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At 0405 Preweek Quizzer B Xx

At 0405 Preweek Quizzer B Xx

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AUDITING THEORYCPA Review School of the PhilippinesPreweek Quizzer1.How did the framework of Philippines Standards on Auditingconceptually describe an assurance?A.It refers to the auditor’s satisfaction as to the reliability of anassertion being made by one party for use by another party.B.The level of assurance which may be provided is determined bythe reporting objective.C.An assurance is expressed positively in the report.D.Because of the inherent limitation in an audit, the assurance isof limited one.2.Which of the following are authoritative sources for auditingstandards for members of the Accountancy profession in thePhilippines?I.Pronouncements on GAAS, issued by ASPC.II.Pronouncements on GAAS issued by PICPA which are notsuperseded or amended by statements issued by ASPC.III.Pronouncements issued by AICPA.A.I only.C.I and III onlyB.I and II only.D.I, II and III3.In the absence of pronouncements issued by ASPC and the PICPA,published statements and guidelines by other authoritative bodies,like AICPA, IAPC and AFA are the basis of determining generallyaccepted auditing standards. What effect do these pronouncementsprovide in determining the generally accepted auditing standards?A.AuthoritativeC.AlternativeB.PersuasiveD.Parallel4.Specifically, the Board of Accountancy is officially represented inthe ASPC byA.Secretary of the BOAB.Chair, PRCC.Chair, BOAD.BOA member who handles Auditing Theory subject5.A draft of statement, studies or standards should be discussed bythe Council en banc. How many members are required to approvethe draft to consider it for exposure?A.MajorityC.TenB.EightD.TwelveMay 2004Page 1 of 26
AUDITING THEORYCPA Review School of the PhilippinesPreweek Quizzer6.How many members of ASPC are needed to approve the exposeddraft of Philippine Standards in Auditing as Philippine Standards onAuditing?A.Majority of the regular membersC.At least eight.B.At least ten.D.At least twelve.7.Which of the following is a correct statement?A.ASPC should normally expose a proposed interpretation of statements.B.ASPC should normally expose its opinion on specific queries froma practicing CPA.C.To make the statements on Philippine Standards on Auditingoperative, the final statements shall be submitted to the Boardof Accountancy for approval.D.When it is deemed necessary to expose for a comment onproposed interpretations of statements, the exposure period isunderstandably shorter than those of the regular drafts of standards.8.Which of the following is not represented by the signatories to the Joint Memorandum of Support to the creation and operation of theAuditing Standards and Practices Council?A.Board of AccountancyB.Philippine Institute of Certified Public Accountants (PICPA)C.Association of Certified Public Accountants in Public Practice(ACPAPP)D.Philippine Institute of Certified Public Accountants Foundation,INC.9.Ethically, how many years can a partner who survived the death orwithdrawal of other partner(s) an continue to practice under thepartnership name though he becomes a sole practitioner?A.1 yearC.2 yearsB.3 yearsD.No prescribed rule10.This exists because business people, investors and the generalpublic perceive the duties and responsibilities of auditors differentlyfrom the way in which auditors themselves perceive those dutiesand responsibilities.A.AssuranceC.Expectation gapB.Audit standardsD.Ethics11.Which of the following public perceptions least likely manifests anexpectation gap?A.The general public expects that the auditors are independent of the financial statements that they audit.B.The general public believes that an unqualified audit opinionguarantees the accuracy of financial statements.C.The general public believes that detection of fraud is the primaryobjective of financial audit.D.The general public believes that an unqualified opinion is anassurance as to the viability of an entity’s future operations.12.Conflict between financial statement users and auditors often arisesbecause of theA.high cost of performing an audit.B.extremely technical vocabulary which the auditor uses in thereport.C.placement of the auditor’s report in the back of the client’sannual report where it is hard to locate.D.expectation gap.13.The subsequent discovery of material misstatements of thefinancial statements resulting from fraud or error existing duringthe period covered by the auditor’s reportA.Indicates that the auditor has failed to the basic principles andessential procedures of an audit.B.Always results to litigation due to the auditor’s negligence.C.Does not, in itself, indicate that the auditor has failed to adhereto the basic principles and essential procedures of an audit.D.Does not make the auditor liable because he just provides areasonable and not an absolute assurance.May 2004Page 2 of 26
AUDITING THEORYCPA Review School of the PhilippinesPreweek Quizzer14.Most accounting and auditing professionals agree that when anaudit has failed to uncover material misstatements, and the wrongtype of audit opinion is issued, the audit firmA.has failed to follow generally accepted auditing standards(GAAS).B.deserves to lose the lawsuit.C.should be asked to defend the quality of the audit.D.should not be held responsible for the financial loss suffered losssuffered by others.15.The understanding between the client and the auditor as to thedegree of responsibility to be assumed by each is normally set forthin a(n)A.Representation letterC.Engagement letter.B.Management letterD.Letter of reportableconditions.16.In a financial statement audit, audit risk represents the probabilitythatA.Internal control fails and the failure is not detected by theauditor’s procedures.B.The auditor unknowingly fails to modify an opinion on materiallymisstated financial statements.C.Inherent and control risk cause errors that could be material tothe financial statements.D.The auditor is not retained to conduct a financial statementaudit in the succeeding year.17.The auditor’s judgment concerning the overall fairness of thepresentation of financial positions, results of operations, and cashflows is applied within the framework of A.Quality control.B.Generally accepted auditing standards that include the conceptof materiality.C.The auditor’s evaluation of the audited company’s internalcontrols.D.Generally accepted accounting principles.18.In “auditing” accounting data, the concern is withA.determining whether recorded information properly reflects theeconomic 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 complieswith government requirements.19.The responsibility for adopting sound accounting policies,maintaining an adequate internal control structure, and making fairrepresentations in the financial statements restsA.with management.C.equally with management andthe auditor..B.with the independent auditor.D.with the internal auditdepartment.20.The auditor’s best defense when material misstatements in thefinancial statements are not uncovered in the audit is thatA.the audit was conducted in accordance with generally acceptedaccounting principles.B.client is guilty of contributory negligence.C.the audit was conducted in accordance with generally acceptedauditingD.the financial statements are client’s responsibility.21.Which of the following circumstances would ordinarily not impairthe auditor’s independence?A.Litigation by client against auditor related to tax services.B.Litigation by client against auditor claiming a deficiency in theprevious audit.C.Litigation by CPA firm against client claiming management fraudor deceit.D.Intent to start a lawsuit at some future date, after the currentaudit is completed, claiming a deficiency in the previous audit.May 2004Page 3 of 26

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