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Auditing Theory

Auditing Theory

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Published by 'Jemuel Vales

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Categories:Types, Business/Law
Published by: 'Jemuel Vales on Feb 18, 2011
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NFJPIA-Region X and CARAGA Council
RFJPIA Cup Level 2 – Auditing TheoryELIMINATION ROUND
EASY ROUND
RFJPIA CUP LEVEL 2 – Auditing Theory (EASY QUESTION #1)
 The need for assurance services arises because:a.There is a consonance of interests of the preparer and the user of thefinancial statements.
b.There is a potential bias in providing information.
c.Economic transactions are less complex than they were a decade ago.d.Most users today have access to the system that generates thefinancial statements they use.e.None of the above.
RFJPIA CUP LEVEL 2 – Auditing Theory (EASY QUESTION #2)
Which of the following is explicitly included in the Auditor’s responsibilitysection of the auditor's report?
a.
Reason for modification of opinion.
b.
“Philippine Financial Reporting Standards”.
c.
“Philippines Standards on Auditing”.
d.
Division of responsibility with another auditor.e.Management representations.
RFJPIA CUP LEVEL 2 – Auditing Theory (EASY QUESTION #3)
 The measure of variability of a statistical sample that serves as an estimateof the population variability is the:
a.
Basic precision.
b.
Range.c.Measures of central tendency.
d.
Standard deviation.
e.Interval.
RFJPIA CUP LEVEL 2 – Auditing Theory (EASY QUESTION #4)
If a control total were to be computed on each of the following data items,which would best be identified as a hash total for a payroll CBIS application?a.Net pay
b.
Department numbers.
 c.Hours workedd.Total debits.e.Total credits.
RFJPIA CUP LEVEL 2 – Auditing Theory (EASY QUESTION #5)
When the auditor determines that detection risk regarding a financialstatement assertion for a material account balance or class of transactions cannotbe reduced to an acceptable level, the auditor should express:
 
a.Qualified or adverse opinion.
b.
Unqualified opinion with explanatory paragraph.
c.
Qualified or disclaimer of opinion.
d.Unqualified opinion.e.Adverse or disclaimer of opinion.
AVERAGE ROUND
RFJPIA CUP LEVEL 2 – Auditing Theory (AVERAGE QUESTION #1)
Which of the following is not explicitly referred to in the Code of Ethics assource of technical standards?
a.Commission on Audit.
b.Auditing and Assurance Standards Council.c.Securities and Exchange Commission.d.Relevant legislation.e.None of the above.
RFJPIA CUP LEVEL 2 – Auditing Theory (AVERAGE QUESTION #2)
 This occurs when a firm or a member of the assurance team, promotes ormay be perceived to promote an assurance client’s position or opinion to the pointthat objectivity may or may be perceived to be compromised. Such may be thecase if a firm or a member of the assurance team were to subordinate their judgment to that of the client.
Answer: Advocacy threat.RFJPIA CUP LEVEL 2 – Auditing Theory (AVERAGE QUESTION #3)
An auditor who discovers that client employees have committed an illegalact that has a material effect on the client's financial statements most likely wouldwithdraw from the engagement if:a.The illegal act is violation of generally accepted accounting principles.
b.The client does not take the remedial action that the auditorconsiders necessary.
c.The illegal act was committed during a prior year that was not audited.d.The auditor has already assessed control risk at the minimum level.e.The auditor cannot reduce the material effect of the illegal act to animmaterial one.
RFJPIA CUP LEVEL 2 – Auditing Theory (AVERAGE QUESTION #4)
A written representation from a client's management which, among othermatters, acknowledges responsibility for the fair presentation of financialstatements should normally be signed by the:
a.Chief executive officer and the chief financial officer.
b.
Chief financial officer and the chairman of the BOD.
c.
Chairman of the audit committee of the BOD.
d.
Chief executive officer, the chairman of the BOD and the client's lawyer.
e.
Chief executive officer, chief financial officer and the chairman of theBOD.
RFJPIA CUP LEVEL 2 – Auditing Theory (AVERAGE QUESTION #5)
 
CBIS controls are frequently classified as to general controls and applicationcontrols. Which of the following is an example of an application control?a.Programmers may access the computer only for testing and"debugging" programs.b.All program changes must be fully documented and approved by theinformation systems manager and the user department authorizing thechange.c.A separate data control group is responsible for distributing output, andalso compares input and output on a test basis.d.Use of passwords and identification codes.
e.In processing sales orders, the computer compares customerand product numbers with internally stored lists.
DIFFICULT ROUND
RFJPIA CUP LEVEL 2 – Auditing Theory (DIFFICULT QUESTION #1)
In studying a client's internal controls, an auditor must be able todistinguish between prevention controls and detection controls. Of the followingdata processing controls, which is the best detection control?
a.
Policy requiring password security.b.Backup and recovery procedure.
c.
Access controls.
d.
Use of data encryption techniques.
e.Review of machine utilization logs.RFJPIA CUP LEVEL 2 – Auditing Theory (DIFFICULT QUESTION #2)
When the auditor encounters sophisticated computer-based systems, he orshe may need to modify the audit approach. Of the following conditions, whichone is not a valid reason for modifying the audit approach?a.More advanced computer systems produce less documentation, thusreducing the visibility of the audit trail.b.In complex computer-based systems, computer verification of data atthe point of input replaces the manual verification found in lesssophisticated data processing systems.
c.
Integrated data processing has replaced the more traditional separationof duties that existed in manual and batch processing systems.
d.Real-time processing of transactions has enabled the auditor toconcentrate less on the completeness assertion.
e.None of the above. 
RFJPIA CUP LEVEL 2 – Auditing Theory (DIFFICULT QUESTION #3)
In an application of mean per unit sampling, the following information hasbeen obtained:Reported book value P600,000Point estimate (estimated total value) 591,000Allowance for sampling risk (precision) +- 22,000 Tolerable error +- 45,000

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