Excel Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Auditing (AUD) CPA Review
FIRST PRE-BOARD EXAMINATION
Multiple Choice. Select the letter that corresponds to the
best answer. This examination consists of 70 items and the
exam is good for three (3) hours. Good luck!
1. The objective of the attest function is to
a. Determine the validity of the transactions
examined.
b. Express an opinion on the fairness of the financial
statements.
c. Detect fraud.
d. Ascertain the consistent application of GAAP.
2. An auditor should obtain sufficient knowledge of an
entity's information system to understand the
a. Safeguards used to limit access to computer
facilities.
b. Process used to prepare significant accounting
estimates.
c. Controls used to assure proper authorization of
transactions.
d. Controls used to detect the concealment of fraud.
3. Which of the following documents is not among the
requirements to be submitted when a candidate applies
for the CPA licensure examination with the Commission?
a. A valid clearance from the National Bureau of
Investigation (NBI).
b. Baccalaureate transcript of records with special
order if applicable.
c. Certificate of live birth in Philippine Statistics
Authority (PSA) security paper.
d. Form 138 Permanent Student Record.
4. Individuals who commit fraud are ordinarily able to
rationalize the act and also have an
Incentive Opportunity
a. Yes Yes
b. Yes No
c. No Yes
d. No No
5. Because of the risk of material misstatement, an audit
of financial statements in accordance with generally
accepted auditing standards should be planned and
performed with an attitude of
a. Objective judgment.
b. Independent integrity.
c. Professional skepticism.
d. Impartial conservatism.
6. Which of the following procedures would an auditor least
likely perform while obtaining an understanding of a
client in a financial statement audit?
a. Coordinating the assistance of entity personnel in
data preparation.
b. Discussing matters that may affect the audit with
firm personnel responsible for non-audit services to
the entity.
c. Selecting a sample of vendors' invoices for
comparison to receiving reports.
d. Reading the current year's interim financial
statements.
7. The following professionals are planning to renew their
CPA ID card with the Commission soon. Who among
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Since 1977
OCAMPO/OCAMPO/SOLIMAN/UY/
AGUILA/RICAFRENTE
February 19, 20 & 21, 2023
these professionals is not required to present proof of
compliance with Continuing Professional Development
(CPD) requirements?
a. Ella, a CPA, who works as a marketing specialist in
a big multinational firm. Her role does not require
her to be a CPA.
b. Rosanna, a staff in a small public accounting firm.
She has been working with the firm for 5 years
already.
c. Vanessa, an entrepreneur with various business
interest related to food and beverage.
d. Kim, who passed the CPA examination 2 years ago.
She expects to renew her license for the first-time
next year.
8. Operational auditing is mainly concerned about:
a. Future improvements for management goals.
b. Past protection provided by current internal control.
c. Verification of fair presentation of financial data.
d. Accuracy of data of financial records.
9. Which of the following statements is correct concerning
an auditor’s responsibility to report fraud?
a. The auditor is required to communicate to the
client’s audit committee all minor fraudulent acts
perpetrated by low-level employees, even if the
amounts involved are inconsequential.
b. The disclosure of material management fraud to
principal stockholders is required when both senior
management and the board of directors fail to
acknowledge the fraudulent activities.
c. Fraudulent activities involving senior management
of which the auditor becomes aware should be
reported directly to the SEC.
d. The disclosure of fraudulent activities to parties
other than the client’s senior management and its
audit committee is not ordinarily part of the
auditor’s responsibility.
10. One purpose of establishing quality control policies and
procedures for acceptance and continuance of client
relationships and specific engagements is to
a. Undertake engagements only that the accounting
firm is competent to perform.
b. Monitor significant deficiencies in the design and
operation of the client’s internal control.
c. Identify noncompliance with aspects of contractual
agreements that affect the financial statements.
d. Provide reasonable assurance that personnel will be
adequately trained to fulfill their assigned
responsibilities.
11. Which one of the following is not a logical function of a
CPA in public accounting practice?
a. Attest function.
b. Supervision of internal audit staff.
c. Tax practice.
d. Management consulting services.
12. When an auditor discovered that certain control
activities were ineffective, the auditor most likely would
increase the
a. Level of detection risk.
b. Extent of tests of details.
c. Level of inherent risk.
d. Extent of tests of controls.
AUD.1stPB5.23
TEAM PRTC
13. The understanding with the client regarding a financial
statement audit generally includes which of the
following matters?
a. The expected opinion to be issued.
b. The responsibilities of the auditor.
c. The contingency fee structure.
d. The preliminary judgment about materiality.
14. The reliance placed on substantive tests in relation to
the reliance placed on internal control varies in a
relationship that is ordinarily
a. Parallel.
b. Inverse.
c. Direct.
d. Equal.
15. Which of the following is the most reliable analytical
procedure to verify the year-end financial statement
balances of a wholesale business?
a. Verify depreciation expense by multiplying the
depreciable asset balances by one divided by the
depreciation rate.
b. Verify commission expense by multiplying sales
revenue by the company’s standard commission
rate.
c. Verify interest expense, which includes imputed
interest, by multiplying long-term debt balances by
the year-end prevailing interest rate.
d. Verify payroll tax liability by multiplying total payroll
costs by the contribution rate in effect during the
year.
16. Which of the following is a step in an auditor's decision
to assess control risk at below the maximum?
a. Apply analytical procedures to both financial data
and nonfinancial information to detect conditions
that may indicate weak controls.
b. Perform tests of details of transactions and account
balances to identify potential errors and
irregularities.
c. Identify specific internal control policies and
procedures that are likely to detect or prevent
material misstatements.
d. Document that the additional audit effort to perform
tests of controls exceeds the potential reduction in
substantive testing.
17. Assertions are representations by management that are
embodied in financial statements. Which of the
following is not a management assertion?
a. Obligations classified as long-term liabilities in the
balance sheet will not mature within one year.
b. Property is recorded at historical cost and such cost
is systematically allocated to appropriate accounting
periods.
c. Finished goods inventory in the balance sheet are
available for sale.
d. Net income reflects the earning power of the
enterprise.
18. Which of the following are correct concerning the
likelihood of loss and the potential amount involved with
a material weakness?
Likelihood of loss Potential amount involved
a. Probable More than inconsequential 25. In obtaining evidential matter in a regular audit, the
b. Probable Material
c. Reasonable possibility More than inconsequential
d. Reasonable possibility Material
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19. Which of the following statements most likely would be
included in an engagement letter from an auditor to a
client?
a. The CPA firm will provide absolute assurance about
whether the financial statements are free of
material misstatement.
b. The CPA firm is responsible for ensuring that the
client complies with applicable laws.
c. The CPA firm will involve information technology
specialists in the performance of the audit.
d. The CPA firm will adjust the financial statements to
correct misstatements before issuing a report.
20. Which of the following comparisons would an auditor
most likely make in evaluating an entity's costs and
expenses?
a. The current year's accounts receivable with the prior
year's accounts receivable.
b. The current year's payroll expense with the prior
year's payroll expense.
c. The budgeted current year's sales with the prior
year's sales.
d. The budgeted current year's warranty expense with
the current year's contingent liabilities.
21. In comparison to an external auditor, an internal auditor
is more likely to be concerned with
a. Internal control.
b. Cost accounting procedures.
c. Operational auditing.
d. Reviewing interim financial statements.
22. Which of the following audit risk components may be
assessed in nonquantitative terms?
Inherent risk Control risk Detection risk
a. Yes Yes No
b. Yes No Yes
c. No Yes Yes
d. Yes Yes Yes
23. After obtaining an understanding of internal control and
assessing control risk of an entity, an auditor decided
not to perform tests of controls. The auditor concludes
that
a. The available audit evidence obtained through tests
of controls would not support an increased level of
control risk.
b. A reduction in the assessed level of control risk is
justified for certain financial statement assertions.
c. It would be inefficient to perform tests of controls
that would result in a reduction in planned
substantive tests.
d. The assessed level of inherent risk exceeded the
assessed level of control risk.
24. Which of the following factors or conditions is an auditor
least likely to plan an audit to discover?
a. Financial pressures affecting employees.
b. High turnover of senior management.
c. Inadequate monitoring of significant controls.
d. Inability to generate positive cash flows from
operations.
auditor develops specific audit objectives and design
substantive procedures relating to client’s assertions.
Accordingly:
1) The auditor obtains evidence as to management’s
assertions that all transactions and accounts that
should be presented are so included.
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TEAM PRTC
2) The auditor is concerned with management’s
assertions that it performed efficiently and
effectively.
3) The auditor is concerned with management’s
assertions that assets, liabilities, revenues and
expenses have been included at appropriate
amounts.
4) The auditor obtains evidence as to client’s
assertions that the company can pay its obligations.
a. All of the above statements are true.
b. Only statements (1) and (3) are true.
c. Only statements (2) and (4) are true.
d. All of the above statements are false.
26. An auditor reviews a client’s accounting policies and
procedures when considering which of the following
planning matters?
a. Method of sampling to be used.
b. Preliminary judgments about materiality levels.
c. Nature of reports to be rendered.
d. Understanding of the client’s operations and
business.
27. Before accepting an engagement to audit a new client,
a CPA is required to obtain
a. An understanding of the prospective client's
industry and business.
b. The prospective client's signature to the
engagement letter.
c. A preliminary understanding of the prospective
client's control environment.
d. The prospective client's consent to make inquiries of
the predecessor auditor, if any.
28. Matthews Corp. has changed from a system of recording
time worked with clock cards to a computerized
timekeepingl system in which employees record time in
and out with magnetic cards. The computer system
automatically updates all payroll records. Because of
this change
a. A generalized computer audit program must be
used.
b. Part of the audit trail is altered.
c. The potential for payroll-related fraud is diminished.
d. Transactions must be processed in batches.
29. Which of the following is required documentation in an
audit in accordance with generally accepted auditing
standards?
a. A flowchart or narrative of the accounting system
describing the recording and classification of
transactions for financial reporting.
b. The overall audit strategy and audit plan.
c. All major stakeholder groups.
d. An internal control questionnaire identifying controls
that assure specific objectives will be achieved.
30. When an auditor considers a client’s internal control,
control activities ordinarily relate to performance
reviews, information processing, segregation of duties
and
a. Information and communication.
b. Operating decisions.
c. Physical controls.
d. Risk assessment.
31. In theory, which of the following would not have an
effect on the extent of audit evidence examined by a
CPA?
a. The types of audit evidence gathered.
b. The type of opinion to be issued.
c. The auditor's evaluation of internal control.
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d. Whether or not the client reports to the Securities
and Exchange Commission.
32. If specific information comes to an auditor's attention
that implies noncompliance with laws that could result
in a material, but indirect effect on the financial
statements, the auditor should next
a. Apply audit procedures specifically directed to
ascertaining whether noncompliance has occurred.
b. Seek the advice of an informed expert qualified to
practice law as to possible contingent liabilities.
c. Report the matter to an appropriate level of
management at least one level above those
involved.
d. Discuss the evidence with the client's audit
committee, or others with equivalent authority and
responsibility.
33. When performing a financial statement audit, auditors
are required to explicitly assess the risk of material
misstatement due to
a. Errors.
b. Fraud.
c. Illegal acts.
d. Business risk.
34. Which of the following is not represented in the Auditing
and Assurance Standards Council?
a. Association of CPAs in Public Practice.
b. Insurance Commission.
c. Board of Accountancy.
d. Bureau of Internal Revenue.
35. Nerissa recently took the Licensure Examinations for
CPAs and obtained the following rating: MS – 84.29%;
AUD – 70%; TAX – 71.43%; RFBT – 83%; FAR –
77.14% and AFAR – 78.57%. Which of the following
statements is correct:
a. Nerissa passed the CPA licensure examination.
b. Nerissa failed the CPA licensure examination.
c. Nerissa needs to retake AUD and TAX within the
next two years from the preceding examination.
d. Nerissa needs to re-enroll in AUD and TAX related
subjects in a CHED accredited school before she can
take another set of examination.
36. The auditor's best defense when material
misstatements are not uncovered is to have conducted
the audit
a. in accordance with generally accepted auditing
standards.
b. as effectively as reasonably possible.
c. in a timely manner.
d. only after an adequate investigation of the
management team.
37. Shown below (1 through 5) are the five types of tests
which auditors use to determine whether financial
statements are fairly stated. Which three are
substantive tests?
1. risk assessment procedures
2. tests of controls
3. substantive tests of transactions
4. substantive analytical procedures
5. tests of details of balances
a. 1, 2, and 3
b. 3, 4, and 5
c. 2, 3, and 5
d. 2, 3, and 4
38. Which of the following is not one of the four decisions
about what evidence to gather and how much of it to
accumulate in the development of an audit program?
AUD.1stPB5.23
TEAM PRTC
a. which audit procedures to use
b. which accounts must agree to the general ledger
c. when to perform the procedures
d. what sample size to select for a given procedure
39. Audit evidence has two primary qualities for the auditor;
relevance and reliability. Given the choices below, which
provides the auditor with the most reliable audit
evidence?
a. general ledger account balances
b. confirmation of accounts receivable balance
received from the client’s customer
c. internal memo explaining the issuance of a credit
memo
d. copy of month-end adjusting entries
40. The Auditor's Responsibilities section of the standard
unmodified opinion audit report states that the audit is
designed to
a. discover all errors and/or irregularities.
b. discover material errors and/or irregularities.
c. conform to generally accepted accounting
principles.
d. obtain reasonable assurance whether the
statements are free of material misstatement.
PROBLEM NO. 1
In connection with your audit of Stillness Corp. for the year
ended Dec. 31, 2023, you found the following information
relating to certain inventory transactions from your
observation of the client’s physical count and review of sales
and purchases cutoff:
a. Goods costing P180,000 were received from a vendor
on Jan. 3, 2024. The related invoice was received and
recorded on Dec. 30, 2023. The goods were shipped on
Dec. 31, 2023, terms FOB shipping point.
b. Goods costing P200,000, sold for P300,000, were
shipped on Dec. 31, 2023, and were received by the
customer on Jan. 2, 2024. The terms of the invoice were
FOB shipping point. The sale was recorded in 2024.
c. The invoice for goods costing P150,000 was received
and recorded as a purchase on Dec. 31, 2023. The
related goods, shipped FOB destination, were received
on Jan. 2, 2024.
d. A P600,000 shipment of goods to a customer on Dec.
30, 2023, terms FOB destination, was recorded as a sale
upon shipment. The goods, costing P400,000, were
received by the customer on Jan. 6, 2024.
e. Goods costing P250,000 were received and recorded as
a purchase on Dec. 31, 2023. These goods are held on
consignment from a vendor.
f. Goods costing P160,000, recorded as a sale upon
shipment for P240,000, were shipped on Dec. 31, 2023.
These goods are out on consignment with the customer
and sold to a third party on Jan. 5, 2024.
QUESTIONS:
Based on the given information and the result of your audit,
answer the following:
41. The inventory as of Dec. 31, 2023 is understated by
a. P140,000 c. P490,000
b. P330,000 d. P580,000
42. The cost of sales for the year ended Dec. 31, 2023 is
overstated by
a. P290,000 c. P890,000
b. P730,000 d. P980,000
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43. The profit for the year ended Dec. 31, 2023 is misstated
by
a. P 10,000 c. P350,000
b. P190,000 d. P430,000
44. The working capital as of Dec. 31, 2023 is misstated by
a. P 10,000 c. P350,000
b. P190,000 d. P430,000
45. Purchase cut-off procedures should be designed to
a. Test whether all inventory owned by the entity is in
the possession of the entity at year-end.
b. To detect whether merchandise included in the
physical count at year-end was not recorded as a
sale in the subsequent period.
c. Both a and b.
d. Neither a nor b.
PROBLEM NO. 2
You requested a depreciation schedule for Delivery Trucks
of Apatheia Corp. showing the additions, retirements,
depreciation and other data affecting the income of the
entity in the 4-year period 2020 to 2023, inclusive. The
Delivery Trucks account consists of the following as of Jan.
1, 2020:
Truck No. 1 purchased Jan. 1, 2017, cost P 180,000
Truck No. 2 purchased July 1, 2017, cost 220,000
Truck No. 3 purchased Jan. 1, 2019, cost 300,000
Truck No. 4 purchased July 1, 2019, cost 240,000
P 940,000
The Delivery Trucks–Accumulated Depreciation account
previously adjusted to Jan. 1, 2020, and duly entered to the
ledger, had a balance on that date of P302,000
(depreciation on the 4 trucks from respective date of
purchase, based on five-year life, no salvage value). No
charges have been made against the account before Jan. 1,
2020.
Transactions between Jan. 1, 2020 and Dec. 31, 2023, and
their record in the ledger were as follows:
July 1, 2020 – Truck No. 3 was traded for larger one (No.
5), the agreed purchase price of which was
P340,000. Cheerful Mfg. Co. paid the
automobile dealer P150,000 cash on the
transaction. The entry was debit to Delivery
Trucks and a credit to Cash, P150,000.
Jan. 1, 2021 – Truck No. 1 was sold for P35,000 cash; entry
debited Cash and credited Delivery Trucks,
P35,000.
July 1, 2022 – A new truck (No. 6) was acquired for
P360,000 cash and was charged at that
amount to Delivery Trucks account.
(Assume truck No. 2 was not retired.)
July 1, 2022 – Truck No. 4 was damaged in a wreck to
such an extent that it was sold as junk for
P7,000 cash. Cheerful Mfg. Co. received
P25,000 from the insurance company. The
entry made by the bookkeeper was a debit
to cash, P32,000, and credits to
Miscellaneous Income, P7,000 and Delivery
Trucks P 25,000.
Entries for depreciation had been made for the close of each
year as follows: 2020, P203,000; 2021, P211,000; 2022,
P244,500; 2023, P278,000.
AUD.1stPB5.23
TEAM PRTC

QUESTIONS: QUESTIONS:
Based on the given information and the result of your audit, Based on the given information and the result of your audit,
determine the following: determine the following:
46. The 2020 profit is overstated by 51. Amortization of patent for 2023
a. P 9,000 c. P31,000 a. P400,000 c. P800,000
b. P20,000 d. P 0 b. P720,000 d. P900,000
47. The 2021 profit is understated by 52. Carrying amount of patent as of Dec. 31, 2023
a. P51,000 c. P16,000 a. P2,400,000 c. P2,880,000
b. P50,000 d. P 0 b. P2,700,000 d. P3,200,000
48. The 2022 profit is understated by 53. Carrying amount of intangible assets as of Dec. 31,
a. P23,500 c. P94,500 2023
b. P64,500 d. P 0 a. P3,264,000 c. P3,744,000
b. P3,564,000 d. P4,610,000
49. The adjusted carrying amount of Delivery Trucks as of
December 31, 2023 is 54. Total expenses to be recognized in 2023
a. P885,400 c. P354,000 a. P1,066,000 c. P2,012,000
b. P504,000 d. P284,000 b. P1,932,000 d. P2,112,000
50. Which statement is incorrect regarding audit of 55. Which statement is correct regarding audit of intangible
property, plant and equipment? assets?
a. Property, plant and equipment is typically judged to a. An auditor most likely would review or re-compute
be one of the accounts least susceptible to fraud amortization and determine whether the
because the inherent risk is usually low. amortization period is reasonable in support of
b. When few property and equipment transactions management’s financial statement assertion of
occur during the year the continuing auditor usually valuation.
obtains an understanding of internal control and b. The most effective means for the auditor to
performs extensive tests of current year property determine whether a recorded intangible asset
and equipment transactions. possesses the characteristics of an asset is to
c. Determining that proper amounts of depreciation inquire as to the status of patent applications.
are expensed provides assurance about c. When testing a client's additions to an asset for
management’s assertions of valuation and research and development, the auditor must
presentation and disclosure. remember that such costs should be amortized over
d. In testing for unrecorded retirements of equipment, the lesser of their legal lives or useful lives.
an auditor is most likely to inspect certain items of d. None of these.
equipment in the plant and trace those items to the
accounting records.
PROBLEM NO. 4
You were able to obtain the following information in
PROBLEM NO. 3
connection with your audit of the Cash account of the
In connection with your audit of the Upekkha Corporation’s Aslama Corp. as of Dec. 31, 2023:
financial statements for the year 2023, you noted the Nov. 30 Dec. 31
following items relative to the company’s Intangible Assets. a. Balances per bank P480,000 P420,000
b. Undeposited collections 244,000 300,000
• A patent was purchased for P4,000,000 on Jan. 2, 2022. c. Outstanding checks 150,000 120,000
Upekkha estimated that the remaining useful life of the
patent to be 10 years. The patent was carried in seller’s d. The bank statement for the month of Dec. showed total
accounting records at a carrying value of P4,000,000 credits of P240,000.
when sold to Upekkha.
e. DAIF checks are recorded as a reduction of cash
receipts. DAIF checks which are later redeposited are
• During 2023, a franchise was purchased for P960,000.
then recorded as regular receipts. Data regarding DAIF
In addition, 5% of the revenue from the franchise must
checks are as follows:
be paid to the franchisor. Revenue from the franchise
1. Returned by the bank in Nov. and recorded by the
for 2023 was P5,000,000. Upekkha estimates the useful
company in Dec., P10,000.
life of the franchise to be 10 years and takes full year’s
2. Returned by the bank in Dec. and recorded by the
amortization in the year of purchase.
company in Dec., P25,000.
3. Returned by the bank in Dec. and recorded by the
• Upekkha incurred research and development costs of
company in Jan., P29,000.
P866,000 in 2023. Upekkha estimates that these costs
will be recouped by 2025. f. Check of another company amounting to P90,000 was
charged to the Aslama’s account by the bank in error on
• On Jan. 1, 2023, Upekkha, because of the recent events Dec. 31.
in the industry, estimates that the remaining life of the
g. A bank memo stated that the company’s account was
patent purchased on Jan. 2, 2022, is only 5 years from
credited for the net proceeds of a customer’s note for
Jan. 1, 2023.
P106,000.
h. The company has hypothecated its accounts receivable
with the bank under an agreement whereby the bank
lends the company 80% of the hypothecated accounts
receivable. The company performs accounting and
collection of the accounts. Adjustments of the loan are
made from daily sales reports and deposits.

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TEAM PRTC

PROBLEM NO. 5
i. The bank credits the company account and increases the
amount of the loan for 80% of the reported sales. The In connection with the audit of the financial statements of
loan agreement states specifically that the sales report Hishtavut Corporation, your audit senior instructed you to
must be accepted by the bank before the company is examine the company’s accounts receivable.
credited. Sales reports are forwarded by the company
to the bank on the first day following the date of sale. Prior to any adjustments you were able to extract the
The bank allocates each deposit 80% to the payment of following balances from Hishtavut’s trial balance as of Dec.
the loan, and 20% to the company account. Thus, only 31, 2023:
80% of each day’s sales and 20% of each collection
Accounts receivable P442,500
deposits are entered on the bank statement. The
Allowance for doubtful accounts 15,000
company accountant records the hypothecation of new
accounts receivable (80% of sales) as a debit to Cash
From the schedule of accounts receivable as of Dec. 31,
and a credit to the bank loan as of the date of sales. One
2023, you determined that this account includes the
hundred percent of the collection on accounts receivable
following:
is recorded as a cash receipt; 80% of the collection is
recorded in the cash disbursements books as a payment Accounts with debit balances:
on the loan. In connection with the hypothecation, the 60 days old and below P238,500
following facts were determined: 61 to 90 days 117,200
• Included in the undeposited collections is cash from Over 90 days 85,400 P441,100
the hypothecation of accounts receivable. Sales Advances to officers 16,400
were P180,000 on Nov. 30, and P200,000 at Dec. Accounts with credit balance (15,000)
31. The balance was made up from collections which Accounts receivable per GL P442,500
were entered on the books in the manner indicated
above. The credit balance in customer’s account represents
• Collections on accounts receivable deposited in collection from a customer whose account had been written-
Dec., other than deposits in transit, totaled off as uncollectible in 2022.
P725,000.
Accounts receivable for more than a year totaling P21,000
j. Interest on the bank loan for the month of Dec. charged
should be written off.
by the bank but not recorded in the books, amounted to
P38,000.
Confirmation replies received directly from customers
disclosed the following exceptions:
QUESTIONS:
Based on the given information and the result of your audit, Customer’s
answer the following: Customer Comments Audit Findings
Ey The goods sold on The client failed to
56. How much is the unadjusted balance per books as of
Dec. 1 were record a credit memo
Nov. 30, 2023?
returned on Dec. for P12,000. The
a. P504,000 c. P430,000
16, 2023. merchandise was
b. P484,000 d. P356,000
included in the ending
57. How much is the unadjusted book receipts for Dec., inventory at cost.
2023?
a. P860,000 c. P735,000 Beh We do not owe this Investigation revealed
b. P770,000 d. P738,000 amount *%#@!!! that goods sold for
(censored). We did P16,000 were shipped
58. How much is the unadjusted book disbursements for
not receive any to Beh on Dec. 29,
Dec., 2023?
merchandise from 2023, terms FOB
a. P773,000 c. P735,000
your company. shipping point. The
b. P700,000 d. P760,000
goods were lost in
59. How much is the unadjusted balance per books as of transit and the
Dec. 31, 2023? shipping company has
a. P481,000 c. P309,000 acknowledged its
b. P530,000 d. P539,000 responsibility for the
loss of the
60. Which statement is incorrect regarding audit of cash? merchandise.
a. The general cash account is considered a significant
account in almost all audits even when the ending Sy I am entitled to a Sy is an employee of
balance is immaterial. 10% employee Hishtavut. Starting
b. The starting point for the verification of the balance discount. Your bill Nov. 2023, all
in the general bank account is to obtain a bank should be reduced company employees
reconciliation from the client. by P1,200. were entitled to a
c. An auditor who is engaged to examine the financial special discount.
statements of a business enterprise will request
cutoff bank statement primarily in order to verify
Deh We have not yet Merchandise billed for
the cash balance reported on the bank confirmation
sold the goods. P18,000 were
inquiry form.
We will remit the consigned to Deh on
d. Auditors are likely to prepare a proof of cash when
proceeds as soon Dec. 30, 2023. The
the client has material control weaknesses in cash
as the goods are goods cost P13,000.
receipts and cash disbursements.
sold.

Eh We do not owe you The sale of

P20,000. We merchandise on Dec.

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TEAM PRTC

Customer’s
Customer Comments Audit Findings PROBLEM NO. 6
already paid our 18, 2023 was paid by
Aequanimitas Corp. made investments equity and debt
accounts as Eh on Jan. 6, 2024.
instruments classified as FA at FVTPL. An analysis of these
evidenced by OR #
investments on Dec. 31, 2022 showed the following:
1234.
Instrument Cost Fair value
Ef Reduce your bill by This amount Marcus Inc. (6,000 shares) P307,500 P270,000
P1,500 represents freight
Cato Inc. (2,250 shares) 76,500 90,000
paid by the customer Seneca Co. 12% Bonds
for the merchandise (P300,000 face value) 269,500 280,600
shipped on Dec. 17, Total P653,500 P640,600
2023, terms, FOB
destination-collect. On Apr. 1, 2023, the entity purchased as a temporary
investment, P200,000 face value, 9% Philippine treasury
Based on your discussion with Hishtavut’s Credit Manager, notes for P198,500, which includes accrued interest. The
you both agreed that an allowance for doubtful accounts notes mature on July 1, 2024 and pay interest semiannually
should be maintained using the following rates: on Jan. 1 and July 1. The notes were sold on Dec. 1, 2023
60 days old and below 1% for P206,500, which includes accrued interest.
61 to 90 days 2%
Over 90 days 5% On July 1, 2023, the shares of Cato were sold for P70,000.
On Dec. 31, 2023, Marcus Inc. shares were quoted at P44
QUESTIONS: per share. Seneca bonds were quoted at P950 per P1,000
bond.
Based on the above and the result of your audit, answer the
following: QUESTIONS:
61. In relation to Customer Beh, the necessary adjusting Based on the above and the result of your audit, answer the
journal entry includes a debit to following:
a. Claim Against Shipping Company of P16,000
b. Sales of P16,000 66. The gain on sale of Philippine Treasury Notes on Dec. 1,
c. Loss of P16,000 2023 is
d. None of these a. P 500 c. P 8,000
b. P5,000 d. P12,500
62. In relation to Customer Deh, the necessary adjusting
journal entry includes 67. The loss on sale of Cato shares on July 1, 2023 is
a. A debit to Inventory of P18,000. a. P 0 c. P18,650
b. A credit to Cost of Sales of P13,000 b. P6,500 d. P20,000
c. A credit to Sales of P18,000 68. The interest income for the year 2023 is
d. None of these a. P24,000 c. P37,500
63. The adjusted balance of accounts receivable as of Dec. b. P36,000 d. P48,000
31, 2023 is 69. The carrying amount of the investments at Dec. 31,
a. P371,400 c. P402,400 2023 is
b. P387,400 d. P403,800 a. P520,025 c. P549,000
64. The adjusted allowance for doubtful accounts as of Dec. b. P533,500 d. P577,000
31, 2023 is 70. The net unrealized loss to be recognized in 2023 profit
a. P7,462 c. P7,786 or loss is
b. P7,622 d. P8,372 a. P 0 c. P 2,800
65. Which statement is incorrect regarding audit of b. P1,600 d. P15,100
receivables?
a. Unreturned negative confirmation requests rarely
provide significant explicit evidence. Thank you for participating in Team PRTC
b. An auditor should perform alternative procedures to Nationwide Online Open First Pre-Board
substantiate the existence of accounts receivable Examination.
when no reply to a negative confirmation request is
received.
c. When designing audit procedures, tracing of source
documents to the customers subsidiary ledger and
subsequently to the general ledger is done to verify
completeness assertion.
d. An auditor most likely would analyze notes
receivable and interest income on the same working
paper.

Page 7 of 7 www.teamprtc.com.ph AUD.1stPB5.23