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Homework answers / question archive / University of the East, Manila ACCOUNTING BAT 421 1)The single feature that most clearly distinguishes auditing, attestation, and assurance is a

University of the East, Manila ACCOUNTING BAT 421 1)The single feature that most clearly distinguishes auditing, attestation, and assurance is a

Accounting

University of the East, Manila

ACCOUNTING BAT 421

1)The single feature that most clearly distinguishes auditing, attestation, and assurance is

a.            Type of service.

b.            Training required to perform the service. c. Scope of services.

d. CPA’s approach to the service.

 

2.            The primary goal of the CPA in performing the attest function is to

a.            Detect fraud.

b.            Examine individual transactions so that the auditor may certify as to their validity. c. Determine whether the client's assertions are fairly stated.

d. Assure the consistent application of correct accounting procedures.

 

3.            Philippine Standards on Auditing

a.            Relate to the filing requirements and enforcement activities of the SEC.

b.            Describe procedures to be applied in specific areas of audit activity to eliminate inconsistencies in audit practice.

c.             Are intended to limit the degree of auditor judgment needed to fulfill the attest function.

d.            Interpret standards that provide guidelines or measures of quality for an independent audit.

 

4.            The Philippine Standards on Auditing issued by AASC

a.            Apply to independent examination of financial statements of any entity when such examination is conducted for the purpose of expressing an opinion.

b.            Must not apply to other related activities of auditors. c. Need to be applied on all audit related.

d. Require that in no circumstances would an auditor may judge it necessary to depart from a PSA, even though such a departure may result to more effective achievement of the objective of an audit.

 

5.            Which of the following best describes the objective of an assurance engagement?

a.            To improve the company’s outcomes

b.            To compare the company’s information and polices to those of other entities

c.             To enhance the credibility of information in order to improve the likelihood that the information will meet the needs of an intended user

d.            To provide consulting and advisory services.

 

6.            Assurance services differ from consulting services in that they

I.             Focus on providing advice

II.            Involve monitoring of one party by another

a.            I only b. II only

c. Both I and II

d. Neither I nor II

 

7.            As used in PSA, which of the following statements best describes "assertions"?

a.            Assertions are the representations of management as to the reliability of the information system.

b.            Assertions are the auditor's findings to be communicated in the audit report.

c.             Assertions are the representations of management as to the fairness of the financial statements.

d.            Assertions are found only in the footnotes to the financial statements.

 

8.            Which of the following mostly describes the function of AASC?

a.            To monitor full compliance by auditors to PSAs.

b.            To assist the Board of Accountancy in conducting administrative proceedings on erring CPAs in audit practice.

c.             To promulgate auditing standards, practices and procedures that shall be generally accepted by the accounting profession in the Philippines.

d.            To undertake continuing research on both auditing and financial accounting in order to make them responsive to the needs of the public.

 

9.            Which statement does not accurately describe an assurance engagement?

a.            The objective of an assurance engagement is for a professional accountant to evaluate or measure a subject matter that is the responsibility of another party against identified suitable criteria, and to express a conclusion that provides the intended user with a level of assurance about that subject matter

b.            Not all engagements performed by professional accountants are assurance engagements

c.             A particular engagement, to be an assurance engagement, it depends upon whether it exhibits all the following elements: a two-party relationship, a subject matter, suitable criteria, and a conclusion

d.            An engagement in form of agreed-upon procedures result in the expression of factual findings

 

 

 

 

 

10.          The Philippine Framework for Assurance Engagements identifies two types of assurance engagement a practitioner is permitted to perform: a reasonable assurance engagement and a limited assurance engagement. Which of the following is the objective of a reasonable assurance engagement?

a.            A reduction in assurance engagement risk to a level that is acceptable in the circumstances of the

engagement as a basis for a negative form of expression of the practitioner’s conclusion.

b.            A reduction in assurance engagement risk to a very low level in the circumstances of the engagement as a

basis for a disclaimer of the practitioner’s conclusion.

c.             A reduction in assurance engagement risk to an acceptably low level that is acceptable in the circumstances of the engagement as a basis for a positive form of expression of the practitioner’s conclusion.

d.            A reduction in assurance engagement risk to a level that is acceptable in the circumstances of the

engagement as a basis for a qualified form of the practitioner’s conclusion.

 

11.          How many members of AASC are needed to approve the exposed draft as Philippine Standards on Auditing?

a.            Majority of the regular members

b.            At least eight c. At least ten

d. At least twelve

 

12.          It refers to the level of satisfaction as to the reliability of an assertion being made by one party for use by another party

a. Confidence level b. Assurance level

c. Reasonableness level

d. Tolerable level

 

13.          The following are the elements of an assurance engagement except:

a.            Suitable criteria

b.            An appropriate subject matter.

c.             A two-party relationship involving a practitioner and intended users.

d.            Sufficient appropriate evidence.

 

14.          When performing an assurance service, professional accountants use standards or benchmarks to evaluate or measure the subject matter of an assurance engagement. This element of an assurance engagement is called: a. Criteria.

b.            Conclusion.

c.             GAAP.

d.            Assertion.

 

15.          The subject matter of an assertion may include:

a.            Historical or prospective financial information.

b.            Internal controls.

c.             Compliance with regulation. d. All of the following.

 

16.          In an assurance engagement, the person or class of persons for whom the professional accountant prepares the report for a specific use or purpose is the:

a.            Intended user.

b.            Responsible party.

c.             Management.

d.            Client.

 

17.          Which of the following is expected of AASC to do?

a.            AASC should normally expose a proposed interpretation of statements

b.            AASC should normally expose its opinion on specific queries from a practicing CPA

c.             When it is deemed necessary to expose for a comment on proposed interpretations of statements, the exposure period is understandably shorter than those of the regular drafts of standards

d.            To make the statements on Philippine Standards on Auditing operative, the final statement shall be submitted to the Board of Accountancy for approval

 

18.          The suitability of the criteria to which the professional accountant will base his evaluation of the subject matter

 

partly depends on:         

                a.            b.            c.             d.

Relevance           Yes         Yes         Yes         No

Reliability             Yes         Yes         Yes         Yes

Understandability            Yes         No          Yes         No

Neutrality            No          No          Yes         Yes

 

 

 

 

19.          Professional judgment

a.            Should be exercised in planning an performing an audit of financial statements but need not be documented

b.            Can be used as the justification for the decisions made by the auditor that are not supported by the facts and circumstances of the engagement

c.             Is necessary in the evaluation of management’s judgments in applying the entity’s applicable financial

reporting framework

d.            Is not used in making decisions about materiality and audit risk

 

20.          Reasonable assurance means

a.            Gathering of all available corroborating evidence for the auditor to conclude that there are no material misstatements in the financial statements, taken as a whole

b.            Gathering of the audit evidence necessary for the auditor to conclude that the financial statements, taken as a whole, are free from any misstatements

c.             Gathering of the audit evidence necessary for the auditor to conclude that the financial statements are free of material unintentional misstatements

d.            Gathering of the audit evidence necessary for the auditor to conclude that there are no material misstatements in the financial statements, taken as a whole

21.          An audit in accordance with PSAs is performed on the premise that management and, where appropriate, those charged with governance have responsibilities that are fundamental to the conduct of the audit. Which of the following is not one of those responsibilities?

a. To comply with all relevant PSAs in the preparation and presentation of the entity’s financial statements b. To provide the auditor with all information, such as records and documentation, and other matters that are relevant to the preparation and presentation of the financial statements

c. To provide unrestricted access to those within the entity from whom the auditor determines it necessary to obtain audit evidence

d. To design, implement, and maintain internal control relevant to the preparation and presentation of financial statements that are free from material misstatement, whether caused by fraud or error

 

22.          The auditor is required to maintain professional skepticism throughout the audit. Which of the following statements concerning professional skepticism is false?

a.            A belief that management and those charged with governance are honest and have integrity relieves the auditor of the need to maintain professional skepticism

b.            Maintaining professional skepticism throughout the audit reduces the risk of using inappropriate assumptions in determining the nature, timing, and extent of the audit procedures and evaluating the results thereof

c.             Professional skepticism is necessary to the critical assessment of audit evidence

d.            Professional skepticism is an attitude that includes questioning contradictory

 

23.          Every independent audit engagement involves both auditing standards and auditing procedures. The relationship between the two may be illustrated by how they apply from engagement to engagement. The best representation of this application is that, from one audit engagement to the next

a.            Both auditing standards and auditing procedures are applied uniformly

b.            Auditing standards are applied uniformly but auditing procedures may vary

c.             Auditing standards may vary but auditing procedures are applied uniformly

d.            Auditing standards are applied uniformly but auditing procedures are optional

 

24.          Generally accepted accounting principles (GAAP) are distinguished from generally auditing standards (GAAS) in that

a.            GAAP are the principles for presentation of financial statements and underlying transactions, while GAAS are the standards that the auditors should follow when conducting an audit

b.            GAAP are the principles auditors follow when conducting an audit, while GAAS are the standards for presentation of financial statements and underlying transactions

c.             GAAP are promulgated by the SEC, while GAAS are promulgated by the FRSC

d.            When GAAP are violated, sufficiently strong GAAS may make up for most GAAP deficiencies

 

25.          The primary purpose of an independent financial statement audit is to

a.            Provide a basis for assessing management's performance.

b.            Comply with state and federal regulatory requirements.

c.             Assure management that the financial statements are unbiased and free from material error.

d.            Provide users with an unbiased opinion about the fairness of information reported in the financial statements.

 

26.          Independent auditing can best be described as a

a.            Branch of accounting.

b.            Discipline that attests to the results of accounting and other operations and data.

c.             Professional activity that measures and communicates financial and business data.

d.            Regulatory function that prevents the issuance of improper financial information.

 

27.          An independent audit aids in the communication of economic data because the audit

a. Confirms the accuracy of management's financial representations. b. Lends credibility to the financial statements.

c. Guarantees that financial data are fairly presented.

d. Assures the readers of financial statements that any fraudulent activity has been corrected.

28.          Internal auditing often extends beyond examinations leading to the expression of an opinion on the fairness of financial presentation and includes audits of efficiency, effectiveness, and

a.            Internal control.

b.            Evaluation.

c.             Accuracy. d. Compliance.

 

29.          Which of the following statements is not a distinction between independent auditing and internal auditing?

a.            Independent auditors represent third party users external to the auditee entity, whereas internal auditors report directly to management.

b.            Although independent auditors strive for both validity and relevance of evidence, internal auditors are concerned almost exclusively with validity.

c.             Internal auditors are employees of the auditee, whereas independent auditors are independent contractors.

d.            The internal auditor's span of coverage goes beyond financial auditing to encompass operational and performance auditing.

 

30.          The best description of the scope of internal auditing is that it encompasses

a.            Primarily operational auditing.

b.            Both financial and operational auditing.

c.             Primarily the safeguarding of assets and verifying the existence of such assets.

d.            Primarily financial auditing.

 

31.          Which of the following best describes the operational audit?

a.            It requires the constant review by internal auditors of the administrative controls as they relate to operations of the company.

b.            It concentrates on implementing financial and accounting control in a newly organized company.

c.             It attempts and is designed to verify the fair presentation of a company's results of operations.

d.            It concentrates on seeking out aspects of operations in which waste would be reduced by the introduction of controls.

 

32.          The purpose of a compliance audit for a governmental entity is to determine whether

a.            Financial statements comply with GAAP and whether the entity is operating efficiently.

b.            Financial statements comply with GAAP and the entity has complied with applicable laws and regulations.

c.             The entity has complied with applicable laws and regulations.

d.            Financial statements comply with GAAP.

 

33.          Government auditing often extends beyond examinations leading to the expression of opinion on the fairness of financial presentation and includes audits of efficiency, effectiveness, and

a.            Internal control

b.            Evaluation

c.             Accuracy d. Compliance

 

34.          In government auditing, the three elements of expanded scope auditing are

a.            Goal analysis, audit of operations, audit of systems

b.            Financial and compliance, economy and efficiency, program results

c.             pre-audit, post audit, internal audit

 

d.            national government audit, local government audit, corporation audit

 

35.          An operational audit is designed to

a.            Assess the efficiency and effectiveness of management's operating procedures.

b.            Assess the presentation of management's financial statements in accordance with generally accepted accounting principles.

c.             Determine whether management has complied with applicable laws and regulations.

d.            Determine whether the audit committee of the board of directors is effectively discharging its responsibility to oversee management's operations.

 

36.          Assurance engagement risk is the risk

a.            That the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated

b.            Of expressing an inappropriate conclusion when the subject matter information is not materially misstated

c.             Through loss from litigation, adverse publicity, or other events arising in connection with a subject matter reported on

d.            Of expressing an inappropriate conclusion when the subject matter information is either materially misstated or not materially misstated

 

 

 

 

37.          For the purpose of expressing negative assurance in the review report, the practitioner should obtain sufficient appropriate evidence primarily through

a.            Inquiry and confirmation

b.            Analytical procedures and substantive tests of details of transactions and account balances

c.             Confirmation and tests of controls d. Inquiry and analytical procedures

38.          Which of the following best describes review services?

a.            Review engagements focus on providing assurance on the assertions contained in the financial statements of a public company.

b.            Review engagements focus on providing assurance on the internal controls of a public company.

c.             Review engagements focus on providing limited assurance on financial statements of a private company.

d.            Review engagements focus on providing advice in a three-party contract

 

39.          In an engagement to perform agreed-upon procedures, an auditor is engaged to

a.            Use accounting expertise as opposed to auditing expertise to collect, classify, and summarize financial information.

b.            Provide a moderate level of assurance that the information is free of material misstatement.

c.             Provide a high, but not absolute, level of assurance that the information is free of material misstatement. d. Carry out those procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings.

 

40.          Which of the following statements concerning compilation engagement is incorrect?

a.            In a compilation engagement, the accountant is engaged to use accounting expertise as opposed to auditing expertise to collect, classify and summarize financial information.

b.            The procedures employed in a compilation engagement enable the accountant to express a moderate level of assurance on the compiled financial information.

c.             Users of the compiled financial information derive some benefit as a result of the accountant’s involvement

because the service has been performed with due professional skill and care.

d.            A compilation engagement ordinarily entails reducing detailed data to a manageable and understandable for without a requirement to test the assertions underlying that information.

 

41.          In a compilation engagement, the accountant is engaged to use accounting expertise as opposed to auditing expertise to collect, classify, and summarize financial institution. What type of assurance is provided by the accountant when he/she performs this engagement?

a.            Positive assurance

b.            Negative assurance c. No assurance

d. Limited assurance

42.          Independence is not a requirement for which of the following engagements? Compilation          Review Agreed-upon Procedures

a.            Nob.      No          Yes No  No No

c. Yes     No          Yes

 

d. Yes    Yes         Yes

 

43.          Which of the following engagements require compliance with the requirements of the Code of Ethics for Professional Accountants in the Philippines?

Compilation        Review Agreed-upon Procedures

a. No     Yes         No

b. No     No          No

c. Yes     No          Yes

d. Yes    Yes         Yes

 

44.          Which of the following statements is correct concerning an auditor’s responsibilities regarding financial

statements?

a.            An auditor’s responsibilities for audited financial statements are confined to the expression of the auditor’s

opinion.

b.            The fair presentation of audited financial statements in conformity with GAAP is an implicit part of the

auditor’s responsibilities.

c.             Making suggestions that are adopted about the form and content of an entity’s financial statements impairs an auditor’s independence.

d.            The auditor’s report should provide an assurance as to the future viability of the entity.

 

 

 

 

 

 

 

 

45.          Which of the following best describes why an independent auditor is asked to express an opinion on the fair presentation of financial statements?

a.            It is difficult to prepare financial statements that fairly present a company’s financial position, cash flow,

and operations without the expertise of an independent auditor

b.            It is management’s responsibility to seek available independent aid in the appraisal of the financial information shown in its financial statements

c.             The opinion of an independent party is needed because a company may not be objective with respect to

 

d.            It is customary courtesy that all stockholders of a company receive an independent report on

management’s stewardship in managing the affairs of the business

 

46.          When a CPA expresses an opinion on financial statements, his or her responsibilities extend to

a.            The underlying wisdom of the client’s management decisions.

b.            Whether the results of the client’s operating decisions are fairly presented in the financial statements.

c.             Active participation in the implementation of the advice given to the client.

d.            A ongoing responsibility for the client’s solvency.

 

47.          Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of the following factors, except

a.            The use of selective testing

b.            The fact that much of the evidence available to the practitioner is persuasive rather than conclusive c. The practitioner may not have the required assurance knowledge and skills to gather and evaluate evidence

d. The use of judgment in gathering and evaluating evidence and forming conclusions based on that evidence

 

48.          In “auditing” accounting data, the concern is with

a.            Determining whether recorded information properly reflects the economic events that occurred during the accounting period.

b.            Determining if fraud occurred.

c.             Determining if taxable income has been calculated correctly.

d.            Analyzing the financial information to be sure that it complies with government requirements.

 

49.          Although a CPA does not guarantee his findings, his opinion is nevertheless valuable to various third parties.

The value of the CPA’s opinion lies in the fact that

a.            He has the qualifications required by law to be a CPA.

b.            He is under the supervision of the Professional Regulatory Board of Accountancy. c. He has gathered sufficient, competent, evidential matter to support his opinion.

 

d. He has followed generally accepted auditing standards.

 

50.          Which of the following statements best describes the primary purpose of Philippine Standards on Auditing?

a.            They are guides intended to set forth auditing procedures that are applicable to a variety of situations

b.            They are procedural outlines which are intended to narrow the areas of inconsistency and divergence of auditor opinion

c.             They are authoritative statements, enforced through the Code of Professional Conduct, that are intended

to limit the degree of auditor’s judgment

d.            They are interpretations which are intended to clarify the meaning of “generally accepted auditing standards”

 

51.          The auditor's judgment concerning the overall fairness of the presentation of financial position, results of operations, and changes in financial position is applied within the framework of

a.            Generally accepted accounting principles.

b.            Generally accepted auditing standards.

c.             Internal control.

d.            Information systems control.

 

52.          The exposure period allowed for each exposure draft of PSA to be considered by the organizations and persons to whom it is sent for comment is generally

a. Four months b. Three months

c. Two months

d. Six months

 

53.          The expertise that distinguishes audiauditors from accountants is in the

a.            Ability to interpret generally accepted accounting principles.

b.            Requirement to possess education beyond the Bachelor’s degree.

c.             Accumulation and interpretation of evidence.

d.            Ability to interpret PAS.

 

 

 

 

54.          The financial reporting framework adopted by management and, where appropriate, those charged with governance in the preparation of the financial statements that is in acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.

a.            Generally accepted auditing standards.

b.            Financial reporting standards

c.             Applicable financial reporting framework.

d.            Philippine Standards in Auditing.

 

55.          Which of the following statements is INCORRECT?

a. Unlike consulting services, assurance services report on the quality of information. b. Audit engagements encompass assurance engagements.

c. Not all engagements performed by professional accountants are assurance engagements.

d. Non assurance engagements include agreed-upon procedures, compilation of financial or other information, and preparation of tax returns where no conclusion is expressed, tax consulting and advisory engagements.

 

56.          In “auditing” financial accounting data, the primary concern is with:

a.            Determining whether recorded information properly reflects the economic events that occurred during the accounting period.

b.            Determining if fraud has occurred.

c.             Determining if taxable income has been calculated correctly.

d.            Analyzing the financial information to be sure that it complies with government requirements.

 

57.          An audit of financial statements is conducted to determine if the

a.            Organization is operating efficiently and effectively.

b.            Auditee is following specific procedures or rules set down by some higher authority.

c.             Overall financial statements are stated in accordance with an identified financial reporting framework.

d.            Client’s internal control is functioning as intended.

 

58.          In determining the primary responsibility of the external auditor for an audit of a company’s financial

statements, the auditor owes primary allegiance to a. Shareholders, creditors and the investing public.

 

b.            The management of the audit client because the auditor is hired and paid by management.

c.             The Auditing and Assurance Standards Council, because it determines auditing standards and auditor’s

responsibility.

d.            The audit committee of the audit client because the committee is responsible for coordinating and reviewing all audit activities within the company.

 

59.          An audit involves ascertaining the degree of correspondence between assertions and established criteria. In the case of an audit of financial statements, which of the following would not be a valid criterion?

a.            International Accounting Standards

b.            Philippine Financial Reporting Standards (PFRS) c. Generally accepted auditing standards

d. PFRS for SMEs

 

60.          Most of the independent auditor’s work in formulating an opinion on financial statements consists of

a. Studying and evaluating internal control b. Obtaining and examining evidential matter

c. Examining cash transactions

d. Comparing recorded accountability with assets

 

61.          Which of the following is more difficult to evaluate objectively? a. Efficiency and effectiveness of operations

b.            Compliance with applicable government regulations

c.             Presentation of financial statements in accordance with the applicable financial reporting criteria.

d.            All the given criteria are equally difficult to evaluate effectively.

 

62.          Which of the following best describes the operational audit?

a.            It attempts of verifying the fair presentation of a company’s results of operations.

b.            It concentrates on implementing financial and accounting control in a newly organized company.

c.             It concentrates on seeking out aspects of operations in which waste would be reduced by the introduction of controls.

d.            It requires a constant review of the administrative controls by internal auditors as they relate to operations of the company.

 

63.          The auditor communicates the results of his or her work through the medium of the

a.            Engagement letter

b.            Management letter c. Audit report

d. Financial statements

64.          A limited assurance engagement is one in which:

a.            The aim is a reduction in an assurance engagement risk to n acceptably low level in the circumstances of

the engagement as the basis for a positive form of expression of the practitioner’s conclusion.

b.            The aim is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of expression of the practitioner’s conclusion,

c.             The auditor is responsible not only for the conclusion but also for the subject matter.

d.            None of the choices apply.

 

65.          Which of the following statements exemplifies positive assurance?

a.            “In our opinion internal control is effective, in all material aspects, based on XYZ criteria.”

b.            “Based on our work described in this report, nothing has come to our attention that causes us to believe

that internal control is not effective, in all material respects, based on XYZ criteria.”

c.             Both a and b.

d.            Neither a nor b.

 

66.          The three commonly-sought types of assurance services are:

a.            Audits, review and compilations.

b.            Audits, compilations and other assurance services.

c.             Reviews, compilations and other assurance services. d. Audits, reviews and other assurance services.

 

67.          This assurance engagement provides a limited level of assurance about the client’s historical financial

statements:

a.            Financial statements audit

b.            Review of historical financial statements

c.             Forecasts and projections

d.            Agreed-upon procedures

 

68.          Which of the following best describes risk assessment services?

a.            An engagement which provides assurance about whether financial and non-financial information being

reported from the entity’s performance measurement system is reliable.

b.            An engagement which involves the evaluation of the quality of health care, medical services and looks into the health care delivery system.

c.             An engagement which identifies a set of risks that affect the client organization. It involves the study of the link between risks and the organization’s vision, mission, objectives and strategies and the development of new and relevant measures.

d.            None of the following.

 

69.          Which of the following best describes business performance measurement?

a.            An engagement which identifies a set of risks that affect the client organization. It involves the study of the link between risks and the organization’s vision, mission, objectives and strategies and the development of new and relevant measures.

b.            An engagement which provides assurance about whether financial and non-financial information being reported from the entity’s performance measurement system is reliable.

c.             An engagement which involves the evaluation of the quality of health care, medical services and looks into the health care delivery system.

d.            None of the following,

 

70.          In government auditing, the three elements of expanded scope auditing are:

a.            Goal analysis, audit of operations, audit of systems

b.            Financial and compliance, economy and efficiency, program results

c.             Pre-audit, post audit, internal audit

d.            National government audit, local government audit, corporation audit

 

71.          An audit designed to determine the extent to which the desired results of an activity established by the legislative or other authorizing body are being achieved.

a.            Economy audit

b.            Efficiency audit

c.             Program results audit

d.            Financial-related audit

 

72.          Which of the following types of audits are most similar?

a.            Operational audits and compliance audits

b.            Independent financial statement audits and operational audits c. Compliance audits and independent financial statement audits

d. Internal audits and independent financial statement audits

 

 

 

73.          Which of the following best describes the reason why independent auditors report on financial statements?

a.            A management fraud may exist and it is more likely to be detected by independent auditors

b.            A poorly designed internal control structure may be in existence

c.             A misstatement of account balances may exist and is generally corrected as the result of the independent

auditor’s work

d.            Different interest may exist between the company preparing the statements and the persons using the statements.

 

74.          The best statement of the responsibility of the auditor with respect to audited financial statements is:

a.            The auditor’s responsibility on fair presentation of financial statements is limited only up to the date of the audit report.

b.            The auditor’s responsibility is confined to his expression of opinion about the audited financial statements.

c.             The responsibility over the financial statements rests with the management and the auditor assumes responsibility with respect to the notes of financial statements.

d.            The auditor is responsible only to his qualified opinion but not for any other type of opinion.

 

75.          The general principles for conducting financial statement audits include which of the following?

a.            Compliance with the Code of Ethics for CPAs.

b.            Compliance with Philippine Standards on Auditing.

c.             Planning and performing the audit with professional skepticism. d. All of the choices apply.

 

76.          Philippine Standards on Auditing (PSAs) should be looked upon by practitioners as:

 

a.            Ideals to strive for, but which are not achievable.

b.            Maximum standards which denote excellent work.

c.             Benchmark to be used in all audits, reviews and compilations.

d.            Minimum standards of performance which must be achieved on each audit engagement.

 

77.          An auditor needs not abide by a Philippines Standard on Auditing if the auditor believes that

a.            The amount is insignificant

b.            The requirement of the PSA is impractical to perform

c.             The requirement of the PSA is impossible to perform d. Any of the given three choices is correct

 

78.          Ultimately, the decision about whether or not an auditor is independent must be made by the a. Auditor

b.            Audit committee

c.             Client

d.            Public

79.          Which of the following attributes is required of an auditor in relation to audit clients?

a.            Rationalization

b.            Bias

c.             Loyalty

d.            Independence

 

80.          A CPA, while performing an audit, strives to achieve independence in appearance in order to

a.            Reduce risk and liability

b.            Comply with the generally accepted standards of field work

c.             Become independent in fact

d.            Maintain public confidence in the profession

 

81.          Which of the following best describes why publicly-traded corporations follow the practice of having the outside auditor appointed by the board of directors or elected by the stockholders?

a. To comply with the regulations of the Financial Accounting Standards Board b. To emphasize auditor independence from the management of the corporation

c. To encourage a policy of rotation of the independent auditor

d. To provide the corporate owners with an opportunity to voice their opinion concerning the quality of the auditing firm selected by the directors

 

82.          Practitioner’s independence

a.            Minimize risk

b.            Helps achieve public confidence

c.             Defends against professional liability

d.            Achieves compliance with the standards of planning and assessment of risks.

 

83.          An audit committee must be comprised of independent director. Which of the following is considered an independent director?

a.            A member of company management.

b.            A retired executive from another company.

c.             The company’s independent auditor.

d.            A consultant to the company.

 

84.          Theoretically, it is possible to provide an infinite range of assurance from a very low level of assurance to an absolute level of assurance. In practice, the professional accountants cannot provide absolute assurance because of the following except,

a.            The internal control has its inherent limitations.

b.            The professional accountants employ testing process.

c.             The lack of expertise of the professional accountants in doing a systematic engagement process.

d.            The use of judgment in gathering evidence and drawing conclusions based on that evidence.

 

85.          Which of the following is not one of the limitations of an audit?

a.            The use of testing

b.            Limitations imposed by client

c.             Human error

d.            Nature of evidence that the auditor obtains

 

86.          Which of the following statements does not properly describe a limitation of an audit?

a.            Many audit conclusions are made on the basis of examining a sample of evidence.

b.            Some evidence supporting peso representation in the financial statements must be obtained by oral or

 

written representation of management.

c.             Fatigue can cause auditors to overlook pertinent evidence. d. Many financial statement assertions cannot be audited.

87.          Which of the following is one of the limitations of an audit?

a.            The possibility that management may prevent the auditor from performing the necessary audit procedures.

b.            The likelihood that the auditor may not be able to detect material misstatements in the financial statements because the auditor is engaged only after the year end.

c.             The fact that most audit evidence is persuasive rather than conclusive in nature.

d.            The risk that the auditor may not possess the training and proficiency required by the engagement.

 

88.          Which of the following is not a component of an engagement risk?

a.            Control risk

b.            Inherent risk c. Business risk

d. Detection risk

 

89.          Auditing is based on the assumption that financial data and statements are

a. In conformity with applicable reporting framework. b. Verifiable

c. Presented fairly

d. Consistently applied

 

90.          The decision of whether the criteria are suitable involves considering whether the subject matter of the assurance engagement is capable of reasonably consistent evaluation or measurement using such criteria. Which of the following characteristics is not considered necessary in determining whether the criteria are suitable?

a.            Relevance

b.            Neutrality

c.             Reliability d. Sufficiency

91.          Choose one of the following which would describe best the phrase “Philippine Standards on Auditing (PSAs)”.

a.            They identify the policies and procedures for the conduct of the audit

b.            They define the nature and extent of the auditor’s responsibilities

c.             They provide guidance to the auditor with respect to planning the audit and writing the audit report d. They set forth a measure of the quality of the performance of audit procedures

 

92.          The PSAs established by the Board of Accountancy apply

a. Only to the PICPA membership b. To all CPAs

c. Only to those who choose to follow them

d. Only when conducting audits subject to the Board’s jurisdiction

 

93.          On every audit engagement, the CPA should comply with applicable PSA a. Without exception.

b.            Except in examinations that result in a qualified report.

c.             Except in engagements where the CPA is associated with unaudited financial statements.

d.            Except in examinations of interim financial statements.

 

 

 

 

 

94.          One of the requirements of the Philippine Standards on Auditing is “sufficient and appropriate evidential matter should be obtained.” The term “appropriate” refers primarily to

a.            Relevance of the evidence.

b.            Measurability of the evidence.

c.             Consistency of the evidence.

d.            Dependability of the evidence.

 

95.          The sufficiency and appropriateness of evidential matter is determined by a. Philippine Standards on Auditing

b.            Judgment of the auditor

c.             Availability of corroborating data

d.            Relevance of evidential matter

 

96.          In general, internal auditor’s independence will be greatest when they report directly to the:

a.            financial vice-president

b.            corporate controller

c.             audit committee of the board of directors

d.            corporate stockholders

 

97.          Operational audits often have an objective of determining whether an entity’s

a.            Internal control is adequately operating as designed.

b.            Operational information is in accordance with generally accepted governmental auditing standards. c. Financial statements present fairly the results of operations.

d. Specific operating units are functioning efficiently and effectively.

 

98.          An audit designed to detect violation of laws and regulations would be referred

a. A financial statement audit b. A compliance audit

c. A performance audit

d. An operational audit

 

99.          Which of the following attributes is more closely associated with attestation services performed by a CPA firm than with other lines of professional work?

a.            Integrity

b.            Competence c. Independence

d. Keeping informed on current professional developments

 

100.        Professional skepticism dictates that when management makes a statement to the auditors, the auditors should

a.            Disregard the statement because it ranks low of the evidence quality scale.

b.            Corroborate the evidence with other supporting documentation whenever possible.

c.             Require that the statement be put in writing.

d.            Believe the statement in order to maintain the professional client-auditor relationship.

 

 

 

 

 

 

 

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