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. In all cases, audit reports must

a. Be signed by the individual who performed the audit procedures.

b. Certify the accuracy of the quantitative information which was audited.

c. Communicate the auditor's finding to the general public.

d. Inform readers of the degree of correspondence between the quantifiable information and the
established criteria.

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

a. Engagement letter

b. Audit report

c. Management letter.

d. Financial statements.

4. As used in auditing, 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.

5. The expertise that distinguishes auditors 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 ASC Statements.

6. The framework for auditing and related services as addressed by PSA excludes

a. Review

b. Tax services

c. Compilation

d. Agreed upon procedure

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

a. Confidence level

b. Reasonableness level

c. Assurance level

d. Tolerable level

8. Indicate the level of assurance provided by audit and related services.

abcd

- Audit

- Review

- Agreed-upon procedures

- Compilation

a. high moderate none none

b. high none none none

c. negative moderate none none

d. absolute high limited none

9. Which of the following is true of the report based on agreed-upon-procedures?

a. The report is restricted to those parties who have agreed to the procedures to be performed.

b. The CPA provides the recipients of the report limited assurance as to reasonableness of the
assertion(s) presented in the financial information.

c. The report states that the auditor has not recognized any basis that requires revision of financial
statements.
 d. The report should state that the procedures performed are limited to analytical procedures and
inquiry.

10. Which of the following is an objective of a review engagement?

a. Expressing a positive opinion that the financial information is presented in conformity with
generally accepted accounting principles.

b. Expressing a limited assurance to users who have agreed as to procedures that will be
performed by the CPA.

c. Reporting whether material modifications should be made to such financial statements to make
them conform with generally accepted accounting principles.

d. Reporting that the financial statements, in all materials respects, fairly present the financial
position and operating results of the client.

11. According to Philippine Standard on Auditing, the procedures employed in doing compilation are:

a. Designed to enable the accountant to express a limited assurance.

b. Designed to enable the accountant to express a negative assurance.

c. Not designed to enable the accountant to express any form of assurance.

d. Less extensive than review procedures but more extensive than agreed-upon procedures.

12. Any services in which the CPA firm issues a written communication that express a conclusion

with respect to the reliability of a written assertion that is the responsibility of another party is a(n)

a. Accounting and bookkeeping service

b. Management advisory service

c. Attestation service

d. Tax service

13. The three types of attestation services are:

a. Audits, review, and compilations

b. Audits, compilations, and other attestation services

c. Reviews, compilations, and other attestation services

 d. Audits, reviews, and other attestation services

14. Which of the following is not primary category of attestation report?

a. Compilation report

b. Review report

c. Audit report

d. Special audit report based on a basis of accounting other than generally accepted accounting
principles.

15. 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

16. Which of the following criteria is unique to the independent auditor's attest function?

a. General competence

b. Familiarity with the particular industry of each client

c. Due professional care

d. Independence

17. Assurance engagement

a. Is an engagement in which a practitioner is engaged to issue, or does issue, a written

communication that expresses a conclusion about the reliability of a written assertion that

is the responsibility of another party.

b. Is a systematic process of objectively obtaining and evaluating evidence regarding assertions

about economic actions and events to ascertain the degree of correspondence between those
assertions and established criteria and communicating the results to interested users.

c. Is an engagement in which the auditor provides a moderate level of assurance that the
information subject to the engagement is free of material misstatement.
 d. Is an engagement intended to enhance the credibility of information about a subject matter by
evaluating whether the subject matter conforms in all material respects with suitable criteria,
thereby improving the likelihood that the information will meet the needs of an intended user.

18. 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

19. Identify the following as financial audit (FA), compliance audit (CA), and operational audit (0A).

_ A supervisor is not carrying out his assigned responsibilities.

- A company's tax return does not conform to income tax laws and regulations.

_ A municipality's financial statements correctly show actual cash receipts and disbursements.

- A company's receiving department is inefficient.

a. CA, CA, FA, OA

b, OA, CA, CA, OA

c. CA, CA, FA, OA

d, CA, CA, FA, CA

20. The criteria for evaluating quantitative information vary. For example, in the audit of historical
financial statements by CPA firms, the criteria are usually

a. Generally accepted auditing standards.

b. Generally accepted accounting principles.

c. Regulations of the Internal Revenue Service.

d. Regulations of the Securities and Exchange Commission.

21. Which of the following types of audit uses as its criteria laws and regulations?

a. Operational audit

b. Compliance audit

c. Financial statement audit

d. Financial audit

22. 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

23. A review of any part of an organization's procedures and methods for the purpose of evaluating
efficiency and effectiveness is classified as a(n)

a. Audit of financial statements

b. Compliance audit

c. Operational audit

d. Production audit

24. Which one of the following is more difficult to evaluate objectively?

a. Efficiency and effectiveness of operations.

b. Compliance with government regulations.

c. Presentation of financial statements in accordance with generally accepted accounting

principles.

d. All three of the above are equally difficult.

25. 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

26. A financial statement audit:

a. Confirms that financial statement assertion are accurate.

b. Lends credibility to the financial statements.

c. Guarantees that financial statements are presented fairly.

d. Assures that fraud had been detected.

27. Which of the following best describes the objective of an audit of financial statements?

a. To express an opinion whether the financial statements are prepared in accordance with
prescribed criteria.

b. To express an assurance as to the future viability of the entity whose financial statements are
being audited.

c. To express an assurance about the management's efficiency or effectiveness in conducting the

operations of entity.

d. To express an opinion whether the financial statements are prepared, in all material respect, in
accordance with an identified financial reporting framework.

28. Because an external auditor is paid a fee by a client company, he or she

a. Is absolutely independent and may conduct an audit

b. May be sufficiently independent to conduct an audit

c. ls never considered to be independent

d. Must receive approval of the Securities and Exchange Commission before conducting an audit
29. Which of the following is responsible for an entity's financial statements?

a. The entity's management

b. The entity's internal auditors

c. The entity's audit committee

d. The entity's board of directors

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

a. The audit of the financial statements relieves management of its responsibilities

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 unqualified opinion but not for any other type of opinion.

31. Which of the following least likely limits the auditor’s ability to detect material misstatement'?

a. Most audit evidences are conclusive rather than being persuasive.

b. The inherent limitations of any accounting and internal control system.

c. Audit is based on testing

d. Audit procedures that are effective in detecting ordinary misstatements are ineffective in
detecting intentional misstatements.

32. Because an examination in accordance with generally accepted auditing standards is influenced by the
possibility of material errors, the auditor should conduct the examination

with an attitude of

a. Professional responsiveness

b. Conservative advocacy

c. Objective Judgment

d. Professional skepticism
33. Which of the following best describes why an independent auditor reports on financial statements'?

a. Independent auditors are likely to detect fraud

b. Competing interests may exist between management and the users of the statements

c. Misstated account balances are generally corrected by an independent audit.

d. Ineffective internal controls may exist.

34. An audit can have a significant effect on

a. Information Risk

b. The risk-free interest rate

c. Business Risk

d. All of these

35. The main way(s) to reduce information risk is to have

a. The user verifies the information

b. The user shares the information risk with management

c. Audited financial statements provided

d. All of the above

36. Which of the following is an appraisal activity established within an entity as a service to the

entity'?

a. External auditing

b. Internal auditing

c. Financial auditing

d. Compliance auditing
37. The scope and objectives of internal auditing vary widely and depend on the size and

structure of the entity and the requirements of its management. Ordinarily, internal auditing

activities include one or more of the following:

. Review of the accounting and internal control systems

. Examination of financial and operating information

. Review of the economy, efficiency and effectiveness of operations

. Review of compliance with laws, regulations and other external requirements

a. yes yes yes yes

b. yes yes yes no

c. yes yes no no

d. yes no no no

38. To operate effectively, an internal auditor must be independent of

a. The line functions of the organizations

b. The entity

c. The employer-employee relationship which exists for other employees in the organization

d. All of the above

39. Internal auditors cannot be independent

a. Since they do not possess the CPA license.

b. Because they don't audit financial statements.

 c. Unless their immediate supervisor is a CPA.

d. As long as an employer-employee relationship exists.

40. To provide for the greatest degree of independence in performing internal auditing functions, an
internal auditor most likely should report to

a. Board of Directors.

b. Vice-President for Finance.

c. Corporate Controller.

d. Corporate Stockholders.

41. 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.

42. 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.
43. Which of the following is a correct qualification of the Chairman and Two Commissioners of the
Commission on Audit?

a. A citizen of the Philippines.

b. At least 40 years of age upon appointment.

c. CPA's with no less than 5 years of auditing experience or members of Philippine bar who have
been engaged in law practice for at least 5 years.

d. Must not have been candidates for any elective position preceding appointment.

44. The 1986 Constitution provides that the Chairman and Commissioners of the Commission on Audit
shall be

a. All Certified Public Accountants

b. All lawyers

c. One or two lawyers and one or two CPAs for a total of three

d. Two lawyers and one CPA

45. Which of the following is not one of the duties of the Commission on Audit

a. Define the scope of its audit and examination

b. Assume fiscal responsibility for the government and its instrumentalities

c. Keep the general accounts of the government

d. Promulgate accounting rules and regulations

46. A governmental audit may extend beyond an examination leading to the expression of an opinion on
the fairness of financial presentation to include

PROGRAM RESULTS

COMPLIANCE

ECONOMY & EFFICIENCY

a. Yes Yes No
 b. Yes Yes Yes

c. No Yes Yes

d. No No Yes

47. 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 is a (an)

a. Economy audit

b. Efficiency audit

c. Program audit
d. Financial related audit

48. A government auditor evaluates a disbursement to determine if it is necessary, excessive or

extravagant in accordance with existing rules and regulations. What kind of audit is he conducting?

Compliance audit Economy audit

a. Yes No

b. No Yes

c. Yes Yes

d. No No

QUIZZERS

1. Which of the following is an incorrect phrase?

a. Auditing is a systematic process.

b. Auditing subjectively obtains and evaluates evidence.

c. Auditing evaluates evidence regarding assertions.

d. Auditing communicates results to interested users.

2. Which of the following is a correct statement relating to the theoretical framework of auditing?

a. The financial data to be audited can be verified.

 b. Short-term conflicts do not exist between managers who prepare data and auditors who
examine data.

c. Auditors do not necessarily need independence.

d. An audit has a benefit only to the owners.

3. The essence of the attest function is to

a. Detect fraud

b. Examine individual transactions so that the auditor can certify as to their validity

c. Determine whether the client's financial statements are fairly stated

d. Ensure the consistent application of correct accounting procedures

4. ln "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 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.

5. Users of financial statements demand independent audit because

a. Users demand assurance that fraud does not exist

b. Management may not be objective in reporting.

c. Users expect auditors to correct management errors.

d. Management relies on the auditor to improve internal control.

6. Which of the following types of audits is performed to determine whether an entity's financial
statements are fairly stated in conformity with generally accepted accounting principles?

a. Operational audit

b. Compliance audit
 c. Financial statement audit

d. Performance audit

7. Which of the following types of auditing is performed most commonly by CPAs on a

contractual basis?

a. lnternal auditing

c. Government auditing

b. BIR auditing

d. External auditing

PSA 100 — Assurance engagements

8. Which of the following is incorrect regarding the Philippine Standards on Assurance Engagements
(PSAE)?

a. It provides an overall framework for assurance engagements intended to provide either a high
or moderate level of assurance.

b. It provides basic principles and essential procedures for engagements intended to provide a
moderate level of assurance.

c. When a professional accountant is engaged to perform an assurance engagement for which

specific standards exist, those standards apply.

d. If no specific standards exist for an assurance engagement, PSAE apply.

9. An assurance engagement should exhibit the following elements except

a. A three party relationship

b. A conclusion

c. Appropriate professional fee

d. A subject matter
10. 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.

11. The following are assurance engagements except

a. Financial statements audit

b. Information system reliability services

c. Review of financial statements

d. Tax consulting

12. Engagements frequently performed by professional accountants that are not assurance engagements
include the following except

a. Agreed-upon procedures.

b. Compliance audit

c. Compilation

d. Management consulting.

13. The subject matter of an assurance engagement may take many forms, including

a. Data

b. Systems and processes

c. Behavior
 d. All of these

14. The decision as to whether the criteria are suitable involves considering whether the subject matter is
capable of reasonably consistent evaluation against or measurement using such criteria. The
characteristics for determining whether criteria are suitable include the following, except

a. Relevance

b. Reliability

c. Understandability

d. Sufficiency

15. When the professional accountant has obtained sufficient appropriate evidence to conclude that the
subject matter conforms in all material respects with identified suitable criteria, he or she can provide
what level of assurance?

a. None

b. High

c. Moderate

d. Absolute

16. Absolute assurance is generally not attainable as a result of such factors as:

- the use of selective testing

- the inherent limitations of control systems

- the fact that much of the evidence available to the professional accountant is persuasive rather than
conclusive

- the use of judgment in gathering evidence and drawing conclusions based on that evidence

a. yes yes yes yes

b. yes yes yes no

c. yes yes no no

d. no yes yes no
PSA 120 — Framework of PSA

17. The Framework of PSA applies to

a. Taxation

b. Consultancy

c. Accounting advice

d. Compilation

18. Agreed-upon procedures provides what level of assurance?

a. None

b. High

c. Moderate

d. Absolute

19. Which of the following procedures ordinarily performed during an audit are also performed in
review?

a. Assessment of accounting and internal control systems

b. Test of controls

c. Tests of records and of responses to inquiries

d. Inquiry and analytical procedures

20. The objective of a review of financial statements

a. Is to enable the auditor to express an opinion whether the financial statements are prepared, in
all material respects, in accordance with an identified financial reporting framework.

b. Is to enable an auditor to state whether, on the basis of procedures which do not provide all the
evidence that would be required in an audit, anything has come to the auditor's attention that
causes the auditor to believe that the financial statements are not prepared, in all material respects,
in accordance with an identified financial reporting framework.

c. Is to 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.

d. Is to use accounting expertise as opposed to auditing expertise to collect, classify and

summarize financial information.

21. An auditor is associated with financial information when

- the auditor attaches a report to that

information

- consents to the use of the auditor's name in a

professional connection

a. yes yes

b. no yes

c yes no

d. no no
PSA 200 — Objective and general principles governing an audit of FS

22. The auditor's opinion

a. Enhances the credibility of the financial statements.

b. Is an assurance as to the future viability of the entity.

c. Is an assurance as to the efficiency with which management has conducted the affairs of the
entity, but not effectiveness.

d. Certifies the correctness of the financial statements.

23. Which of the following is incorrect regarding the general principles of an audit?

a. The auditor should comply with the "Code of Ethics for Professional Ethics for Certified Public
Accountants" promulgated by the Philippine Professional Regulation Commission.

b. The auditor should conduct an audit in accordance with PSAs.

c. The auditor should plan and perform an audit with an attitude of professional skepticism
recognizing that circumstances may exist that cause the financial statements to be materially
misstated.

d. The auditor would ordinarily expect to find evidence to support management representations
and

24. It refers to the audit procedures deemed necessary in the circumstances to achieve the

objective of the audit.

a. Scope of an audit

b. Audit program

c. Objective of an audit

d. Reasonable assurance
25. Which of the following are sources of procedures to be considered by the auditor to conduct an audit
in accordance with

-PSAs

-Legislation

-Terms of Audit Engagement

-Type of Opinion

a. Yes No No No

b. No No Yes Yes

c. No Yes Yes No

d. Yes Yes Yes No

1. Recording, classifying and summarizing economic events in a logical manner for the purpose of
providing financial information for decision making is commonly called:
- Accounting
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?
- Philippine Standards

3. Broadly defined, the subject matter of any audit consists of

- Assertions
4. Whenever a CPA professional is engaged to perform an audit of financial statements according
to Philippine Standard on Auditing, he is required to comply with those standards in order to
- Have a measure of the quality of audit performance
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
- Philippine Financial Reporting Standards

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

- Determining whether recorded information properly reflects the economic events that occurred
during the accounting period
7. An audit of financial statements is conducted to determine if the
- Overall financial statements are stated in accordance with an identified financial reporting
framework
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:
- Stockholders, creditors, and the investing public
9. An audit involves ascertaining the degree of correspondence between assertions and
established criteria. In case of an audit of financial statements, which of the following would not
be a valid criterion?
- Generally Accepted Auditing Standards
10. Most of the independent auditor’s work in formulating an opinion on financial statements
consists of
- Obtaining and examining evidence
11. Which of the following is more difficult to evaluate objectively?
- Efficiency and effectiveness of operations
12. An audit that involves obtaining and evaluating evidence about the efficiency and effectiveness
of an entity’s operating activities in relation to specified objective is a(n):
- Operational Audit
13. In financial statement audits, the audit process should be conducted in accordance with
- Philippine Standards on Auditing
14. Internal auditions are expected to add value to the organization through improved operational
effectiveness. In addition, their responsibilities include all the following except:
- Verifying accounting information for external users
15. Which of the following types of audit uses laws and regulations as its criteria?
- Compliance Audit
16. Which of the following best describes an operational audit?
- In concentrates on seeking out aspects of operations in which waste would be reduced by the
introduction of controls.
17. A typical objective of an operational audit is to determine whether an entity’s
- Specific operating units are functioning efficiently and effectively
18. One objective of an operational audit is to:
- Make recommendation for improving performances
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)
- Compliance audit
20. The auditor communicates the result of his or her work through the medium of te
- Audit Report
21. When performing an operational audit, the internal audit team must first determine that:
- 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?
- 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?
- Operational Audit
24. Which of the following is not one of the major differences between financial and operational
auditing?
- Financial audits deal with the information on the financial statements, but operational audits
are concerned with the information in the ledgers and journals
25. Independent external auditing can best be described as a
- professional activity that attests to the fair representation of financial statements
26. Which one of the following is NOT a major difference between operational and financial
auditing?
- Testing the effectiveness of internal controls
27. The overall objective of internal auditing is to
- Assist members of the organization in the effective discharge pf their responsibilities
28. Internal auditors report to
- The audit committee of the board of directors
29. Which of the following is not a similarly between external and internal auditors?
- Both must be independent of the company
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
- Management and the board of directors
31. Which of the following groups, could not be involved in an operational audit?
- External Auditors
- Internal Auditors
- Government Auditors
32. Which of the following statements is not a distinction between independent auditors and
internal auditors?
- Although independent auditors strive for both validity and relevance of evidence, internal
auditor are concerned almost exclusively with validity.
33. Which of the following has the primary responsibility for the fairness of the representation
made in the financial statements?
- Client’s management
34. An audit of the financial statements of JMV Corporation is being conducted by and external
auditor. The external auditor is expected to
- Express an opinion as to the fairness of JMV’s financial statement
35. Which of the following statements about independent financial statement audit is correct?
- The auditor’s opinion is not an assurance as to the future viability of the entity as well as he
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
- Provide users with an unbiased opinion about the finances of the information reported in the
financial statements.
37. Financial statements need to be prepared in accordance with one, or a combination of
- Philippine Accounting Standards
- Other authoritative and comprehensive financial reporting framework
- Philippine Financial Reporting Standards
38. By providing high level of assurance on audit reports on financial statements, the auditor
- Enhances the credibility of the financial statements
39. The reason an independent auditor gathers evidences is to
- Form an opinion on the financial statements
40. The trait that distinguishes auditors from accountants is the
- Auditor’s accumulation and interpretation of evidence related to a company’s financial
statements
41. The level of assurance provided by an auditor on an audit report is
- High
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
- The lack of expertise if the professional accountants in doing a systematic engagement process
43. Which of the following is not one of the limitations of an audit?
- Limitations imposed by client
44. Which of the following statements does not properly describe a limitation of an audit?
- Many financial statement assertions cannot be audited
45. Which of the following is one of the limitation of an audit?
- The fact 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 is because it
- Involves the objective examination o and reporting on management prepared statements
47. The primary reason for and audit by an external audit firm is
- To provide increased assurance to users as to the fairness of the financial statements
48. Which of the following is not one of the general principles governing the audit of financial
statements?
- The auditor should obtain sufficient appropriate evidence primarily through inquiry and
analytical procedures to be able to draw reasonable conclusions.
49. Financial statement users often receive unreliable financial information from companies. Which
of the following is not a common reason for this?
- Each of these choices is a common reason for unreliable financial information
50. Which one of the following is not going the conditions that give rise to a demand by external
users for independent audits of financial statements?
- Complexity of making economic decisions
51. Which of the following would not represent one of the primary problems that would lead the
users to demand for independent audits of a company’s financial statements?
- The downsizing of business and financial markers
52. The need for independent audits of financial statements can be attributed to all of the following
conditions except:
- Validity
53. Which of the following best describes the reason why an independent auditor reports on
financial statements?
- Different interests may exist between the company preparing the statements and the persons
using the statements.
54. Which of the following statements does no describe a condition that creates a demand for
auditing?
- Users can directly assess the quality of information
55. There are four conditions that give to the need for independent audits of financial statements.
One of these conditions is consequence. In this context, consequence means that the:
- Financial statements are used for important decisions

56. Which of the following statements does not properly describe an element of theoretical
framework of auditing?
- Auditors act on behalf of the management
57. Auditing is based on the assumption that financial data are verifiable. Data are verifiable when
two or more qualifies individuals
- working independently, each reach essentially similar conclusion
58. Which of the following is incorrect about responsibility for financial statements?
- Fair representation of financial statements does not reduce management’s responsibility
59. Which of the following one of the assumptions when auditing financial statements?
- Effective internal control system contributes little to the reliability of financial information
60. The best statement of the responsibility of the auditor which respects to audited financial
statement is:
- The auditor’s responsibility is confined to the expression of opinion on the financial statements.
61. Which of the following statements about independent financial statement audit is correct?
- The risk that the auditor will fail to uncover material misstatement is eliminated when the
auditor conducts the audit in accordance with PSA
62. Which of the following is one of the imitation of an audit?
- Nature of evidence obtained
63. Which of the following statements does not properly describe a limitation of an audit?
- Most of the items in the financial statements do not have supporting evidence
64. The assumption underlying an audit of financial statements is that they will be used by
- Different groups for different purposes
65. The procedures deemed necessary in the circumstances to achieve the objective if a financial
statement audit shall be determined by the
- Independent Auditor

66. Which one of the following is an example of management expectation from the independent
Auditors?
- An expert providing a written communication as the product of the engagement
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?
- Users usually lack the necessary expertise to verify the reliability of the financial information
68. Upon completion of a financial statement audit, the auditor has
- Reasonable assurance that the financial statements are fairly presented.
69. Which of the following is not one of the reason why auditors provide only reasonable assurance
on the financial statements?
- Auditors believe that reasonable assurance is sufficient in the vast majority of cases.