Professional Documents
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answer-key-audit-ireneo-2018-ed-ch1-9_compress
answer-key-audit-ireneo-2018-ed-ch1-9_compress
answer-key-audit-ireneo-2018-ed-ch1-9_compress
1 TRUE
2 TRUE
3 FALSE Assurance refers to the practitioner’s satisfaction
4 TRUE
5 FALSE There are five, not six, elements
6 FALSE The responsible party and the intended user need not be from separate organizations.
7 TRUE The term practitioner is broader in scope compared to the term auditor.
8 FALSE A professional accountant shall not agree to perform an assurance engagement which they
are not competent to carry out.
9 TRUE
10 FALSE The intended user may be the one who engages the professional accountant.
11 FALSE See note in number 10. The intended user is the person or class of persons for whom the
practitioner prepares the report.
12 TRUE
13 TRUE
14 TRUE
15 FALSE The criteria in an FS audit is PFRS or GAAP.
16 FALSE Appropriateness refers to quality, while sufficiency refers to quantity...
17 FALSE Evidence obtained directly by the practitioner is more reliable...
18 FALSE The practitioner expresses a conclusion that provides a level of assurance...
19 FALSE This statement describes a direct reporting assurance engagement.
20 TRUE
21 FALSE Absolute assurance is generally not attainable...
22 FALSE CPAs may perform non-assurance engagements.
23 FALSE Agreed-upon procedures lack a written assurance report or conclusion. It is a nonassurance
engagement.
24 FALSE Compliance audits are classified as assurance engagements.
25 TRUE
1A
2C
3 B Engagement process is an element according to the superseded PSA 100.
4 D Auditors must be alert regarding inconsistent evidence
5B
6C
7 D Subject matter may include financial or non-financial information, physical characteristics,
systems and processes, and behavior.
8A
9 D Sufficiency is an attribute of audit evidence.
10 A Efficiency and effectiveness may involve subjective factors.
11 C
12 C
13 D Compilations are non-assurance engagements.
14 B Choice C refers to Business Risk Assessment service.
15 C
16 D
17 A
18 A
19 B
20 D
1 TRUE
2 FALSE ...complied with generally accepted accounting principles or PFRS
3 FALSE This refers to operational audits.
4 FALSE Preparation of financial statements is the responsibility of management.
5 TRUE
6 FALSE An audit aids in the communication of economic data because it provides reasonable
assurance that the financial statements are fairly stated.
7 FALSE The financial statements remain management’s responsibility.
8 TRUE
9 TRUE
10 TRUE
11 FALSE The most cost-beneficial option to reduce information risk is to have the financial
statements audited.
12 FALSE An audit does not provide assurance regarding the prevention of fraud.
13 TRUE
14 FALSE The auditor of the past focused on detecting fraud, while the auditor of today focused on
expressing an opinion on the fairness of financial statements.
15 TRUE
16 FALSE The rules and regulations are set by a higher authority (such as legislation).
17 TRUE Note however, that external auditing may also refer to operational audits and compliance
audits that are performed by independent auditors.
18 TRUE
19 FALSE Internal audits are intended to serve the needs of management, not to aid the external
auditor.
20 FALSE The major beneficiary of internal audits is management.
21 FALSE
22 FALSE Auditing requires that data should be verifiable.
23 TRUE
24 TRUE
25 FALSE The main difference between auditors and accountants is the ability to gather and evaluate
evidence.
16 A
17 D
18 B
19 C
20 C
21 B
22 A Information risk is the likelihood that information presented is false or misleading.
23 B The best reason for audits is the conflict of interest between preparers and users of financial
statements.
24 B Choice B refers to the objective of a financial statement audit, not a reason for audits.
25 C
26 B Statement 1 is false because CPAs have as their primary responsibility the performance of
the audit function on published financial statements of publicly traded corporations.
27 B
28 C
29 D
30 B Some evidence supporting peso representations in the financial statements must be
obtained by oral or written
25 D
14 C
15 A
16 B
17 A
18 D
19 D
20 B
21 C
22 D
23 D
24 C
25 C
26 A
27 A
28 D
29 C
30 D Choice A refers to Existence. Choice B refers to Completeness. Choice D refers to rights
and obligations.
19 FALSE Strategies are operational approaches by which management intends to achieve its
objectives. Objectives are the overall plans for the entity.
20 TRUE
21 TRUE
22 TRUE
23 TRUE
24 TRUE
25 TRUE
8-2 : Multiple Choice
1D
2C
3A
4B
5A
6D
7 A Representation letters are considered at audit completion.
8 A The most costly procedure is test of balances.
9C
10 D
11 C
12 A
13 C This is already a further audit procedure (performed after planning).
14 C
15 B Note that the client under consideration is a continuing audit client.
16 B Comparison of actual results versus budgeted figures is known as variance analysis.
17 D
18 C
19 D
20 C
21 C PSA 550 covers related parties. Related parties are indicated by transactions which have
abnormal terms of trade.
22 B
23 A
24 A
25 C Client management is expected to have a deeper understanding of the entity’s operations.
The auditor is expected to obtain an understanding of the entity sufficient for him/her to
perform the audit effectively, but not so much as to be comparable to the level of
operational knowledge possessed by management.
26 B This procedure is a substantive test.
27 D
28 A
29 D Most business risks do have financial consequences.
30 B
CHAPTER 9 : Study and Evaluation of Internal Control
5 C The internal control system of a company is broader in scope compared to the accounting
system of the entity.
6B
7C
8 B Not all controls are relevant to the auditor’s risk assessment (only those which may affect
the entity’s ability to produce fairly stated financial statements).
9A
10 D Choice A refers to risk assessment process. Choice B refers to the information system.
Choice C refers to control activities.
11 C
12 B Specific authorization is required for non-routine transactions, while general authorization is
required for routine transactions.
13 D Risk arises from change. Choice D shows stability (no change).
14 D
15 B
16 B
17 A See 9-1 number 18
18 A The understanding of internal control is used to determine the control risk, not inherent risk.
19 B
20 D See number 17.
21 B
22 A
23 B
24 B
25 D
26 A The basis for the control risk assessment is documented only when the control risk
assessment is Less than High.
27 A Choice B is incorrect because the preliminary assessment of control risk is done before tests
of controls. Choice C is incorrect because the preliminary assessment of control risk for a
financial statement assertion is normally HIGH, unless the auditor is able to identify controls
that are potentially reliable.
28 D Choice A is incorrect (see comment in number 26). Choice B is incorrect because
substantive tests cannot be eliminated, regardless of the control risk assessment. Choice C
is incorrect because evidence regarding the operation of controls in a prior period may be
considered during the current audit.
29 C Choice A is incorrect because tests of controls are used to verify effectiveness of controls
not management assertions. Choice B is incorrect because analytical procedures cannot be
used to validate control risk, and substantive tests are not used to validate control risk.
Choice D is incorrect because the assessment of control risk has already been performed
(see question).
30 D Tests of controls will not be performed since there are missing controls.
31 A Choices B, C and D are substantive tests.
32 A
33 B Choice B is evidence obtained during the performance of substantive tests.
34 C
35 C See comment for Choice B in number 29.
36 D
37 C
38 C As the acceptable level of detection risk decreases, the auditor relies on more stringent
substantive testing.
39 B
40 A