AUDS — Audi of Specialized Industries ‘Mtg Term ~ Long Exam #1 3 ‘Statement #1: Banks ontinarty operate through networks of branches and departments that ere geographically dtsperséd, because of this they are» \uinerabie 1 adverse economic events and Increases the risk of fate, ‘Statement #2: The auditing of contract costs invoNes two primary areas: the accumulated costs to date and the estimated cost to complete. 7 ment #1 is true ~ c, Both statements are tue @_ Both statements are faise ‘Statement #1. Retentions arise when cavenues have Deen recorded due to the performance of contract ‘Work Being performed, but the amount cannot be. hited unger the terme of he contract uni ater ‘Statement #2: In Cooperatve Banks, risks and profits are shared both by the financial insitution {and the account holers. F @ Only Statement #1 is true Only Statement #2 is true c ei seerer a te ‘Statement #1: Only universal banks are allowed to ‘engage in other intermediation activities such as underwriting, * ‘Statement #2: Narrow variances in bid amounts ‘among competing COnUSCIONY us audit risk. 7 = 2 On! “£. Both statements are true 4) Both statements are false ‘Statement #1: One way of income recognition for this industry is Completed-Contract Method which allows all revenue and expense recognition to be deferred until the completion of a contract. | ‘Statement #2: Window dressing Is to improve liquidity and asset ratios for the presentation and discigsure of money market instruments. F . Only Statement #2 is true ¢ Both statements are true 6. Both statements are false Statement #1: in auditing the measurement of. assessing ine Ceasonableness of the reported amounts. Such ‘techniques include comparison of reported interest yields in percentage terms. ‘Statement #2. The audit risk normaly increases ‘when small portion of work is performed by subgontractors ‘© Onty Statement a b__ Only Statement true d. Both statements are false Statement #1: Since work is performed under contractual are . these agreements ‘generally requires Onty partial performance before the contractor's obligation is discharged. Statement #2: L tisk abso inchudes any toss that could arise from changes in regulatory requirements. ‘8, Onty Statement #1 is tue 'b) Only Statement #2 is true Statement #1: One ofthe key gusit considerations of banks is that they have assets that can rapidly change In value and whose valve is often dificult to eiermine, so loss of confidence by depositors may quickly result in liquidity crisis. ‘Statement #2: CIAP implements tts policies through Philippine Overseas Construction Board which is. under its jurisdiction. “| true (G Both statements are tue & Both statements are false ‘Statement #1: Cost-plus contract requires that the contractor's bestefforts, accomplish the scope of the work within some specified ime, and stated dotar limitation. These types of projects can pose a higher fisk for contractors, based on whether a cost is eimbursable arn}. * T Statement #2: All universal banks are commercial but not all commercial banks are universal. T 8, Only Statement #1 Is true > tA. d. Both statements are false Statement #1: Auditors report on disclosures about the bank’s capital and tis capital ratios, either because that information is included in the financial statements or Its required. bythe BSP. T Statement #2: Eixed-price contract is usually the safest aption for-the-owner, but the riskiest forthe contractor. § ‘a. Only Staternent #1 i true b, Only Statement a2 is trueAUDS — Audit of Speciatiz Mia Term—Long Exam at Usre® {e) ou tatemeni stn ti 6. Both statements are taise 10. Statement #1: construction manager also does Fanaa aL contracts with other contractors fora Stone eon work in behalf ofthe sumer. Y tement #2: Changing an asset's categorization Provides management with an opportunity for financial ting, as it would be possible to recognize’ profit or avoid recognizing a loss by ‘changing the categorization of particular securities. 7 ‘Only Statement #1 is true A @. Both statements are false D ‘11. Which of the following statements does fotmake Not-tor- ‘@ Specialized industry? “2 all of the money eamed by or donated toa not-for-profit entity is used to pursue the ‘organization's objectives and keep it running 25 typically tax-exempt charities or other types ‘of public service organizations S- income is not distributed to the group's members, directors, or officers (4 None oft above } % 12. The following are considered as key audit ‘considerations in specialized ie “a competence of the audit firm to provide the ‘senvice, inciuding be and resources, 1.60 50, identtication of the risk of material misstatement by obtaining an appropriate understanding of the business and its ‘environment reliance on expen is likely because despite being competent, the audit frm may not have the necessary specific expertise in some areas © 58, Enormeans en in financial statements such 2s ae 2 Mathematical 1 mistake in the Lndertyng records and accounting data ht or of facts 4. Misappication of accounting policies 14. Which of the following statements would most likely 22pe@" in an auditor's engagement letter? o 8. Management is responsible for reporting 10 UF Inadequate provisions for the safeguard" sets We will entity Internal controle relevant to cic assertions that may prevent of detoct material misstatements “orManagement agrees to correct Gijteficiencies rol actviies identified by us LP 15, ‘An act of two ot more employes to Sieal assets)and ‘cover theicthefl by misstating the accounting records would be referred to as: ’b. Amaterial weakness ¢ Acontrol deficiency 4. Asignificant deficiency 16. Which ofthe following is Kojconsidered as gn-bank. financial insittions? A insurance companies 4) Pension fund institutions pare 17. One key audit consideration of banks is that they ‘engage in a large volume and variety of transactions ‘whose value may be significant, the downside of this would be ly small decrease in asset values may have a significant effect on their capital ‘and solvency b. It could pose a systemic risk to the count in wh A ts vulnerable to adverse economic events and increases the risk of failure 18. Which of the followir describes a Replacement risk? ‘a. adverse changes in market prices, including interest rates, foreign exchange rates, equity 1nd commodity prices and from movements inthe marke investments fone side of a transaction will be settled without value being received from the customer ‘customer or counterparty will not settle an obligation for full value ase ‘AUDS — Audit of Specialized Industries ‘Mid Term — Long Exam #1 419, The folowing describes the risks posed hy hanks ordinary operating through 5 branches SMG departments that are geogrephicaly dlspersed, @ vows a greater decenatzaion of authorty cc. dispersal of accounting and control functions difficulties in maintaining uniform operating practices and accounting systems A, wpencnn nan oe ist aoe soon a Settlement risk some ‘Operational risk é eGeprenrting te 28 21, Which ofthe fl - 7 fikeot Danks spanking industry natural Nav Sh inherent risk so t needs: ‘adequate internal contra! To assess | inherent risk and detection atless. seen C ‘banking industry naturally nave high Cor risk so it needs adequate intemal eonraTio detedto ‘assess control risk and than high level fsk 30 kneods adequate internal cone © se ges contro rsk and inherent risk at less ‘than high level considering the bank's intemal controls the fotowing SEEPS ie ‘constantly developing new financial products ‘and services 923: The following are needed in considering the influence of environ rs (excat va’ The organizational structure ofthe bank and the manner in which it provides for the “delegation at authorty and responsibilities. The qualty.of management supervision. ‘c. The extent and effectiveness ofthe risk ‘management and compliance systems 4 24, 26. 26. ~ 28. Which of the following regarding audit ca an ‘areas for whic seguir may use conti the following @xcet i_cola a forward purchase and tomers and ‘asset, liability, 3« ‘sale positions with cust counterparties > faga opinions on te valicty Of SF dais bank's “pe indepen iy Terms communicated clearly a. ale work of te auctor adeaele ‘Audit procedure used to cok Gicflassrion interest income/éxpense . Reviewing Interest Income/EXPense , ‘Schedule interest Accruals. of The following audit procedures may be used {0 check valuation spaueston assertion of cash and cash equivalents. “a obtain or prepare year end bank, <> rpconeilation be testt c._ trace a sample of entries in the cash receipts journals to the accounts receivable subsidiary ledgers, bank validated deposit procedures for correct? Follow up the subsequent disposition of items included in the count \y Preparation of bank reconciliation statements ‘4 Preparation of Bank transfer schedulesAUDS - Audit of Specialized | Mid Term Long Gear a1 Ste 29. What is the assertion for ascertair ng that cash in the custody of te cent Is ecorsed nthe ronen accounting period? = a Exister epee are | Obiaining an understanding of those t Gpchesiren| ns components of nts corral maintained at Valuation and Allocation 1 eene 36. The following are characteristics of a construction Bs 30. This type of contract requires that the contractor contractor's accounts receivable, that may require EGS ef to accomplish the scope ofthe special aud consideration, except) work within some specified lime, and stated dollar © Unbilled receivables limtation, These types of projects can pose a higher Retentions. ‘isk for contractors, based on whether a cost is reimbursable or not @ pes pee gee Contract scope changes c, Time-and-materials contract © 36. Which of the following about auditing contract costs &. Unit-price contract ears? inder the completed-contract method, proft 31. The following comet considerations for recognition Ts deferred untl the contract is con substantially completed (The percentage of completion.metnos rrangements wih investors”? requires that projected gross profit onthe DE Normally obtains the corivacts thet generate ‘contract be estimated before the gross profit revenue or sales by bidding a for the period under audit can be _Z® May be exposed to significant eke inthe performance of a contract LAT Casi and venues atypically 4. Allof the above fsccumulated and accouried for contract ‘commitments extending beyond one a7. ‘The eetinh om auditor in examining contracts sccountng period or by the completed-contract method are to owing. B32. The following characteristics normally increase audit fisk, a ‘few previous contracts with contractor _/,_3& Sbe proper amount and accounting period for GAC signiticant underbiling ‘ecognition ofthe profit rom completed contracts D 33, The following cheracteristics normally decrease the amount of anticipated losses, if any, on : AR uncompleted contracts to be ecognized in {Comfortable time frame |, the current period o 1 catty eaterse wear pigh 7 (@ inatreyneppeaten the rats a Y %e. Many previous contracts with contractor determining completion seg ro ero Wenetiy 38. Additional representations specific to construction ‘contractors that may be obtained Include the 24, mca tuations, ob ste vss are essen following except) the auditor to understand the contractors operations, ‘A. Melhod of income recognition used Job site visits assist the audtor In meeting the 5. Provisions for anticipated losses on Pi following objectives, aco yp Contracts: (Gaining an understanding of the contractor's 7 (€.) Backlog information if presented in the ‘method of operations aS J. Determining thatthe job actualy exists_qu05 - Audit of Specialized Industries id Term — Long Exam #1 - 1p 38: The auditor should review agreements oting ee ‘and document a contractors participation ‘formation that the auditor might consider @® vayze ease and recalculate repair and documenting includes ‘maintenance expense accounts A. Capital contributions and funding ¥ Fequirements of the venture participants 45, The following audit procedures may be used to Financial guarantees of recourse, or both, check Valuatidn assertion of Construction in of Construction i between the parties and to outside parties Progress <._ None of the above B 40. Complian Compare the CIP balance to the project =e Risk encompasses the following, excep) budget and prior period balances. Environmental / ge Analyze trends in CIP costs and assess the reasonableness in light of the project's stage Brocess FOsks of completion “gf Workplace Health and Safety ©) liwesigatesgiscantMucwatons of deviations from expectations and obtain ‘41. The folowing ausit procedures may be used to _ ‘management explanations. ‘check Rights and Obligations assertion oftevenue) excep? . 48. The {allowing are part of project execution risks, cas a 21 Review customer contracts for terms of sale, Project Delays ~ billings, and potential contingencies. i Bi (©) Customer credit analysis # Z Assessment of the validity of contracts and 6. Quality Control Issues potential future obligations. B47. Key audit consideration that involves examination of D 42. The following audit procedures may be used to __ contract terms, change orders, and claims ‘check Completeness assertion of{iventory éxcepl> Jhanagement “Z Reconelliation of ventory suniary sheet Revenu with general ledger. va\ven'3) AS” Valuation in accordance with accounting Asset valuation 4. Compliance ria A 48. Established through presidentiat decree no. 1746,_ ~ apelin rae ae sso cl iba th ead rey 2 OS oon . development of the construction industry in the al 143. The following audit procedures may be used Philippines el ‘ay oD check Qcourrence/Exstence assertion of — ne tracing the payroll transactions to supporting. 2© Construction Manpower Development Foundation ‘&._ Philippine Construction Accreditation Board A® Philippine Overseas Construction Board .s.analyze payroll totals for reasonableness 4 49, Revenue recognition risk ‘compared to budgets and prior periods CS a aaa obtaining legal advice if necessary to assess the validity of employment relationships and ‘DL, Overestimation of Completion related liabilities < Underestimation of Costs Char 44. The following audit procedures may be used to cepeee tenmaee © 80. Bonus: Professor's year of check Cc issertion of Property, Plant, nny sistas a 2017 (Obtaining PPE schedule and reconcile with ledger balances 4.201 ol ty =NAME: PANTY wtcokt tt. camstan 4. Each account balance will be tested under SOT I IY sccm come elther tests of controls or tests of transactions. INTRODUCTION 8. Relationship between contol sk and detection isk 1. Alot the statements below regarding nature of audit 1s ordinarity aera evidence Is true) except” a. Parallel in =a Ropropriaieness isthe measure of the quality of Direct vin k audit evidence ~ thats both reliable and (6) inverse ct] relevant in providing support for, oF detecting Equal oe misstalements in, financial statement 2 gl) assertions. /7 Wien oft fotowng statements 6) caret , Appropriateness is affected by the risk of about materiality? material misstatements (the greater the risk, the _ac The concept of materiality recognizes that some more audt evidence required) matters are important for fair presentation of financial statements in conformity with the applicable financial reporting framework, while € Relevance of evidence is the appropriateness (pertinence of evidence to the audit objective ‘being tested) ‘other matters are not important. A Reliability is the quality of information when itis & An auditor considers materiality for planning {ree from material error and bias and can be purposes in terms of the largest aggregate level ‘depended upon by users to represent faithfully cof misstatements that could be material to any that which i elther purports to represent or cone of the financial statements. could reasonably be expected to reprasent ‘&. Materialty judgments are made in light of surrounding circumstances and necessarily 2. Wreters to those matters that, in the auditor's involve both quantitative and qualitative professional judgment, were of most significant in judgments ‘the audit of the financial statements of the current 2 An auditor's consideration of materiality is period: +” inftuenced by the auditor's perception of the ‘a. Emphasis of a matter reeds of a reasonable person wito wil rely on b. Other mater the financial statements, © Key audit matters = 6 What's the matier 8. Which ofthe folowingloest Uescribes the purpose of the control activities? 3. An auditor performs procedures to identity and '2. The actions, policies and procedures that reflect assess risks of material misstatements in order to ___. the overall atitudes of the management design appropriate responses to assessed risk ‘b.) The identification and analysis of risks and a. Performance Risk relevant tothe preparation of the financial b. Agency Risk statements, Risk assessment (x. The policies and procedures that help ensure Control risk that necessary actions are taken in order to achieve the entity's objectives 4. Which of the following matters would least Ikely. 4. Activities that deal with the ongoing assessment ‘appear in the audit programm? of the qualty of internal control by management. ‘2. Specific procedures that wil be performed. b. Specific audit objectives. 9. The auditor uses professional judgment in areas ¢. Estimated time that wil be spent in performing such as, certain procedures. ? 27 Assessing inherent and control risk and the risk © Documentation of the accounting and internal of material misstatement due to fraud or error control systems being reviewed. _& Deciding upon the nature, timing and extent of the audit planning 5. An auditor should design the written audit program @Q Evaluating the results of those procedures so that A. Assessing the reasonableness of the judgments a7 All material transactions will be selected for and estimates made by management in "substantive testing preparing the financial statements ’ (o) ‘Substantive tests prior to the balance sheet date will be minimized. 410. Which of the following factors pst likely would ‘c. The audit procedures selected will achieve heighten an auditor's concem about the risk of specific audit objectives. fraudulent financial reporting? ment german 1‘a. The audit committee's approval of the intial selection of accounting principles. b. Alack of competition in the entity's industry, accompanied by increasing profit margins. ‘a. Oversight or misinterpretation of facts c) Managements disciosure of unresolved . Misapplication of accounting policies litigation and contingent liabilities. ¢. Mathematical or clerical mistake in the 15. Year-end adjustments by the entty that _~\ underlying records and accounting data. significantly affect financial results ‘) Recording of transactions without substances. 11, The following are considered as key audit_——. ‘considerations in specialized industries, except B+ Wentification of the risk of material a. Audit planning misstatement by obtaining an appropriate b. Understanding intemal contro! understanding of the business and its (2 Substantive tests environment \d. Reporting (AS. reliance on experts is likely because despite 17. Which of the following regarding audit sampling is being competent, the audit firm may not have the necessary specific expertise in some areas ‘Sampling is done to facilitate efficiency in doing the audit ‘audit firm personnel having knowledge of 2 relevant industries, even ifthere’s no B® Itis impossible to have a case wherein the population is being tested 100%. experience with relevant regulatory or reporting d._ competence of the audit firm to provide the 2 Number of samples is dependent on the 16. This is the part in audit cycle that consumes majority, of the time of the auditors. requirements service, including time and resources, to do so 12. Which of the following statements woulo mest key appear in an auditor's-engagementtetier? ‘@. Management is responsible for reporting to us ‘any Inadequate provisions for the safeguarding Staseets. 'B) Management is responsible for making all financial records and related information avaliable t0 US c. Management agrees to correct all deficiencies in internal control activties identified by us. We will identify intemal controls relevant to specific assertions that may prevent or detect material misstatements. 13, An act of two or more employee to steal assets and ‘cover their theft by misstating the accounting records would be referred to as: a. Control deficiency b._ Material weakness ‘Significant deficiency (4,/ Collusion 14. Which of the folowing statements does fot make Not-for-profit Entities a specialized industy? 37 all of the money eamed by or donated to a not- for-profit entity is used to pursue the organization's objectives and keep it running. Jb typically tax-exempt charities or other types of public service organizations 2 income is not disibuted to the group's members, directors, of officers. (3) None of the above 19. Which of the fol ‘amount of the account, result of the test of controls and number of population. 4 Depending on the population in the account being tested sampling other than random might be applied. pi ‘18. Stotement #1: For balance sheet accounts, test of _ details of transactions is normally done. ‘Statement #2: For PAL secounts, test of balance is normally done” r a. Only Statement #1 is tue b. Only Statement #2 is tue ¢_Both statements are true d. Both statements are false statements regarding scoping 18 ings poronance atta determine which accounts are scoped out A© Using the clearly insignificant materiality tevel, determine which accounts are scoped in ¢. Allofthe above d. None of the above 20. Tne olin we eprint, tetemal controls. Be Obtain a copy of process flows Za Perform a walk-through of the organizations processes that are affecting the financial statements c. identify the internal controls in place to ensure that there are no errors in the recording of the ‘tvansactions:4, Ifthe intemal contros exists and are rekable, 7 the audi team wil proceed to do an extensive substantve testing ‘AUDIT_OF BANKS 21. Banks have the following characteristics that generally distinguish them from most Other commercial enterprises, exc ‘a They generally derive a significant amount of thet funding from long-term deposits 27 They ordinarily require complex accounting and intemal control systems and widespread use of Information Technology ZL They may issue and trade in complex financial instruments, some of which may need to be recorded at fair values in the financial _, Statements. ” @y They often assume significant commitments: _without any nial transter of funds other than, in ‘some cases, the payment of fees. 22. Banks have cutis in respect ofthe assots they ho that Belang to other persons. This may dive rise to tables fr breach of us, They fheretore need to 32. establich appropriate valuation and risk bank . establish complex accounting and interna control systems and widespread use of Information Technology 23. Which of the following is fot going concem i pt on Sree auc lan? ~~ “a. Rapid decreases in levels of trading in dervatives . ProGtabilty performance or forecasts that suggest a serious decine in proftabilty Rates of interest being paid on money market ‘and depostor abiltes that are higher than normal market rates 6. Sigrifcant decreases in deposits from other banks or other forms of short term money market funding 24. Special audit considerations arise in the auctts of banks because of matters such as the following, ‘extensive dependence on IT to process transactions 76 The effect ofthe regulations in the various jurisdictions in which they operate (C2 Tre contiwing development of new products ‘and banking practices that matched the concurrent development of accounting principles or intemal controks 4° The continuing development of new products 25, The auditor takes into account a number of factors that are especially important in a banking environment. These includes ‘a. Some of the transactions entered into by banks ‘may not be required to be disclosed in the financial statements b. Many of the transactions entered into by banks are subject io specialized accounting rues 7 © Alotine above None of the above 26. Because of the number of accounts requifing reconciiation and the frequency wih which these reconciiations need to be performed. the (considers factors such asthe fotowing. 2. much of the audit effort is rected to the documentation, testing and evaluation of the reconciiation controls b. the work of the intarnal auditor wil aso be Biruary Guected, but the aucsior can never bodied at the year-end date, ascuming Mat they are prepared as of that date, soon enough for the audior to use and that the auditor is satisfied that the reconciiation control procedures are effective. 4. Allo’ the above 27. Banks ere parvcutaty susceptible to this risk when ‘entering nto new types of transactions and when the fight of a counterparty to enter info a transaction is not established. @ Fiduciary risk ? Legal risk Price risk d. Operational risk 28. May be considered the most important risk in Yao Gre isk b. Operational risk cc. Reputational risk d. Regulatory riskAMANTASAN NG'LUNGSOD NG VALENZUELA allege af Accouritancy and Business Administration 29, In developing an’ for the audit of the financial statements of a bank, the auditor gives articular attention to ‘a. the extent to which any core activities are provided by senvice organizations . contingent kabiiies and balance sheet items cc. the unexpected assessments of inherent and control risks the work of external auditing 30. Banks are often subject to regulatory requirements, ‘Such as the requirement to maintain sainimurr-tevels “of.captalA breach of these requirements could call 32 One key audit consideration of banks is that they engage ina large volume and variety o! transactons whose value may be significant, the downside of this would be 2. ft could pose a systemic risk to the countnes in which they operate bd requires compiex accounting and intemal control systems with widespread use of Information Technology . its winerabie to adverse economic events and increases the risk of faiture 4. relatively small decrease in asset valves may have a significant effect on their capital and solvency 33. Which of the following i corect Fegarding the audit risk of banks a. banking industry naturally.have high inherent ‘isk so it needs adequate intemal contr to assess inherent nsk and délection risk at less =, than high Jevel (©) Banking industry natural have high contol isk “$0 it needs adequate internal control to assess Controt risk and detection risk at less than high level ‘AUDS — AUDIT OF SPECIALIZED INDUSTRIES Midterm Major Exam <_ banking industry naturally have high inherent ‘fick so if needs adequate internal control lo assess inherent risk and control risk at less. ‘than high level (@. barking industry naturally have high control isk: ‘so needs adequate internal control to assess ‘control risk and inherent risk at less than high level 34. Because of bank's wide geographic, the involvement of other auditors is common, using, the following must be 36. Statement #1: One of te key audit considerations of ‘banks is tat they have assets that can rapidly change in value and whose value is often dificult to determine, so foss bf confidence By deposttors may quick result in liquidity crisis, f ‘Statement #2: Fixed price contract Is usualy the Safest opton for the owner, but the riskiest for the contractor. | @ Only Slatement #1 is tue 'b) Only Statement #2 is true . Both statements are tue 4. Both statements are false 317, Areas fo which the eur may use confirmation are the ftowing ecepd Dar Calera Zar Lega opinions onthe vat ota banks 7-9 @ Value of assets and liabilities that are tot raed on overde-counir markets 4. Asset laity, and forward purchase and eal postions wih customers and counterparties 38. Which of the following regarding aust procedures for cash and cash equivalents’ existence Soom 2. Preparation of Bank translé/ schedules, 4be Count all cash in bank simultaneously ‘¢Proparation of bank reconciliation statements 4. Follow up the subsequent disposition of ons included In the count 39 Factors in conskéering the bank's intemal controls that management use are the foliowing, except) large volume of transaction’ ~ subject to specialized accounting rules * constantly developing new financial products and services some transactions may be required to disclosed in the financial statements @ ®kA 40. The following describes the risks posed by banks ordinarily operating through networks of branches and that are geographically dispersed, — Seographically d, ‘dispersal of accounting and contrat functions ‘nvolves a greater decentralization of authority fe.) could pose a systemic risk to the countries in which they operate AP oificulties in maintaining uniform operating ‘practices nd accounting systems ‘41, Provides for payments to the Contractor cn the basis of direct labor hours at fixed hourly rates (the rates Gover the costs of indirect labor and Indirect expenses and profit) and cost of materials or other spocited costs. Usually the safest option for the contractor, but the riskiest for the owner. 2 _ Fixed-price contract A Cost-type contract c. Time-and-materials contract 6. Unit-price contract 42. The independent auditor should test the cost accumulated on contracts and be alert for items 38 ‘@.) Charges accumutated on cost-plus type ~ contracts which are reimbursable b. Moderate charges for contractor's equipment used on the job site -8© Charges for rented equipment, with no option to buy 4. The contractor's accounting policy with respect tooverhead 43. Characters that noma decreask Suits © Subcontractors - Large portion af work, (7, Petformed by subcontractors Suey (b.) Profit fade - Significant profit fade Ee Underbilling - Unusual/significant underbilling wares" 1d. Materlal costs - High susceptibility to price escalations during performance of contract 44, Due to the nature of the construction industry, problems frequently arise in the audit of inventory of Taw materials and supplies in the usage of raw materials, The auditor should a. review stock activity, and discuss this problem with the contractor's engineering personnel b. thoroughly review the contractor's procedure for accounting for the disposition of excess materials on contracts c. ascertain that these charges to contract costs represent materials actually placed in process d. charge contract costs with the value of materials purchased for a specific contract 48, Due to the nature of the construction industry, problems frequently arise in the audit of inventory of raw materials and supplies in the area of ‘obsolescence and inacthity. The auditor should ‘a. review stock activity, and discuss this problem ‘with the contractor's engineering personnel 'b. thoroughly review the contractor's procedure for ‘accounting for the disposition of excess materials on contracts c. ascertain that these charges to contract costs represent materials actually placed in process 76. change ‘contract costs with: the, valle Of ‘acing the payroll ransactons to supporting documents . analyze payroll totals for reasonableness compared to budgets and prior periods ©) reconciiation of accrued payrol liabilities to supporting calculations and employee records 4. obtaining legal advice if necessary to assess the validity of employment relationships and related lablities 58. The following audit procedures may be used to ‘check Valuation assertion af Construction in roereet PE ect cate dros trom expectations and obtain management case _-®<” Analyze trends in CIP costs and assess their reasonableness in ight of the project's stage of ‘completion.Review of Change Orders and Contract Modifications 4. Compare the CIP balance to the project budget ‘and prior period balances. 8 Sct riaks inclides the following, ‘Overestimation of Completion Material Shortages Changes in Estimates AE Underestimation of Costs 60. Statemem #1: Cost-plus contract requires that the contractor's best efforts, accomplish the scope of the work within some specified time, and stated dollar limitation. These types of projects can pose a higher ‘ick for contractors, based on whether a cost is femmburseble ornot. YT. ‘Statement #2: Fixed-price contract Is usually the ‘safest option for the owner, but the nskiest for the contractor. ‘a, Only Statement #4 Is trie Only Statement #2 Is true ©) owt etaterents are re ‘6. Both statements are alee AUDIT OF MINING COMPANIES 1, stapnaon aconm fo 4nd comcast a ee trumerol reserve and other preparations (07 Cornmercia! production 3 exponen 3) Development < Production 4. Rehabilitation 62. Responsible for collecting sibnational payments a. Bureau of intemal Revel ) b. Department of Environment ana Natural Resources (DENR) Environmental Management Bureau (EMB) ( gj Local govemment units (LGUs) 7 63. The price that the owner of a natural resaurce (usually a government) charges @ private company tor the ight to develop the resource. (®) Ryans Ucense 4. Bonuses 64. One of the Involved in auditing mining revenues that refers to the difficulty in finding Specialized knowledge that are independent from ‘mining companies because most active experts have links with the industry Expertise Site visits c, Access o information d. Mandate fimitations 85, With mineral extraction, there may be cases where ‘this would be: ‘oF would involve complex I ‘mines are often in remote areas, far from cities and transportation hubs. » Expertioe Site visits c. Access 10 information d. Mandate limitations 66. Docu testimonial, and i ‘can all play @ role in audits of nancial “assurances for sie remediation. The main sources. of evidence fhat will be useful in this context are the VY (anion Ge a. a review of relevant documents coe a 2 ee 87. Granis the contractor the-raht to conduct mining ‘operations wenin a contract area and,share ie PB Reon perm eo) b. Mineral Processing Permat (MPP) ‘e, Minera! Production Sharing Agreement (MPSA) 4. Financial or Technical Assistance Agreement (FTAA) 68, It's the risk that local communiies may have concers about The envronmental and social impacts of mining actives 2. Environmental Risk ©. Individual Risk Regulatory Risk Ace 69. The a audit process for * JF Shock te tevenuo conc by ‘vouchng' ibe ‘agreement of the company and is cents — ab” check the recorded rovetvables of the company ‘by sending confirmations to its cents, Allof the above ‘None of the above 70. The following are risk-based audit process for revenue. except a. check the revenue contracts by “vouching” the agreement of the company and its chents,b. check the recorded receivables of the company by sending confirmations to is clients, © Allof the above 4d. None of the above n ‘ahi fo owog io roaieg oi ‘company’s 8¢ structural development within the area? AZ provide education and health services >) create other economic activities to support the A“ rrines by importing all supplies from abroad create employment opportunities both directly in the mines and indirectly on services to the mines 4. improve infrastructure tke roads and water ‘supply 72 Which of the. regarding the phases in mining s a Rehabiltation ocours after mining operations rave ceased and includes restoration (© Exploration is the determination of the technical feasibly and commercial viabisty of a mineral resource © Development ts establishing access to and ‘commissioning facies to extract treat and ‘transport production '@._ Production is the day-to-day activites of ‘obtaining @ saleable product from the mineral reserve on a commercial scale 73, Statemem #1: Costs incurred before leyel gts to explore have been obtained are expenses to profit or loss. Statement #2: The entiy can retain the accumulated ‘cast as an exploration asset when there is sufiosent information that there wil be commercial cash flows. Only Statement #1 is tue Only Statement #2 is tue Both statements are tue Both statements are false 74. The following are high-Jeyel questions about revenues from the extraction of minerals, except 27 Ts there a regulated royatty audit regime in place? b._ Is there significant reliance on setf-eporting of production lever? (©) ‘ee site inspections providing sufficiently complete assessments? #7 Are the revenues from the extraction of minerais significant? 75. The folowing are ofrect egarcing Considerations of mining companies, éxoopt > @ ‘They involve impairment of assets, £0, there's 2 "need to evaluate @ company’s ability to continue ‘as a going concer. b. There is a significant captal investment required in the mining musty, $0 there's 2 need to scrutinize the company’s cape! expenditure process. Environmental matters are significant to the entity, so there may be a risk of material misstatement 6. None of the above 76. The folowing are risk-based audit process for PPE, @. perform a tes! of movements of the fixed assets, which involves determining their addétons, reciassificatons, and disposals. ‘D)) check the balance of the PPE by testing and reviewing the inventory rol-forward of the company 77 &. Allof the above 1d. None of the above 6. Verify that the cost accumutation methods used by the company are appropriate and ‘consistently appied. 78. Mining companies in the Phisppnes are required by ‘the law to Noid funds for extraction, these are called |, Reconditioning costs ./ Rehabilitation bonds. . Developmental cost 6. Exploration cost 79. The following are risk-based audi process for Inventory, xcept AE use the owledge of experts such as actuaries _~ Wascenain the number of invertories. (B check it the inventories are recorded at net realizable value following PFRS 2 — Inventones. ¢ test the costing of the inventonies by exracting al the costs that are tagged as mining in the ‘company’s database . None of the above 80. Audit procedure for the occurrence asserson of tevenveparrecareney oe procedures and ensure consistency in nue recognition practices across periods )btain the sales transactions recorded in the sales report that links to the financial statements. Perform an audit sampling to the total population of those sales transactions to review against quotation, sales orders, invoices, contracts, and goods delivery noted . Perform Sales Revenues Analysis could help augitors to identify the unusual event or transactions related to sales. LNAME: PALIH Mico t He CARWUA_. TEAM: pup ¢ SECTION: aca 3 ano ms (TaTeTi Ti Te] xo *0@000 9000 e ° O0@> 000 O° 000@0o >00 O=00@006 2 0800 2 ° 3 3 eNase: Bih_9:1 gal. tom: nn * Eau menue ne ¢ a SECTION/SCHEDULE: Bea 4-1 gal IUSTRUGTIONS: Choose the beat answ IT has several ’ ral signiticant etfect rer tetany 3 effacts|on an ctgerizetion, Which of the £ Be the visibility of informacion w the povential for misstacenen . & Nohe of the above as all of SALE EENY at procedure which 25 least useful in gathering evid evidence on # significant : i. computer process i: (B) observacion’ we. Tost. checks / Genecalized Audit 3. Mhach of4ch Dee Rrche orieeleg 42 Gk mach 94 is hot a benefit of us 'Rbshity te peecast Lavoe voline of tanesets ———— y to replace manuel concrols with conpurer based contzel stent processing of transactions e- Reducel ‘Reduetlon an misatavenents dus tq £9 Be ieeceapganee’ fo svscem a ata Suchen the foliwsag sangre ist fot? syste So tele eterno a separation ef 21 function fon Acc Gey mabsocad ose S207 Reeser a Hatounca end Se wslnera@ssscy ch of the following oF Sachet 1 raES TE ament of 11 Gonexel controls? & ‘Ae 3 to programs and data een ee Dee eas and ayavena: devaiopott Jez Computer Operations (QP Application controls’ ae Appl scot i eracems eperating simultaneously in 61D } Integrated testin: | Bneckliata, systems development methodology and staff hiring are examples of whet type of controls? = a Fi correctave 4. subjective a. Internal conteol 1s sneffactive when Ene computer personnel potegredcapacaa in Che compurer #Ofr vere Gequssition decisions 2 pes Tien for computerized systems es Su tevaD in a computerized nysical Se eN on of the following procedures would ticipates 33 under these circunstan 22 ) procedures: trol procedures cedures S& provides Pt 9. an auditor an! environment he auditor init: progzam contro. . application con GC. output control procs ro Memeprain-avisdanss. Tae enbie.scesad Son would. most -lakel A ga at periodic intervals after Live data ‘create checkP f the system discover whether an: unauthorized use © © the transaction log to ection ether the system bp. Exemint ceed tuace due. CO, fais Cen Ta eae 4 e passuords to ascercain Wh will reject them a. vouch a random sample of processed transactions to Snsitt proper author3zecton aL coctnieal teasning and proty bs an audicor encompasse® 2° ability © dnderstand ap IT system ninsTentry co sdencify and evaluate. see ene processing and imperti0d ‘of information elated features . forms with the application Of GARE b. All accounting %. degree to rogramming sessing c: erols ore pronexiu functioning e7 ueiser processing to test for y transactions were 10st OF cont13,"Wnich statement 4: incorrect When auditing in # CIS environment? @. ACIS environment e Jot Kista when a computer of any type of size is involved in the Processing by the encity of the financial information of significance to che wp, MUSE, whether the computer is opecated by the entity or a third party bs The auditor should consider how the CIS environnent aftects the audit: The use of a computer changes the processing, storage and conmunication of finaneiel infermation and nay affect the accounting and internal control systens employed by the entity. Aa“whicn of the following! processing? A. Transections axe exchanged electronically with ether organizations with nanual review of their propriety. 2. The volume of transactions is such that users will find ir difficult t and correct errors in processing. ©. The computer automatically generates material transactions or entries directly te another application. = ne ice —— = TEE ee of whe C15 envisonnent that the auditors are Include the following xcept Lm Lack of segregation of duties Ter wack of transaction trails of other control over the system Indicates « conplexity, in information sdencity iesEt 19 a communi equipment, app! oie fe. Application G. Operating system 17. R collection cf gata that 13 shares epczes eacion systen thet enables computer usara to share cosp Cation software, data, voice and video transmissions. RE SE reresle vc. Information tile G. Teensaction file " ie. mich of the following 1sGop)a hardware element in an IT environsent? Scanner aa — sone astsas operetingsimtcanecuny sn @)tocetons 1s 6 ese epprech vmown aa parallel vesting. / sire onthe: ommend Wan ap ta was wae 1 @rpeith ret) “N¢, false, True se ba Se Sa Bias cenmsne srevann in sont So gia detebase? 2, Application software be. systems Software ne organ:zeti paincain and operas _ thedecabase and DEE %. DBMS and data sharing 6. DBMS and data independence 22. The auditor is required to consider how an entity's get CIS applications significant to the audic. Accordingly. - Review the design of the general CIS controls only b. Review the design of SS .ap ication controls only23. The Ewe broad categories of IT controls are general controls and application controls. General control includes: eee, . For reasonable assurance thet only authorized users receive output from date jes Processing * E 7 (&) for reasonable assurance thet ell dete submitted for processing have Bs properly authorized 26, The moat important segregation of duties in the organization of the snfornarson systens function is: a. Using different programming personnel to maintain utility progsans maintain the application prograns. b. Having @ separate information officer et the toj cutsige of rhe ac function. from those who Jp level of the organization earn NIN. x mate preening zen © soe saowing one nee abeaien 2 AES (Page foiening she ie gate aes Fuser procedures 26 nse o che following would represent an snternal consrol Sgahnesd 4 environnent? — eeeeeeeiter Librarian maintains custody of the computer sppiscerton programs and files. b. The ea nan IT able for distesbucing compurer-generaced contrel gzoup x5 solely respons ina designed by systems analysts fay schedule of planned computer ue control objective this Computer programmers write and modify Progrel 27 tne manager of computer operetions prepares & processing and sends a copy to the computer 1ibrarien shat Abela rere Dserey tr rete Dee nae PT A. cogn ye Bien wa arte nr ee oe Gun environment, 2, shat ancompecabnencucsee ay 72 = RGN eing control ae the use oF jenerated hash totals 5 tacstity fc, self-checking digit system / @. geno checks aot ne eecity should plan che physical location of ite compuces’ facttacy- co emeaey SN giaary consideration for selecting @ computes 3t5e? following tt eet nche basement or on the ground floor. gy Te sould mevimize the visibility of the compucers. bo He should maxints tne distance chek the data conteol personel aust travel £0 Be should nindnitf ports end be easily acceaasbie by the majority of the which of the 30° which of the following 39 9) jer reason why an accounting audit tra:l should ‘be maintained for a computer system? a. Query answering b. Deterrent to fraud nicer ins ses sivWhich of the following is classified a I7 gen} ontcols that relates to segregation of duties? aia %, R system of trensaction 1093. @. Follow up all errors detected during processing. 32, An operating _aysten is: 7 (@) The esseabler program including the source and object progzam. B. All hardware ‘eeded to operate the computer system. ‘d. Only the hardware of the computer systen. 33. An advantage of decentralizang data processing faci a, Economy of scale obtainable using microcomputer. etter handled at a local level. ~ d. The virtual elimination of the need for communication capability.4. A system With several computers that “'cGanamission purposes, but where each conierey con afey “ammundcauion and sata a r can also process ita oun deca a, Distributed date proc b. Muleidrop network €. Centralized network d/ Decentralize network 35. Which of the follewing controls Sst likely) would assure that an entity can puite neo the coupucer by the compucer nenutscrurer, apes of files a¥e stored away from the originals. “Ee Reztonnel who aze independent of data input pesform parallel simulations. ~ System flowcharts provide accurate description of input and output operations. 36. A computer system that enables users to access data and programs directly through workstations. ————— n-line computer systems) + Database systen €. Flat-file system d. Computer line system 37. Which of the following client EDP system can be audited without examining or directly testing the ED? computer programs of the system? a m that Racuaa eee SS Gated processed and produces ‘detailedy UEP b. A system that affects a umber of essential master files and produces limited output. ‘A system that updates a few essential naster files and produces no printed output coche: than final balances. -@ A system that performs relatively complicated processing and produces very little - detailed output. 38. Which of the following is en application control? “et Organizational charts charts ) program Changes policy 39, A control which relates to all pacts of the SOP system is called: systens control GPcanered control Application control