Philippine Standard on auditing,
Chapter 1 he is required to comply with
Multiple Choice Questions
Audit in General
1. Recording, classifying, and
summarizing economic events in
logical manner for the purpose of
providing financial information
for decision making is commonly
called:
A. Finance
B. Auditing
C. Accounting
D. Economics
2. An audit involves ascertaining
the degree of correspondence
between assertions and established
criteria. In the case of financial
statement audit, which of the
following is not a valid criterion?
A. Philippine Standards on Auditing
B. International Accounting
Standards
C. Authoritative financial reporting
framework
D. Accounting standards generally
accepted in the Philippines
3. The subject matter of the
financial audit is the
A. Financial statements
B. Economic data
C. Assertions
D. Operating data
4. Whenever a CPA professional is
engaged to perform an audit of
financial statements according to
those standards in order
A. Eliminate audit risk
B. Meet the minimum requirement when
providing audit services
C. To reduce the auditor's
responsibility
D. Eliminate the professional
judgment in resolving audit issues
5. The criteria for evaluating
quantitative information vary. For
example, in the case of an
independent audit of financial
Statements by CPA firms, the
criteria are usually the
A. Philippine Standards on Auditing
B. Philippine Financial Reporting
Standards
C. National Internal Revenue Code
D. Regulations of the Securities and
Exchange Commission
6. 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.
7. 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 the
applicable financial reporting
framework.
D. Client's internal control is
functioning as intended.
8. 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. Stockholders, 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 that committee is
responsible for coordinating and
reviewing all audit activities
within the company.
9. 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 be a valid
criterion?
A. International Standards on
Auditing.
B. Philippine Standards on Auditing.
C. Generally accepted accounting
principles
D. Quality Control Standards
10. Most of the independent
auditor's work in formulating an
opinion on financial statements
consists of
A. Obtaining and examining evidence
B. Examining cash transactions
C. Comparing recorded accountability
with assets
D. Studying and evaluating internal
control
11. 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
objectively
12. An audit that involves obtaining
and evaluating evidence about the
efficiency and effectiveness of an
entity's operating activities in
relation to specified objectives
is a(n):
A. External audit
B. Compliance audit
C. Operational audit
D. Financial statement audit
13. In financial statement audits,
the audit process should be
conducted in accordance with
A. The audit program
B. Philippine Standards on Auditing
C. Philippine Accounting Standards
D. Philippine Financial Reporting
Standards
14. Internal auditors are expected
to add value to the organization
through improved operational
effectiveness. In addition, their
responsibilities include all the
following except:
A. Reviewing the reliability and
integrity of information.
B. Ensuring compliance with the
company's accounting policies.
C. Verifying accounting information
for external users.
D. Ensuring compliance with
applicable governmental
regulations.
15. Which of the following types of
audit uses laws and regulations as
its criteria?
A. Operational audit
B. Financial statement audit .
C. Compliance audit
D. Performance audit
16. Which of the following best
describes an 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.
17. A typical objective of an
operational audit is to determine
whether an entity's
A. Internal control structure is
adequately operating as designed
B. Operational information is in
accordance with generally accepted
accounting principles.
C. Specific operating units are
functioning efficiently and
effectively
D. Financial statements present
fairly the results of operations
18. One objective of an operational
audit is to:
A. Determine whether the financial
statements fairly present the
entity's operations.
B. Evaluate the feasibility of
attaining the entity's operational
objectives.
C. Make recommendations for
improving performance.
D. Report on the entity's relative
success in attaining profit
maximization.
19. An audit designed to provide
reasonable assurance of detecting
violations of a specific
provisions of contracts or grant
agreements would be called a(n):
A. Performance audit
B. Management audit
C. Operational audit
D. compliance audit
20. The auditor communicates the
results of his or her work through
the medium of the
A. Engagement letter between
B. Audit report.
C. Management letter
D. Financial statements
21. When performing an operational
audit, the internal audit team
must first determine that:
A. A financial audit has been
performed by an independent
auditor.
B. A financial audit has been
performed by an internal auditor.
C. A review was performed by either
an independent or an internal
auditor.
D. Specific criteria are developed
to define effectiveness.
22. Which of the following types of
auditing is performed most
commonly by CPA's on a contractual
basis?
A. Internal auditing
B. Income tax auditing
Government auditing
D. External auditing
23. An examination of part of an
organization's procedures and
methods for the purpose of
evaluating efficiency and
effectiveness is what type of
audit?
A. Operational audit.
B. Compliance audit.
C. Financial statement audit.
D. Production audit.
24. Which of the following is not
one of the major differences
between financial and operational
auditing?
A. The financial audit is oriented
to the past, but an operational
audit concerns performance for the
future.
B. The financial audit report has
widespread distribution, but the
operational audit report has
limited distribution.
C. Financial audits deal with the
information on the financial
statements, but operational audits
are concerned with the information
in the ledgers and journals.
D. Financial audits are limited to
matters that directly affect the
fairness of the financial
statement presentation, but
Operational audits cover any aspect
of efficiency and effectiveness.
25. Independent external auditing
can best be described as a
A. Professional activity that
measures and communicates
financial accounting data.
B. Subset of accounting.
C. Professional activity that
attests to the fair presentation
of financial statements.
D. Regulatory activity that prevents
the issuance of misleading
financial information
26. Which one of the following is
NOT a major difference between
operational and financial auditing?
A. Purpose of the audit
B. Distribution of the report
C. Testing the effectiveness of
internal controls
D. Audits of non-financial areas
27. The overall objective of
internal auditing is to
A. Attest to the efficiency with
which resources are employed
B. Ascertain that controls are costs
justified
C. Provide assurance that financial
data have been accurately recorded.
D. Assist members of the
organization in the effective
discharge of their
responsibilities.
28. Internal auditors report to:
A. The audit committee of the board
of directors.
B. Management.
C. External auditors.
D. The government regulators.
29. Which of the following is not a
similarity between external and
internal auditors?
A. Both must be independent of the
company.
B. Both must be competent.
C. Both follow a similar methodology
in performing their audits.
D. Both consider risk and
materiality deciding the extent of
their tests and evaluating results.
30. Internal auditing is an
independent appraisal function
established within an organization
to examine and evaluate its
activities. To that end, internal
auditing provides assistance to
A. External auditors
B. Stockholders
C. Management and the board of
directors
D. Government
31. Which of the following groups
could not be involved in an
operational audit?
A. External auditors
B. Internal auditors
C. Government auditors
D. All of the above could be
involved.
32. Which of the following
statements is not a distinction
between independent auditors and
internal auditors?
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.
Financial Statement Audit
33. Which of the following has the
primary responsibility for the
fairness of the representations
made in the financial statements?
A. Client's management
B. Audit committees
C. Independent auditor
D. Board of Accountancy
34. An audit of the financial
statements of JMV Corporation is
being conducted by an external
auditor. The external auditor is
expected to
A. Express an opinion as to the
fairness of JMV's financial
statements.
B. Express an opinion as to the
attractiveness of JMV for
investment purposes.
C. Certify the correctness of JMV's
financial statements.
D. Examine all evidence supporting
JMV's financial statements.
35. Which of the following
statements about independent
financial statement audit is
correct?
A. The audit of financial statements
relieves management of its
responsibilities for the financial
statements.
B. An audit is designed to provide
limited assurance that the
financial statements taken as a
whole are free from material
misstatement.
C. The procedures required to
conduct an audit in accordance
with PSAs should be determined by
the client who engaged the
services of the auditor.
D. The auditor's opinion is not an
assurance as to the future
viability of the entity as well as
the effectiveness and efficiency
with which management has
conducted the affairs of the
entity. .
36. The primary purpose of an
independent financial statement
audit is to
A. Provide a basis for assessing
management's performance.
B. Comply with government 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.
37. Financial statements normally
prepared in accordance with one,
or a combination of:
Other Philip
Philip Philipp authorita pine
pine ine tive or Financ
Standa Account Comprehen ial
rds On ing sive Report
Auditi Standar financial ing
ng ds reporting Standa
framework rds
A Yes Yes Yes Yes
 B No Yes Yes Yes
C No Yes No No
D Yes No No No
38. By providing high level of
assurance on audit reports on
financial statements, the auditor
A. Guarantees the fair presentation
of the financial statements
B. Confirms the accuracy of the
financial statements.
C. Enhances the credibility of the
financial statements.
D. Assures the readers that
fraudulent activities of employees
have been detected.
39. The reason an independent
auditor gathers evidence is to
A. Form an opinion on the financial
statements.
B. Detect fraud.
C. Evaluate management's performance.
D. Evaluate the entity's internal
control.
40. The trait that distinguishes
auditors from accountants is the:
A. Auditor's ability to interpret
accounting standards.
B. Auditor's education beyond the
Bachelor's degree.
C. Auditor's ability to interpret
PFRS.
D. auditor's accumulation and
interpretation of evidence related
to the company's financial
statements.
41. The level of assurance provided
by an auditor on an audit report
is:
A. Low
B. high
C. Moderate
D. None
42. 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.
43. 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
44. 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 epidence.
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
45. 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 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.
46. The independent audit is
important to readers of financial
statement because it
A. Determines the future stewardship
of the management of the company
whose financial statements are
audited.
B. Measures and communicates
financial and business data
involved in financial statements.
C. Involves the objective
examination of and reporting on
management prepared statements.
D. Reports on the accuracy of all
information in the financial
statements.
47. The primary reason for an audit
by an external audit firm is
A. To satisfy governmental
regulatory requirements.
B. To guarantee that there are no
misstatements in the financial
statements.
C. To provide increased assurance to
users as to the fairness of the
financial statements.
D. To ensure that any fraud will be
discovered.
48. Which of the following is not
one of the general principles
governing the audit of financial
statements?
A. The auditor should plan and
perform the audit with an attitude
of professional skepticism.
B. The auditor should obtain
sufficient appropriate evidence
primarily through inquiry and
analytical procedures to be able
to draw reasonable conclusions.
C. The auditor should conduct the
audit in accordance with PSA.
D. The auditor should comply with
the Philippine Code of
professional Ethics.
49. Financial statement users often
receive unreliable financial
information from companies. Which
of the following is not a common
reason for this?
A. Complex exchange transactions.
B. Voluminous data.
C. Bias in the preparation of
financial statements.
D. Each of these choices is a common
reason for unreliable financial
information.
50. Which one of the following is
not among the conditions that give
rise to a demand by external users
for independent audits of
financial statements?
A. Remoteness of users
B. complexity of making economic
decisions
C. Potential conflict of interest
between users and preparers of the
statements
D. Consequence for making decisions
51. Which of the following would not
represent one of the primary
problems that would lead the users
to demand for i independent audits
of a company's financial
statements?
A. The downsizing of business and
financial markets
B. Management bias in preparing
financial statement
C. The complexity of transactions
affecting financial statements.
D. The remoteness of the user to
directly obtain financial
information from the company.
52. The need for independent audits
of financial statements can be
attributed to all of the following
conditions except:
A. Remoteness
B. Consequence
C. Complexity of subject matter
D. Validity
53. Which of the following best
describes the reason why an
independent auditor reports on
financial statements?
A. A management fraud may exist and
it is more likely to be detected
by independent auditors.
B. Different interests may exist
between the company preparing the
statements and the persons using
the statements.
C. A misstatement of account
balances may exist and is
generally corrected as the result
of the independent auditor's work.
D. A poorly designed internal
control system may be in existence.
54. Which of the following
statements does not describe a
condition that creates a demand
for auditing?
A. Conflict between an information
preparer and a user can result in
biased information.
B. Information can have substantial
economic consequences for a
decision-maker.
C. Expertise is often required for
information preparation and
verification
D. Users can directly assess the
quality of information.
55. There are four conditions that
give rise to the need for
independent audits of financial
statements. One of these
conditions is consequence. In this
context, consequence means that
the:
A. Users of the statements may not
fully understand the consequences
of their actions.
B. Auditor must anticipate all
possible consequences of the
report issued.
C. Impact of using different
accounting methods may not be
fully understood by the users of
the statements.
D. Financial statements are used for
important decisions.
56. Which of the following
statements does not properly
describe an element of theoretical
framework of auditing?
A. The data to be audited can be
verified
B. Short-term conflicts may exist
between managers who prepare the
data and auditors who examine the
data.
C. Auditors act on behalf of the
management
D. An audit benefits the public
57. Auditing is based on the
assumption that financial data are
verifiable. Data are verifiable
when two or more qualified
individuals,
A. Working together, can prove,
beyond doubt, the accuracy of the
data.
B. Working independently, each reach
essentially similar conclusions.
C. Working independently, can prove,
beyond reasonable doubt, the
truthfulness of the data.
D. Working together, can agree upon
the accuracy of the data.
58. The best statement of the
responsibility of the auditor with
respect to audited financial
statement 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 the expression of
opinion on the financial
statements audited.
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 unmodified opinion but not
for any other types of opinion.
59. Which of the following is
incorrect about responsibility for
financial statements?
A. Management is responsible for
fair presentation of the financial
statements.
B. Auditor is responsible for
expressing an opinion on the
financial statements
C. Audit of financial statements
does not reduce management's
responsibility
D. Fair presentation of financial
statements is an implicit part of
the auditor's responsibility:
60. Which of the following one of
the assumptions when auditing
financial statements?
A. The data in the financial
statements are verifiable.
B. Compliance to PFRS results in
fair presentation of financial
statements.
C. Effective internal control system
contributes little to the
reliability of financial
information.
D. The auditor should be independent
61. Which of the following
statements about independent
financial statement audit is
incorrect?
A. Scope of the audit refers to
audit procedures deemed necessary
in the circumstances to achieve
the objective of the audit.
B. The auditor's opinion enhances
the credibility of the financial
statements.
C. The phrase used to express the
auditor's opinion is “present
fairly, in all material respects”.
D. The risk that the auditor will
fail to uncover material
misstatement is eliminated when
the auditor conducts the audit in
accordance with PSAs.
62. 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. The work undertaken by the
auditor is permeated by judgment.
C. The auditor might misinterpret
the evidence obtained.
D. Most of the items in the
financial statements do not have
supporting evidence.
63. Which of the following is one of
the limitations of an audit?
A. Nature of evidence obtained
B. Inadequacy of the accounting
records
C. Confidentiality of information
D. Scope limitations imposed by the
entity
64. The assumption underlying an
audit of financial statements is
that they will be used by
A. Different groups for different
purposes.
B. The general public in making
investment decisions.
C. The board of directors as basis
of declaring cash dividends.
D. The regulatory agencies to verify
information that is relevant to
their supervisory functions.
65. The procedures deemed necessary
in the circumstances to achieve
the objective of a financial
statement audit shall be
determined by the
A. Client management
Br Independent auditor
C. Internal Auditor
D. Those charged with governance
66. Which one of the following is an
example of management expectations
from the independent auditors?
A. An active participant in
management decision making.
B. An internal source of expertise
of financial and other matters.
C. An expert providing a written
communication as the product of
the engagement.
D. Individuals who perform day-to-
day accounting functions on behalf
of the company.
67. One of the conditions that give
rise to a demand for an external
audit of financial statements is
expertise. Which of the following
best describes the meaning of
expertise as used in this context?
A. Auditors usually rely on the work
of an expert as a basis for
evaluating some assertions
embodied in the financial
statements.
B. The readers of the financial
statements must possess the
necessary expertise to be able to
understand the financial
statements.
C. Users usually lack the necessary
expertise to verify the
reliability of the financial
information.
D. As experts, auditors are expected
to detect all material
misstatements in the financial
statements.
68. Upon completion of a financial
statement audit, the auditor has
A. No assurance that the financial
statements are fairly resented
B. Absolute assurance that the
financial statements are fairly
presented
C. Reasonable assurance that all
material errors and irregularities
have been detected.
D. A low level of assurance that all
material errors and irregularities
have been found.
69. Which of the following is not
one of the reasons why auditors
provide only reasonable assurance
on the financial statements?
A. The auditor commonly examines a
sample, rather than the entire
population of transactions.
B. Accounting presentations contain
complex estimates which involve
uncertainty.
C. Fraudulently prepared financial
statements are often difficult to
detect.
D Auditors believe that reasonable
assurance is sufficient in the
vast majority of cases.
70. The objective of the ordinary
examination by the independent
auditor is the expression of an
opinion on
A. The fairness of the financial
statements
B. The accuracy of the financial
statements
C. The accuracy of the annual report
D. The balance sheet and income
statement
71. Auditors accumulate evidence to
A. Defend themselves in the event of
a lawsuit
B. Justify the conclusions they have
otherwise reached
C. Satisfy the requirements of the
Securities Acts of 1933 and 1934.
D. Enable them to reach conclusions
about the fairness of the
financial statements and issue an
appropriate audit report.
72. Which of the following is not
one of the reasons that auditor
provide reasonable, but not
absolute assurance on the
financial statements?
A. The auditor commonly examines a
sample, rather than the entire
population of transactions.
B. Accounting presentations contain
complex estimates which inherently
involve uncertainty.
C. Fraudulently prepared financial
statements are often difficult to
detect
D. Auditors believe that reasonable
assurance is sufficient in the
vast majority of cases.
has primary responsibility to be
an advocate for the client.
B. The CPA firm is engaged and paid
by the client, but the primary
beneficiaries of the audit are the
statement users.
C. Should a situation arise where
there is no convincing
authoritative standard available,
and there is a choice of actions
which could impact client's
financial statements either
positively or negatively, the CPA
is free to endorse the choice
which is in the client's interests.
D. As long as CPA firms are
competent, it is not required that
they remain unbiased.

73. The responsibility for the

preparation of the financial
statements and the accompanying
footnotes belongs to
A. The auditor
B. Management
C. Both management and the auditor
equally
D. Management for the statements and
the auditor for the notes

74. Which of the following

statements is true when the CPA
has been engaged to do an audit
engagement?
A. The CPA firm is engaged and paid
by the client; therefore, the firm
 Chapter 2
Multiple Choice Questions
Generally Accepted Auditing
Standards (GAAS)
1. In the auditing environment,
failure to meet auditing standards
is often:
A. An accepted practice
B. A suggestion of negligence
C. Conclusive evidence of negligence
D. Tantamount to criminal behavior
2. Audit standard requires an
auditor to:
A. Perform procedures that are
designed to detect all instances
of fraud.
B. Provide reasonable assurance that
the financial statement are not
materially misstated.
C. Issue an unmodified opinion only
when the auditors satisfied that
no instances of fraud have
occurred.
D. Design the audit program to meet
financial statement users
expectations concerning fraud.
3. Which of the following underlies
the application of generally
accepted auditing standards,
particularly the standards of
field work and reporting?
A. Element of internal control.
B. Elements of materiality and risk.
C. Element of reasonable assurance.
D. Element of corroborating evidence.
4. Which of the following best
describes what is meant by
generally accepted auditing
standards?
A. Audit objectives generally
determined on audit engagements.
B. Acts to be performed by the
auditor.
C. Measures of the quality of the
auditor's performance.
D. Procedures to be used to gather
evidence to support financial
statements.
5. Requirements for training,
independence and due professional
care are included in which group
of the generally accepted auditing
standards?
A. Fieldwork.
B. Genera
C. Reporting
D. Quality control
6. The general standards of the
generally accepted auditing
standards include a requirement
that
A. The fieldwork to be adequately
planned.
B. The auditor's report to state
whether the financial statements
are presented in conformity with
PFRS.
C. Due professional care be
exercised by the auditor.
D. The auditor to obtain sufficient,
competent evidential matter.
7. Under GAAS, which of the
following reflects a concept from
the general group?
A. The confirmation of accounts
receivable.
B. Completing an internal control
questionnaire.
C. The initial planning of the audit
with the audit partner, manager,
senior, staff and client personnel.
D. The assignment of audit personnel
to an engagement where they have
no financial interest. IM DEPPO.
8.
What is the general character of the
three generally accepted
Auditing standards classified as
general standards?
A, Criteria for competence,
independence, and
Professional care of individuals
performing the audit.
B. Criteria of evidence gathering
C. Criteria for the content of the
auditors' report on
Financial statements and related
footnote disclosures.
D. The requirements for the planning
of the audit and
Supervision of assistants, if any.
9.
What is the general character of the
three generally accepted
Auditing standards classified as
standards of field work?
A. The competence of persons
performing the audit.
B. Criteria for the content of the
auditor's report on financial
Statements and related footnote
disclosures.
The criteria of audit planning and
evidence-gathering,
D. The need to maintain an
independence in mental attitude
In all matters relating to the audit
Cy
10. Which of the following does not
pertain to the standards of
Fieldwork?
A, Adequate planning and supervision
B. Obtaining sufficient competent
evidential matter.
C. Proper study and evaluation of
internal control as a basis
For reliance thereon.
D. Technical training and
proficiency.
11. While performing audit services
for their clients,
Professional accountants have a duty
to provide a level of
Care which is
Al Reasonable
B. Greater than average
C. Superior
D. Guaranteed to be free from error.
12. The standard of due audit care
requires the auditor to
A. Make perfect judgment decisions
in all cases.
B. Ensure that the financial
statements are free from error.
C. Possess skills clearly above the
average for the profession.
D.) Apply judgment in a
conscientious manner, carefully
Weighing the relevant factors before
reaching a decision.
13. The third standard of field work
states that sufficient
Competent evidential matter may in
part be obtained through
The following methods except
A. Inspection
C. Confirmation
B. Observation
D. Reconciliation
14
The generally accepted standards of
reporting encos
Of the following except
2. Consideration of an entity's
internal control
B. Consistent application of
accounting principles
C. Informative disclosures
D. Conformity of financial
statements with GAAP
Of reporting encompass all
15. The third generally accepted
standard of reporting in
Auditing refers to
A. Whether financial statements are
presented in conformity
With GAAP
B. Whether accounting principles
have been consistently
Observed.
Chadequacy of disclosures.
An expression of opinion on the
financial statements
Taken as a whole.
D.
An
16. The objective of the consistency
standard is to provide
Assurance that
A. There are no variations in the
format and presentation of
Financial statements.
B. Substantially different
transactions and events are not
Accounted for on an identical basis.
C. The auditor is consulted before
material changes are made
In the application of accounting
principles.
D. The comparability of financial
statements between
Periods in not materially affected
by changes in accounting
Principles without disclosure.
17. The fourth generally accepted
auditing standard of reporting
Requires an auditor to render a
report whenever an auditor's
Name is associated with financial
statements. The overall
Purpose of the fourth standard of
reporting is to require that
Reports:
A. State that the examination of
financial statements has
Been conducted in accordance with
generally accepted
Auditing standards.
B,
C.
Indicate the character of the
auditor's examination and
The degree of responsibility assumed
by the auditor.
Imply that the auditor is
independent in mind as well as
In appearance with respect to the
financial statements
Under examination.
Express whether the accounting
principles used in
Preparing the financial statements
have been applied
Consistently in the period under
examination.
18. The fourth reporting standard
requires the auditor's report to
Contain an expression of opinion
regarding the financial
Statements taken as a whole, or an
assertion to the effect that
An opinion cannot be expressed. The
objective of the fourth
Standard is to prevent
A. An auditor from reporting on one
basic financial statement
And not on the others.
An auditor from expressing different
opinions on each of
The basic financial statements.
C. Management from reducing its
final responsibility for the
Basic financial statements
Do Misinterpretations regarding the
degree of responsibility
The auditor is assuming
B.
The dasic
**19. The auditor is not liable to
his client for
A. Negligence
B. Fraud
C. Dishonesty
D. Errors in application of judgment
Philippine Standards on Auditing
(PSA)
20. The Philippine Standards on
Auditing issued by the Auditing
And Assurance Standards Council:
Ar are interpretations of generally
accepted auditing
Standards.
B. Are the criteria used in
evaluating the fair presentation
of
The financial statements.
Principles.
Ons of generally accepted accounting
Are optional guidelines which an
auditor may choose to
Follow or not follow when conducting
an audit
21
According to Philippine Standards on
Auditing, because there
Are inherent limitations in an audit
that affect the auditor's
Ability to detect material
misstatements, the auditor is:
A. A guarantor but not an insurer of
the statements.
B. An insurer but not a guarantor of
the statements.
C. Neither a guarantor nor an
insurer of financial statements.
D. Both a guarantot and an insurer
of the financial statements.
22. An auditor need not abide with a
specific requirement of PSA
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.
23. The Philippine Standards on Standards on Standards on Standards
Auditing can be described as on
A. Providing very specific guidance Auditing Assurance Review
about the specific Engagements Engagements
Activities an auditor must perform Yes
on each engagement. Yes
B. Similar to Philippine Financial Yes
Reporting Standards Yes
(PFRS). No
C, Defining the minimum standards of Yes
performance for an Yes
Auditor. Yes
D. Providing assurance that an No
auditor will not issue an Yes
Inappropriate audit opinion No
Yes
24. Which of the following best Yes
describes the function of No
Auditing and Assurance Standards A,
Council (AASC)? ·b.
A. To establish and promulgate C.
generally accepted D.
Accounting principles in the .
Philippines. No
B. To investigate violations of Yes
Accountancy Law.
C. To promulgate auditing standards, 26. Which of the following is
practices and correct about Philippine Auditing
Procedures that shall be generally Practices Statements (PAPS)?
accepted by the A. These are issued to resolve
Accounting profession in the issues relating to psas.
Philippines. B. These statements are intended to
D. To determine the minimum have the authority of
requirements for admission Psas.
In the accounting profession. C. These statements are issued to
provide practical assistance
25. Pronouncements issued by AASC To auditors in implementing psas or
may be in the form of to promote good
Philippine Practice.
Stand D. These statements are forms of
Related interpretations issued by
Philippine Philippine Philippine AASC.
 D. Under no circumstances.
27. Which of the following
pronouncements issued by AASC is 30. The auditor's best defence when
Designed to resolve issues relating material misstatements are
to psas? Not uncovered is to have conducted
A. Philippine Auditing Practices the audit:
Statements A, in accordance with PSA.
By Interpretations B. As effectively as reasonably
C. Statements of Auditing Standards possible.
in the Philippines C. In a timely manner.
D. Generally Accepted Auditing D. Only after an adequate
Standards investigation of the management
Team.
28. Based on the structure of AASC
pronouncements, related 31. The failure of the auditor to
Services include? meet the requisites of PSA is
Assurance Review Agreed-upon A. An accepted practice.
procedures Compilation B. A suggestion of negligence.
A. Yes Yes C, An evidence of negligence.
No D. Tantamount to criminal behavior.
No Quality Control System
B. No No
Yes 32. A firm of independent auditors
C. Yes must establish and follow
No Quality control policies and
D. No procedures because these
Yes Standards
Yes Are necessary to meet increasing
Yes requirements of
Yes Auditors' liability as insurers.
Yes B. Are required by the SEC for
Yes auditors of all firms.
C. Include formal filing of records
29. The risk that an auditor will of such policies and
fail to uncover a material Procedures to a regulatory agency.
Misstatement is eliminated D. Give reasonable assurance that
A. If client has good internal the firm as a whole will
control. Comply with professional standards.
B. If auditor observes the Code of
Professional Ethics. 33.. The main purpose of
C. When the auditor complies with implementing a system of quality
PSA. control
Is to provide the firm with
reasonable assurance that:
A. The firm and its personnel will
comply regulatory and
Legal requirements.
B. The audit will be performed in
accordance with PSA.
C. The firm will issue a report that
is appropriate in the
Circumstances.
D. All of the above.
34. The nature and extent of a CPA
firm's quality control policies
And procedures depend on
The CPA Firm's Size The nature of
the CPA Cost-benefit
Size
Firm's Practice considerations
Yes
Yes
: Yes
Yes
Yes
No
Yes
No
Yes
Yes
No
Yes
35. Which of the following is not an
essential component of
Quality control?
A, Policies and procedures to ensure
that firm personnel are
Actively engaged in marketing
strategies.
B. Policies and procedures to ensure
that the work performed
By firm personnel meet applicable
professional standards.
C. Policies to ensure that personnel
maintain their
Independence in fact and in
appearance.
D. Policies that ensure that
monitoring activities are
Effectively applied.
36. The objective of the quality
control policies to be adopted by
An audit firm will ordinarily
incorporate all of the following
Except:
4. Risk assessment
B. Leadership responsibilities
'C. Engagement performance
D. Human resources
37. The person responsible for the
audit engagement and its
Performance, and for the auditor's
report that is issued in behalf
Of the firm is the
A. Quality control reviewer
B, engagement partner
C. Client's management
D. Audit manager
38. Which of the following is an
element of a CPA firm's quality
Control system that should be
considered in establishing its
Quality control policies and
procedures?
A. Complying with laws and
regulations
B. Using statistical sampling
techniques
. Cy Independence
D. Consideration of audit risk and
materiality
39. Elements of a CPA firm's quality
control that should be
Considered in establishing its
quality control policies and
Procedures must include:
Monitoring Ethical Requirements
Engagement Performance
Ar Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Eo
40. Which of the following is one of
the elements of a CPA firm's
Quality control system?
A/ Leadership responsibilities
B. Computer assisted audit
techniques
C. Control activities
D. Control environment
41. Which of the following quality
control objectives would be
Least important to the auditor?
A. Engagement performance
B. Human resources
C. Determination of audit fee
D. Independence.
42. A quality control policy that
requires personnel in the firm to
Adhere to independence, integrity,
objectivity, confidentiality
And professional behavior, relates
to
A, Ethical Requirements
B. Human resources
C. Assignment
D. Consultation
43. Which of the following quality
control policies and procedures
Does not relate to human resources
and assignment?
A, Emphasize independence of mental
attitude in training
Programs and in supervision and
review of the audits.
B. Monitor the effectiveness of
recruiting programs.
Identify criteria which will be
considered in evaluating
Individual performance and expected
proficiency.
D. Identify on a timely basis the
staffing requirements of
Specific audits.
44. In pursuing a CPA firm's quality
control objectives, a CPA
Firm may maintain records indicating
which partners or
Employees of the CPA firm were
previously employed by the
CPA firm's clients. Which quality
control element would this
Be most likely to satisfy?
A. Monitoring
B. Assignment
C, Independence
D. Skills and competence
45. A procedure in which a quality
control partner periodically
Tests the application of quality
control procedures is most
Directly related to which quality
control element?
A. Engagement performance
B. Independence, integrity, and
objectivity
C, Monitoring
D. Personnel management
46. In connection with the element
of engagement performance,
Acrtims system of quality control
should ordinarily provide
That all personnel
A. "Have the knowledge required to
enable them to fulfil
Responsibilities assigned.
B. Review and test compliance with
the firm's quality control
Policies and procedures.
Cy Seek assistance from persons
having appropriate levels
Of knowledge, judgment and authority.
D. Appropriately maintain
independence when providing
Assurance services
47. Maintaining or providing access
to adequate reference libraries
And other authoritative sources is a
procedure that is most
Likely performed to comply with the
policy of
A. Monitoring
B. Skills and competence
C, consultation
D. Assignment
48. Which of the following quality
control procedures relates to
Engagement performance?
A. Hiring
By Direction
C. Professional development
D. Advancement.
49. Within the context of quality
control, the primary purpose of
Continuing professional education
and training activities is to
Enable a CPA firm to provide its
personnel with:
A. Technical training that assures
proficiency as a valuation
Expert.
B. Professional education that is
required in order to perform
With due professional care.
C knowledge required to fulfil
assigned responsibilities.
D. Knowledge required to perform a
peer review.
50. In compliance with the element
of human resources, the firm
Should address issues relating to
A. Engagement performance
B/ assignment of engagement teams
C. Consultation
D. Differences of opinion
51. In pursuing the firm's quality
control objectives with respect
To assigning personnel to
engagements, the auditors may use
Policies and procedures such as
A. Designating senior qualified
personnel to provide advice
On accounting or auditing questions
throughout the
Engagement.
By Requiring timely identification
of the staffing
Requirements of specific engagements
so that enough
Qualified personnel can be made
available.
Establishing at entry levels a
policy for recruiting that
Includes minimum standards of
academic preparation and
Accomplishments.
D. Evaluate clients upon occurrence
of specified events to
Determine whether the relationships
ought to be
Continued.
C.
52. In connection with the element
of assignment, a CPA firm's
System of quality control should
ordinarily establish procedures
That
A. Provide adequate supervision at
all levels, considering
The training, ability and experience
of the personnel
Assigned
B. Encourage personnel to use
authoritative sources on
Complex or unusual matter.
C. Require preparation of time
budgets for audits to
Determine manpower requirements and
to schedule the
Audit work.
D. Establish qualifications deemed
necessary for various
Levels of responsibility within the
firm.
53. Which of the following i
Ing is a policy that must be
established to
Comply with the quality control
engagement performans
A. The firm is to be staffed by
personnel who have att
Ained the technical standards and
professional
Competence required to enable them
to fulfill their
Responsibilities.
B. There is a sufficient direction,
supervision, and review
Of work performed at all levels to
provide reasonable
Assurance that the work performed
meets appropriate
Standards of quality.
C. The firm should assign
responsibility for each engagement
To an engagement partner.
The continued adequacy and
operational effectiveness
Of quality control policies and
procedures are to be
Observed.
54. The work performed by the
assistants should be reviewed by
Personnel of at least equal
competence to consider all of the
Following except::
A. Whether the conclusions expressed
are consistent with
The results of the work performed.
B. Whether the work was adequately
performed and
Documented.'
C. Whether the objectives of the
audit have been achieved.
D. Whether the engagement personnel
maintained
Independence.
55. The primary factor that should
be considered in determining
The extent of supervision needed by
an assistant is the assistant's
A. Willingness to exercise due care
B. Competence
C. Professional certification
D. Independence
56. The primary purpose of
establishing quality control
policies
And procedures for deciding whether
to accept a new client is
To
A. Enable the CPA firm to attest to
the integrity of the client
Management.
B. Satisfy the CPA firm's duty to
the public concerning the
Acceptance of new clients.
D.
Minimize the likelihood of
association with clients whose
Management lacks integrity.
Anticipate before performing any
field work whether an
Unmodified opinion can be expressed.
57. In making a decision to accept
or retain a client, the firm
should
Consider
A. Its competence
B. Its ability to comply with
ethical requirements
C. The integrity of the client's
management.
D. All three should be considered.
58. A CPA firm's quality control
procedures pertaining to the
Acceptance of a prospective audit
client would most likely
Include
A. Inquiry of management as to
whether disagreements
Between the predecessor auditor and
the prospective client
Were resolved satisfactorily.
B. Consideration of whether
sufficient competent evidential
Matter may be obtained to afford a
reasonable basis for
An opinion.
C, Inquiry of third parties, such as
the prospective client's
Bankers and attorneys, about
information regarding the
Prospective client and its
management.
D. Consideration of whether the
internal control structure
Is sufficiently effective to permit
a reduction in the
Required substantive tests.
59. Quality control policies and
procedures should provide the
Firm reasonable assurance that the
policies and procedures
Relating to the other elements of
quality control are being
Effectively applied. This statement
defines the quality control
Element of
A. Planning
B. Independence, integrity and
objectivity.
C. Assignment
Dmonitoring
60. In connection with the element
of monitoring, a CPA DE
System of quality control should
ordinarily provide to
Maintenance of
A. A file of minutes of staff
meetings.
B. Updated personnel files.
C Documentation to demonstrate
compliance with
Policies and procedures.
Documentation to demonstrate
compliance with peer
Review directives.
63. Which of the following is
responsible for establishing
auditing
Standards that will become generally
accepted in the
Philippines?
A. Securities and Exchange
Commission
B. Financial Reporting Standards
Council
C. Commission on Audit
D/ Auditing and Assurance Standards
Council

61. A deficiency in the firm's

system of quality control is an
Indication that:
The audit engagement was not
performed in accordance
With the professional standards.
B. The audit reports issued were not
appropriate.
C. Both a and b.
D, neither a norb

62. It involves a study or appraisal

by the Board or its duly
Authorized representatives, of the
quality of audit of financial
Statements through an evaluation of
the quality control
Measures instituted by the CPA firm
to ascertain compliance
With ethical and technical standards
of public practice.
Ay Quality review
B. Peer review
C. Compliance audit
D. External audit