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CHAPTER 9
1. Of the following procedures, which does not produce analytical evidence?
a. Compare revenue, cost of sales, and gross profit with the prior year and
investigate significant variations
b. Examine monthly performance reports and investigate significant revenue
and expense variances
c. Confirm customers account receivable and clear all material exceptions.
d. Compare sales trends and profit margins with industry average and
investigate significant differences
2. Which of the following comparisons is most useful to an auditor in evaluating
the results of an entitys operations?
a. Prior year accounts payable to current year accounts payable
b. Prior year payroll expense to budgeted current year payroll expense
c. Current year revenue to budgeted current year revenue
d. Current year warranty expense to current year contingent liabilities.
3. Which of the following analytical procedures should be applied to the income
statement?
a. Select sales and expense items and trace amounts to related supporting
documents
b. Ascertain that the new income amount in the statement of cash flows
agrees with the net income amount in the income statements
c. Obtain from the client representatives, the beginning and ending
inventory amounts that were used to determine costs of sales
d. Compare the actual revenues and expenses with the corresponding
figures of the previous year and investigate significant differences.
4. Which of the following tends to be most predictable for the purpose of
analytical procedures applied as substantive test?
a. Relationships involving balance sheet accounts
b. Transactions subject to management discretion
c. Relationships involving income statement accounts.
d. Data subject to audit testing in the prior year
5. Auditors try to identify predictable relationships when using analytical
procedures. Relationships involving transactions from which of the following
accounts most likely would yield the highest level of evidence?
a. Accounts payable
b. Advertising expense
c. Accounts receivable
d. Interest expense.
6. Auditors sometimes use comparison of ratios as audit evidence. For example,
an unexplained decrease in the ratio of gross profit to sales may suggest
which of the following possibilities?
a. Unrecorded purchases
b. Unrecorded sales.
the
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CHAPTER 10
9. Which of the following represents a reasonable test of controls for cash receipts
and cash management controls?
a. Document internal controls over cash by completing the internal control
questionnaire or by flowcharting the process.
b. Prepare an independent bank reconciliation
c. Obtain a bank confirmation
d. Obtain a bank cutoff statement
10. Which of the following assertions is relevant to whether the marketable
securities balances include all securities transactions that have taken place during
the period?
a. Existence or occurrence
b. Completeness.
c. Rights and obligations
d. Valuation or allocation
CHAPTER 11
1. A proper segregation of duties requires
CHAPTER 13
1. The current file of an auditors working papers most likely would include a copy of
the
a. Bank reconciliation
b. Articles of incorporation
c. Pension plan contract
d. Flowchart of the internal control procedures
2. The primary concern of the auditor regarding related party transactions is that
a. They are reported to proper regulatory authorities because they are illegal
b. Their form be emphasized rather than their economic substance
c. Their existence and significance be adequately disclosed
d. Their effects are eliminated from the financial statements
3. The permanent file of an auditors working papers generally would not include
a. Bond indenture agreements
b. Working trial balance
c. Lease agreements
d. Flowchart of the intentional control structure
4. A person or firm possessing special skill, knowledge and experience in a
particular field other than accounting and auditing is called a/an
a. Professional
b. Consultant
c. Expert
d. Assistant
5. Which of the following is not an expert upon whose work an auditor may rely?
a. Actuary
b. Internal auditor
c. Appraiser
d. Engineer
6. To operate effectively, an internal auditor must be independent of
a. The line functions of the organization
b. The entity
c. The employer-employee relationship which exists for other employees in the
organization
d. The audit committee of the board of directors
7. The sufficiency and appropriateness of evidential matter ultimately is based on
the
a. Availability of corroborating data
b. Philippine Standards on Auditing
c. Pertinence of the evidence
d. Judgment of the auditor
8. An auditors working papers will generally be least likely to include
documentation showing how the
a. Clients schedules were prepared
CHAPTER 15
1. Which of the following statement is not correct about the unmodified audit
report in the financial statement?
a. The auditors report shall include a section with a heading
Managements Responsibility for the financial statements
b. The auditors report shall include a section with a heading Auditors
Responsibility
c. The auditors report shall include a section with a heading Basis for
Opinion
d. The auditors report shall include a section with a heading Opinion
2. PSA 700 requires the auditors report to describe managements
responsibility for the financial statements. The description shall include an
explanation that management is responsible for the preparation of the
financial statements and
a. For selecting and applying appropriate accounting policies
b. For such internal control as it determines necessary to enable the
preparation of financial statement that are free from material
misstatement
c. For making accounting estimates that are reasonable in the
circumstances
d. Preventing collusion among employees
3. Which section of the auditors report gives a general description of opinion
a. Introductory paragraph
b. Auditors responsibility
c. Managements responsibility
d. Auditors Opinion
4. The auditors inability to obtain sufficient appropriate audit evidence may
arise from all of the following conditions, except
a. Restriction imposed my management on the scope of the audit
b. Limitations beyond the control of the entity
c. Limitations relating to the nature or timing of the auditors work
d. Restrictions on the disclosures in the financial statements
5. When an auditor expresses a qualified opinion due to a material
misstatement, the auditor shall include in the opinion paragraph
A description of material
misstatement
a.
b.
c.
Yes
Yes
No
A quantification of effects
of misstatement if
practicable
No
Yes
No
No
Yes
CHAPTER 16
1. Which of the following procedures should an auditor generally perform
regarding subsequent events?
a. Compare the latest available interim financial statements with the
financial statements being audited.
b. Send second requests to the clients customers who failed to respond
to initial account receivable confirmation request.
c. Communicate material weaknesses in the internal control structure to
the clients audit committee
d. Review the cut-off bank statements for several months after the yearend.
2. The procedures to identify events that may require adjustment of, or
disclosure in, the financial statements would be performed as near as
practicable to the date of the auditors report. These procedures would
ordinarily include the following except
a. Reviewing procedures management has established to ensure that
subsequent events are identified.
b. Reading minutes of the meetings of shareholders, the board of
directors and audit and executive committee held after period end and
inquiring about matters discussed at meetings for which minutes are
not yet available.
c. Testing the effectiveness of those internal control policies and
procedures that may have significantly changed in the subsequent
period.
d. Inquiring or extending previous oral or written inquiries, of the entitys
lawyers concerning litigation and claims.
3. Which of the following subsequent events will be least likely to result in an
adjustment to the financial statements?
a. Culmination of events affecting the realization of account receivable
owned as of the balance sheet date.
b. Culmination of events affecting the realization of inventories owned as
of the balance sheet date.
c. Material changes in the settlement of liabilities which were estimated
as of the balance sheet date.
d. Material changes in the quoted market prices of listed investment
securities since the balance sheet date.
4. Which of the following is not among the characteristics of the procedures
performed in completing the audit?
CHAPTER 17
3. A review does not provide assurance that the CPA will become aware of all
significant matters that would be disclosed in an audit. However, if the CPA
becomes aware that information coming to his attention is incorrect,
incomplete, or otherwise unsatisfactory, he should
a. Withdraw immediately from the engagement
b. Perform additional procedures he deems necessary to achieve limited
assurance.
c. Perform a complete audit and issue a standard audit report with
appropriate qualifications.
d. Downgrade the engagement to a compilation and issue the appropriate
report
a.
b.
c.
d.