37
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Select one:
a. eliminates risk and potential loss to the entity
b. is unaffected by changing circumstances and conditions encountered by the entity
c. cannot be circumvented by management
d. reduces the need for management the review exception reports on a day-to-day basis
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Question 38
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A successor auditor most likely would make specific inquiries of the predecessor auditor
regarding
Select one:
a. Specialized accounting principles of the client’s industry.
b. Disagreements with management as to auditing procedures.
c. The competency of the client’s internal audit staff.
d. The uncertainty inherent in applying sampling procedures.
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Question 39
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Select one:
a. obtaining a flowchart of activities performed by entity personnel.
b. developing audit objectives that reduce control risk.
c. performing test of transactions that corroborate management's financial statement's
assertions.
d. observing employees as they apply specific controls.
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Question 40
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Select one:
a. i, iv, iii, ii, v, vi
b. i, iv, ii, iii, v, vi
c. i, iv, ii, iii, vi, v
d. i, ii, iii, iv, v, vi
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Question 41
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In planning the audit engagement, the auditor should consider each of the following, except
Select one:
a. materiality level and audit risk
b. matters relating to the entity's business and the industry in which it operates
c. the kind of opinion that is likely to be expressed
d. the entity's accounting policies and procedures
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Question 42
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Select one:
a. transactions are executed in accordance with management's authorization
b. irregularities will be eliminated
c. access to assets is permitted only in accordance with management's authorization
d. the recorded accountability for assets is compared with the existing assets at reasonable
intervals
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Question 43
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Which of the following least likely requires the auditor to send a new engagement letter?
Select one:
a. Any revised or special terms of the engagement.
b. A recent change in the audit firm’s management.
c. An indication that the client misunderstands the objective and scope of the audit.
d. Legal requirements and other government agencies’ pronouncements.
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Select one:
a. Tests of the operating effectiveness of controls are performed only on those controls that
the auditor has determined are suitably designed to prevent, or detect and correct, a
material misstatement in an assertion.
b. Testing the operating effectiveness of controls is the same as obtaining audit evidence
that controls have been implemented.
c. Tests of controls are required when an entity conducts its business using IT and no
documentation of transactions is produced or maintained, other than through the IT
system.
d. Tests of controls are required under certain circumstances.
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Question 45
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Select one:
a. both statements are incorrect
b. only statement 1 is correct
c. only statement 2 is correct
d. both statements are correct
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Question 46
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Select one:
a. All audit procedures can be performed prior to period end.
b. The auditor may perform tests of controls or substantive procedures at an interim date or
at period end.
c. Timing refers to when audit procedures are performed or the period or date to which the
audit evidence applies.
d. If the auditor performs tests of controls or substantive procedures prior to period end, the
auditor considers the additional evidence required for the remaining period.
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Question 47
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Arrangements concerning with which of the following are least likely to be included in the
engagement letter?
Select one:
a. Fees and billing
b. A predecessor auditor
c. CPA investment in client securities
d. Other services to be provided in addition to the audit
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Question 48
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Internal control can only provide reasonable, not absolute, assurance of achieving entity
control objectives. One of the factors limiting the likelihood of achieving those objectives is
that:
Select one:
a. the auditor's primary responsibility is the detection of fraud
b. management monitors internal control
c. the board of directors is active and independent
d. The cost of internal control should not exceed its benefits
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Question 49
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It involves establishing the overall audit strategy for the engagement and developing an
audit plan in order to reduce audit risk to an acceptably low level.
Select one:
a. organizing
b. planning
c. field work
d. reporting
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Question 50
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Select one:
a. both statements are correct
b. only statement 2 is correct
c. both statements are incorrect
d. only statement 1 is correct
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In considering internal control within the revenue/receipt cycle, what is the purpose of a
transaction walk through?
Select one:
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When conducting surprise cash count, the auditor should simultaneously count all cash
funds, marketable securities and other negotiable assets to prevent
Select one:
a. time-out
b. substitution
c. misappropriation
d. defalcation
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The basic "give and take" functions of a business have been grouped into transaction cycles.
The cycle that includes the events of hiring employees and paying them is known as the
Select one:
a. revenue cycle
b. expenditure cycle
c. financing cycle
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The transaction cycles relate to one another and interface with this to generate information
for both management and external parties.
Select one:
d. computer processor
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What is the major difference between the revenue and the expenditure cycle?
Select one:
a. in the revenue cycle, cash is received; in the expenditure cycle, cash is paid out.
b. the revenue cycle includes the activity of obtaining funds from investors.
c. the revenue cycle includes marketing activities; the expenditure cycle does not.
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Which of the following would the auditor consider to be an incompatible operation if the
cashier receives remittances from the mail room?
Select one:
c. The cashier posts the receipts to the accounts receivable subsidiary ledger.
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a. Receiving personnel
b. Purchasing personnel
c. Sales personnel.
d. Inventory control personnel.
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Which of the following would best protect a company that wishes to prevent lapping?
Select one:
a. Requesting that customers checks be made payable to the company and be addressed to
the treasurer
d. Segregating duties so that no employee has access both to checks from customers and to
currency from daily cash receipts
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The person who opens the mail commonly prepares a remittance advice when a customer
fails to return one with a payment. Consequently, mail should be opened by the
Select one:
a. Receptionist.
c. Credit manager.
d. Sales manager.
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Which of the following is not a universal rule for achieving control over cash?
Select one:
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The business owners obtain financing from outside investors, which result to an inflow of
cash into the company. This transaction is considered to be part of which cycle?
Select one:
a. production cycle
b. payroll cycle
c. financing cycle
d. revenue cycle
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Which of the following is not normally considered an act of concealing cash shortage?
Select one:
a. lapping
b. banking
c. window dressing
d. kiting
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b. Sales invoice
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This occurs when collection of receivable from one customer is misappropriated and then
concealed by applying a subsequent collection from another customer.
Select one:
a. window dressing
b. floating
c. kiting
d. lapping
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This occurs when cash shortage is concealed by overstating the balance of cash. This is
performed by exploiting the float period (the time it needs for a check to clear at the bank it
was drawn).
Select one:
a. window dressing
b. kiting
c. floating
d. lapping
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After the auditor has prepared a flowchart of internal control for sales, and cash receipts
transactions and evaluated the design of the system, the auditor would perform tests of
controls on all control procedures
Select one:
a. Considered to be strengths that the auditor plans to rely on in assessing control risk.
c. Considered to be deficiencies that might allow errors to enter the accounting system.
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To achieve control when there is no billing department, the billing function should be
performed by the
Select one:
a. Credit and collection department
b. Sales department
c. Shipping department
d. Accounting department
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a. the auditor has a reason to believe that recipients of negative confirmation requests will
disregard such confirmation requests
b. the assessed level of inherent and control risk for receivable and sales is very low
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
Bank balance – November 30, 2018 P90,800
Undeposited collections 5,000
Bank service charges 100
Bank collection of customer’s note (8,000)
Outstanding checks:
Number Amount
7159 P3,000
7767 5,000
7915 2,000 (10,000)
Book balance – November 30, 2018 P77,900
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
f. Undeposited collections on December 31, 2018 - P8,000.
g. The service charge for December was P150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the adjusted bank disbursement
for December 2018.
Select one:
a. P 98,150
b. P120,150
c. P125,150
d. P 76,150
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
g. The service charge for December was P150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the adjusted book receipts for
December 2018.
Select one:
a. P172,000
b. P182,000
c. P170,500
d. P173,000
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The cash and cash equivalents of P6,325,000 reported by Kristine Co. on December 31, 2018
include the following:
a) Two certificates of deposits, each totaling P500,000, having a maturity of 120 days.
b) A check that is dated January 12, 2019 in the amount of P125,000.
c) A commercial paper of P2,100,000 which is due in 90 days.
d) Currency and coins on hand amounted to P7,700.
Kristine Co. has agreed to maintain a cash balance of P500,000 in one of its banks at all
times to ensure future credit availability (this amount is legally restricted as to withdrawal
and was included in the above balance).
How much is the correct amount of cash and cash equivalents that Kristine should report in
its December 31, 2018 statement of financial position?
Select one:
a. P4,700,000
b. P5,200,000
c. P6,200,000
d. P3,100,000
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
g. The service charge for December was P150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
a. P134,650
b. P137,650
c. P132,650
d. P137,800
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The cash account of Ria on December 31, 2018 has a balance of P151,000 and it consists of
the following:
Bills and coins on hand P52,780
Total P151,000
The correct cash and cash equivalents balance on December 31, 2018 is
Select one:
a. 98,330
b. 98,900
c. 97,530
d. 98,730
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Of the two forms of confirmation request, which is considered more reliable source of
evidence?
Select one:
a. negative confirmation
b. positive confirmation
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To test the existence assertion for recorded receivables, an auditor would select a sample
from the
Select one:
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Which of the following is an effective internal control over accounts receivable?
Select one:
a. Balances in the subsidiary accounts receivable ledger should be reconciled to the general
ledger control account once a year, preferably at year-end.
b. Only persons who handle cash receipts should be responsible for the preparation of
documents that reduce accounts receivable balances.
c. The billing function should be assigned to persons other than those responsible for
maintaining accounts receivable subsidiary records.
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
g. The service charge for December was P150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the unadjusted cash balance per
books as of December 31, 2018?
Select one:
a. P144,900
b. P152,750
c. P165,700
d. P152,800
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
Bank balance – November 30, 2018 P90,800
Undeposited collections 5,000
Bank service charges 100
Bank collection of customer’s note (8,000)
Outstanding checks:
Number Amount
7159 P3,000
7767 5,000
7915 2,000 (10,000)
Book balance – November 30, 2018 P77,900
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
f. Undeposited collections on December 31, 2018 - P8,000.
g. The service charge for December was P150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the adjusted cash balance as of
November 30, 2018.
Select one:
a. P85,800
b. P90,800
c. P63,800
d. P58,800
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Which of the following is the best argument against the use of negative accounts receivable
confirmations?
Select one:
a. recipients are likely to feel that in reality the confirmation is a subtle request for payment.
d. the inference drawn from drawn from receiving no reply may not be correct.
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a. accuracy
b. completeness
c. gross valuation
d. existence
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Overdraft in a special checking account with RCBC Bank (Kerry does not have another account
20,000
with RCBC bank)
Cash accumulated in a special fund that will be used for plant expansion in five years 150,000
Currency and coins in a petty cash fund (the company has not replenished the fund to the
1,000
imprest amount of P5,000)
How much cash and cash equivalents should Kerry Corp. report on the December 31, 2018
statement of financial position?
Select one:
a. P383,000
b. P372,000
c. P352,000
d. P391,000
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Which of the following is a likely procedure to test the adequacy of the allowance for
doubtful accounts?
Select one:
c. Confirm receivables.
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Which of the following types of misstatements is least likely a concern of the auditor when
verifying the occurrence of sales?
Select one:
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Which of the following would be least likely to diminish the validity of evidence obtained
through confirmation of accounts receivable?
Select one:
a. the return address on the envelope used to send the confirmation request is that of the
client.
b. the client's mailroom personnel closely monitor and inspect confirmations during mailing.
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The books of Manila's Service, Inc. disclosed a cash balance of P687,570 on December 31,
2018. The bank statement as of December 31 showed a balance of P547,800. Additional
information that might be useful in reconciling the two balances follows:
(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was
dishonored on December 29 (maturity date). The bank charged Manila's account for
P142,650, including a protest fee of P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a
deposit of P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) Manila's account had been charged on December 26 for a customer's NSF check for
P12,960.
(g) Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been
collected on December 27, and the bank charged a P360 collection fee.
Based on the above and the result of your audit, determine the adjusted cash in bank
balance.
Select one:
a. P589,200
b. P577,200
c. P583,200
d. P512,400
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The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by bank on July 16 marked 8,250
NSF, and redeposited immediately; no entry made on books for return or
redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
Based on the application of the necessary audit procedures and appreciation of the above
data, how much is the cash shortage as of July 31?
Select one:
a. P0
b. P196,144
c. P8,250
d. P71,815
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The internal controls surrounding the revenue cycle provide the organization with several
assurances that include all of the following except the
Select one:
b. proper authorization of all sales and sales return and allowance transactions.
d. proper safeguarding of finished goods inventories while in stock and during the shipment
process.
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a. the auditor
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Which of the following business functions is associated with the revenue/receipt cycle?
Select one:
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The use of pre-numbered invoices, then accounting for their numeric sequence, meets
primarily the
Select one:
b. completeness assertion
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The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by bank on July 16 marked 8,250
NSF, and redeposited immediately; no entry made on books for return or
redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
Based on the application of the necessary audit procedures and appreciation of the above
data, how much is the adjusted cash balance as of July 31?
Select one:
a. P137,817
b. P112,335
c. P22,513
d. P120,585
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Cutoff tests designed to detect credit sales made before the end of the year that have been
recorded in the subsequent year provide assurance about management's assertion of
Select one:
a. presentation
b. completeness
c. existence
d. rights
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The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by bank on July 16 marked 8,250
NSF, and redeposited immediately; no entry made on books for return or
redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
Select one:
a. P214,802
b. P245,537
c. P232,881
d. P253,787
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This document is a bank statement prepared few days after month-end. Its purpose is to
help auditors verify reconciling items on the year-end bank reconciliation.
Select one:
b. proof of cash
c. bank reconciliation
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b. approve credit
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Which procedure would be of most assistance to an auditor discovering a large credit sale
that has erroneously been recorded twice?
Select one:
d. tracing the total sales in the sales journal to the general ledger
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Shown below is the bank reconciliation for Marikina Company for November 2018:
The bank statement for December 2018 contains the following data:
All outstanding checks on November 30, 2018, including the bank credit, were cleared in the
bank in December 2018.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December
31, 2018.
Based on the above and the result of your audit, how much is the cash balance per bank on
December 31, 2018?
Select one:
a. P154,000
b. P172,400
c. P150,000
d. P164,000
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Shown below is the bank reconciliation for Marikina Company for November 2018:
The bank statement for December 2018 contains the following data:
All outstanding checks on November 30, 2018, including the bank credit, were cleared in the
bank in December 2018.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December
31, 2018.
Based on the above and the result of your audit, how much is the December disbursements
per books?
Select one:
a. P79,600
b. P98,000
c. P89,600
d. P96,000
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Shown below is the bank reconciliation for Marikina Company for November 2018:
The bank statement for December 2018 contains the following data:
All outstanding checks on November 30, 2018, including the bank credit, were cleared in the
bank in December 2018.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December
31, 2018.
Based on the above and the result of your audit, how much is the December receipts per
books?
Select one:
a. P110,000
b. P148,000
c. P96,000
d. P124,000
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In connection with your audit of Caloocan Corporation for the year ended December 31,
2018, you gathered the following:
Based on the above information and the result of your audit, compute for the cash and cash
equivalent that would be reported on the December 31, 2018 balance sheet.
Select one:
a. P2,704,000
b. P3,084,000
c. P2,784,000
d. P2,790,000
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The cash and cash equivalents to be shown on the December 31, 2018 balance sheet is
Select one:
a. P1,910,000
b. P2,910,000
c. P4,410,000
d. P3,310,000
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Question 18
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Shown below is the bank reconciliation for Marikina Company for November 2018:
The bank statement for December 2018 contains the following data:
All outstanding checks on November 30, 2018, including the bank credit, were cleared in the
bank in December 2018.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December
31, 2018.
Based on the above and the result of your audit, the adjusted cash in bank balance as of
December 31, 2018 is
Select one:
a. P196,000
b. P141,600
c. P172,000
d. P162,000
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Shown below is the bank reconciliation for Marikina Company for November 2018:
The bank statement for December 2018 contains the following data:
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December
31, 2018.
Based on the above and the result of your audit, how much is the cash balance per books
on December 31, 2018?
Select one:
a. P170,400
b. P180,400
c. P150,000
d. P162,000
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Which of the following generally provides the least evidence regarding the valuation of
accounts receivable?
Select one:
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c. sales department
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You were able to gather the following from the December 31, 2018 trial balance of
Mandaluyong Corporation in connection with your audit of the company:
a. Customer’s check for P40,000 returned by bank on December 26, 2018 due to
insufficient fund but subsequently redeposited and cleared by the bank on January 8, 2019.
b. Customer’s check for P20,000 dated January 2, 2019, received on December 29, 2018.
c. Postal money orders received from customers, P30,000.
The petty cash fund consisted of the following items as of December 31, 2018.
Included among the checks drawn by Mandaluyong Corporation against the BPI current
account and recorded in December 2018 are the following:
a. Check written and dated December 29, 2018 and delivered to payee on January 2, 2019,
P80,000.
b. Check written on December 27, 2018, dated January 2, 2019, delivered to payee on
December 29, 2018, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in
excess of the deposit balance. These checks were still outstanding at December 31, 2018.
The savings account deposit in PNB has been set aside by the board of directors for
acquisition of new equipment. This account is expected to be disbursed in the next 3
months from the balance sheet date.
Based on the above and the result of your audit, determine the adjusted balance of BPI
Current Account.
Select one:
a. P1,000,000
b. 1,080,000
c. P1,120,000
d. 1,040,000
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To achieve control when there is no billing department, the billing function should be
performed by the
Select one:
a. accounting department
c. shipping department
d. sales department
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In the course of your audit of the Las Piñas Corporation, its controller is attempting to
determine the amount of cash to be reported on its December 31, 2018 balance sheet. The
following information is provided:
Based on the above and the result of your audit, how much will be reported as cash and
cash equivalent at December 31, 2018?
Select one:
a. P2,825,000
b. P3,025,000
c. P5,025,000
d. P2,575,000
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Question 25
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You were able to gather the following from the December 31, 2018 trial balance of
Mandaluyong Corporation in connection with your audit of the company:
a. Customer’s check for P40,000 returned by bank on December 26, 2018 due to
insufficient fund but subsequently redeposited and cleared by the bank on January 8, 2019.
b. Customer’s check for P20,000 dated January 2, 2019, received on December 29, 2018.
c. Postal money orders received from customers, P30,000.
The petty cash fund consisted of the following items as of December 31, 2018.
Included among the checks drawn by Mandaluyong Corporation against the BPI current
account and recorded in December 2018 are the following:
a. Check written and dated December 29, 2018 and delivered to payee on January 2, 2019,
P80,000.
b. Check written on December 27, 2018, dated January 2, 2019, delivered to payee on
December 29, 2018, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in
excess of the deposit balance. These checks were still outstanding at December 31, 2018.
The savings account deposit in PNB has been set aside by the board of directors for
acquisition of new equipment. This account is expected to be disbursed in the next 3
months from the balance sheet date.
Based on the above and the result of your audit, determine the adjusted balance of cash
and cash equivalents.
Select one:
a. P3,066,000
b. P3,074,900
c. P3,052,000
d. P2,917,200
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a. existence
c. completeness
d. classification
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The books of Manila's Service, Inc. disclosed a cash balance of P687,570 on December 31,
2018. The bank statement as of December 31 showed a balance of P547,800. Additional
information that might be useful in reconciling the two balances follows:
(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was
dishonored on December 29 (maturity date). The bank charged Manila's account for
P142,650, including a protest fee of P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a
deposit of P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) Manila's account had been charged on December 26 for a customer's NSF check for
P12,960.
(g) Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been
collected on December 27, and the bank charged a P360 collection fee.
Based on the above and the result of your audit, determine the net adjustment to cash as of
December 31, 2018.
Select one:
a. P 98,370
b. P104,370
c. P175,170
d. P110,370
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a. sales personnel
b. receiving personnel
d. purchasing personnel
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the unadjusted cash balance per
books as of December 31, 2018?
Select one:
a. P152,800
b. P165,700
c. P152,750
d. P144,900
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The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by bank on July 16 marked 8,250
NSF, and redeposited immediately; no entry made on books for return or
redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
Based on the application of the necessary audit procedures and appreciation of the above
data, how much is the adjusted book disbursements for July?
Select one:
a. P212,517
b. P181,782
c. P206,673
d. P220,767
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You were able to gather the following from the December 31, 2018 trial balance of
Mandaluyong Corporation in connection with your audit of the company:
a. Customer’s check for P40,000 returned by bank on December 26, 2018 due to
insufficient fund but subsequently redeposited and cleared by the bank on January 8, 2019.
b. Customer’s check for P20,000 dated January 2, 2019, received on December 29, 2018.
c. Postal money orders received from customers, P30,000.
The petty cash fund consisted of the following items as of December 31, 2018.
Included among the checks drawn by Mandaluyong Corporation against the BPI current
account and recorded in December 2018 are the following:
a. Check written and dated December 29, 2018 and delivered to payee on January 2, 2019,
P80,000.
b. Check written on December 27, 2018, dated January 2, 2019, delivered to payee on
December 29, 2018, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in
excess of the deposit balance. These checks were still outstanding at December 31, 2018.
The savings account deposit in PNB has been set aside by the board of directors for
acquisition of new equipment. This account is expected to be disbursed in the next 3
months from the balance sheet date.
Based on the above and the result of your audit, determine the adjusted balance of petty
cash fund.
Select one:
a. P6,000
b. P2,000
c. P4,900
d. P7,200
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The cash account of the Makati Corporation as of December 31, 2018 consists of the
following:
410,000
Petty Cash fund of which P5,000 is in currency; P3,600 in form of
employees’ I.O.U. s; and P1,400 is supported by approved petty cash
vouchers for expenses all dated prior to closing of the books on December
31, 2018
10,000
Total 1,950,000
Less: Overdraft with Piggy Bank secured by a Chattel mortgage on the
inventories 300,000
Balance per ledger P1,650,000
At what amount will the account “Cash” appear on the December 31, 2018 balance sheet?
Select one:
a. P1,315,000
b. P1,725,000
c. P1,425,000
d. P1,495,000
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The overall objective in the audit of the sales and collection cycle is to evaluate whether
Select one:
a. the account balances affected by the cycle are fairly presented in accordance with GAAP.
b. the sales account and the accounts receivable account are free of errors.
c. the sales account and the accounts receivable are free of material errors.
d. The sales account and the accounts receivable account are presented fairly in accordance
with GAAP.
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
g. The service charge for December was P150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the adjusted cash balance as of
November 30, 2018.
Select one:
a. P58,800
b. P90,800
c. P63,800
d. P85,800
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From the standpoint of good internal control, the credit manager should be responsible to
the
Select one:
a. customer-service manager
b. sales manager
c. treasurer
d. controller
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You were able to gather the following from the December 31, 2018 trial balance of
Mandaluyong Corporation in connection with your audit of the company:
a. Customer’s check for P40,000 returned by bank on December 26, 2018 due to
insufficient fund but subsequently redeposited and cleared by the bank on January 8, 2019.
b. Customer’s check for P20,000 dated January 2, 2019, received on December 29, 2018.
c. Postal money orders received from customers, P30,000.
The petty cash fund consisted of the following items as of December 31, 2018.
Included among the checks drawn by Mandaluyong Corporation against the BPI current
account and recorded in December 2018 are the following:
a. Check written and dated December 29, 2018 and delivered to payee on January 2, 2019,
P80,000.
b. Check written on December 27, 2018, dated January 2, 2019, delivered to payee on
December 29, 2018, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in
excess of the deposit balance. These checks were still outstanding at December 31, 2018.
The savings account deposit in PNB has been set aside by the board of directors for
acquisition of new equipment. This account is expected to be disbursed in the next 3
months from the balance sheet date.
Based on the above and the result of your audit, determine the adjusted balance of cash on
hand.
Select one:
a. P530,000
b. P410,000
c. P470,000
d. P440,000
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Question 37
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a. bank statement
c. bank reconciliation
d. proof of cash
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Question 38
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To obtain the best evidence regarding the completeness of recorded accounts receivable,
the auditors
Select one:
a. confirm a sample of accounts payable
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Question 39
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To achieve good internal control, which department should perform the activities of
matching shipping documents with sales orders and preparing daily summaries?
Select one:
b. billing department
c. credit department
d. shipping department
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Question 40
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Which of the following is not typically included in the sales and collection cycle?
Select one:
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the adjusted cash balance as of
December 31, 2018.
Select one:
a. P134,650
b. P132,650
c. P137,650
d. P137,800
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
f. Undeposited collections on December 31, 2018 - P8,000.
g. The service charge for December was P150 which was charged by the bank to another
client.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the adjusted book receipts for
December 2018.
Select one:
a. P170,500
b. P182,000
c. P173,000
d. P172,000
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The person who opens the mail commonly prepares a remittance advice when a customer
fails to return one with a payment. Consequently, mail should be opened by the
Select one:
b. credit manager
c. sales manager
d. receptionist
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A client might overstate December 31 accounts receivable balances by dating and recording
January transactions in December. Such entries recorded in which journal are most likely to
achieve this end?
Select one:
a. cash receipts
b. sales
c. payroll
d. purchases
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The internal control objectives of the revenue cycle include all of the following except
Select one:
b. Custody over assets resulting from the revenue cycle is properly maintained.
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Question 46
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The primary assertion being addressed by sending bank confirmation is
Select one:
b. classification
c. completeness
d. existence
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Which of the following is not normally considered a step in the credit sales functions?
Select one:
a. approving credit
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Question 48
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Matching the suppliers' invoice, the purchase order , and the receiving report normally
should be the responsibility of the
Select one:
a. treasury function
b. accounting function
c. purchasing department
d. receiving department
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In the audit of Pasig Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30,
2018:
c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a
voucher for P30,000. Upon examination of the checks returned by the bank, the actual
amount of the check was P30,000.
d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check
(no.7767), which was returned by the payee. Both checks were recorded in the amount
drawn, P5,000, but no entry was made to cancel check no. 7767.
e. The December bank statement included a check drawn by Sipag Company for P1,500.
h. The bank collected a note receivable of P7,000 on December 28, 2018, but the
collection was not received on time to be recorded by Pasig.
i. The outstanding checks on December 31, 2018, were:
Based on the above and the result of your audit, determine the adjusted bank disbursement
for December 2018.
Select one:
a. P 98,150
b. P120,150
c. P125,150
d. P 76,150
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The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by bank on July 16 marked 8,250
NSF, and redeposited immediately; no entry made on books for return or
redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
Based on the application of the necessary audit procedures and appreciation of the above
data, how much is the adjusted cash balance as of June 30?
Select one:
a. (P3,695)
b. P107,082
c. P15,822
d. P87,565
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The following accounts were taken from Cervantes Inc.’s balance sheet at December 31,
2018.
Debit Credit
Accounts receivable P4,100,000
Allowance for doubtful accounts 100,000
Net credit sales P7,500,000
If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be
reported for 2018.
Select one:
a. P123,000
b. P223,000
c. P 23,000
d. P225,000
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Your audit of Banayoyo Corporation for the year ended December 31, 2018 revealed that
the Accounts Receivable account consists of the following:
Trade accounts receivable (current) P3,440,000
Past due trade accounts 640,000
Uncollectible accounts 128,000
Credit balances in customers’ accounts (80,000)
Notes receivable dishonored 240,000
Consignment shipments – at cost
The consignee sold goods costing P96,000 for P160,000. A 10%
commission was charged by the consignee and remitted the balance to
Banayoyo. The cash was received in January, 2019.
320,000
Total P4,688,000
The balance of the allowance for doubtful accounts before audit adjustment is a credit of
P80,000. It is estimated that an allowance should be maintained to equal 5% of trade
receivables, net of amount due from the consignee who is bonded. The company has not
provided yet for the 2018 bad debt expense.
Based on the above and the result of your audit, determine the adjusted balance
of Doubtful accounts expense.
Select one:
a. P220,000
b. P252,000
c. P264,000
d. P227,200
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The adjusted trial balance of Galimuyod Company as of December 31, 2017 shows the
following:
Debit Credit
Accounts receivable P1,000,000
Allowance for bad debts P40,000
Additional information:
Select one:
a. P 20,000
b. P120,000
c. P180,000
d. P146,640
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In connection with your audit of the Salcedo Corporation, you noted that the company’s
Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, the adjusted balance of Notes Receivable
as of December 31, 2018 is
Select one:
a. P2,480,000
b. P 900,000
c. P1,020,000
d. P1,220,000
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Cabugao Company provides for doubtful accounts based 3% of credit sales. The following
data are available for 2018.
Select one:
a. P580,000
b. P630,000
c. P420,000
d. P500,000
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
All of the above notes are considered good except that of A Company which is somewhat
doubtful. An allowance of 25% should be established against the notes receivable of this
company.
Based on the above and the result of your audit, compute the Net realizable value of Trade
Notes Receivable as of December 31, 2018.
Select one:
a. P1,090,145
b. P1,447,561
c. P 838,509
d. P1,947,561
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In connection with your audit of the Salcedo Corporation, you noted that the company’s
Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, how much of foregoing notes receivable
will be reported in the current assets section of the balance sheet?
Select one:
a. P1,680,000
b. P1,520,000
c. P1,220,000
d. P2,480,000
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In connection with your audit of the Salcedo Corporation, you noted that the company’s
Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, the adjusted balance of Interest Receivable
as of December 31, 2018 is
Select one:
a. P 5,760
b. P 0
c. P70,613
d. P19,093
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Your audit disclosed that on December 31, 2018, the accounts receivable control account of
Alilem Company had a balance of P2,865,000. An analysis of the accounts receivable
account showed the following:
Based on the above and the result of your audit, determine the adjusted balance of the
trade accounts receivable as of December 31, 2018.
Select one:
a. P1,485,000
b. P1,147,500
c. P1,522,500
d. P1,447,500
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An analysis and aging of Burgos Corp. accounts receivable at December 31, 2018, disclosed
the following:
What is the net realizable value of Burgos’ receivables at December 31, 2018?
Select one:
a. P16,250,000
b. P15,700,000
c. P17,500,000
d. P14,450,000
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The adjusted trial balance of Galimuyod Company as of December 31, 2017 shows the
following:
Debit Credit
Accounts receivable P1,000,000
Allowance for bad debts P40,000
Additional information:
Select one:
a. P2,444,000
b. P 333,333
c. P 300,000
d. P3,000,000
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
All of the above notes are considered good except that of A Company which is somewhat
doubtful. An allowance of 25% should be established against the notes receivable of this
company.
Based on the above and the result of your audit, compute the Interest income for the year
ended December 31, 2018.
Select one:
a. P208,185
b. P253,185
c. P 43,185
d. P243,749
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Your audit of Banayoyo Corporation for the year ended December 31, 2018 revealed that
the Accounts Receivable account consists of the following:
The balance of the allowance for doubtful accounts before audit adjustment is a credit of
P80,000. It is estimated that an allowance should be maintained to equal 5% of trade
receivables, net of amount due from the consignee who is bonded. The company has not
provided yet for the 2018 bad debt expense.
Based on the above and the result of your audit, determine the adjusted balance
of Allowance for doubtful accounts.
Select one:
a. P179,200
b. P216,000
c. P204,000
d. P172,000
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
All of the above notes are considered good except that of A Company which is somewhat
doubtful. An allowance of 25% should be established against the notes receivable of this
company.
Based on the above and the result of your audit, compute the Accrued interest income as of
December 31, 2018.
Select one:
a. P198,749
b. P253,185
c. P 78,749
d. P243,749
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At the end of its first year of operations, December 31, 2018, Caoayan, Inc. reported the
following information:
What should be the balance in accounts receivable at December 31, 2018, before
subtracting the allowance for doubtful accounts?
Select one:
a. P10,100,000
b. P10,580,000
c. P10,340,000
d. P 9,740,000
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Your audit disclosed that on December 31, 2018, the accounts receivable control account of
Alilem Company had a balance of P2,865,000. An analysis of the accounts receivable
account showed the following:
Questions:
Based on the above and the result of your audit, determine the adjusted balance of the
current trade and other receivables (net) as of December 31, 2018.
Select one:
a. P2,272,500
b. P2,610,000
c. P2,647,500
d. P1,822,500
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Your audit of Banayoyo Corporation for the year ended December 31, 2018 revealed that
the Accounts Receivable account consists of the following:
The balance of the allowance for doubtful accounts before audit adjustment is a credit of
P80,000. It is estimated that an allowance should be maintained to equal 5% of trade
receivables, net of amount due from the consignee who is bonded. The company has not
provided yet for the 2018 bad debt expense.
Based on the above and the result of your audit, determine the adjusted balance of the
trade accounts receivable.
Select one:
a. P3,584,000
b. P4,464,000
c. P3,440,000
d. P4,080,000
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In connection with your audit of the Salcedo Corporation, you noted that the company’s
Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, how much is the net interest income from
the foregoing notes receivable for 2018?
Select one:
a. P166,613
b. P 35,093
c. P19,093
d. P70,613
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Your audit disclosed that on December 31, 2018, the accounts receivable control account of
Alilem Company had a balance of P2,865,000. An analysis of the accounts receivable
account showed the following:
Based on the above and the result of your audit, how much of the foregoing will be
presented under noncurrent assets as of December 31, 2018?
Select one:
a. P525,000
b. P 375,000
c. P 0
d. P1,200,000
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
Select one:
a. P1,536,915
b. P1,179,499
c. P 927,863
d. P2,036,915
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a. vendor payments
b. purchase requisitions
c. purchase orders
d. receiving reports
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The Anda Company is on a calendar year basis. The following data were found during your
audit:
a. Goods in transit shipped FOB destination by a supplier, in the amount of P100,000, had
been excluded from the inventory, and further testing revealed that the purchase had been
recorded.
b. Goods costing P50,000 had been received, included in inventory, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and would
be immediately returned.
d. Goods costing P70,000 was out on consignment with Hermie Company. Since the
monthly statement from Hermie Company listed those materials as on hand, the items had
been excluded from the final inventory and invoiced on December 31 at P80,000.
e. The sale of P150,000 worth of materials and costing P120,000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory. The sale was properly recorded in 2017.
f. Goods costing P100,000 and selling for P140,000 had been segregated, but not shipped
at December 31, and were not included in the inventory. A review of the customer’s
purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point but the goods had
not arrived as yet. However, these materials costing P170,000 had been included in the
inventory count, but no entry had been made for their purchase.
h. Merchandise costing P200,000 had been recorded as a purchase but not included as
inventory. Terms of sale are FOB shipping point according to the supplier’s invoice which
had arrived at December 31.
Further inspection of the client’s records revealed the following December 31, 2018
balances: Inventory, P1,100,000; Accounts receivable, P580,000; Accounts payable,
P690,000; Net sales, P5,050,000; Net purchases, P2,300,000; Net income, P510,000.
Based on the above and the result of your audit, determine the adjusted balance of Net
sales as of December 31, 2018:
Select one:
a. P4,970,000
b. P4,650,000
c. P4,550,000
d. P4,730,000
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a. existence
c. valuation
d. completeness
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The Anda Company is on a calendar year basis. The following data were found during your
audit:
a. Goods in transit shipped FOB destination by a supplier, in the amount of P100,000, had
been excluded from the inventory, and further testing revealed that the purchase had been
recorded.
b. Goods costing P50,000 had been received, included in inventory, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and would
be immediately returned.
c. Materials costing P250,000 and billed on December 30 at a selling price of P320,000,
had been segregated in the warehouse for shipment to a customer. The materials had been
excluded from inventory as a signed purchase order had been received from the customer.
Terms, FOB destination.
d. Goods costing P70,000 was out on consignment with Hermie Company. Since the
monthly statement from Hermie Company listed those materials as on hand, the items had
been excluded from the final inventory and invoiced on December 31 at P80,000.
e. The sale of P150,000 worth of materials and costing P120,000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory. The sale was properly recorded in 2017.
f. Goods costing P100,000 and selling for P140,000 had been segregated, but not shipped
at December 31, and were not included in the inventory. A review of the customer’s
purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point but the goods had
not arrived as yet. However, these materials costing P170,000 had been included in the
inventory count, but no entry had been made for their purchase.
h. Merchandise costing P200,000 had been recorded as a purchase but not included as
inventory. Terms of sale are FOB shipping point according to the supplier’s invoice which
had arrived at December 31.
Further inspection of the client’s records revealed the following December 31, 2018
balances: Inventory, P1,100,000; Accounts receivable, P580,000; Accounts payable,
P690,000; Net sales, P5,050,000; Net purchases, P2,300,000; Net income, P510,000.
Based on the above and the result of your audit, determine the adjusted balance of Net
income as of December 31, 2018:
Select one:
a. P290,000
b. P540,000
c. P220,000
d. P550,000
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a. requisitions
b. orders
c. journal
d. invoices
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Which of the following is the best audit procedure for the discovery of damaged
merchandise in a client's ending inventory?
Select one:
b. observe merchandise and raw materials during the client's physical inventory taking.
c. test overall fairness of inventory values by comparing the company's turnover ratio with
the industry average.
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When perpetual inventory records are maintained in quantities and in dollars, and internal
control procedures over inventory are deficient, the auditor would probably
Select one:
b. Want the client to schedule the physical inventory count at the end of the year.
c. Increase the extent of tests for unrecorded liabilities at the end of the year.
d. Insist that the client perform physical counts of inventory items several times during the
year.
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Which of the following is not true relating to the auditor's observation of the client's
physical inventory?
Select one:
a. the auditors should make certain that consigned items from suppliers are included in
physical inventory totals.
c. the auditors should evaluate the adequacy of the client's counting procedures.
d. the auditors should evaluate the client's planning of the physical inventory.
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Question 9
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Which of the following policies is an internal control weakness related to the acquisition of
factory equipment?
Select one:
c. Acquisitions are to be made through and approved by the department in need of the
equipment.
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The Anda Company is on a calendar year basis. The following data were found during your
audit:
a. Goods in transit shipped FOB destination by a supplier, in the amount of P100,000, had
been excluded from the inventory, and further testing revealed that the purchase had been
recorded.
b. Goods costing P50,000 had been received, included in inventory, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and would
be immediately returned.
d. Goods costing P70,000 was out on consignment with Hermie Company. Since the
monthly statement from Hermie Company listed those materials as on hand, the items had
been excluded from the final inventory and invoiced on December 31 at P80,000.
e. The sale of P150,000 worth of materials and costing P120,000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory. The sale was properly recorded in 2017.
f. Goods costing P100,000 and selling for P140,000 had been segregated, but not shipped
at December 31, and were not included in the inventory. A review of the customer’s
purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point but the goods had
not arrived as yet. However, these materials costing P170,000 had been included in the
inventory count, but no entry had been made for their purchase.
h. Merchandise costing P200,000 had been recorded as a purchase but not included as
inventory. Terms of sale are FOB shipping point according to the supplier’s invoice which
had arrived at December 31.
Further inspection of the client’s records revealed the following December 31, 2018
balances: Inventory, P1,100,000; Accounts receivable, P580,000; Accounts payable,
P690,000; Net sales, P5,050,000; Net purchases, P2,300,000; Net income, P510,000.
Based on the above and the result of your audit, determine the adjusted balance of
Accounts payable as of December 31, 2018:
Select one:
a. P710,000
b. P760,000
c. P540,000
d. P810,000
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Which of the following is not one of the independent auditor's objectives regarding the
examination of inventories?
Select one:
d. verifying that all inventory owned by the client is on hand at the time of the count.
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Your answer is correct.
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The objectives of the internal structure for a production cycle are to provide assurance that
transactions are properly executed and recorded, and that
Select one:
a. Independent internal verification of activity reports is established
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b. Sales personnel.
c. Purchasing personnel
d. Receiving personnel
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Which of the following is true about the auditor's observation of the client's physical
inventory?
Select one:
d. the auditor should justify any omission of the observation in the audit report.
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The Anda Company is on a calendar year basis. The following data were found during your
audit:
a. Goods in transit shipped FOB destination by a supplier, in the amount of P100,000, had
been excluded from the inventory, and further testing revealed that the purchase had been
recorded.
b. Goods costing P50,000 had been received, included in inventory, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and would
be immediately returned.
d. Goods costing P70,000 was out on consignment with Hermie Company. Since the
monthly statement from Hermie Company listed those materials as on hand, the items had
been excluded from the final inventory and invoiced on December 31 at P80,000.
e. The sale of P150,000 worth of materials and costing P120,000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory. The sale was properly recorded in 2017.
f. Goods costing P100,000 and selling for P140,000 had been segregated, but not shipped
at December 31, and were not included in the inventory. A review of the customer’s
purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point but the goods had
not arrived as yet. However, these materials costing P170,000 had been included in the
inventory count, but no entry had been made for their purchase.
h. Merchandise costing P200,000 had been recorded as a purchase but not included as
inventory. Terms of sale are FOB shipping point according to the supplier’s invoice which
had arrived at December 31.
Further inspection of the client’s records revealed the following December 31, 2018
balances: Inventory, P1,100,000; Accounts receivable, P580,000; Accounts payable,
P690,000; Net sales, P5,050,000; Net purchases, P2,300,000; Net income, P510,000.
Based on the above and the result of your audit, determine the adjusted balance of Net
income as of December 31, 2018:
Select one:
a. P290,000
b. P540,000
c. P550,000
d. P220,000
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Which of the following is not a reason for the special significance attached by the auditors
to the verification of inventories?
Select one:
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The Anda Company is on a calendar year basis. The following data were found during your
audit:
a. Goods in transit shipped FOB destination by a supplier, in the amount of P100,000, had
been excluded from the inventory, and further testing revealed that the purchase had been
recorded.
b. Goods costing P50,000 had been received, included in inventory, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and would
be immediately returned.
d. Goods costing P70,000 was out on consignment with Hermie Company. Since the
monthly statement from Hermie Company listed those materials as on hand, the items had
been excluded from the final inventory and invoiced on December 31 at P80,000.
e. The sale of P150,000 worth of materials and costing P120,000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory. The sale was properly recorded in 2017.
f. Goods costing P100,000 and selling for P140,000 had been segregated, but not shipped
at December 31, and were not included in the inventory. A review of the customer’s
purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point but the goods had
not arrived as yet. However, these materials costing P170,000 had been included in the
inventory count, but no entry had been made for their purchase.
h. Merchandise costing P200,000 had been recorded as a purchase but not included as
inventory. Terms of sale are FOB shipping point according to the supplier’s invoice which
had arrived at December 31.
Further inspection of the client’s records revealed the following December 31, 2018
balances: Inventory, P1,100,000; Accounts receivable, P580,000; Accounts payable,
P690,000; Net sales, P5,050,000; Net purchases, P2,300,000; Net income, P510,000.
Based on the above and the result of your audit, determine the adjusted balance of
Inventory as of December 31, 2018:
Select one:
a. P1,480,000
b. P1,650,000
c. P1,230,000
d. P1,550,000
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The Anda Company is on a calendar year basis. The following data were found during your
audit:
a. Goods in transit shipped FOB destination by a supplier, in the amount of P100,000, had
been excluded from the inventory, and further testing revealed that the purchase had been
recorded.
b. Goods costing P50,000 had been received, included in inventory, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and would
be immediately returned.
d. Goods costing P70,000 was out on consignment with Hermie Company. Since the
monthly statement from Hermie Company listed those materials as on hand, the items had
been excluded from the final inventory and invoiced on December 31 at P80,000.
e. The sale of P150,000 worth of materials and costing P120,000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory. The sale was properly recorded in 2017.
f. Goods costing P100,000 and selling for P140,000 had been segregated, but not shipped
at December 31, and were not included in the inventory. A review of the customer’s
purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point but the goods had
not arrived as yet. However, these materials costing P170,000 had been included in the
inventory count, but no entry had been made for their purchase.
h. Merchandise costing P200,000 had been recorded as a purchase but not included as
inventory. Terms of sale are FOB shipping point according to the supplier’s invoice which
had arrived at December 31.
Further inspection of the client’s records revealed the following December 31, 2018
balances: Inventory, P1,100,000; Accounts receivable, P580,000; Accounts payable,
P690,000; Net sales, P5,050,000; Net purchases, P2,300,000; Net income, P510,000.
Based on the above and the result of your audit, determine the adjusted balance of Net
purchases as of December 31, 2018:
Select one:
a. P2,150,000
b. P2,420,000
c. P2,370,000
d. P2,320,000
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The auditor tests the quantity of materials charged to work-in-process by tracing these
quantities to
Select one:
a. material requisitions
b. receiving reports
c. cost ledgers
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a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, how much is the net interest income from
the foregoing notes receivable for 2018?
Select one:
a. P19,093
b. P70,613
c. P166,613
d. P 35,093
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In connection with your audit of the Alcala Manufacturing Company, you reviewed its
inventory as of December 31, 2018 and found the following items:
(a) A packing case containing a product costing P100,000 was standing in the shipping
room when the physical inventory was taken. It was not included in the inventory because it
was marked “Hold for shipping instructions.” The customer’s order was dated December 18,
but the case was shipped and the costumer billed on January 10, 2019.
(b) Merchandise costing P600,000 was received on December 28, 2018, and the invoice
was recorded. The invoice was in the hands of the purchasing agent; it was marked “On
consignment”.
(c) Merchandise received on January 6, 2019, costing P700,000 was entered in purchase
register on January 7. The invoice showed shipment was made FOB shipping point on
December 31, 2018. Because it was not on hand during the inventory count, it was not
included.
(d) A special machine costing P200,000, fabricated to order for a particular customer, was
finished in the shipping room on December 30. The customer was billed for P300,000 on
that date and the machine was excluded from inventory although it was shipped January 4,
2019.
(e) Merchandise costing P200,000 was received on January 6, 2019, and the related
purchase invoice was recorded January 5. The invoice showed the shipment was made on
December 29, 2018, FOB destination.
(f) Merchandise costing P150,000 was sold on an installment basis on December 15. The
customer took possession of the goods on that date. The merchandise was included in
inventory because Alcala still holds legal title. Historical experience suggests that full
payment on installment sale is received approximately 99% of the time.
(g) Goods costing P500,000 were sold and delivered on December 20. The goods were
included in the inventory because the sale was accompanied by a purchase agreement
requiring Alcala to buy back the inventory in February 2019.
Based on the above and the result of your audit, how much of these items should be
included in the inventory balance at December 31, 2018?
Select one:
a. P 800,000
b. P1,650,000
c. P1,050,000
d. P1,300,000
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In a manufacturing company, which one of the following audit procedures would give the
least assurance of the valuation of inventory at the audit date?
Select one:
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An auditor performs a test to determine whether all merchandise for which the client was
billed was received. The population for this test consists of all:
Select one:
a. canceled checks
b. vendor's invoices
c. merchandise received
d. receiving reports
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Question 5
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On January 1, 2018, Sinait Company loaned P3,000,000 to Ilocos Company. The terms of the
loan were payment in full on January 1, 2023, plus annual interest payments at 11%. The
interest payment was made as scheduled on January 1, 2019; however, due to financial
setbacks, Ilocos was unable to make its 2020 interest payment. Sinait considers the loan
impaired and projects the following cash flows from the loan as of December 31, 2020 and
2021. Assume that Sinait accrued the interest at December 31, 2019, but did not continue
to accrue interest due to the impairment of the loan.
Amount projected as of
Date of Flow Dec. 31, 2020 Dec. 31, 2021
December 31, 2021 P 200,000 P 200,000
December 31, 2022 400,000 600,000
December 31, 2023 800,000 1,200,000
December 31, 2024 1,200,000 1,000,000
December 31, 2025 400,000
Your client requested you to determine the Loan impairment (bad debt expense) for the
year 2020
: (Round-off present value factors to four decimal places)
Select one:
a. P1,212,380
b. P 882,380
c. P1,542,380
d. P1,549,500
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b. entries in the accounts receivable subsidiary ledger were for sales actually shipped.
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The adjusted trial balance of Galimuyod Company as of December 31, 2017 shows the
following:
Debit Credit
Accounts receivable P1,000,000
Allowance for bad debts P40,000
Additional information:
Select one:
a. P 333,333
b. P 300,000
c. P3,000,000
d. P2,444,000
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a. requisitions
b. invoices
c. journal
d. orders
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To best ascertain that a company has properly included merchandise that it owns in its
ending inventory, the auditors should review and test the:
Select one:
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
All of the above notes are considered good except that of A Company which is somewhat
doubtful. An allowance of 25% should be established against the notes receivable of this
company.
Based on the above and the result of your audit, compute the Accrued interest income as of
December 31, 2018.
Select one:
a. P 78,749
b. P198,749
c. P253,185
d. P243,749
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Which of the following procedures would an auditor most likely rely on to verify
management's assertion of completeness?
Select one:
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The adjusted trial balance of Galimuyod Company as of December 31, 2017 shows the
following:
Debit Credit
Accounts receivable P1,000,000
Allowance for bad debts P40,000
Additional information:
· Cash sales of the company represents 10% of gross sales.
· 90% of the credit sales customers do not take advantage of the 2/10, n/30 terms.
· It is expected that cash discount of P6,000 will be taken on accounts receivable
outstanding at December 31, 2018.
· Sales returns in 2018 amounted to P400,000. All returns were from charge sales.
· During 2018, accounts totaling to P44,000 were written off as uncollectible; bad debt
recoveries during the year amounted to P3,000.
· The allowance for bad debts is adjusted so that it represents certain percentage of the
outstanding accounts receivable at year end. The required percentage at December 31,
2018 is 150% of the rate used on December 31, 2017.
Based on the above and the result of your audit, the allowance for doubtful accounts as of
December 31, 2018 is
Select one:
a. P 20,000
b. P146,640
c. P180,000
d. P120,000
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An auditor performs a test to determine whether all merchandise for which the client was
billed was received. The population for this test consists of all:
Select one:
a. vendor's invoices
b. receiving reports
c. merchandise received
d. canceled checks
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On January 1, 2018, Sinait Company loaned P3,000,000 to Ilocos Company. The terms of the
loan were payment in full on January 1, 2023, plus annual interest payments at 11%. The
interest payment was made as scheduled on January 1, 2019; however, due to financial
setbacks, Ilocos was unable to make its 2020 interest payment. Sinait considers the loan
impaired and projects the following cash flows from the loan as of December 31, 2020 and
2021. Assume that Sinait accrued the interest at December 31, 2019, but did not continue
to accrue interest due to the impairment of the loan.
Amount projected as of
Date of Flow Dec. 31, 2020 Dec. 31, 2021
December 31, 2021 P 200,000 P 200,000
December 31, 2022 400,000 600,000
December 31, 2023 800,000 1,200,000
December 31, 2024 1,200,000 1,000,000
December 31, 2025 400,000
Your client requested you to determine the Interest income for 2021 assuming the P200,000
was collected on December 31, 2021 as scheduled
: (Round-off present value factors to four decimal places)
Select one:
a. P 66,000
b. P200,000
c. P232,938
d. P195,855
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To measure how effectively a client employs its assets, an auditor calculates inventory
turnover by dividing the average inventory into:
Select one:
b. operating income
c. net sales
d. gross sales
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To gather audit evidence about the proper credit approval of sales, the auditor would select
a sample of documents from the population represented by the
Select one:
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Presented below is a list of items that may or may not reported as inventory in a company’s
December 31 balance sheet.
Select one:
a. P2,000,000
b. P2,260,000
c. P2,300,000
d. P2,220,000
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
All of the above notes are considered good except that of A Company which is somewhat
doubtful. An allowance of 25% should be established against the notes receivable of this
company.
Based on the above and the result of your audit, compute the Interest income for the year
ended December 31, 2018.
Select one:
a. P 43,185
b. P253,185
c. P208,185
d. P243,749
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The auditor tests the quantity of materials charged to work in process by tracing these
quantities to
Select one:
c. Cost ledgers
d. Receiving reports
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An auditor is testing sales transactions. One step is to trace a sample of debit entries from
the accounts receivable subsidiary ledger back to the supporting sales invoices. What
would the auditor intend to establish by this step?
Select one:
c. Debit entries in the accounts receivable subsidiary ledger are properly supported by sales
invoices.
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Purchase cutoff procedures should be designed to test that merchandise is included in the
inventory of the client company, if the company:
Select one:
c. holds the shipping documents for the merchandise issued in the company's name.
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In determining validity of accounts receivable, which of the following would the auditor
consider most reliable?
Select one:
a. Credits to accounts receivable from the cash receipts book after the close of business at
year end
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Select one:
a. Purchase requisitions
b. Vendor payments
c. Receiving reports
d. Purchase orders
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Question 25
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a. vendor payments
b. receiving reports
c. purchase requisitions
d. purchase orders
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Which of the following control procedures would most likely be used to maintain accurate
perpetual inventory records?
Select one:
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Otso Manufacturing Corporation mass produces eight different products. The controller,
who is interested in strengthening internal controls over the accounting for materials used
in production, would be most likely to implement
Select one:
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When auditing merchandise inventory at year end, the auditor performs a purchase cutoff
test to obtain evidence that
Select one:
a. No goods held on consignment for customers are included in the inventory balance.
b. All goods purchased before year end are received before the physical inventory count.
c. All goods owned at year end are included in the inventory balance
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After accounting for a sequence of inventory tags, an auditor traces a sample of tags to the
physical inventory listing to obtain evidence that all items:
Select one:
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Question 30
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a. valuation
b. completeness
d. existence
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Question 31
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An auditor who wishes to substantiate the gross balance of the account "Trade Notes
Receivable" is considering the advisability of performing the four procedures listed below.
Which pair of procedures is best suited to this objective?
I. Age the receivables.
II. Confirm the notes with the makers.
III. Inspect the notes.
IV. Trace a sample of postings from the sales journal to the notes receivable ledger.
Select one:
a. I and III
b. II and III
c. I and IV
d. I and II
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Which of the following items should not be included in a physical inventory?
Select one:
a. Consignment to an agent.
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Question 33
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An auditor has accounted for a sequence of inventory tags and is now going to trace
information on a representative number of tags to the inventory summary sheets. Which
assertion does this procedure relate to most directly?
Select one:
a. existence
b. completeness
c. valuation
d. legality
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On January 1, 2018, Sinait Company loaned P3,000,000 to Ilocos Company. The terms of the
loan were payment in full on January 1, 2023, plus annual interest payments at 11%. The
interest payment was made as scheduled on January 1, 2019; however, due to financial
setbacks, Ilocos was unable to make its 2020 interest payment. Sinait considers the loan
impaired and projects the following cash flows from the loan as of December 31, 2020 and
2021. Assume that Sinait accrued the interest at December 31, 2019, but did not continue
to accrue interest due to the impairment of the loan.
Amount projected as of
Date of Flow Dec. 31, 2020 Dec. 31, 2021
December 31, 2021 P 200,000 P 200,000
December 31, 2022 400,000 600,000
December 31, 2023 800,000 1,200,000
December 31, 2024 1,200,000 1,000,000
December 31, 2025 400,000
Your client requested you to determine the Allowance for loan impairment as of December
31, 2021
: (Round-off present value factors to four decimal places)
Select one:
a. P776,900
b. P649,442
c. P554,340
d. P752,640
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
All of the above notes are considered good except that of A Company which is somewhat
doubtful. An allowance of 25% should be established against the notes receivable of this
company.
Based on the above and the result of your audit, compute the Net realizable value of Trade
Notes Receivable as of December 31, 2018.
Select one:
a. P 838,509
b. P1,447,561
c. P1,090,145
d. P1,947,561
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In connection with your audit of the Salcedo Corporation, you noted that the company’s
Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, how much of foregoing notes receivable
will be reported in the current assets section of the balance sheet?
Select one:
a. P1,680,000
b. P1,220,000
c. P1,520,000
d. P2,480,000
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Question 37
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Select one:
a. Completeness
b. Valuation or allocation
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Question 38
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In auditing a manufacturing entity, which of the following procedures would an auditor least
likely perform to determine whether slow-moving, defective, and obsolete items included in
inventory are properly identified?
Select one:
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In connection with your audit of the Salcedo Corporation, you noted that the company’s
Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, the adjusted balance of Interest Receivable
as of December 31, 2018 is
Select one:
a. P70,613
b. P 5,760
c. P 0
d. P19,093
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In auditing inventories, a major objective relates to the existence assertion. Of the following
audit procedures relating to inventories, which does not support the existence assertion?
Select one:
b. The auditor observes the client's inventory and performs test counts as appropriate.
c. The auditor performs a lower of cost or market test for major categories of inventory.
d. The auditor reviews the client's inventory-taking instructions for such matters as proper
arrangement of goods, separation of consigned goods, and limits on movements of goods
during inventory.
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In connection with your audit of the Salcedo Corporation, you noted that the company’s
Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2018, from AA Company, P200,000; interest rate,
16%; discounted on November 30, 2018 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie
Company in favor of the Delta Company, endorsed to Salcedo Corp. on December 2, 2018
and accepted on December 4, 2018.
c. A 90-day note dated November 1, 2018 from E. Dy, P500,000; interest at 16%; the note
is for subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2018, from CC Company, P600,000; interest rate, 16%;
dishonored at maturity; judgment obtained on October 10, 2018. Collection within the next
twelve months is doubtful.
e. A 90-day note dated January 4, 2018, from Apol Bobads, president of Salcedo,
P160,000; no interest; note not renewed; president confirmed.
f. A 120-day note dated September 14, 2018, from DD Company, P120,000; interest rate,
16%; note is held by bank as collateral.
Based on the above and the result of your audit, the adjusted balance of Notes Receivable
as of December 31, 2018 is
Select one:
a. P1,220,000
b. P 900,000
c. P2,480,000
d. P1,020,000
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Question 43
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The auditor tests the quantity of materials charged to work in process by tracing these
quantities to
Select one:
a. cost ledgers
b. material requisitions
c. receiving reports
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Question 44
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Proper authorization procedures in the revenue/receipt cycle usually provide for approval of
write-offs by an employee in which of the following departments?
Select one:
a. Treasurer
b. Billing
c. Accounts receivable
d. Sales
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The auditors will usually trace the details of the test counts made during the observation of
the physical inventory taking to a final inventory schedule. This audit procedure is
undertaken to provide evidence that items physically present and observed by the auditors
at the time of the physical inventory count are:
Select one:
a. owned by the client
c. not obsolete
d. physically present at the time of the preparation of the final inventory schedule.
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Select one:
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Question 47
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Select one:
d. Analytical evidence obtained by comparing sales adjustments to gross sales for a period
of time.
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Question 48
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Which source document should an auditor use to verify the correct sales date for an item
sold FOB shipping point?
Select one:
a. Carrier's bill of lading
d. Sales invoice
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Question 49
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The negative form of accounts receivable confirmation request is particularly useful except
when
Select one:
a. The auditor has reason to believe the persons receiving the request are likely to give them
consideration.
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Question 50
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Mark 1.00 out of 1.00
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Unless otherwise identified, the notes receivable of the Quirino Company on December 31,
2018, were trade notes receivable. On this date the balance of the account, P3,036,915,
consisted of the following notes all received during the calendar year under audit:
All of the above notes are considered good except that of A Company which is somewhat
doubtful. An allowance of 25% should be established against the notes receivable of this
company.
Based on the above and the result of your audit, compute the Adjusted balance of Trade
Notes Receivable as of December 31, 2018.
Select one:
a. P1,179,499
b. P2,036,915
c. P 927,863
d. P1,536,915
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