ACTG411 - Assurance Principles, Professional Ethics &

Good Gov
Final Exam
If the auditor concludes that the fraud or error has a material effect on the financial statements
and has not been properly corrected in the financial statements, the auditor should issue a:
a. Qualified or adverse opinion.
b. Unqualified opinion with explanatory paragraph.
c. Qualified or disclaimer of opinion.
d. Adverse or disclaimer of opinion.

In a limited assurance engagement, the practitioner expresses his/her conclusion in positive

form.
Select one:
True
False

According to Philippine Standard on Auditing, the procedures employed in doing compilation

are:
Select one:
a. Designed to enable the accountant to express a negative assurance.
b. Not designed to enable the accountant to express any form of assurance.
c. Less extensive than review procedures but more extensive than agreed-upon procedures.
d. Designed to enable the accountant to express a limited assurance.

Which of the following is an appraisal activity established within an entity as a service to the
entity?
Select one:
a. Internal auditing
b. External auditing
c. Compliance auditing
d. Financial auditing

When using statistical sampling for tests of controls, an auditor's evaluation would include a
statistical conclusion about whether:
Select one:
a. The population's total monetary value is not in error by more than a predetermined amount.
b. Population characteristics occur at least once in the population.
c. Monetary precision exceeds a predetermined amount.
d. Deviations in the population are within an acceptable range.

Which of the following is an incorrect phrase?

Select one:
a. Auditing communicates results to interested users.
b. Auditing subjectively obtains and evaluates evidence.
c. Auditing evaluates evidence regarding assertions.
d. Auditing is a systematic process.

The code of Professional Ethics for CPAs states, in part, that a CPA should maintain a high
degree of integrity and objectivity in all his actuations. Objectivity in said Code refers to a CPA's
ability:
Select one:
a. To independently distinguish between accounting practices that are acceptable and those that
are not.
b. To maintain an impartial attitude on all matters which come under the CPA's review
c. To independently choose between alternate accounting principles and auditing standards.
d. To be unyielding in all matters dealing with auditing procedures
An auditor is applying mean-per-unit estimation. Assuming estimated audited value is
P950,000, the achieved allowance for sampling risk is P75,000, and recorded book value is
P925,000, what is the auditor's conclusion?
Select one:
a. Recorded book value is not likely misstated by a material amount, assuming the client records an
adjusting journal entry equal to the allowance for sampling risk.
b. Recorded book value is misstated by a material amount.
c. There is insufficient evidence to reach a conclusion.
d. Recorded book value is not likely misstated by a material amount.

In a small company that doesn't employ an adequate number of employees to permit proper
division of responsibilities, effective internal control can be strengthened by
Select one:
a. Delegation of full, clear-cut responsibility to each employee for the functions assigned to each.
b. Direct participation by the owner of the business in the record keeping activities of the business.
c. Engaging a CPA to perform monthly "write up" work.
d. Employment of temporary personnel to aid in the separation of duties.

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

The auditor should consider whether the assessment of control risk is confirmed
Select one:
a. Upon the conclusion of the audit, based on the results of substantive procedures and other audit
evidence obtained.
b. Upon completion of understanding of internal control.
c. Before the final audit program is completed.
d. Upon completion of tests of controls
Which of the following is incorrect regarding independence
Select one:
a. Independence in appearance is the avoidance of facts and circumstances that are so significant a
reasonable and informed third party, having knowledge of all relevant information, including
any safeguards applied, would reasonably conclude a firm's or a member of the assurance
team's integrity, objectivity or professional skepticism had been compromised.
b. Independence is a combination of impartiality, intellectual honesty and a freedom from conflicts
of interest.
c. Independence of mind is the state of mind that permits the provision of an opinion without being
affected by influences that compromise professional judgment, allowing an individual to act
with integrity, and exercise objectivity and professional skepticism.
d. Independence consists of independence of mind and independence in appearance.

Working papers that record the procedures used by the auditor to gather evidence should be
Select one:
a. Designed to meet the circumstances of the particular engagement.
b. Viewed as the connecting link between the books of accounts and the financial statements.
c. Destroyed when the audited entity ceases to be a client.
d. Considered the primary support for the financial statements being audited.

An operational audit is designed to

Select one:
a. Determine whether the audit committee of the board of directors is effectively discharging its
responsibility to oversee management's operations
b. Determine whether management has complied with applicable laws and regulations
c. Assess the efficiency and effectiveness of management's operating procedures
d. Assess the presentation of management's financial statements in accordance with generally
accepted accounting principles

An auditor's working papers will ordinarily be least likely to include documentation showing
how the
Select one:
a. Client's schedules were prepared.
b. Understanding of the client's internal control was obtained and control risk was assessed.
c. Engagement was planned.
d. Unusual matters were resolved.

Incremental risk is the increased risk that errors may not be detected at the balance sheet date
because:
Select one:
a. Detection risk was set too high a level.
b. Inherent risk was assessed too low.
c. Audit procedures were performed at an interim date
d. Analytical procedures were not performed.

An appropriate subject matter is one that is capable of consistent evaluation or measurement

against the identified criteria.
Select one:
True
False

Which of the following is usually included or shown in the auditor's working papers?
Select one:
a. The procedures used by the auditor to verify the personal financial status of members of the
client's management team
b. The manner in which exceptions and unusual matters disclosed by the auditor's procedures
were resolved or treated
c. Analyses that are designed to be a part of, or a substitute for, the client's accounting records
d. Excerpts from authoritative pronouncements that support the underlying generally accepted
accounting principles used in preparing the financial statements

Which of the following is the ultimate concern of the knowledge about the business?
Select one:
a. It assists in determining the type of audit report to be issued.
b. To assure that sufficient audit evidence is obtained.
c. Assists the auditor in enforcing quality control procedures.
d. Consideration of how it affects the financial statements taken as a whole.

Independence is not a requirement for a compilation engagement.

Select one:
True
False

An auditor, planning an attribute sample from a large number of invoices, intends to estimate
the actual rate of deviations. Which factor below is the most important for the auditor to
consider?
Select one:
a. Population variance
b. Audit objective
c. Desired confidence level
d. Population size

The practitioner's conclusion in an assertion based engagement can be worded in terms of the
intended user's assertion.
 Select one:
True
False

For agreed-upon procedures and compilation engagements, no assurance is expressed.

Select one:
True
False

A practitioner's report expressing an opinion on an entity's internal controls should state that
the study and evaluation of the internal controls was conducted in accordance with Philippine
Standards on Auditing (PSA).
Select one:
True
False

Although substantive tests may support the accuracy of underlying records, these tests
frequently provide no affirmative evidence of segregation of duties because
Select one:
a. Substantive tests relate to the entire period under audit, but tests of controls ordinarily are
confined to the period during which the auditor is on the client's premises.
b. Many computerized procedures leave no audit trail of who performed them, so substantive tests
may necessarily be limited to inquiries and observation of office personnel
c. The records may be accurate even though they are maintained by a person who performs
incompatible functions
d. Substantive tests rarely guarantee the accuracy of the records if only a person who performs
incompatible functions

Which statement is correct regarding the Code of Ethics for Professional Accountants in the
Philippines?
Select one:
a. All CPAs are expected to comply with the ethical requirements of the Code and other ethical
requirements that may be adopted and approved by IFAC. Apparent failure to do so may result
in an investigation into the CPA's conduct.
b. Professional accountants refer to persons who are Certified Public Accountants (CPA) in public
practice and who hold a valid certificate issued by the Board of Accountancy.
c. It is practical to establish ethical requirements which apply to all situations and circumstances
that professional accountants may encounter.
d. Professional accountants should consider the ethical requirements as the ideal principles which
they should follow in performing their work.
 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.
Select one:
a. Confidence level
b. Reasonableness level
c. Assurance level
d. Tolerable level

After considering internal control, an auditor might decide to

Select one:
a. Reduce the extent of tests of controls in areas where internal control is strong
b. Increase the extent of tests of controls and substantive tests in areas where internal control is
strong
c. Increase the extent of substantive tests in areas where internal control is weak
d. Reduce the extent of both substantive tests and tests of controls in areas where internal control
is strong

An auditor had expressed a qualified opinion on the financial statements of a prior period
because the client's financial statements departed from generally accepted accounting
principles. The prior period statements are restated in the current period to conform with
generally accepted accounting principles. The auditor's updated report on the prior period
statements should
Select one:
a. express an unqualified opinion about the restated financial statements
b. be accompanied by the auditor's original report on the prior period
c. bear the same date as the auditor's original report on the prior period
d. qualify the opinion concerning the restated financial statements because of a change in
accounting principles

Which of the following is not a purpose of working papers?

Select one:
a. Assist in the supervision and review of the audit work.
b. Assist in the planning and performance of the audit.
c. Record the audit evidence resulting from the audit work performed to support the auditor's
opinion.
d. Support the client's financial statements.

An auditor is evaluating the results of a variables sampling plan. Which of the following is not
relevant to the auditor's judgment about the sample?
Select one:
a. Management's explanations for why errors in the sample occurred.
b. Qualitative information that lends insight into errors found.
c. Considering the effects of sampling risk.
d. Projecting the sample error to the population.
 The auditor communicates the results of his or her work through the medium of the
Select one:
a. Audit report
b. Financial statements
c. Engagement letter
d. Management letter.

With respect to errors and fraud, which of the following should be a part of an auditor's
planning in an audit engagement?
Select one:
a. Planning to discover errors or fraud that are either material or immaterial
b. Planning to consider factors affecting the risk of material misstatements both at the financial
statement and account balance level.
c. Planning to discover errors or fraud that are material
d. Planning to search for errors or fraud that would have a material or immaterial effect on the
financial statements.

Which of the following statements is not correct about materiality?

Select one:
a. An auditor considers materiality for planning purposes in terms of the largest aggregate level of
misstatements that could be material to any one of the financial statements.
b. Materiality judgments are made in light of surrounding circumstances and necessarily involve
both quantitative and qualitative judgments.
c. An auditor's consideration of materiality is influenced by the auditor's perception of the needs of
a reasonable person who will rely on the financial statements.
d. The concept of materiality recognizes that some matters are important for fair presentation of
financial statements in conformity with GAAP, while other matters are not important.

Which of the following is not part of the control environment?

Select one:
a. Information and communication systems.
b. Organizational structure and methods of assigning authority and responsibility.
c. The function of the board of directors and its committees.
d. Management philosophy and operating style.

Which of the following best describes the auditor's responsibility for "other information"
included in the annual report to stockholders which contains financial statements and the
auditor's report?
Select one:
a. The auditor should extend the examination to the extent necessary to verify the "other
information."
b. The auditor must modify the auditor's report to state that the "other information is unaudited"
or "not covered by the auditor's report."
c. The auditor has no obligation to read the "other information."
d. The auditor has no obligation to corroborate the "other information," but should read the "other
information" to determine whether it is materially inconsistent with the financial statements.

Conducting a substantive test of an account balance, an auditor hypothesis that no material

misstatement exists. The risk that sample results will support the hypothesis when a material
misstatement actually does exist is the risk of
Select one:
a. Alpha error.
b. Incorrect rejection.
c. Type I error.
d. Incorrect acceptance

The most common type of audit report contains a(n):

Select one:
a. Qualified opinion.
b. Adverse opinion.
c. Unqualified opinion
d. Disclaimer of opinion.

Which of the following is true of the communication to management of material weaknesses in

accounting and internal control?
Select one:
a. The communication should indicate that the auditor had extensively examined the accounting
and internal control system of the client.
b. Communication must be in writing.
c. Oral communication of material weaknesses, when appropriate, would be documented in the
audit working papers.
d. The auditors should indicate in the communication that the examination is primarily designed to
determine whether the accounting and internal control is adequate.

The conclusion "In our opinion, internal control is effective in all material respects, based on
XYZ criteria", expresses a reasonable assurance in positive form.
Select one:
True
False

A summary of findings rather than assurance is most likely to be included in an examination

report.
Select one:
True
 False

In some cases, the ethical requirement on professional competence can be satisfied by using
the work of individuals from other disciplines referred to in the standards as experts.
Select one:
True
False

As used in auditing, which of the following statements best describes "assertions"?

Select one:
a. Assertions are the representations of management as to the fairness of the financial statements.
b. Assertions are the representations of management as to the reliability of the information system.
c. Assertions are the auditor's findings to be communicated in the audit report.
d. Assertions are found only in the footnotes to the financial statements.

Which of the following is responsible for an entity's financial statements?

Select one:
a. The entity's audit committee
b. The entity's board of directors
c. The entity's management
d. The entity's internal auditors

Assessing control risk too high is the risk that the sample.
Select one:
a. Contains monetary misstatements that could be material to the financial statements when
aggregated with misstatements in other account balances or classes of transactions.
b. Contains proportionately more deviations from prescribed control procedures than actually exist
in the population as a whole.
c. Does not support tolerable error for some or all of management's assertions.
d. Contains proportionately fewer deviations from prescribed control procedures than actually exist
in the population as a whole

Which of the following is an engagement attribute for an audit of an entity that processes most
of its financial data in electronic form without any paper documentation?
Select one:
a. Performance of audit tests on a continuous basis.
b. Increased effort to search for evidence of management fraud.
c. Discrete phases of planning, interim, and year-end field work.
d. Increased emphasis on the completeness assertion.

In all cases, audit reports must

Select one:
a. Be signed by the individual who performed the audit procedures.
b. Inform readers of the degree of correspondence between the quantifiable information and the
established criteria.
c. Certify the accuracy of the quantitative information which was audited.
d. Communicate the auditor's finding to the general public.

Assertion about account balances at period end which means assets, liabilities, and equity
interests are included in the financial statements at appropriate amounts is
Select one:
a. Completeness
b. Valuation and allocation
c. Rights and obligations
d. Existence
Which of the following least likely affects the nature, timing, and extent of the procedures
performed by the auditor to obtain an understanding of the accounting and internal control
systems of an audit client?
Select one:
a. The auditor's assessment of inherent risk
b. Materiality considerations
c. The level of acceptable detection risk
d. The size and complexity of the entity and of its computer system

Throughout the course of the audit, the auditors make judgment about many matters where
knowledge of the business is important. These procedures do not include:
Select one:
a. Identifying related parties and related party transactions.
b. Assessing the appropriateness of using statistical sampling instead of judgmental sampling.
c. Evaluating accounting estimates and management representations.
d. Assessing inherent and control risks.

In the absence of pronouncements issued by the ASPC and the PICPA, published statements
and guidelines by other authoritative bodies, like AICPA, IAPC and AFA are the basis of
determining generally accepted auditing standards. What affect do these pronouncements
provide in determining the generally accepted auditing standards?
Select one:
a. Persuasive
b. Parallel
c. Authoritative
d. Alternative

An auditor would issue an adverse opinion if

Select one:
a. A qualified opinion cannot be given because the auditor lacks independence.
b. The audit was begun by other independent auditors who withdrew from the engagement.
c. The statements taken as a whole do not fairly present the financial condition and results of
operations of the company.
d. The restriction on the scope of the audit was significant.

The risk that the assertion contains material misstatements that, when aggregated with
misstatements in other assertions, could make the entire financial statements materially
misstated is:
Select one:
a. Individual audit risk
b. Detection risk
c. Control risk
d. Inherent risk

Which statement is incorrect regarding the Code of Ethics for Professional Accountants in the
Philippines?
Select one:
a. The Code of Ethics for Professional Accountants in the Philippines is mandatory for all CPAs and
is applicable to professional services performed in the Philippines on or after January 1, 2004.
b. Where a national statutory requirement is in conflict with a provision of the IFAC Code, the IFAC
Code requirement prevails.
c. Professional accountants refer to persons who are Certified Public Accountants (CPA) and who
hold a valid certificate issued by the Board of Accountancy.
d. Professional accountants should consider the ethical requirements as the basic principles which
they should follow in performing their work.

Because of inadequate records the auditor is uncertain as to whether property and equipment
is stated at cost. The auditor should issue a (n):
Select one:
a. Unqualified opinion
b. Standard opinion
c. Qualified opinion
d. Adverse opinion

After issuing a report, an auditor has no longer obligation to make continuing inquiries or
perform other procedures concerning the audited financial statements, unless
Select one:
a. Management of the entity requests the auditor to reissue the auditor's report.
b. Information about an event that occurred after the end of fieldwork comes to the auditor's
attention.
c. Final determinations or resolutions are made of contingencies that had been disclosed in the
financial statements.
d. Information, which existed at the report date and may affect the report, comes to the auditor's
attention.
 Assurance engagement
Select one:
a. 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.
b. 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.
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.

The objective of tests of details of transactions performed as tests of controls is to

Select one:
a. Monitor the design and use of entity documents such as prenumbered shipping form
b. Detect material misstatements in the account balances of the financial statements.
c. Evaluate whether controls operated effectively.
d. Determine whether controls have been placed in operation.

Which of the following is incorrect regarding the "three-party relationship" element of

assurance engagements?
Select one:
a. The responsible party and the intended user will often be from separate organizations but need
not be.
b. The responsible party is the person or persons, either as individuals or representatives of an
entity, responsible for the subject matter.
c. The intended user is the person or class of persons for whom the professional accountant
prepares the report for a specific use or purpose
d. Professional accountants as those persons who are members of an IFAC member body, which
should be in public practice.

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

In which of the following circumstances would an auditor usually choose between expressing a
qualified opinion or disclaiming an opinion?
Select one:
a. Unreasonable justification for a change in accounting principle
b. Inability to obtain sufficient competent evidential matter
c. Inadequate disclosure of accounting policies
d. Departure from generally accepted accounting principles

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

Select one:
a. Determine whether the client's assertions are fairly stated
b. Assure the consistent application of correct accounting procedures
c. Detect fraud
d. Examine individual transactions so that the auditor may certify as to their validity

Understanding the business and using this information appropriately assists the auditor in,
except
Select one:
a. Assessing risks and identifying potential problems
b. Deciding whether to do tests of controls
c. Evaluating audit evidence.
d. Planning and performing the audit effectively and efficiently.

Common examples of assurance engagements are engagements to apply agreed-upon

procedures and consulting.
Select one:
True
False

Internal auditors cannot be independent

Select one:
a. As long as an employer-employee relationship exists.
b. Unless their immediate supervisor is a CPA
c. Because they don't audit financial statements.
d. Since they do not possess the CPA license.

In a financial statement audit, reasonable assurance is obtained when the auditor has gathered
sufficient appropriate evidence to reduce risk to an acceptably low level.
Select one:
True
False

Under all situations, the responsible party is the party who engages the practitioner.
Select one:
True
False
 In statistical sampling methods used in substantive testing, when would an auditor most likely
stratify a population into meaningful groups?
Select one:
a. If the standard deviation of recorded amounts is relatively small.
b. If the population has highly variable recorded amounts.
c. If the auditor's estimated tolerable misstatement is extremely small.
d. If probability proportional to size sampling is used.

In a direct report engagement, the responsible party is responsible for the subject matter of the
engagement.
Select one:
True
False

The sequence of steps in gathering evidence as the basis of the auditor's opinion is
Select one:
a. Documentation of control structure, tests of controls, and substantive tests
b. Substantive tests, documentation of control structure, and tests of controls
c. Documentation of control structure, substantive tests, and tests of controls
d. Tests of controls, documentation of control structure, and substantive tests

In an engagement to provide assurance about the effectiveness of an entity's internal control,

the subject matter is the assertion of the management about its effectiveness.
Select one:
True
False

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
Select one:
a. Conservative advocacy
b. Objective judgment
c. Professional skepticism
d. Professional responsiveness

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?
Select one:
a. Compliance audit
b. Financial statement audit
c. Performance audit
d. Operational audit
 The criteria or benchmarks that are used to measure or evaluate the subject matter of the
assurance engagement need not be available to the intended users.
Select one:
True
False

The responsible party can be one of those whom the practitioner prepares the assurance
report.
Select one:
True
False

If an auditor is certain an illegal act has a material effect on financial statements and the clients
agrees to adjust the statements accordingly, the auditor should:
Select one:
a. Issue a qualified opinion.
b. Withdraw from the engagement.
c. Issue an unqualified opinion.
d. Disclaim an opinion on the financial statements taken as a whole.

While performing a substantive test of details during an audit, the auditor determined that the
sample results supported the conclusion that the recorded account balance was materially
misstated. It was, in fact, not materially misstated. This situation illustrates the risk of
Select one:
a. Incorrect acceptance
b. Assessing control risk too high
c. Assessing control risk too low
. Incorrect rejection

If the auditor is precluded by the entity from obtaining evidence to evaluate whether fraud or
error that may be material to the financial statements has, or is likely to have, occurred, the
auditor should issue a (n):
Select one:
a. Qualified or disclaimer of opinion.
b. Qualified or adverse opinion.
c. Adverse or disclaimer of opinion.
d. Unqualified opinion with explanatory paragraph.

Which of the following is required documentation in an audit in accordance with generally

accepted auditing standards?
Select one:
a. An audit program setting forth in detail the procedures necessary to accomplish the
engagement's objectives.
b. A planning memorandum establishing the timing of the audit procedures and coordinating the
assistance of entity personnel.
c. A flowchart or narrative of the information system describing the recording and classification of
transactions for financial reporting.
d. An internal control questionnaire identifying policies and procedures that assure specific
objectives will be achieved.

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

An auditor is confronted with an exception sufficiently material to warrant departing from the
standard wording of an unqualified report. If the exception relates to a departure from the
generally accepted accounting principles, the auditor must decide between a(n)
Select one:
a. disclaimer of opinion and a qualified opinion
b. adverse opinion and a qualified opinion
c. adverse opinion and an unqualified opinion
d. adverse opinion and a disclaimer of opinion

Tests of controls may include the following, except:

Select one:
a. Analytical procedures involving comparison of operating expenses with budgeted amount.
b. Inspection of documentary support for transactions evidencing authorization
c. Inquiries about, and observation of, internal controls which leave no audit trail.
d. Reperformance of internal control procedures

The financial statements audited by the auditor are identified in the

Select one:
a. Opinion paragraph
b. Opening paragraph
c. Scope paragraph
d. All of these

Assurance engagement risk is the possibility that the practitioner will express an inappropriate
conclusion on a subject matter information that is materially misstated.
Select one:
True
False
 Why does an auditor document audit evidence?
Select one:
a. To support audit opinion and to provide evidence that the audit was carried out in accordance
with PSA.
b. To provide client reference for all account balances and correcting entries.
c. To document all records of misstatements noted in the financial statements.
d. To comply with the requirements of gathering all available evidence.

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
Select one:
a. Understandability
b. Sufficiency
c. Relevance
d. Reliability

If a selected random number matches the number of a voided voucher, the voucher ordinarily
should be replaced by another voucher in the sample if the voucher
Select one:
a. Constitutes a deviation
b. Has been properly voided
c. Represents an immaterial peso amount
d. Cannot be located

It means the materials prepared by and for, or obtained and retained by the auditor in
connection with the performance of the audit.
Select one:
a. Documentation
b. Audit report
c. Audit evidence
d. Engagement letter

The auditor's report contains a paragraph explaining that the entity changed from the
straightline to the declining balance method of depreciation. The auditor expressed an:
Select one:
a. Unqualified opinion
b. Disclaimer of opinion
c. Adverse opinion
d. Qualified opinion
 In the course of the audit of financial statements for the purpose of expressing an opinion
thereon, the auditor will normally prepare a schedule of unadjusted differences for which he
did not propose adjustment when they were uncovered. The primary purpose served by this
schedule is to
Select one:
a. Point out to the responsible client officials the errors made by various company personnel.
b. Summarize the errors made by the company so that corrections can be made after the audited
financial statements are released.
c. Summarize the adjustments that must be made before the company can prepare and submit its
income tax returns.
d. Identify the potential financial statement effects of errors or disputed items that were considered
immaterial when discovered.

A measure of uniformity in the form and content of the auditor's report is desirable because
Select one:
a. It helps the auditors avoid legal liability.
b. It makes the auditors more informed of their responsibilities with respect to audit report.
c. It helps the auditor identify the usual circumstances that are expected to occur.
d. It helps the readers understand the report.

Because most of the evidence available to the auditor is conclusive rather than persuasive in
nature, absolute assurance in auditing is not attainable.
Select one:
True
False

Which of the following events occurring after the issuance of an auditor's report most likely
would cause the auditor to make further inquiries about the previously issued financial
statements?
Select one:
a. The discovery of information regarding a contingency that existed before the financial
statements were issued.
b. The entity's sale of a subsidiary that accounts for 30 percent of the entity's consolidated sales.
c. The final resolution of a lawsuit explained in a separate paragraph of the auditor's report
d. A technological development that could affect the entity's future ability to continue as a going
concern.

As used in the Philippine Framework for Assurance Engagements, the term "practitioner" refers
to a CPA in public practice.
Select one:
True
False
 A review of the entity's financial statements usually involves an assessment of an entity's
accounting and internal control systems.
Select one:
True
False

"Whenever a sample is taken, there is a risk that the quantitative conclusions about the
population will be incorrect."
Select one:
a. This is true for statistical sampling, but not for non-statistical sampling.
b. This is true for non-statistical sampling but not for statistical sampling.
c. This is always true unless 100 percent of the population is tested.
d. This is always true

The best statement of the responsibility of the auditor with respect to audited financial
statement is:
Select one:
a. The responsibility over the financial statements rests with the management and the auditor
assumes responsibility with respect to the notes of financial statements.
b. The auditor is responsible only to his unqualified opinion but not for any other type of opinion.
c. The audit of the financial statements relieves management of its responsibilities
d. The auditor's responsibility is confined to his expression of opinion about the audited financial
statements.

Tests of controls are necessary

Select one:
a. When risk assessment procedures by themselves do not provide sufficient appropriate audit
evidence.
b. When the auditor's risk assessment includes an expectation of the operating effectiveness of
controls.
c. When substantive procedures alone provide sufficient appropriate audit evidence.
d. Under no circumstances.

The criteria for evaluating quantitative information vary. For example, in the audit of historical
financial statements by CPA firms, the criteria are usually.
Select one:
a. Generally accepted accounting principles.
b. Generally accepted auditing standards.
c. Regulations of the Securities and Exchange Commission.
d. Regulations of the Internal Revenue Service.
 Which statement is correct regarding the sufficiency and appropriateness of audit evidence?
Select one:
a. Appropriateness is the measure of the quantity of audit evidence; that is, its relevance and its
reliability in providing support for, or detecting misstatements in, the classes of transactions,
account balances, and disclosures and related assertions.
b. Merely obtaining more audit evidence may compensate for its poor quality.
c. The quantity of audit evidence needed is affected by the risk of misstatement (the greater the
risk, the more audit evidence is likely to be required) and also by the quality of such audit
evidence (the higher the quality, the less may be required).
d. Sufficiency is the measure of the quality of audit evidence.