1.

Certain fundamental beliefs called "postulates" underlie auditing theory. Which of the following is not a postulate of
auditing?
a. No long-term conflict exists between the auditor and the management of the enterprise under audit.
b. Economic assertions can be verified.
c. The auditor acts exclusively as an auditor.
d. An audit has a benefit only to the owners.

2.

Which statement is correct regarding the relationship between internal auditing and the external auditor?
a. Some judgments relating to the audit of the financial statements are those of the internal auditor.
b. The external audit function's objectives vary according to management's requirements.
c. Certain aspects of internal auditing may be useful in determining the nature, timing and extent of external audit
procedures.
d. The external auditor is responsible for the audit opinion expressed, however that responsibility may be reduced by any
use made of internal auditing.

3.

Which of the following is incorrect regarding the three-party relationship element of assurance engagements?
a. Professional accountants as those persons who are members of an IFAC member body, which should be in public
practice.
b. The responsible party and the intended user will often be from separate organizations but need not be.
c. The responsible party is the person or persons, either as individuals or representatives of an entity, responsible for the
subject matter.
d. The intended user is the person or class of persons for whom the professional accountant prepares the report for a
specific use or purpose.
The following are related to the auditors responsibility to assess the ability of the company to continue as a going concern?
I.
II.
III.

The auditor should consider the appropriateness of the managements use of the going concern assumption in the
preparation of the financial statements.
The auditor is to consider whether there are material uncertainties about the entitys ability to continue as a going
concern that needs to be disclosed in the financial statements.
The absence of any reference to going concern uncertainty in the auditors report is viewed as a guarantee as to the
entitys ability to continue as a going concern.

4.

Which of the foregoing inappropriately describe(s) the auditors responsibility?

a. I only
b. I and II only
c. II only
d. III only

5.

Which of the following is an aspect of scheduling and controlling the audit engagement?
a. Including in the audit program a column for estimated and actual time.
b. Performing audit work only after the clients books of account have been closed for the period under examination.
c. Writing a conclusion in individual working papers indicating how the results of the audit will affect the auditors report
d. Including in the engagement letter an estimate of the minimum and maximum audit fee.

6.

Which of the following factors is inappropriately relevant to the managements assessment of the going concern
assumption?
a. The degree of uncertainty associated with the outcome of an event or condition decreases significantly the further into
the future of judgment being made about the outcome of an event or condition.
b. Any judgment about the future is based on information available at the time at which the judgment is made
c. The size and complexity of the entity, and the nature and conditions of its business affect the judgment regarding the
outcome of events or conditions.
d. Subsequent events can contradict a judgment which was reasonable at the time it was made

7.

When an independent auditor expresses an unqualified opinion he asserts that:

1.
2.
3.
4.
a.
b.

8.

He performed the audit in accordance with generally accepted auditing standards.

The company is a profitable and viable entity.
The financial statements examined are in conformity with GAAP.
The financial statements are accurate and free of errors.

All of the above statements are true.

Only statements (1) and (3) are true.

c. Only statements (2) and (4) are true.

d. All of the above statements are false

Which of the following is not explicitly included in the opening paragraph of an audit report?

a.
b.
c.
d.
9.

Identification of the financial statements that have been audited

A statement by the auditor that the audit provides a reasonable basis for the opinion
Statement that the financial statements are the responsibility of the entitys management
Statement that the responsibility of the auditor is to express an opinion on the financial statements based on his audit.

The auditor issued a qualified opinion covering the financial statements of Client A for the year ended December 31, 2014.
The reason for the qualification was a departure from GAAP. In presenting comparative statements for the years ended
December 31, 2014 and 2015, the client revised the 2014 financial statements to correct the previous departure from GAAP.
The auditor's 2015 report on the 12/31/14 and 12/31/15 comparative financial statements will
a. Express unqualified opinions on both the 2014 and 2015 financial statements.
b. Express a qualified opinion on the 2014 financial statements and an unqualified opinion on the 2015 statements.
c. Retain the qualified opinion covering the 2014 statements, but add an explanatory paragraph describing the correction
of the prior departure from GAAP.
d. Render qualified audit opinions for both 2014 and 2015 financial statements given the 2015 carryover effect of the
2014 error.

10. In relation to comparatives as corresponding figures, which of the following is incorrect?

a. When the prior period financial statements are not audited, the incoming auditor should state in the auditors report that
the corresponding figures are unaudited
b. The incoming auditor must refer to the predecessor auditors report on the corresponding figures in the incoming
auditors report for the current period.
c. When the financial statements of the prior period were audited by another auditor, the incoming auditors report should
state that the prior period was audited by another auditor.
d. In situations were the incoming auditor identified that the corresponding figures are materially misstated, the auditor
should request management to revise the corresponding figures or if management refuses to do so, appropriately
modify the report.