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Auditing Theory Nov 26

Auditing Theory Nov 26

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Published by: Yani Gemuel Gatchalian on Dec 06, 2012
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1.As guidance for measuring the quality of the performance of an auditor, the auditor should refer toA.Statements of Financial Accounting Standards Board.B.Philippine Standards on Auditing.C.Interpretations of Rules of Conduct.D.Statements on Quality Control Standards.2.Generally Accepted Auditing Standards (GAAS) and Philippine Standards on Auditing (PSA) should belooked upon by practitioner as
Ideals to work for, but which are not achievable.
Maximum standards which denote excellent work.
Minimum standards of performance which must be achieved on each audit engagement.
Benchmarks to be used on all audits, reviews, and compilations.
An auditor who accepts an audit engagement, but does not possess the industry expertise of the businessentity, shouldA.Engage financial experts familiar with the nature of the business entity.B.Obtain a knowledge of matters that relates to the nature of the entity’s business.C.Refer a substantial portion of the audit to another CPA who will act as the principal auditor.D.First inform the client management that an unqualified opinion cannot be issued.4.Which of the following statements best describes the primary purpose of Philippine Standards onAuditing?A.They are guides intended to set forth auditing procedures that are applicable to a variety of situations.B.They are procedural outlines which are intended to narrow down the areas of inconsistency anddivergence of auditor’s opinion.C.They are authoritative statements, enforced through the Code of Professional Conduct, that areintended to limit the degree of the auditor’s judgment.D.They are interpretations which are intended to clarify the meaning of “generally acceptedauditing standards”.5.An auditor need not abide by a Philippine Standard on Auditing if the auditor believes thatA.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.6.Auditing standards areA.Statutory in nature.B.Rules imposed by the Securities and Exchange Commission.C.Rules imposed by the PICPA.D.General guidelines to help the auditor.
7.Though PSAs do not provide “hard and fast rules” , they provide subjective guidance which allow theauditors to:A.Tailor their audit to procedures requested by management.B.Only apply those standards that are important to the audit.C.Accurately interpret the profession’s Code of Professional Conduct.D.Use adequate professional judgment when applying the standards.8.Every independent audit engagement involves both auditing standards and auditing procedures. Therelationship between the two may be illustrated by how they apply from engagement to engagement.The best representation of this application is that, from one audit engagement to the next,
Both auditing standards and auditing procedures are applied uniformly.B.Auditing standards are applied uniformly but auditing procedures may vary.C.Auditing standards may vary but auditing procedures are applied uniformly.D.Auditing standards are applied uniformly but auditing procedures are optional.9.Philippine Financial Reporting Standards (PFRS) are distinguished from generally accepted auditingstandards (GAAS) in that:A.PFRS are the principles for presentation of financial statements and underlying transactions,while GAAS are the standards that the auditors should follow when conducting an audit.B.PFRS are the principles auditors follow when conducting an audit, while GAAS are thestandards for presentation of financial statements and underlying transactions.C.PRFS are promulgated by the SEC, while GAAS are promulgated by the FRSC.D.When PFRS are violated, sufficiently strong GAAS may make up for most PFRS deficiencies.10.The Philippine Standards on Auditing issued by the Auditing and Assurance Standards Council (AASC)A.Are interpretations of generally accepted auditing standards.B.Are the equivalent of laws for audit practitioners.C.Must be followed in all situations.D.Are optional guidelines which an auditor may choose not to follow when conducting an audit.11.Competence as a certified public accountant includes all of the following exceptA.Having the technical qualifications to perform an engagement.B.Possessing the ability to supervise and evaluate the quality of staff work.C.Warranting the infallibility of the work performed.D.Consulting other if additional technical information is needed.12.In any case in which the incoming accountant is not qualified to perform the work, a professionalobligation exists toA.Acquire the required level of knowledge and skills.B.Recommend someone else who is qualified to perform the work.C.Decline the engagement.D.Any of the given choices.
13.Ultimately, the decision about whether or not an auditor is independent must be made by theA.Auditor B.Audit committeeC.ClientD.Public14.To be independent, the auditor:A.Cannot place any reliance on the client’s verbal and written assertions.B.Is responsible only to third-party users of the financial statements.C.Cannot perform any other professional services for an audit client.D.Must be impartial when dealing with the client.15.What is the meaning of the generally accepted auditing standard that requires that the auditor beindependent?A.The auditor must be without bias with respect to the client entity.B.The auditor must adopt a critical attitude during the audit.C.The auditor’s sole obligation is to third parties.D.The auditor may have a direct ownership interest in the client’s business if it is not material.16.Which of the following is not required by the Generally Accepted Auditing Standard that states that due professional care is to be exercised in the performance of the audit?A.Observance of the standards of field work and reporting.B.Critical review of the audit work performed at every level of supervision.C.Degree of skill commonly possessed by others in the profession.D.Responsibility for losses because of errors of judgment.17.The standard of due audit care requires the auditor toA.Apply judgment in a conscientious manner, carefully weighing the relevant factors beforereaching a decision.B.Ensure that the financial statements are free from error.C.Make perfect judgment decisions in all cases.D.Possess skills clearly above the average for the profession.18.Which of the following mostly describes the function of AASC?A.To promulgate auditing standards, practices and procedures that shall be generally accepted bythe accounting profession in the Philippines.B.To monitor full compliance by all auditors to PSAs.C.To assist the Board of Accountancy in conducting administrative proceedings on erring CPAs inaudit practice.D.To undertake continuing research on both auditing and financial accounting in order to makethem responsive to the needs of the public.

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