Holy Trinity College of General Santos City b.

Objective and unbiased

College of Business Management and Accountancy c. Factual, adequate, and convincing

Final Exam in Acctg 113 d. Consistent with the audit objective

Jaypee D. Bigno, CPA 6. Which of the following statements about audit

evidence is correct?
Instruction: Choose the best letter of your answer on
the paper provided in a Capital letter. a. Appropriateness is the measure of the
quantity of audit evidence.
1. Which of the following is the best example of
corroborating evidence? b. The competence of evidence is heavily
affected by the amount of evidence
a. General journal gathered.

b. Worksheet allocations c. Audit evidence is more persuasive when

items of evidence from different sources or
c. Purchase orders
of different nature are consistent.
d. Cash receipts journal
d. There should be a one-to-one relationship
2. Which of the following types of audit evidence is between audit objective and audit
the most persuasive? procedure.

a. Pre-numbered client purchase order forms 7. Which of the following is not an example of
confirmation evidence?
b. Client work sheets supporting cost
allocations a. Requesting the client’s outside legal counsel
to evaluate the possible outcome of
c. Bank statements obtained from the client pending litigation

d. Client representation letter b. Questioning the client’s employees about

3. Which of the following factors is most important
in determining the competence of audit evidence?
a. The reliability of the evidence in meeting
the audit objective
b. The objectivity of the auditor gathering the
evidence
c. The quantity of the evidence obtained
d. The independence of the source of
evidence
4. When the auditor is gathering evidence, if the
source of the evidence is independent of the client,
the auditor will conclude that the evidence is
existing internal control policies and
procedures
c. Requesting the client’s customers to verify
the year-end accounts receivable balances
d. Requesting payees to respond in writing to
the terms contained in notes payable
appearing in the client’s ledger.
8. The primary purpose of sending a standard
confirmation request to financial institutions with
which the client has done business during the year is
to
a. Corroborate information regarding deposit
and loan balances

a. Not reliable b. Provide the data necessary to prepare a

proof of cash
b. Reliable
c. Detect kiting activities that may otherwise
c. Not reliable unless the provider is qualified not be discovered
to provide the evidence
d. Request information about contingent
d. Reliable if the provider has no reason to be liabilities and secured transactions
biased
9. An auditor ordinarily sends a standard
5. Audit information is generally considered relevant confirmation request to all banks with which the
when it is client has done business during the year under audit,

a. Derived through valid statistical sampling

regardless of the year-end balance. A purpose of this b. Be unaware of all the financial relationships
procedure is to that the bank has with the client

a. Request a cutoff bank statement and
related checks be sent to the auditor
b. Detect kiting activities that may otherwise
not be discovered
c. Seek information about contingent liabilities
and security agreement
d. Provide the data necessary to prepare a
proof of cash
10. Which of the following sets of information does
an auditor usually confirm on one form?
c. Sign and return the form without inspecting
the accuracy of the client’s bank
reconciliation
d. Not have access to the client’s cutoff bank
statement
14. In obtaining evidence concerning the cash
balance, the auditor performs the following
procedures: obtain bank statement directly from the
bank, prepare bank reconciliation, and verify all
reconciling items. In this case, it is most likely that:
a. Detection risk is set at moderate to high

a. Cash in bank and collateral for loans b. Detection risk is set at low to very low

b. Accounts payable an purchase c. Control risk is set at moderate to low

commitments
d. Inherent risk is set at low
c. Inventory on consignment and contingent
liabilities 15. The main reason an auditor requests the client to
request its bank to send to the auditor a bank cutoff
d. Accounts receivable and accrued interest statement is for the auditor to
receivable
a. Verify the cash balance reported on the
11. Which of the following is confirmed on the bank confirmation
standard confirmation form used for cash balances
at financial institution? b. Verify reconciling items on the client’s
reconciliation
a. Factored accounts receivable
c. Detect lapping
b. Loss contingencies
d. Detect kiting
c. Loans payable
16. To check for the validity of deposits in transit and
d. Safe deposit boxes controlled by the entity outstanding checks, the auditor examines

12. Two months before year-end, the bookkeeper a. Bank confirmation

erroneously recorded the receipt of a long-term loan
by a debit to cash and a credit to sales. Which of the b. Cutoff bank statement
following is the most effective procedure for
detecting this type of error? c. Year-end bank statement

a. Analyze bank confirmation information d. Bank reconciliation

b. Analyze the notes payable journal
c. Prepare year-end bank reconciliation
d. Prepare a year-end bank transfer schedule
13. The usefulness of the standard bank
confirmation request may be limited because the
bank employee who completes the form may
a. Not believe that the bank is obligated to
verify confidential information to a third
party
17. Obtaining cutoff bank statement is not
specifically useful in determining whether
a. Kiting has occurred
b. Lapping has occurred
c. Window dressing has occurred
d. Disbursements per the bank statement can
be reconciled with total checks written
18. Upon examination of the bank cutoff statement,
if the auditor finds that a prior-period check not on
the list of outstanding checks has cleared the bank,
which is more likely present?
 a. Nothing 23. A cash shortage may be concealed by
transporting funds from one location to another or
b. Lapping by converting negotiable assets to cash. Because of
this, which of the following is vital?
c. Window dressing
a. Simultaneous confirmations
d. Kiting
b. Simultaneous bank reconciliations
19. The best way to detect kiting is to
c. Simultaneous verification
a. Send standard bank confirmations
d. Simultaneous surprise cash count
b. Prepare bank transfer schedule
24. When counting cash on hand, the auditor must
c. Obtain cut-off bank statement
exercise control over all cash receipts and other
d. Prepare bank reconciliation negotiable assets to prevent

20. An auditor should trace bank transfers for the a. Theft

last part of the audit period and first part of the
b. Irregular indorsement
subsequent period to detect whether
c. Deposits in transit
a. The cash receipt journal was held open for a
few days after the year-end d. Substitution

b. The last checks recorded before the year- 25. Inspecting marketable securities provides
end were actually mailed by the year-end primary evidence about the assertion of

c. Cash balances were overstated because of a. Rights and obligations

kiting
b. Valuation
d. Any unusual payments to or receipts from
related parties c. Existence

21. Cash receipts should be deposited on the day of d. Completeness

receipt or the following business day. Select the
most appropriate audit procedure to determine that
cash is promptly deposited.
a. Review the functions of cash receiving and
disbursing for proper separation of duties.
b. Review cash register tapes prepared for
each sale.
c. Review the functions of cash handling and
maintaining accounting records for proper
separation of duties.
d. Compare the daily cash receipts total with
the bank deposits.
22. An auditor most likely would limit substantive
test of sales transactions when control risk is
assessed as low for the existence or occurrence
assertion concerning sales transactions and the
auditor has already gathered evidence supporting
a. Opening and closing inventory balances
b. Cash receipts and accounts receivable
c. Shipping and receiving activities
26. Employees bond employees who handle cash
receipts because fidelity bonds reduce the possibility
of employing dishonest individuals and
a. Protect employees who make unintentional
misstatements from possible monetary
damages resulting from their misstatements
b. Deter dishonesty by making employees
aware that insurance companies may
investigate and prosecute dishonest acts
c. Facilitate an independent monitoring of the
receiving and depositing of cash receipts
d. Force employees in positions of trust to
take periodic vacations and rotate their
assigned duties
27. Which of the following audit objectives is not
served by confirming customers’ accounts
receivable?
a. Sales and accounts receivable cutoff
b. Valuation of accounts receivable as of the
balance sheet date

d. Cutoffs of sales and purchases

 c. Existence of customers represented in the
accounts receivable trail balance
d. Completeness of customers represented in
the accounts receivable trial balance
28. In determining validity of accounts receivable,
which of the following would the auditor consider to
be the most reliable?
a. Documentary evidence that supports the
accounts receivable
b. Credits to accounts receivable from the
cash receipts book after the close of
business at year end
c. Direct telephone communication between
the auditor and debtor
d. Confirmation replies received directly from
customers
29. When an auditor does not receive replies to
positive request for year-end accounts receivable
confirmations, the auditor most likely would
a. Inspect the allowance account to verify
whether the accounts were subsequently
written off
b. Increase the assessed level of detection risk
for the valuation and completeness
assertions
c. Ask the client to contact the customers to
request that the confirmations be returned
d. Increase the assessed level of inherent risk
for the revenue cycle
30. To reduce the risks associated with accepting fax
responses to requests for confirmations of accounts
receivable, an auditor most likely would
a. Examine the shipping documents that
provide evidence for the existence assertion
b. Verify the sources and contents of the faxes
in telephone calls to the senders
c. Consider the faxes to be non-responses and
evaluate them as unadjusted differences
d. Inspect the faxes for forgeries or alterations
and consider them to be acceptable if none
are noted
31. In which of the following circumstances would
the use of the negative form of accounts receivable
confirmation most likely be justified?
a. A substantial number of accounts may be in
dispute and the accounts receivable balance
arises from sales to a few major customers
b. A substantial number of accounts may be in
dispute and the accounts receivable balance
arises from sales to many customers with
small balances
c. A small number of accounts may be in
dispute and the accounts receivable balance
arises from sales to a few major customers
d. A small number of accounts may be in
dispute and the accounts receivable balance
arises from sales to many customers with
small balances
32. In auditing accounts receivable, the negative
confirmation request most likely would be used
when
a. The total recorded amount of accounts
receivable is immaterial to the financial
statements taken as whole
b. Response rates in prior years to properly
designed positive confirmation request
were inadequate
c. Recipients are likely to return positive
confirmation request without verifying the
accuracy of the information
d. The combined assessed level of inherent
risk and control risk relative to accounts
receivable is low
33. Which of the following statements would an
auditor most likely add to the negative form of
confirmations of accounts receivable to encourage
timely consideration by the recipients?
a. “This is not a request for payment;
remittances should not be sent our auditors
in the enclosed envelope.”
b. “Report any differences on the enclosed
statement directly to our auditors ; no reply
is necessary if this amount agrees with your
records.”
c. “If you do not report any differences within
fifteen days, it will be assumed that this
statement is correct.”
d. “The following invoices have been selected
for confirmation and represent amounts
that are overdue.”
34. The auditor will most likely perform extensive
tests for possible understatement of
 a. Revenues b. Compare depreciation journal entries with
similar prior year entries in search of fully
b. Assets depreciated equipment

c. Liabilities c. Inspect items of equipment observed during

the plant tour and then trace them to the
d. Capital
equipment subsidiary ledger
35. Which of the following procedures is least likely
d. Scan the general journal for unusual
to be completed before the balance sheet date?
equipment additions and excessive debits
a. Observation of inventory to repairs and maintenance expense

b. Review of internal control over cash 40. Testing for understatement of equipment
disbursements account requires examination first of the

c. Confirmation of receivable a. Equipment

d. Search for unrecorded liabilities b. Depreciation

36. If the purpose of the audit procedure is to test c. Cash

for overstatement of accounts payable, a more
d. Repairs expense
relevant procedure would be to start the procedure
from the 41. Which of the following explanations most likely
would satisfy an auditor who questions management
a. Recorded accounts payable
about significant debits to the accumulated
b. Unrecorded accounts payable depreciation accounts?

c. File of purchase invoices a. The estimated remaining useful lives of

plant assets were revised upward
d. Cancelled checks
b. Plant assets were retired during the year
37. In auditing accounts payable, an auditor’s
procedures most likely would focus primarily on c. The prior year’s depreciation expense was
management’s assertion of erroneously understated

a. Existence or occurrence d. Overhead allocations were revised at year-

end
b. Presentation and disclosure
42. An auditor analyzes repairs and maintenance
c. Completeness accounts primarily obtain evidence in support of the
audit assertion that all
d. Valuation and allocation
a. Noncapitalizable expenditures for repairs
38. Analysis of which account is least likely to reveal
and maintenance have been recorded in the
evidence relating to recorded retirement of
proper period
equipment?
b. Expenditures for property and equipment
a. Accumulated depreciation
have been recorded in the proper period
b. Insurance expense
c. Noncapitalizable expenditures for repairs
c. Property, plant and equipment and maintenance have been properly
charged to expense
d. Purchase returns and allowances
d. Expenditures for property and equipment
39. In testing for unrecorded retirements of have not been charged to expense
equipment, an auditor most likely would
43. Treetop Corporation acquired a building and
a. Select items of equipment from accounting arranged mortgage financing during the year.
records and then locate them during the Verification of the related mortgage acquisition costs
plant tour would be least likely to include an examination of
the related

a. Deed
 b. Canceled checks 49. To satisfy the valuation assertion when auditing
an investment accounted for by the equity method,
c. Closing statement an auditor most likely would

d. Interest expense a. Examine the audited financial statements of

the investee company
44. An auditor selected items for test counts while
observing a client’s physical inventory. The auditor b. Inspect the stock certificates evidencing the
then traced the test counts to the client’s inventory investment
listing. This procedure most likely obtained evidence
concerning management’s assertion of c. Review the broker’s advice or canceled
check for the investment’s acquisition
a. Rights and obligations
d. Obtain market quotations from financial
b. Existence or occurrence newspapers or periodicals

c. Valuation 50. A company has temporarily excess funds to

d. Completeness
45. A client maintains perpetual inventory records in
both quantities and pesos. If the assessed level of
control risk is high, the auditor would probably
invest. The board of directors decided to purchase
marketable securities and assigned the future
purchase and sale decisions to a responsible financial
executive. The best person(s) to make periodic
reviews of the investment activity would be

a. Insist that the client perform physical a. The investment committee of the board of
counts of inventory items several times directors
during the year
b. The treasurer
b. Apply gross profit tests to ascertain the
c. The corporate controller
reasonableness of the physical counts
d. The chief operating officer of the company
c. Increase the extent of tests of controls of
inventory cycle 51. The auditor’s program for examining long-term
debt should include
d. Request the client to schedule the physical
inventory count at the end of the year a. Verification of the existence of the
bondholders
47. In establishing the existence and ownership of a
long-term investment in the form of publicly traded b. Examination of any bond trust agreement
stock, an auditor should inspect the securities or
c. Inspection of the accounts payable
a. Correspond with the investee company to subsidiary ledger
verify the number of shares owned
d. Investigation of credits to the bond interest
b. Inspect the audited financial statements of income account
the investee company
52. During its fiscal year, a company issued, at a
c. Confirm the number of shares owned that discount, a substantial amount of first-mortgage
are held by an independent custodian bonds. When performing audit work, the
independent auditor
d. Determine that the investment is carried at
the lower of cost or market a. Confirms the existence of the bondholders

48. During the audit of a publicly held company, the b. Reviews the minutes for authorization
auditor could obtain written confirmation regarding
long-term bond transactions from the c. Traces the net cash received from the
issuance to the bonds payable account
a. Bond holder
d. Inspects the records maintained by the
b. Client’s attorney bond trustee

c. Internal auditor 53. An audit program for the examination of the

retained earnings account should include a step that
d. Trustee
requires verification of the
 a. Market value used to charge retained c. Performance of management
earnings to account for a two-for-one stock
split d. Attractiveness of the audited entity

b. Approval of the adjustment to the 57. An unmodified opinion means that

beginning balance as a result of write-down
a. Immaterial errors were corrected
of an account receivable
b. There are no material misstatements
c. Authorization for both cash and stock
dividends c. Material misstatement discovered were
resolved to the auditor’s satisfaction
d. Gain or loss resulting from disposition of
treasury shares d. The financial statements are free from any
errors
54. An auditor usually obtains evidence of
stockholders’ equity transactions by reviewing the 58. The auditors’ best defense when existing
entity’s material misstatement in the financial statements
are not uncovered in the audit is that
a. Minutes of board of directors meetings
a. The audit was conducted in accordance
b. Transfer agent’s records
with PSAs
c. Canceled stock certificate
b. The audit was conducted in accordance
d. Treasury stock certificate book with PFRSs

54. Where no independent stock transfer agents are c. Client is guilty of contributory negligence
employed and the corporation issues its own stocks
d. The financial statements are client’s
and maintains stock records, canceled stock
responsibility
certificates should
59. Yellow Company hired Blue and Black, CPAs to
a. Be defaced to prevent reissuance and
audit the financial statements of Green Company
attached to their corresponding stubs
and deliver the report to Mr. Pink. Which of the
b. Not be defaced but segregated from the following is the client?
other stock certificates and retained in a
a. Mr. Pink
canceled certificates file
b. Yellow Company
c. Be destroyed to prevent fraudulent
reissuance c. Green Company

d. Be defaced and sent to the secretary of d. Blue and Black CPAs

state
55. Consistency in the auditor’s report is achieved
when
a. The principles used in the financial
statements are the same every year
b. The same auditor is engaged every year
c. The audit is conducted in accordance with
Philippine Standards on Auditing
d. The auditor and management do not have
disagreements during the audit
60. Justine, CPA, is engaged by Shoppers Corp., a
client, to audit the financial statements of Small Bar
Corp., a company that is not Justine’s client.
Shoppers expects to present Small Bar’s audited
financial statements with Justine’s auditor’s report
to Philippine Bank to obtain financing in Shopper’s
attempt to purchase Small Bar. In these
circumstances, Justine’s auditor’s report would
usually be addressed to
a. Shoppers Corp.
b. Blue Bar Corp.

56. The opinion if the auditor is primarily an attest as c. Philippine Bank

to the
d. The investors and creditors of Blue Bar Corp
a. Accuracy of the financial statement
60. The introductory paragraph of the audit report
b. Fairness of the financial statements
 a. Identifies the name of the entity for who B. Modifications to the opinion in the independent
the report is prepared auditor’s report

b. Indicates the date of audit report a. A only

c. States that the financial statements have b. B only

been audited
c. Both A and B
d. Includes a statement of management’s
responsibility d. Neither A nor B

61. “Written Representations” is covered by 65. Items that materially affect the comparability of
financial statements generally require disclosure in
a. PSA 560 the footnotes. If the client refuses to properly
disclose the item, the auditor may be required to
b. PSA 570 issue

c. PSA 580 a. The disclaimer

d. PSA 590 b. An unmodified opinion

62. An auditor completed fieldwork on February 10, c. A qualified opinion

2013 for a December 31, 2012 year-end client. A
significant subsequent event occurred on February
22, 2013 if the event was a non-adjusting event
a. The report may be dated on February 10,
2013 if the event was a non-adjusting
event.
d. An adverse opinion
66. When determining whether an exception is
highly material, the extent to which the exception
affects different parts of the financial statements
must be considered. This is referred to as

b. The report may be dated February 10, a. Materiality

except for Note 1, February 22, 2013 if
auditor extended his procedures to all b. Financial analysis
subsequent events through February 22,
c. Pervasiveness
2013.
d. Ratio analysis
c. Dual dating generally applies to adjusting
events. 67. In which of the following cases may the auditor
choose between qualified and adverse opinion?
d. The report may be dated February 22, 2013
if the event was a non-adjusting event. A. Required disclosures are omitted (undisclosed)
from the financial statements
63. An auditor issued an audit report that was dual
dated for a subsequent event occurring after the B. disclosures in the notes to the financial
completion of fieldwork but before the issuance of statements are not appropriate
the auditor’s report. The auditor’s responsibility for
events occurring subsequent to the completion of C. Management provides disclosures beyond those
fieldwork was required by PFRSs

a. Extended to subsequent events occurring a. A and B only

through the date of issuance of the report
b. A and C only
b. Extended to include all events occurring
c. B and C only
since the completion of fieldwork
d. A, B, and C
c. Limited to the specific event occurred
68. An auditor is confronted with an exception
d. Limited to include only events occurring up
sufficiently material to warrant departing from the
to date of the last subsequent event
standard wording of an unmodified report. If the
referenced
exception relates to departure from generally
64. PSA 705 deals with accepted accounting principles, the auditor must
decide between
A. Modification to the independent auditor’s report
 a. An adverse opinion and an unmodified a. The principal effects of the departure from
opinion the identified financial reporting framework

b. An adverse opinion and a qualified opinion b. The substantive reasons for the financial
statements being misleading
c. An adverse opinion and a disclaimer of
opinion c. The direct reference to a separate
paragraph disclosing the basis for the
d. A disclaimer of opinion and a qualified opinion
opinion
d. All of the above
69. When comparing misstatements with a
measurement base, the auditor must consider the 73. When the auditor expresses a qualified opinion,
pervasiveness of the misstatement. An example of a the financial statements, in all material respects, are
pervasiveness misstatement would be
a. Fairly stated
a. An understatement of retained earnings,
caused by a miscalculation of dividends b. Misleading
payable
c. Materially misstated
b. A misclassification of notes payable as a
d. Unreliable
long-term liability when it should be current
74. Select opinion provided.
c. An understatement of inventory, caused by
miscounting “Except for the effects” “Because of the significance”

d. A misclassification of salary expense as a a. Qualified Qualified

selling expense when it should be allocated
equally to both selling and administrative b. Qualified Adverse
expense
c. Disclaimer Qualified
70. The peso amount of misstatement cannot be
d. Disclaimer Adverse
accurately measured. For example, if the client were
unwilling to disclose an existing lawsuit, the auditor 75. Of the two major categories of scope restrictions,
must estimate 1) those caused by client and 2) those caused by
conditions beyond the control of either client or
a. It’s likely to effect on net income
auditor, the effect on the auditor’s report
b. It’s likely effect on users of the financial
a. Is the same for either
statement
b. Is more serious for 2 than for 1
c. It’s likely effect on the auditor’s exposure to
lawsuits c. Is more serious for 1 than for 2

d. It’s likely effect on management’s future d. Is negligible

decisions
71. When the auditor knows that the financial
statements may be misleading because they were
not prepared in conformity with generally accepted
accounting principles, he or she must issue
76. If a scope limitation is imposed by the
circumstances, which course of actions are available
to the auditor?
I. Issue a qualified opinion if effects are material

a. Unmodified opinion II. Disclaim an opinion if effects are pervasive

b. An adverse opinion III. Resign or withdraw from the engagement

c. A disclaimer opinion a. I and II only

d. A qualified or an adverse opinion, b. I and III only

depending on the materiality of the item in
question c. II and III only

72. When the auditor expresses an adverse opinion, d. I, II and III only
the opinion paragraph should include
77. If the auditor is not independent, a disclaimer of 81. Which of the following procedures is most likely
opinion is issued to ensure that employee job time tickets are
accurate?
a. In all cases
a. Check the employee clock cards against job
b. If the effect is material time tickets

c. If the effect is both material and b. Keep employment information in the

pervasiveness human resource department

d. If the effect is highly material
78. The stockroom serving as the company’s
warehouse for items acquired from wholesalers and
ready to be sold to distributors is out of sufficient
stock. Which of the following function is incorrectly
performed?
a. The stockroom personnel prepare the
requisition form.
c. Make sure that the number of hours per
week on each employee’s job time ticket is
40
d. Approve the payroll voucher in the accounts
payable department
82. Before accepting an audit engagement, a
successor auditor should make specific inquiries of
the predecessor auditor regarding

b. The purchasing department acquires the a. Disagreements the predecessor had with
goods. the client concerning auditing procedures
and accounting principles
c. The receiving department accepts and
counts the goods. b. The predecessor’s evaluation of matters of
continuing accounting significance
d. The accounting department pays for the
invoice due. c. The predecessor’s assessments of inherent
risk and judgments about materiality
79. Accounts payable department generally
should 83. The auditor should document the understanding
established with a client through a (n)
a. Stamp, perforate, or otherwise cancel
supporting documentation after a. Oral communication with the client
payment is mailed- treasury dept.
b. Written communication with the client
b. Ascertain that each requisition is
approved as to price, quantity and c. Written or oral communication with the
quality by an authorized employee- client
purchasing department
d. Completely detailed audit plan
c. Obliterate the quantity ordered on the
receiving department copy of the 84. Arrangements concerning which of the following
purchase order-purchasing department are least likely to be included in engagement letter?

d. Establish the agreement of the a. A predecessor auditor

vendor’s invoice with the receiving
b. CPA investment in client securities
report and purchase order
c. Fees and billing
80. To assure that all purchases are authorized
before payment is made, accounting department d. Other services to be provided in addition to
personnel should match the vendor’s invoice to the audit

a. Purchase requisition 85. It is the financial reporting framework adopted

by management and, where appropriate, those
b. Receiving report
charged with governance in the preparation of
c. Purchase order financial statements that is acceptable in view of the
nature of the entity and the objective of the financial
d. Voucher statements or that is required by law or regulation.

a. Fair presentation framework

 b. Compliance framework b. Analytical procedures to verify the design of
internal control
c. Applicable financial reporting framework
c. Substantive tests to increase risk for
d. Conceptual framework significant transaction classes

86. On the basis of the audit evidence gathered and
evaluated, an auditor decides to increase the
assessed level of control risk from that originally
planned. To achieve an overall audit risk level that is
substantially the same as the planned audit risk
level, the auditor would
d. Dual-purpose tests to evaluate both the risk
of monetary misstatement and preliminary
control risk
91. These procedures are designed to detect
misstatements in the financial statements

a. Decrease substantive testing a. Risks assessment procedures

b. Decrease detection risk b. Tests of controls

c. Increase inherent risk c. Substantive procedures

d. Increase materiality levels d. Walk-through test

87. Which of the following is a function of the risks of 92. The ultimate basis of RA 9298 is the
material misstatement and detection risk?
a. NIRC
a. Internal control
b. PD 692
b. Corroborating evidence
c. Revenue Regulations
c. Quality control
d. Philippine Constitution
d. Audit risk
93. Any person who shall violate any of the provision
88. Before assessing control risk at a level lower than of the Act or any of its implementing rules and
the maximum, the auditor obtains reasonable regulations promulgated by the BOA subject to the
assurance that controls are in use and operating approval of the PRC, shall upon conviction, be
effectively. This assurance is most likely obtained in punished by
part by
a. Lethal injection
a. Preparing flowcharts
b. A fine of not more than P50,000
b. Performing substantive test
c. Imprisonment for a period not exceeding
c. Analyzing tests of trends and ratios two years

d. Inspection of documents d. A fine of not less than P50,000 or by

imprisonment for a period not exceeding 2
89. Which of the following is not one of the years or both
components of the major elements of internal
control? 94. An entity’s ongoing monitoring activities rather
than a separate evaluation often include
a. Physical security
a. Periodic audits by the audit committee
b. Control environment
b. Reviewing the purchasing function
c. Control activities
c. The audit of the annual financial statement
d. Monitoring
d. Control risk assessment in conjunction with
90. Regardless of the assessed level of control risk, quarterly reviews
an auditor would perform some
95. Sampling risk that leads the auditor to conclude
a. Tests of controls to determine the that a material misstatement exists when in fact it
effectiveness of internal control policies does not is

a. Risk of assessing control risk too low

 b. Risk of assessing control risk too high a. Journal and ledgers are considered as
corroborating information or supporting
c. Risk of incorrect rejection documents.(accounting records)

d. Risk of incorrect acceptance b. The sales journal is a record of the sales to

96. While performing a substantive test of details
during an audit, the auditor determined that the
sample results supported the conclusion that the
recorded account balance was materially misstated.
It was, in fact, not materially misstated. This
situation illustrates the risk of
a. Incorrect rejection
and movement of the balances of each
customer.(subsidiary ledger)
c. The subsidiary leger is a record of the total
sales for the period. (general ledger)
d. Before a credit sale is recorded, the sales
order, shipping document, and sales invoice
must be on hand.

b. Incorrect acceptance

c. Assessing control risk too low

d. Assessing control risk too high

97. An auditor understands the client’s business

primarily to

a. Assess the level of control risk

b. Identify transactions that may impact the

financial statements “GOD BLESS”

c. Develop a questioning attitude during the

audit

d. Make suggestions on how to improve

internal control

98. These procedures are designed to detect

misstatements in the financial statements

a. Risks assessment procedures

b. Tests of controls

c. Substantive procedures

d. Walk-through test

99. The primary purpose for obtaining and

understanding of an entity’s internal control is to

a. Determine the nature, timing and extent of

tests to be performed in the audit

b. Provide a basis for making constructive

suggestions in a management letter

c. Provide information for a communication of

internal control-related matters to
management

d. Obtain sufficient appropriate audit evidence

from which to draw conclusion as a basis for
forming an opinion on the financial
statements

100. In accounting department