AUDITING THEORY CPA Review School of the Philippines Preweek !

i""er
#$ How %i% the fr&'ework of Philippines St&n%&r%s on A!%itin( concept!&ll) %escri*e &n
&ss!r&nce+
A$ It refers to the &!%itor,s s&tisf&ction &s to the reli&*ilit) of &n &ssertion *ein( '&%e *) one
p&rt) for !se *) &nother p&rt)$
-$ The level of &ss!r&nce which '&) *e provi%e% is %eter'ine% *) the reportin( o*.ective$
C$ An &ss!r&nce is e/presse% positivel) in the report$
D$ -ec&!se of the inherent li'it&tion in &n &!%it0 the &ss!r&nce is of li'ite% one$
1$ 2hich of the followin( &re &!thorit&tive so!rces for &!%itin( st&n%&r%s for 'e'*ers of the
Acco!nt&nc) profession in the Philippines+
I$ Prono!nce'ents on GAAS0 iss!e% *) ASPC$
II$ Prono!nce'ents on GAAS iss!e% *) PICPA which &re not s!perse%e% or &'en%e% *)
st&te'ents iss!e% *) ASPC$
III$ Prono!nce'ents iss!e% *) AICPA$
A$ I onl)$ C$ I &n% III onl)
-$ I &n% II onl)$ D$ I0 II &n% III
3$ In the &*sence of prono!nce'ents iss!e% *) ASPC &n% the PICPA0 p!*lishe% st&te'ents &n%
(!i%elines *) other &!thorit&tive *o%ies0 like AICPA0 IAPC &n% A4A &re the *&sis of
%eter'inin( (ener&ll) &ccepte% &!%itin( st&n%&r%s$ 2h&t effect %o these prono!nce'ents
provi%e in %eter'inin( the (ener&ll) &ccepte% &!%itin( st&n%&r%s+
A$ A!thorit&tive C$ Altern&tive
-$ Pers!&sive D$ P&r&llel
5$ Specific&ll)0 the -o&r% of Acco!nt&nc) is offici&ll) represente% in the ASPC *)
A$ Secret&r) of the -OA
-$ Ch&ir0 PRC
C$ Ch&ir0 -OA
D$ -OA 'e'*er who h&n%les A!%itin( Theor) s!*.ect
6$ A %r&ft of st&te'ent0 st!%ies or st&n%&r%s sho!l% *e %isc!sse% *) the Co!ncil en *&nc$ How
'&n) 'e'*ers &re re7!ire% to &pprove the %r&ft to consi%er it for e/pos!re+
A$ 8&.orit) C$ Ten
-$ Ei(ht D$ Twelve
9$ How '&n) 'e'*ers of ASPC &re nee%e% to &pprove the e/pose% %r&ft of Philippine
St&n%&r%s in A!%itin( &s Philippine St&n%&r%s on A!%itin(+
A$ 8&.orit) of the re(!l&r 'e'*ers C$ At le&st ei(ht$
-$ At le&st ten$ D$ At le&st twelve$
:$ 2hich of the followin( is & correct st&te'ent+
A$ ASPC sho!l% nor'&ll) e/pose & propose% interpret&tion of st&te'ents$
-$ ASPC sho!l% nor'&ll) e/pose its opinion on specific 7!eries fro' & pr&cticin( CPA$
C$ To '&ke the st&te'ents on Philippine St&n%&r%s on A!%itin( oper&tive0 the fin&l
st&te'ents sh&ll *e s!*'itte% to the -o&r% of Acco!nt&nc) for &pprov&l$
D$ 2hen it is %ee'e% necess&r) to e/pose for & co''ent on propose% interpret&tions of
st&te'ents0 the e/pos!re perio% is !n%erst&n%&*l) shorter th&n those of the re(!l&r %r&fts
of st&n%&r%s$
;$ 2hich of the followin( is not represente% *) the si(n&tories to the <oint 8e'or&n%!' of
S!pport to the cre&tion &n% oper&tion of the A!%itin( St&n%&r%s &n% Pr&ctices Co!ncil+
A$ -o&r% of Acco!nt&nc)
-$ Philippine Instit!te of Certifie% P!*lic Acco!nt&nts =PICPA>
C$ Associ&tion of Certifie% P!*lic Acco!nt&nts in P!*lic Pr&ctice =ACPAPP>
D$ Philippine Instit!te of Certifie% P!*lic Acco!nt&nts 4o!n%&tion0 INC$
?$ Ethic&ll)0 how '&n) )e&rs c&n & p&rtner who s!rvive% the %e&th or with%r&w&l of other
p&rtner=s> &n contin!e to pr&ctice !n%er the p&rtnership n&'e tho!(h he *eco'es & sole
pr&ctitioner+
A$ # )e&r C$ 1 )e&rs
-$ 3 )e&rs D$ No prescri*e% r!le
#@$ This e/ists *ec&!se *!siness people0 investors &n% the (ener&l p!*lic perceive the %!ties &n%
responsi*ilities of &!%itors %ifferentl) fro' the w&) in which &!%itors the'selves perceive
those %!ties &n% responsi*ilities$
A$ Ass!r&nce C$ E/pect&tion (&p
-$ A!%it st&n%&r%s D$ Ethics
##$ 2hich of the followin( p!*lic perceptions le&st likel) '&nifests &n e/pect&tion (&p+
A$ The (ener&l p!*lic e/pects th&t the &!%itors &re in%epen%ent of the fin&nci&l st&te'ents
th&t the) &!%it$
-$ The (ener&l p!*lic *elieves th&t &n !n7!&lifie% &!%it opinion (!&r&ntees the &cc!r&c) of
fin&nci&l st&te'ents$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
C$ The (ener&l p!*lic *elieves th&t %etection of fr&!% is the pri'&r) o*.ective of fin&nci&l
&!%it$
D$ The (ener&l p!*lic *elieves th&t &n !n7!&lifie% opinion is &n &ss!r&nce &s to the vi&*ilit)
of &n entit),s f!t!re oper&tions$
#1$ Conflict *etween fin&nci&l st&te'ent !sers &n% &!%itors often &rises *ec&!se of the
A$ hi(h cost of perfor'in( &n &!%it$
-$ e/tre'el) technic&l voc&*!l&r) which the &!%itor !ses in the report$
C$ pl&ce'ent of the &!%itor,s report in the *&ck of the client,s &nn!&l report where it is h&r% to
loc&te$
D$ e/pect&tion (&p$
#3$ The s!*se7!ent %iscover) of '&teri&l 'isst&te'ents of the fin&nci&l st&te'ents res!ltin( fro'
fr&!% or error e/istin( %!rin( the perio% covere% *) the &!%itor,s report
A$ In%ic&tes th&t the &!%itor h&s f&ile% to the *&sic principles &n% essenti&l proce%!res of &n
&!%it$
-$ Alw&)s res!lts to liti(&tion %!e to the &!%itor,s ne(li(ence$
C$ Does not0 in itself0 in%ic&te th&t the &!%itor h&s f&ile% to &%here to the *&sic principles &n%
essenti&l proce%!res of &n &!%it$
D$ Does not '&ke the &!%itor li&*le *ec&!se he .!st provi%es & re&son&*le &n% not &n
&*sol!te &ss!r&nce$
#5$ 8ost &cco!ntin( &n% &!%itin( profession&ls &(ree th&t when &n &!%it h&s f&ile% to !ncover
'&teri&l 'isst&te'ents0 &n% the wron( t)pe of &!%it opinion is iss!e%0 the &!%it fir'
A$ h&s f&ile% to follow (ener&ll) &ccepte% &!%itin( st&n%&r%s =GAAS>$
-$ %eserves to lose the l&ws!it$
C$ sho!l% *e &ske% to %efen% the 7!&lit) of the &!%it$
D$ sho!l% not *e hel% responsi*le for the fin&nci&l loss s!ffere% loss s!ffere% *) others$
#6$ The !n%erst&n%in( *etween the client &n% the &!%itor &s to the %e(ree of responsi*ilit) to *e
&ss!'e% *) e&ch is nor'&ll) set forth in &=n>
A$ Represent&tion letter C$ En(&(e'ent letter$
-$ 8&n&(e'ent letter D$ Aetter of report&*le con%itions$
#9$ In & fin&nci&l st&te'ent &!%it0 &!%it risk represents the pro*&*ilit) th&t
A$ Intern&l control f&ils &n% the f&il!re is not %etecte% *) the &!%itor,s proce%!res$
-$ The &!%itor !nknowin(l) f&ils to 'o%if) &n opinion on '&teri&ll) 'isst&te% fin&nci&l
st&te'ents$
C$ Inherent &n% control risk c&!se errors th&t co!l% *e '&teri&l to the fin&nci&l st&te'ents$
D$ The &!%itor is not ret&ine% to con%!ct & fin&nci&l st&te'ent &!%it in the s!ccee%in( )e&r$
#:$ The &!%itor,s .!%('ent concernin( the over&ll f&irness of the present&tion of fin&nci&l
positions0 res!lts of oper&tions0 &n% c&sh flows is &pplie% within the fr&'ework of
A$ !&lit) control$
-$ Gener&ll) &ccepte% &!%itin( st&n%&r%s th&t incl!%e the concept of '&teri&lit)$
C$ The &!%itor,s ev&l!&tion of the &!%ite% co'p&n),s intern&l controls$
D$ Gener&ll) &ccepte% &cco!ntin( principles$
#;$ In B&!%itin(C &cco!ntin( %&t&0 the concern is with
A$ %eter'inin( whether recor%e% infor'&tion properl) reflects the econo'ic events th&t
occ!rre% %!rin( the &cco!ntin( perio%$
-$ %eter'inin( if fr&!% h&s occ!rre%$
C$ %eter'inin( if t&/&*le inco'e h&s *een c&lc!l&te% correctl)$
D$ &n&l)"in( the fin&nci&l infor'&tion to *e s!re th&t it co'plies with (overn'ent
re7!ire'ents$
#?$ The responsi*ilit) for &%optin( so!n% &cco!ntin( policies0 '&int&inin( &n &%e7!&te intern&l
control str!ct!re0 &n% '&kin( f&ir represent&tions in the fin&nci&l st&te'ents rests
A$ with '&n&(e'ent$ C$ e7!&ll) with '&n&(e'ent &n% the &!%itor$$
-$ with the in%epen%ent &!%itor$ D$ with the intern&l &!%it %ep&rt'ent$
1@$ The &!%itor,s *est %efense when '&teri&l 'isst&te'ents in the fin&nci&l st&te'ents &re not
!ncovere% in the &!%it is th&t
A$ the &!%it w&s con%!cte% in &ccor%&nce with (ener&ll) &ccepte% &cco!ntin( principles$
-$ client is (!ilt) of contri*!tor) ne(li(ence$
C$ the &!%it w&s con%!cte% in &ccor%&nce with (ener&ll) &ccepte% &!%itin(
D$ the fin&nci&l st&te'ents &re client,s responsi*ilit)$
1#$ 2hich of the followin( circ!'st&nces wo!l% or%in&ril) not i'p&ir the &!%itor,s in%epen%ence+
A$ Aiti(&tion *) client &(&inst &!%itor rel&te% to t&/ services$
-$ Aiti(&tion *) client &(&inst &!%itor cl&i'in( & %eficienc) in the previo!s &!%it$
C$ Aiti(&tion *) CPA fir' &(&inst client cl&i'in( '&n&(e'ent fr&!% or %eceit$
D$ Intent to st&rt & l&ws!it &t so'e f!t!re %&te0 &fter the c!rrent &!%it is co'plete%0 cl&i'in( &
%eficienc) in the previo!s &!%it$
8&) 1@@5 P&(e 1 of #;
AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
11$ The 'e'*ers of & client,s B&!%it co''itteeC '!st &ll *e
A$ 'e'*ers of '&n&(e'ent$
-$ %irectors who &re not & p&rt of co'p&n) '&n&(e'ent$
C$ nonD%irectors &n% nonD'&n&(ers$
D$ %irectors &n% '&n&(ers$
13$ 2hen & CPA fir' is re7!este% to provi%e & written or or&l opinion on the &pplic&tion of
&cco!ntin( principles or the t)pe of &!%it opinion th&t wo!l% *e iss!e% for & specific or
h)pothetic&l tr&ns&ction rel&tin( to &n &!%it client of &nother CPA fir'0 pri'&ril) &'on( the
re7!ire'ents set forth is th&t
A$ client is entitle% to confi%enti&lit)0 so the cons!ltin( CPA fir' is for*i%%en fro'
co''!nic&tin( with the CPA fir' which %oes the &!%it$
-$ the cons!lte% CPA fir' sho!l% co''!nic&te with the entit),s e/istin( &!%itors to &scert&in
&ll the &v&il&*le f&cts relev&nt to for'in( & profession&l .!%('ent on the '&tters th&t the
fir' h&s *een re7!este% to report on$
C$ client is entitle% to confi%enti&lit)0 so the CPA fir' which %oes the &!%it sho!l% ref!se to
sh&re &n) infor'&tion with the cons!ltin( CPA fir' !n%er &n) circ!'st&nces$
D$ client is not entitle% to confi%enti&lit) !n%er these circ!'st&nces0 so the e/istin( &!%itors
sho!l% sh&re &ll infor'&tion with the cons!ltin( CPA fir'$
15$ BA*sence of re&son&*le c&re th&t c&n *e e/pecte% of & person in & set of circ!'st&ncesC is the
%efinition of
A$ or%in&r) ne(li(ence$ C$ constr!ctive fr&!%$
-$ (ross ne(li(ence$ D$ fr&!%$
16$ 2hen CPA,s &re &*le to '&int&in &n in%epen%ent &ttit!%e in f!lfillin( their responsi*ilit)0 it is
referre% to &s in%epen%ence
A$ in f&ct C$ in con%!ct
-$ in &ppe&r&nce D$ in tot&l
19$ In r&re c&ses &!%itor,s h&ve *een hel% li&*le for cri'in&l &cts$ A cri'in&l conviction &(&inst &n
&!%itor c&n res!lt onl) when it is %e'onstr&te% th&t the &!%itor
A$ w&s ne(li(ent$
-$ w&s (rossl) ne(li(ent$
C$ inten%e% to %eceive or h&r' others$
D$ c&!se% fin&nci&l loss to &n innocent thir% p&rt)$
1:$ The &!%itor,s responsi*ilit) for f&il!re to %etect fr&!% &rises
A$ when s!ch f&il!re cle&rl) res!lts fro' f&il!re to co'pl) with (ener&ll) &ccepte% &!%itin(
st&n%&r%s$
-$ whenever the &'o!nts involve% &re '&teri&l$
C$ onl) when the e/&'in&tion w&s specific&ll) %esi(ne% to %etect fr&!%$
D$ onl) when s!ch f&il!re cle&rl) res!lts fro' ne(li(ence so (ross &s to s!st&in &n inference
of fr&!% on the p&rt of the &!%itor$
1;$ There is &(ree'ent within the &!%itin( profession &n% the co!rts th&t the &!%itor
A$ is not & (!&r&ntor or ins!rer of fin&nci&l st&te'ents$
-$ is & (!&r&ntor *!t not &n ins!rer of the st&te'ents$
C$ is &n ins!rer *!t not & (!&r&ntor of the st&te'ents$
D$ is *oth & (!&r&ntor &n% &n ins!rer of the fin&nci&l st&te'ents$
1?$ The &!%itor is not li&*le to his client for
A$ ne(li(ence$ C$ %ishonest)
-$ *&% f&ith$ D$ errors of .!%('ent
3@$ An in%ivi%!&l who is not p&rt) to the contr&ct *etween CPA &n% client0 *!t who is known *)
*oth &n% is inten%e% to receive cert&in *enefits fro' the contr&ct0 is &
A$ co''on l&w inheritor$ C$ thir% p&rt) *enefici&r)$
-$ thir% p&rt)$ D$ tort$
3#$ The pr!%ent person concept est&*lishes in l&w th&t
A$ the CPA fir' is not e/pecte% to *e inf&lli*le$
-$ &n &!%it in &ccor%&nce GAAS
C$ the co!rts %o not re7!ire th&t the &!%itor *eco'e the ins!rer or (!&r&ntor of the &cc!r&c)
of the st&te'ents$
D$ &ll three of the &*ove &re tr!e$
31$ The le&%in( prece%entDsettin( &!%itin( c&se in the thir% p&rt) li&*ilit) is
A$ Escott et &l$ v$ -&r Chris Constr!ction Corp$
-$ Hochfel%er v$ Ernst E Ernst$
C$ Ultr&'&res Corpor&tion v$ To!che$
D$ Unite% St&tes v$ Si'on$
8&) 1@@5 P&(e 3 of #;
AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
33$ The le&%in( c&se of cri'in&l &ction &(&inst CPAs is the
A$ ##39 Ten&nts c&se$
-$ Unite% St&tes v$ Si'on c&se0 &k& Continent&l Fen%in(
C$ Escott et &l$ v$ -&r Chris c&se0 &k& -&r Chris
D$ Ultr&'&res Corpor&tion v$ To!che c&se$
35$ A CPA is s!*.ect to cri'in&l li&*ilit) if the CPA
A$ ref!ses to t!rn over the workin( p&pers to the client$
-$ perfor's &n &!%it in & ne(li(ent '&nner$
C$ willf!ll) o'its & '&teri&l f&ct re7!ire% to *e st&te% in & fin&nci&l st&te'ent$
D$ willf!ll) *re&ches the contr&ct with the client$
36$ 4r&!%!lent fin&nci&l reportin( is often c&lle%G
A$ '&n&(e'ent fr&!% C$ %ef&lc&tion
-$ theft of &ssets D$ e'plo)ee fr&!%
39$ 8&n&(e'ent &ssertions &re
A$ %irectl) rel&te% to (ener&ll) &ccepte% &!%itin( st&n%&r%s$
-$ %irectl) rel&te% to (ener&ll) &ccepte% &cco!ntin( principles$
C$ in%irectl) rel&te% to (ener&ll) &ccepte% &!%itin( st&n%&r%s$
D$ in%irectl) rel&te% to (ener&ll) &ccepte% &cco!ntin( principles$
3:$ A CPA is s!*.ect to cri'in&l li&*ilit) if the CPA
A$ ref!ses to t!rn over the workin( p&pers to the client$
-$ perfor's &n &!%it in & ne(li(ent '&nner$
C$ willf!ll) o'its & '&teri&l f&ct re7!ire% to *e st&te% in & fin&nci&l st&te'ent$
D$ willf!ll) *re&ches the contr&ct with the client$
3;$ 4r&!%!lent fin&nci&l reportin( is often c&lle%G
A$ '&n&(e'ent fr&!% C$ %ef&lc&tion
-$ theft of &ssets D$ e'plo)ee fr&!%
3?$ 8&n&(e'ent &ssertions &re
A$ %irectl) rel&te% to (ener&ll) &ccepte% &!%itin( st&n%&r%s$
-$ %irectl) rel&te% to (ener&ll) &ccepte% &cco!ntin( principles$
C$ in%irectl) rel&te% to (ener&ll) &ccepte% &!%itin( st&n%&r%s$
D$ in%irectl) rel&te% to (ener&ll) &ccepte% &cco!ntin( principles$
5@$ The followin( &re so'e of the 7!&lit) control policies th&t CPAs sho!l% h&veG
#$ Skills &n% co'petence 5$ Accept&nce &n% retention of clients
1$ Dele(&tion 6$ Direction
3$ Cons!lt&tion 9$ Review
2hich of the fore(oin( &re cl&ssifie% &s control policies &t the level of the fir'+
A$ #0 30 60 9 C$ #0 10 60 9
-$ #0 10 30 5 D$ 30 50 9
5#$ 2hich of the followin( le&st s&tisfies skills &n% co'petence &s &n o*.ective of 7!&lit) control
policies+
A$ A%v&nce'ent C$ Hirin(
-$ Profession&l %evelop'ent D$ Cons!lt&tion
51$ The followin( &re 7!&lit) control proce%!res th&t &re o*serve% *) & fir'G
I$ I%entifies on & ti'el) *&sis the st&ffin( re7!ire'ents of specific &!%its
II$ Perio%ic&ll) co!nsels personnel &s to their pro(ress &n% c&reer opport!nities
III$ Prep&res ti'e *!%(et for &!%it to %eter'ine '&npower re7!ire'ents &n% to sche%!le
&!%it work$
IF$ Ev&l!&tes p&rtners perio%ic&ll) *) 'e&ns of senior p&rtner or fellow p&rtner ev&l!&tion
&n% co!nselin( &s to whether the) contin!e to h&ve the 7!&lific&tions to f!lfill their
responsi*ilities$
2hich of the fore(oin( proce%!res is =&re> necess&r) to &chieve the o*.ectives of &ssi(n'ent
of personnel+
A$ I C$ I0 III
-$ II0 IF D$ I0 II0 III0 IF
53$ The o*.ectives of the 7!&lit) control policies to *e &%opte% *) &n &!%it fir' will or%in&ril)
incl!%e the followin(+
A$ Profession&l re7!ire'ents0 skills &n% co'petence0 &ssi(n'ent0 inspection0 %!e
profession&l c&re0 cons!lt&tion
-$ Profession&l re7!ire'ents0 skills &n% co'petence0 Assi(n'ent0 cons!lt&tion0 inspection0
'onitorin(
C$ Profession&l re7!ire'ents0 skills &n% co'petence0 &ssi(n'ent0 %ele(&tion0 'onitorin(0
cons!lt&tion
D$ Skills &n% co'petence0 %!e profession&l c&re0 cons!lt&tion0 &ssi(n'ent0 'onitorin(0
%ele(&tion
8&) 1@@5 P&(e 5 of #;
AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
55$ 2hich of the followin( is the le&st f&ctor to consi%er for & fir' to h&ve 7!&lit) control+
A$ The for' of or(&ni"&tion$ C$ Geo(r&phic&l %ispersion of the fir'$
-$ Si"e &n% n&t!re of the fir',s pr&ctice$ D$ Appropri&te costH*enefit consi%er&tions$
56$ 2hich of the followin( constit!tes B%irectin( &n &!%it &ssist&ntC
A$ I%entif)in( in &%v&nce the &!%it personnel re7!ire'ents of & p&rtic!l&r &!%it en(&(e'ent$
-$ Infor'in( &ssist&nts of their responsi*ilities &n% the o*.ectives of the proce%!res the) &re
to perfor'$
C$ Resolvin( &n) %ifferences in profession&l .!%('ent *etween &!%it personnel$
D$ Provi%in( &!%it st&ff the necess&r) onDtheD.o* tr&inin($
59$ The work of e&ch &ssist&nt nee%s to *e reviewe% *) personnel of &t le&st e7!&l co'petence$
2hich of the followin( is not one of the o*.ectives of this re7!ire'ent+
A$ The work perfor'e% &n% the res!lts o*t&ine% h&ve *een &%e7!&tel) %oc!'ente%$
-$ The o*.ectives of the &!%it proce%!res h&ve *een &chieve%$
C$ All &v&il&*le evi%ences h&ve *een o*t&ine%0 ev&l!&te &n% %oc!'ente%$
D$ The concl!sion e/presse% &re consistent with the res!lt of the work perfor'e% &n%
s!pport the opinion$
5:$ It involves infor'in( &ssist&nts of their responsi*ilities &n% the o*.ectives of the proce%!res
the) h&ve to perfor'G
A$ S!pervision$ C$ Dele(&tion$
-$ Direction D$ Review
5;$ A pr&ctice of provi%in( s!fficient %irection0 s!pervision &n% review of the work &t &ll levels to
provi%e re&son&*le &ss!r&nce th&t the work perfor'e% 'eets &ppropri&te st&n%&r%s of 7!&lit)
is & control polic) of
A$ Assi(n'ent$ C$ 8onitorin(
-$ Dele(&tion D$ Cons!lt&tion
5?$ !&lit) control policies &n% proce%!res sho!l% *e i'ple'ente% &t *oth the level of the &!%it
fir' &n% on in%ivi%!&l &!%its$ Cl&ssif) the followin( control policies &s to &!%it fir' level or
in%ivi%!&l &!%itG
I$ Cons!lt&tion II$ Assi(n'ent III$ Direction
2hich of these control policies &re in%ivi%!&l &!%it level+
A$ I onl)$ C$ III onl)$
-$ I &n% II D$ All of these
6@$ 2hich one of the followin( polic) st&te'ents rel&tes to %ele(&tion+
A$ Personnel in the fir' &re to &%here to principles of in%epen%ence0 inte(rit)0 o*.ectivit)0
confi%enti&lit)0 &n% profession&l *eh&vior$
-$ There is to *e & s!fficient %irection0 s!pervision0 &n% review of work &t &ll levels to provi%e
re&son&*le &ss!r&nce th&t the work perfor'e% 'eets &ppropri&te st&n%&r%s of 7!&lit)$
C$ A!%it work is to *e &ssi(ne% to personnel who h&ve the %e(ree of technic&l tr&inin( &n%
proficienc) re7!ire% in the circ!'st&nces$
D$ 2henever necess&r)0 cons!lt&tion within or o!tsi%e the fir' is to occ!r with those who
h&ve &ppropri&te e/pertise$
6#$ 2h&t is the responsi*ilit) of & s!ccessor &!%itor to co''!nic&te with the pre%ecessor &!%itor
in connection with & prospective new client+
A$ The s!ccessor &!%itor h&s no responsi*ilit) to cont&ct the pre%ecessor &!%itor$
-$ The s!ccessor &!%itor sho!l% o*t&in per'ission fro' the prospective client to cont&ct the
pre%ecessor &!%itor$
C$ The s!ccessor &!%itor sho!l% cont&ct the pre%ecessor &!%itor if the client &!thori"es
cont&ct$
D$ The s!ccessor &!%itor nee% not cont&ct the pre%ecessor if the s!ccessor is &w&re of &ll
&v&il&*le relev&nt f&cts$
61$ In p!rs!in( its 7!&lit) control o*.ectives with respect to &ccept&nce of & client0 & CPA fir' is
not likel) to
A$ 8&ke in7!iries of the propose% client,s le(&l co!nsel$
-$ Review fin&nci&l st&te'ents of the propose% client$
C$ 8&ke in7!iries of previo!s &!%itors$
D$ Review the personnel pr&ctices of the propose% client$
63$ An) %evi&tion fro' the in%epen%ence r!le is consi%ere%
A$ i''&teri&l$ C$ '&teri&l$
-$ sli(htl) '&teri&l D$ hi(hl) '&teri&l
65$ Intern&l control proce%!res &re not %esi(ne% to provi%e re&son&*le &ss!r&nce th&t
A$ Tr&ns&ctions &re e/ec!te% in &ccor%&nce with '&n&(e'ent,s &!thori"&tion$
-$ Irre(!l&rities will *e eli'in&te%$
C$ Access to &ssets is per'itte% onl) in &ccor%&nce with '&n&(e'ent,s &!thori"&tion$
D$ The recor%e% &cco!nt&*ilit) for &ssets is co'p&re% with the e/istin( &ssets &t re&son&*le
interv&ls$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
66$ After consi%er&tion of & client,s intern&l control0 &n &!%itor 'i(ht %eci%e to
A$ Incre&se the e/tent of s!*st&ntive testin( in &re&s where the control str!ct!re is stron($
-$ Re%!ce the e/tent of tests of controls in &re&s where the controls &re stron($
C$ Re%!ce the e/tent of *oth s!*st&ntive tests &n% tests of controls in &re&s where the
controls &re stron($
D$ Incre&se the e/tent of s!*st&ntive testin( in &re&s where the controls &re we&k$
69$ In &n &!%itor,s consi%er&tion of intern&l control0 the co'pletion of & 7!estionn&ire is 'ost
closel) &ssoci&te% with which of the followin(+
A$ Sep&r&tion of %!ties C$ Un%erst&n%in( the s)ste'$
-$ 4lowch&rt &cc!r&c) D$ Tests of controls$
6:$ Tests of controls '&) incl!%e the followin(0 e/ceptG
A$ Reperfor'&nce of intern&l control proce%!res
-$ In7!iries &*o!t0 &n% o*serv&tion of0 intern&l control which le&ve no &!%it tr&il$
C$ An&l)tic&l proce%!res involvin( co'p&rison of oper&tin( e/penses with *!%(ete% &'o!nt$
D$ Inspection of %oc!'ent&r) s!pport for tr&ns&ctions evi%encin( &!thori"&tion
6;$ In consi%erin( intern&l control within the reven!eHreceipt c)cle0 wh&t is the p!rpose of &
tr&ns&ction w&lkDthro!(h+
A$ To &ss!re th&t e'plo)ees &re perfor'in( &ssi(ne% f!nctions &cc!r&tel)$
-$ To confir' the &!%itor,s !n%erst&n%in( of the intern&l control str!ct!re$
C$ To select %oc!'ents for %et&ile% tests of controls$
D$ To verif) the res!lts of the &!%itor,s s&'plin( pl&n$
6?$ 4ollowin( &re fo!r steps &n &!%itor !n%ert&kes in &ssessin( control riskG
A$ Deter'ine wh&t control proce%!res &re !se% *) the entit)$
-$ I%entif) the s)ste',s control o*.ectives$
C$ Desi(n tests of controls$
D$ Consi%er the potenti&l errors or irre(!l&rities th&t co!l% res!lt$
In wh&t or%er wo!l% &n &!%itor perfor' these steps+
A$ D-AC C$ -DAC
-$ -CDA D$ DCA-
9@$ The p!rpose of tests of controls over shippin( is to
A$ Deter'ine whether *ille% (oo%s h&ve *een shippe%$
-$ Deter'ine whether ship'ents &re *ille%$
C$ Deter'ine whether shippin( %ep&rt'ent personnel &re co'petent$
D$ Deter'ine whether cre%it is &pprove% *efore (oo%s &re shippe%$
9#$ The p!rpose of tests of controls over *illin( is to
A$ Deter'ine whether *ille% (oo%s h&ve *een shippe%$
-$ Deter'ine whether ship'ents &re *ille%$
C$ Deter'ine whether shippin( %ep&rt'ent personnel &re co'petent$
D$ Deter'ine whether cre%it is &pprove% *efore (oo%s &re shippe%$
91$ After finishin( the review ph&se of the st!%) &n% ev&l!&tion of intern&l control in &n &!%it
en(&(e'ent0 the &!%itor sho!l% perfor' tests of controls on
A$ those controls th&t the &!%itor pl&ns to rel) !pon$
-$ those controls in which '&teri&l we&knesses were i%entifie%$
C$ those controls th&t h&ve & '&teri&l effect !pon the fin&nci&l st&te'ent *&l&nces$
D$ & r&n%o' s&'ple of the controls th&t were reviewe%$
93$ The pri'&r) e'ph&sis *) &!%itors is on controls over
A$ cl&sses of tr&ns&ctions$
-$ &cco!nt *&l&nces$
C$ *oth & &n% *0 *ec&!se the) &re e7!&ll) wei(hte%$
D$ *oth & &n% *0 *ec&!se the) v&r) fro' client to client$
95$ The three ke) concepts th&t !n%erlie the st!%) of &n intern&l control str!ct!re &n% the
&ssess'ent of control risk wo!l% not incl!%e & criteri& th&t
A$ the control risk '&) r&n(e fro' "ero to #@@I$
-$ '&n&(e'ent0 not the &!%itor0 '!st est&*lish &n% '&int&in the entit),s controls$
C$ the intern&l control str!ct!re provi%es re&son&*le0 *!t not &*sol!te &ss!r&nce th&t the
fin&nci&l st&te'ents &re f&irl) st&te%$
D$ the intern&l control str!ct!re c&n never *e re(&r%e% &s co'pletel) effective$
96$ 2hen the &!%itor &tte'pts to %eter'ine the oper&tion of the &cco!ntin( s)ste' *) tr&cin( one
or few tr&ns&ctions thro!(h the &cco!ntin( s)ste'0 this is referre% to &s
A$ tr&cin($ C$ tests of controls$
-$ vo!chin($ D$ & w&lkDthro!(h$
99$ The proce%!res to test effectiveness of control policies &n% proce%!res in s!pport of & re%!ce%
&ssesse% control risk &re c&lle%
A$ tests of tr&ns&ctions$ C$ &n&l)tic&l tests$
-$ tests of controls$ D$ & w&lkDthro!(h$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
9:$ Un%erst&n%in( co'ponents of intern&l control &n% &ssessin( the level of control risk &re
pri'&ril) !se% *) the &!%itor to
A$ %eter'ine whether proce%!res &n% recor%s concernin( the s&fe(!&r%in( of &ssets &re
reli&*le$
-$ &scert&in whether the opport!nities to &llow &n) person to *oth perspective &n% conce&l
irre(!l&rities &re 'ini'i"e%$
C$ 'o%if) the initi&l &ssess'ents of inherent risk &n% preli'in&r) .!%('ents &*o!t '&teri&lit)
levels$
D$ %eter'ine the n&t!re0 ti'in(0 &n% e/tent of s!*st&ntive tests for fin&nci&l st&te'ent
&ssertions$
9;$ Tests of controls &re %irecte% tow&r% the control,s
A$ efficienc) C$ efficienc) &n% effectiveness
-$ effectiveness D$ cost *enefit r&tio
9?$ The fin&l step in the ev&l!&tion of the &!%it res!lts is the %ecision to
A$ &ccept the pop!l&tion &s f&irl) st&te% or to re7!ire f!rther &ction$
-$ %eter'ine s&'plin( error &n% c&lc!l&te the esti'&te% tot&l pop!l&tion error$
C$ pro.ect the point esti'&te$
D$ %eter'ine the error in e&ch s&'ple$
:@$ The pri'&r) f&ctor fro' the &!%it risk 'o%el which &ffects the &!%itor,s %ecision &*o!t
&ccept&*le risk of incorrect &ccept&nce is
A$ control risk C$ %etection risk
-$ &!%it risk D$ inherent risk
:#$ In co'p&rison of %etectin( '&teri&l fr&!% &n% '&teri&l error0 which of the followin( is le&st
likel) & re&son wh) the &!%itor '&) %iscover '&teri&l error *!t less of fr&!%,s+
A$ Coll!sion *etween or &'on( e'plo)ees$
-$ Intention&l 'isrepresent&tions *) the client personnel$
C$ S&'plin( of tr&ns&ctions$
D$ 4or(er)$
:1$ Or%in&ril)0 the likelihoo% of %etectin( errors is hi(her th&n th&t of %etectin( fr&!% *ec&!se
A$ The &!%itor is responsi*le to %etect errors *!t not fr&!%$
-$ The effect of fr&!%!lent &ct is likel) o'itte% in the &cco!ntin( recor%s$
C$ 4r&!% is or%in&ril) &cco'p&nie% *) &cts specific&ll) %esi(ne% to conce&l its e/istence$
D$ 4r&!% is &lw&)s & res!lt of conniv&nce *etween or &'on( e'plo)ees$
:3$ 2hich of the followin( le&st likel) &ffect the .!%('ent of the &!%itor in %eter'inin( the e/tent of
'o%ifie% or &%%ition&l proce%!res when he *elieves th&t fr&!% or error possi*l) e/ists+
A$ The t)pes of fr&!% &n% error in%ic&te%$
-$ The re&son wh) fr&!% or error h&s *een co''itte%$
C$ The likelihoo% th&t & p&rtic!l&r t)pe of fr&!% or error co!l% h&ve & '&teri&l effect on the
fin&nci&l st&te'ents$
D$ The likelihoo% of their occ!rrence$
:5$ 2hen the &!%itor %iscovers fr&!% or error0 the effect of which is '&teri&l to the fin&nci&l
st&te'ents0 he sho!l% 'ost likel) consi%er the followin(0 e/cept
A$ The i'plic&tions of fr&!% &n% si(nific&nt error in rel&tion to the reli&*ilit) of '&n&(e'ent
represent&tions$
-$ The &!%itor sho!l% &ss!'e th&t the inst&nce of fr&!% or error is &n isol&te% occ!rrence$
C$ The &!%itor '&) necess&ril) &%.!st the n&t!re0 ti'in( &n% e/tent of s!*st&ntive
proce%!res$
D$ The &!%itor '&) reconsi%er risk &ssess'ent$
:6$ 2hich of the followin( is the 'ost co'pellin( re&son for the &!%itor to resi(n fro' &n &!%it
en(&(e'ent when he %iscovers '&teri&l irre(!l&rit)+
A$ The top '&n&(e'ent is the perpetr&tor of fr&!%$
-$ The irre(!l&rit) is co''itte% thro!(h conniv&nce of r&nk &n% file e'plo)ees$
C$ The e/tent of effect of fr&!% on the fin&nci&l st&te'ents c&nnot i''e%i&tel) *e esti'&te%$
D$ The '&n&(e'ent t&kes re'e%i&l &ction re(&r%in( fr&!%$
:9$ 2hich of the followin( st&te'ents is tr!e+
A$ It is !s!&ll) e&sier for the &!%itor to !ncover irre(!l&rities th&n errors$
-$ It is !s!&ll) e&sier for the &!%itor to !ncover errors th&n irre(!l&rities$
C$ It is !s!&ll) e7!&ll) %iffic!lt for the &!%itor to !ncover errors or irre(!l&rities$
::$ Sho!l% the &!%itor !ncover circ!'st&nces %!rin( the &!%it th&t '&) c&!se s!spicions of
'&n&(e'ent fr&!%0 the &!%itor '!st
A$ iss!e &n &%verse opinion$
-$ iss!e & %iscl&i'er$
C$ ev&l!&te their i'plic&tions &n% consi%er the nee% to 'o%if) &!%it evi%ence$
D$ with%r&w fro' en(&(e'ent$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
:;$ An &!%itor sho!l% reco(ni"e th&t the &pplic&tion of &!%itin( proce%!res '&) pro%!ce evi%enti&l
'&tter in%ic&tin( the possi*ilit) of errors or irre(!l&rities &n% therefore sho!l% & %esi(n &!%it
tests to %etect !nrecor%e% tr&ns&ctions$
A$ %esi(n &!%it tests to %etect !nrecor%e% tr&ns&ctions$
-$ e/ten% the work to &!%it 'ost recor%e% tr&ns&ctions &n% recor%s of &n entit)$
C$ pl&n &n% perfor' the en(&(e'ent with &n &ttit!%e of profession&l skepticis'$
D$ not %epen% on intern&l &cco!ntin( control fe&t!res th&t &re %esi(ne% to prevent or %etect
errors or irre(!l&rities$
:?$ 2h&t is e/pecte% of &!%itor in %eter'inin( nonco'pli&nce *) &n entit) to e/istin( l&ws &n%
re(!l&tions+
A$ 2hether &n &ct constit!tes nonco'pli&nce is & le(&l %eter'in&tion th&t is or%in&ril) within
the &!%itor,s profession&l co'petence$
-$ The &!%itor,s tr&inin(0 e/perience &n% !n%erst&n%in( of the entit) &n% its in%!str) c&nnot
provi%e & *&sis for reco(nition th&t so'e &cts co'in( to the &!%itor,s &ttention '&)
constit!te nonco'pli&nce with l&ws &n% re(!l&tions$
C$ The %eter'in&tion &s to whether & p&rtic!l&r &ct constit!tes or is likel) to constit!te
nonco'pli&nce is (ener&ll) *&se% on the !n%erst&n%in( of the &!%itor *!t !lti'&tel) c&n
onl) *e %eter'ine% *) &n e/pert who is 7!&lifie% to pr&ctice l&w$
D$ In or%er to pl&n the &!%it0 the &!%itor sho!l% o*t&in & (ener&l !n%erst&n%in( of the le(&l
&n% re(!l&tor) fr&'ework &pplic&*le to the entit) &n% the in%!str) &n% how the entit) is
co'pl)in( with the fr&'ework$
;@$ A t)pe of fr&!% in which &n e'plo)ee t&kes &ssets fro' &n or(&ni"&tion for person&l (&inG
A$ 4r&!%!lent fin&nci&l reportin( C$ Def&lc&tion$
-$ 2in%ow %ressin( D$ Secret reserve$
;#$ 2hen the &!%itor *eco'es &w&re of infor'&tion concernin( & possi*le nonco'pli&nce to l&ws
or re(!l&tions0 the &!%itor sho!l% &ppropri&tel)G
A$ O*t&in &n !n%erst&n%in( of the n&t!re of the &ct &n% the circ!'st&nces in which it h&s
occ!rre%0 &n% ev&l!&te the possi*le effect on the fin&nci&l st&te'ents$
-$ Disc!ss his s!spicion with the '&n&(e'ent$
C$ Ask '&n&(e'ent to %eter'ine whether & viol&tion is re&%il) co''itte%$
D$ Cons!lt with the entit),s le(&l co!nsel &s to wh&t &ppropri&te &ction the &!%itor sho!l% %o$
;1$ If the &!%itor s!spects th&t 'e'*ers of senior '&n&(e'ent0 incl!%in( 'e'*ers of the *o&r%
of %irectors0 &re involve% in nonco'pli&nce to l&ws &s re(!l&tions0 &n% he *elieves his report
'&) not *e &cte% !pon0 he wo!l%$
A$ Do nothin($
-$ Iss!e & %iscl&i'er of opinion$
C$ Consi%er seekin( le(&l &%vice$
D$ 8&ke speci&l investi(&tion in or%er to f!ll) %eter'ine the e/tent of client,s nonco'pli&nce$
;3$ The &!%itor is e/&'inin( copies of s&les invoices onl) for the initi&ls of the person responsi*le
for checkin( the e/tensions$ This is &n e/&'ple of &
A$ Test of controls C$ S!*st&ntive test$
-$ D!&lDp!rpose test D$ Test of *&l&nces$
;5$ After the &!%itor h&s prep&re% & flowch&rt of intern&l control for s&les &n% c&sh receipts
tr&ns&ctions &n% ev&l!&te% the %esi(n of the s)ste'0 the &!%itor wo!l% perfor' tests of
controls on &ll control proce%!res
A$ Doc!'ente% in the flowch&rt$
-$ Consi%ere% to *e %eficiencies th&t 'i(ht &llow errors to enter the &cco!ntin( s)ste'$
C$ Consi%ere% to *e stren(ths th&t the &!%itor pl&ns to rel) on in &ssessin( control risk$
D$ Th&t wo!l% &i% in preventin( irre(!l&rities$
;6$ To %eter'ine whether intern&l control effectivel) 'ini'i"e% errors of f&il!re to *ill & c!sto'er
for & ship'ent0 the &!%itor wo!l% select & s&'ple of tr&ns&ctions fro' the pop!l&tion
represente% *) the
A$ C!sto'er or%er file C$ Shippin( recor%s file
-$ S!*si%i&r) c!sto'er &cco!nts le%(er D$ S&les invoice
;9$ 2hich of the followin( s&'plin( 'etho%s is 'ost !sef!l to &!%itors when perfor'in( tests of
controls+
A$ Discover) s&'plin($
-$ Attri*!te esti'&tion$
C$ F&ri&*le s&'plin($
D$ Unrestricte% r&n%o' s&'plin( with repl&ce'ent$
;:$ At ti'es0 & s&'ple '&) in%ic&te th&t the &!%itor,s &ssesse% level of control risk for & (iven
control is re&son&*le when0 in f&ct0 the tr!e co'pli&nce r&te %oes not .!stif) the &ssesse%
level$ This sit!&tion ill!str&tes the risk of
A$ Assessin( control risk too low C$ Assessin( control risk too hi(h$
-$ Incorrect precision D$ Incorrect re.ection$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
;;$ 2hich of the followin( is &n ele'ent of s&'plin( risk+
A$ Choosin( &n &!%it proce%!re th&t is inconsistent with the &!%it o*.ective$
-$ Choosin( & s&'ple si"e th&t is too s'&ll to &chieve the s&'plin( o*.ective$
C$ 4&ilin( to %etect &n error on & %oc!'ent th&t h&s *een inspecte% *) the &!%itor$
D$ 4&ilin( to perfor' &!%it proce%!re th&t &re re7!ire% *) the s&'plin( pl&n$
;?$ If the &!%itor is concerne% th&t & pop!l&tion '&) cont&in e/ceptions0 the %eter'in&tion of &
s&'ple si"e s!fficient to incl!%e &t le&st one s!ch e/ception is & ch&r&cteristic of
A$ Discover) s&'plin( C$ F&ri&*les s&'plin($
-$ R&n%o' s&'plin( D$ Pro*&*ilit)Dproportion&lDtoDsi"e s&'plin($
?@$ 2hich of the followin( *est ill!str&tes the concept of s&'plin( risk+
A$ A r&n%o'l) chosen s&'ple '&) not *e represent&tive of the pop!l&tion &s & whole on the
ch&r&cteristic of interest$
-$ An &!%itor '&) select &!%it proce%!res th&t &re not &ppropri&te to &chieve the specific
o*.ective$
C$ An &!%itor '&) f&il to reco(ni"e errors in the %oc!'ents e/&'ine% for the chosen s&'ple$
D$ The %oc!'ents rel&te% to the chosen s&'ple '&) not *e &v&il&*le for inspection$
?#$ Discover) s&'plin( sho!l% *e !se% to esti'&te whether & pop!l&tion cont&ins
A$ Errors of &n) kin% C$ Noncritic&l errors$
-$ Critic&l %evi&tions D$ No errors$
?1$ In &ssessin( s&'plin( risk0 the risk of incorrect re.ection &n% the risk of &ssessin( control risk
too hi(h rel&te to the
A$ Efficienc) of the &!%it C$ Effectiveness of the &!%it$
-$ Selection of the s&'ple D$ A!%it 7!&lit) controls$
?3$ An &%v&nt&(e of !sin( st&tistic&l s&'plin( is th&t s!ch techni7!es
A$ 8&the'&tic&ll) 'e&s!re risk$
-$ Eli'in&te the nee% for .!%('ent&l %ecision$
C$ Define the v&l!e of reli&*ilit) necess&r) to provi%e &!%it &ss!r&nce$
D$ H&ve *een est&*lishe% in the co!rts to *e s!perior to nonst&tistic&l s&'plin($
?5$ 8&n&(e'ent &ssertions &re
A$ st&te% in the footnotes to the fin&nci&l st&te'ents$
-$ i'plie% or e/presse% represent&tions &*o!t the fin&nci&l st&te'ents$
C$ e/plicitl) e/presses represent&tions &*o!t the fin&nci&l st&te'ents$
D$ provi%e% to the &!%itor in the &ssertions letter0 *!t &re not %isclose% on the fin&nci&l
st&te'ents$
?9$ The re&son &n in%epen%ent &!%itor (&thers evi%ence is to
A$ 4or' &n opinion on the fin&nci&l st&te'ents$
-$ Detect fr&!%$
C$ Ev&l!&te '&n&(e'ent
D$ Ev&l!&te intern&l controls$
?:$ It refers to the &!%itor,s &*ilit) to perfor' &!%it proce%!res %ee'e% necess&r) in the
circ!'st&ncesG
A$ Scope &n% A!%it C$ S!*st&ntive Proce%!res
-$ O*.ectivit) D$ Reportin( O*.ective
?;$ 2hich of the followin( f&ctors will le&st &ffect the in%epen%ent &!%itor,s .!%('ent &s to the
7!&ntit)0 t)pe &n% content of the workin( p&pers %esir&*le for & p&rtic!l&r en(&(e'ent+
A$ N&t!re of the &!%itor,s report$
-$ N&t!re of the fin&nci&l st&te'ents0 sche%!les0 or other infor'&tion !pon which the &!%itor
is reportin($
C$ Nee% for s!pervision &n% review$
D$ N!'*er of personnel &ssi(ne% to the &!%it$
??$ 2hich of the followin( is not & pri'&r) p!rpose of &!%it workin( p&pers+
A$ To coor%in&te the e/&'in&tion$
-$ To &ssist in prep&r&tion of the &!%it report$
C$ To s!pport the fin&nci&l st&te'ents$
D$ To provi%e evi%ence of the &!%it work perfor'e%$
#@@$The reli&*ilit) of intern&l evi%ence v&ries &ccor%in( to the followin(0 e/cept
A$ The effectiveness of the client,s intern&l control str!ct!re$
-$ The potenti&l 'otiv&tion '&n&(e'ent to 'isst&te fin&nci&l st&te'ents$
C$ The for'&lit) of the %oc!'ent&tion$
D$ The 7!&ntit) of &!%it evi%ence$
#@#$The followin( st&te'ents were '&%e in & %isc!ssion of &!%it evi%ence *etween two CPAs$
2hich st&te'ent is not v&li% concernin( evi%enti&l '&tter+
A$ I &' sel%o' convince% *e)on% &ll %o!*t with respect to &ll &spects of the st&te'ents
*ein( e/&'ine%$
8&) 1@@5 P&(e ? of #;
AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
-$ I wo!l% not !n%ert&ke th&t proce%!re *ec&!se &t *est the res!lts wo!l% onl) *e
pers!&sive &n% I,' lookin( for convincin( evi%ence$
C$ I ev&l!&te the %e(ree of risk involve% in %eclinin( the kin% of evi%ence I will (&ther$
D$ I ev&l!&te the !sef!lness of the evi%ence I c&n o*t&in &(&inst the cost to o*t&in it$
#@1$Evi%ence is (ener&ll) consi%ere% co'petent when
A$ it h&s the 7!&lities of *ein( relev&nt0 o*.ective0 &n% free fro' known *i&s$
-$ there is eno!(h of it to &ffor% & re&son&*le *&sis for &n opinion on fin&nci&l st&te'ents$
C$ it h&s *een o*t&ine% *) r&n%o' selection$
D$ it consists of written st&te'ents '&%e *) '&n&(ers of the enterprise !n%er &!%it$
#@3$The pri'&r) e'ph&sis in 'ost tests of %et&ils of *&l&nces is on the
A$ *&l&nce sheet &cco!nts C$ c&sh flow st&te'ent &cco!nt
-$ inco'e st&te'ent &cco!nts D$ three st&te'ents (iven
#@5$8ore t)pes of evi%ence &re o*t&ine% *) !sin( this test th&n *) !sin( &n) other t)pe of test$
A$ Tests of controls C$ Tests of *&l&nces
-$ Tests of tr&ns&ctions D$ An&l)tic&l proce%!res
#@5$In testin( for c!toff0 the o*.ective is to %eter'ine
A$ whether &ll of the c!rrent perio%,s tr&ns&ctions &re recor%e%$
-$ th&t no tr&ns&ctions fro' the prior perio% &re incl!%e% in the c!rrent perio%,s *&l&nces$
C$ th&t no tr&ns&ctions of the c!rrent perio% h&ve *een %el&)e% &n% recor%e% in & f!t!re
perio%$
D$ whether the tr&ns&ctions &re recor%e% in the proper perio%$
#@6$In %eter'inin( the 7!&ntit) &n% 7!&lit) of evi%ence to (&ther0 the &!%itor will *e s&tisfie% when
the evi%ence is
A$ irref!t&*le$ C$ hi(hl) pers!&sive$
-$ concl!sive$ D$ co'pletel) convincin($
#@9$BThe %et&ile% instr!ctions for the collection of & p&rtic!l&r t)pe of &!%it evi%ence th&t is to *e
o*t&ine% &t so'e ti'e %!rin( the &!%itC is the %efinition of &=n>
A$ s&'plin( pl&n$ C$ &!%it pl&n$
-$ &!%it proce%!re$ D$ &!%it pro(r&'$
#@:$The thir% st&n%&r% of fiel% work re7!ires the &!%itor to &cc!'!l&te s!fficient co'petent
evi%ence to s!pport the opinion iss!e%$ -ec&!se of the n&t!re of &!%it evi%ence0 it is
A$ !nlikel) th&t &!%itor will *e co'pletel) convince% th&t the opinion is correct$
-$ likel) th&t &!%itor will *e co'pletel) convince% th&t the opinion is correct$
C$ !nlikel) th&t &!%itor will &rrive &t & concl!sion$
D$ likel) th&t the &!%itor wo!l% ch&n(e hisHher 'in% &*o!t the opinion if heHshe took the ti'e
to (&ther &%%ition&l evi%ence$
#@;$Evi%ence is !s!&ll) 'ore pers!&sive for *&l&nce sheet &cco!nts when it is o*t&ine%
A$ fro' v&rio!s ti'es thro!(ho!t the client,s )e&r$
-$ onl) fro' tr&ns&ctions occ!rrin( on the *&l&nce sheet %&te$
C$ &s close to the *&l&nce sheet %&te &s possi*le$
D$ fro' the ti'e perio% when tr&ns&ctions in th&t &cco!nt were 'ost n!'ero!s %!rin( the
fisc&l perio%$
#@?$2hich of the followin( st&te'ents is not correct+
A$ An&l)tic&l proce%!res !se co'p&risons &n% rel&tionships to %eter'ine which &cco!nt
*&l&nces &re in error$
-$ 4or cert&in i''&teri&l &cco!nts0 &n&l)tic&l proce%!res '&) *e the onl) evi%ence nee%e%$
C$ In so'e inst&nces0 other t)pes of evi%ence '&) *e re%!ce% when &n&l)tic&l proce%!res
in%ic&te th&t &n &cco!nt *&l&nce &ppe&rs re&son&*le$
D$ An&l)tic&l proce%!res &re !se% to isol&te &cco!nts or tr&ns&ctions th&t sho!l% *e
investi(&te% 'ore e/tensivel)$
##@$ The workin( p&pers prep&re% %!rin( the en(&(e'ent &re the propert) of
A$ the &!%itor0 *!t %o not incl!%e the workin( p&pers prep&re% *) client for the &!%itor$
-$ the &!%itor0 even incl!%in( those prep&re% *) client for &!%itor$
C$ the client$
D$ the &!%itor &n% client .ointl)$
###$ -efore &ppl)in( princip&l s!*st&ntive tests to the %et&ils of &sset &n% li&*ilit) &cco!nts &t &n
interi' %&te0 the &!%itor sho!l%
A$ &ssess the %iffic!lt) in controllin( incre'ent&l &!%it risk$
-$ investi(&te si(nific&nt fl!ct!&tions th&t h&ve occ!rre% in the &sset &n% li&*ilit) &cco!nts
since the previo!s *&l&nceDsheet %&te$
C$ select onl) those &cco!nts which c&n effectivel) *e s&'ple% %!rin( )e&rDen% &!%it work$
D$ consi%er the tests of controls th&t '!st *e &pplie% &t the *&l&nceDsheet %&te to e/ten% the
&!%it concl!sions re&che% &t the interi' %&te$
8&) 1@@5 P&(e #@ of #;
AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
##1$ An &!%itor sho!l% e/&'ine 'in!tes of the *o&r% of %irectors, 'eetin(s$
A$ thro!(h the %&te of his report$
-$ thro!(h the %&te of the fin&nci&l st&te'ents$
C$ on & test *&sis$
D$ onl) &t the *e(innin( of the &!%it$
##3$ 2hich of the followin( is & *&sic tool !se% *) the &!%itor to control the &!%it work &n% review
the &!%it pro(ress+
A$ Ti'e &n% e/pense s!''&r)$ C$ Pro(ress flowch&rt
-$ En(&(e'ent letter$ D$ A!%it pro(r&'$
##5$ A!%it pro(r&'s &re 'o%ifie% to s!it the circ!'st&nces on p&rtic!l&r en(&(e'ents$ A co'plete
&!%it pro(r&' for &n en(&(e'ent (ener&ll) sho!l% *e %evelope%
A$ prior to *e(innin( the &ct!&l &!%it work$
-$ &fter the &!%itor h&s co'plete% &n ev&l!&tion of the e/istin( intern&l &cco!ntin( control$
C$ &fter reviewin( the client,s &cco!ntin( recor%s &n% proce%!res$
D$ when the &!%it en(&(e'ent letter is prep&re%$
##6$ The c!rrent file of the &!%itor,s workin( p&pers (ener&ll) sho!l% incl!%e
A$ & flowch&rt of the intern&l controls C$ & cop) of the fin&nci&l st&te'ents
-$ or(&ni"&tion ch&rts D$ copies of *on% &n% note in%ent!res
##9$ 2hich of the followin( eli'in&tes vol!'ino!s %et&ils fro' the &!%itor,s workin( tri&l *&l&nce *)
cl&ssif)in( &n% s!''&ri"in( si'il&r or rel&te% ite's+
A$ Acco!nt &n&l)ses$ C$ Control &cco!nts$
-$ S!pportin( sche%!les D$ Ae&% sche%!les
##:$ The esti'&te for s&'plin( error res!lts *ec&!se the &!%itor h&s s&'ple% onl) & portion of the
pop!l&tion$ S&'plin( error represents the
A$ '&/i'!' 'isst&te'ents in the &!%ite% &cco!nts$
-$ 'ini'!' 'isst&te'ents in the &!%ite% &cco!nts$
C$ '&/i'!' 'isst&te'ents in &cco!nts not &!%ite%$
D$ 'ini'!' 'isst&te'ents in &cco!nts not &!%ite%$
##;$ Tr&cin( copies of s&les invoices to shippin( %oc!'ents will provi%e evi%ence th&t &ll
A$ Ship'ents to c!sto'ers were recor%e% &s receiv&*les$
-$ -ille% s&les were shippe%$
C$ De*its to the s!*si%i&r) &cco!nts receiv&*le le%(er &re for s&les shippe%$
D$ Ship'ents to c!sto'ers were *ille%$
##?$ To (&ther &!%it evi%ence &*o!t the proper cre%it &pprov&l of s&les0 the &!%itor wo!l% select &
s&'ple of %oc!'ents fro' the pop!l&tion represente% *) the
A$ C!sto'er or%er file C$ -ill of l&%in( file$
-$ S!*si%i&r) c!sto'ers, &cco!nts le%(er D$ S&les invoice file$
#1@$A s&les c!toff test of *illin(s co'ple'ents tests of
A$ S&les ret!rns C$ C&sh$
-$ Acco!nts receiv&*le D$ S&les &llow&nces$
#1#$2hich of the followin( is the *est &r(!'ent &(&inst the !se of ne(&tive &cco!nts receiv&*le
confir'&tions+
A$ The costDperDresponse is e/cessivel) hi(h$
-$ There is no w&) of knowin( if the inten%e% recipients receive% the'$
C$ Recipients &re likel) to feel th&t in re&lit) the confir'&tion is & s!*tle re7!est for p&)'ent$
D$ The inference %r&wn fro' receivin( no repl) '&) not *e correct$
#11$As one of the )e&rDen% &!%it proce%!res0 the &!%itor instr!cte% the client,s personnel to
prep&re & st&n%&r% *&nk confir'&tion re7!est for & *&nk &cco!nt th&t h&% *een close% %!rin(
the )e&r$ After the client,s tre&s!rer h&% si(ne% the re7!est0 it w&s '&ile% *) the &ssist&nt
tre&s!rer$ 2h&t is the '&.or fl&w in this &!%it proce%!re+
A$ The confir'&tion re7!est w&s si(ne% *) the tre&s!rer$
-$ Sen%in( the re7!est w&s 'e&nin(less *ec&!se the &cco!nt w&s close% *efore the )e&rD
en%$
C$ The re7!est w&s '&ile% *) the &ssist&nt tre&s!rer$
D$ The CPA %i% not si(n the confir'&tion re7!est *efore it w&s '&ile%$
#13$C!sto'ers with s!*st&nti&l %!e *&l&nces h&ve f&ile% to repl) &fter secon% re7!ests h&% *een
'&ile% to the' %irectl)$ 2hich of the followin( &!%it proce%!res is 'ost &ppropri&te+
A$ E/&'ine shippin( %oc!'ents$
-$ Review c&sh collections %!rin( the )e&r *ein( &!%ite%$
C$ Intensif) the st!%) of intern&l controls for receiv&*les$
D$ Incre&se the *&l&nce in the &cco!nts receiv&*le &llow&nce &cco!nt$
8&) 1@@5 P&(e ## of #;
AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
#15$2hich of the followin( proce%!res rel&tin( to the &!%it of &cco!nts p&)&*le co!l% the &!%itor
%ele(&te entirel) to the client,s e'plo)ees+
A$ Test footin(s in the &cco!nts p&)&*le le%(er$
-$ Reconcile !np&i% invoices to ven%ors, st&te'ents$
C$ Prep&re & sche%!le of &cco!nts p&)&*le$
D$ 8&il confir'&tions for selecte% &cco!nt *&l&nces$
#16$Ne(&tive confir'&tion of &cco!nts receiv&*le is less effective th&n positive confir'&tion of
&cco!nts receiv&*le *ec&!se
A$ A '&.orit) of recipients &re !s!&ll) !nwillin( to respon% o*.ectivel)$
-$ So'e recipients '&) report incorrect *&l&nces th&t re7!ire e/tensive followD!p$
C$ The &!%itor c&nnot infer th&t &ll nonrespon%ents h&ve verifie% the &cco!nt infor'&tion$
D$ Ne(&tive confir'&tions %o not pro%!ce evi%ence th&t is st&tistic&ll) 7!&ntifi&*le$
#19$In or%er to efficientl) est&*lish the correctness of the &cco!nts p&)&*le c!toff0 the &!%itor will
*e 'ost likel) to
A$ Coor%in&te c!toff tests with ph)sic&l inventor) o*serv&tion$
-$ Co'p&re c!toff reports with p!rch&se or%ers$
C$ Co'p&re ven%ors, invoices with ven%ors, st&te'ents$
D$ Coor%in&te '&ilin( of confir'&tions with c!toff tests$
#1:$2hich of the followin( is incorrect &*o!t the '&n&(e'ent,s responsi*ilit) to '&ke &n
&ssess'ent of &n entit),s &*ilit) to contin!e &s & (oin( concern+
A$ In &ssessin( whether the (oin( concern &ss!'ption is &ppropri&te0 the '&n&(e'ent
t&kes into &cco!nt &ll &v&il&*le infor'&tion for the foresee&*le f!t!re0 which sho!l% *e &t
le&st twelve 'onths fro' the *&l&nce sheet %&te$
-$ Tho!(h there is & histor) of profit&*le oper&tions &n% & re&%) &ccess to fin&nci&l
reso!rces0 '&n&(e'ent '!st '&ke its &ssess'ent with %et&ile% &n&l)sis$
C$ 8&n&(e'ent,s &ssess'ent of the (oin( concern &ss!'ption involves '&kin( & .!%('ent0
&t & p&rtic!l&r point of ti'e0 &*o!t the f!t!re o!tco'es of events or con%itions which &re
inherentl) !ncert&in$
D$ 8&n&(e'ent sho!l% '&ke e/plicit &ssess'ent of its &*ilit) to contin!e &s & (oin(Dconcern
entit)$
#1;$2hich of the followin( le&st likel) is &n &ction th&t '&) 'iti(&te &n entit),s %iffic!lt) to contin!e
&s & (oin( concern+
A$ Incre&se% c&sh %ivi%en%s$
-$ Retire'ent of o!tst&n%in( c&pit&l stock in or%er to i'prove e&rnin(s per sh&re$
C$ Retire'ent of lon(Dter' %e*t in or%er to i'prove profit&*ilit)$
D$ Dispos&l of propert) in & s&leDle&se*&ck &rr&n(e'ent$
#1?$2hich of the followin( le&st likel) in%ic&te & potenti&l (oin(Dconcern pro*le' of &n entit)+
A$ Historic&l ne(&tive oper&tin( c&sh flows$
-$ 4&il!re to co'pl) with lo&n coven&nts$
C$ Refin&ncin( of l&r(e shortDter' o*li(&tion with & 'e%i!'Dter' lo&n$
D$ Pen%in( re(!l&tor) procee%in(s &(&inst the entit)$
#3@$2hich of the followin( is correct &*o!t the &!%itor,s responsi*ilit) with respect to the entit),s
&*ilit) to contin!e &s & (oin( concern+
A$ The &!%itor is responsi*le to '&ke &n &ssess'ent of the entit),s &*ilit) to contin!e &s &
(oin( concern
-$ The &!%itor,s responsi*ilit) is to consi%er the &ppropri&teness of the '&n&(e'ent,s !se of
the (oin( concern &ss!'ption in the prep&r&tion of the fin&nci&l st&te'ents$
C$ The &!%itor c&n pre%ict f!t!re events or con%itions th&t '&) c&!se &n entit) to ce&se to
contin!e &s & (oin( concern$
D$ The &!%itor '&) &llow the '&n&(e'ent to '&ke &n &ssess'ent of its &*ilit) to contin!e
&s & (oin( concern if the '&n&(e'ent is *elieve% to *e o*.ective in %oin( s!ch &n
&ssess'ent$
#3#$In ev&l!&tin( '&n&(e'ent,s &ssess'ent of the entit),s &*ilit) to contin!e &s & (oin( concern0
he sho!l% consi%er the followin(0 e/ceptG
A$ The in%epen%ence of the '&n&(e'ent$
-$ The process th&t the '&n&(e'ent h&s followe% to '&ke its &ssess'ent$
C$ The &ss!'ptions on which the &ssess'ent is *&se% &n% '&n&(e'ent,s pl&n for f!t!re
&ction$
D$ 2hether the &ssess'ent h&s t&ken into &cco!nt &ll relev&nt infor'&tion of which the
&!%itor is &w&re of &s & res!lt of the &!%it proce%!res$
#31$2hich of the followin( is &n &ppropri&te proce%!re to test for &n in%ic&tion of events or
con%itions th&t c&st si(nific&nt %o!*t on the entit),s &*ilit) to contin!e &s & (oin( concern
*e)on% the perio% &ssesse% *) '&n&(e'ent+
A$ Inspection$ C$ In7!ir)
-$ O*servin( D$ An&l)sis
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
#33$The '&n&(e'ent,s &ssess'ent of those events th&t '&) c&st si(nific&nt %o!*t &*o!t the
entit),s &*ilit) to contin!e &s & (oin( concern sho!l% *e &t le&st
A$ Two )e&rs fro' the *&l&nce sheet %&te$
-$ Two )e&rs fro' the %&te of the &!%it report$
C$ One )e&r fro' the *&l&nce sheet %&te$
D$ One )e&r fro' the %&te of the &!%it report$
#35$2hen events or con%itions h&ve *een i%entifie% to c&st si(nific&nt %o!*t on the entit),s &*ilit)
to contin!e &s & (oin( concern0 the &!%itor sho!l%
A$ Consi%er re&ssessin( control risk &t the '&/i'!'$
-$ Consi%er the iss!&nce of %iscl&i'er of opinion %!e to scope li'it&tion$
C$ Review '&n&(e'ent pl&ns for f!t!re &ctions *&se% on its (oin(Dconcern &ssess'ents$
D$ Report the '&tter to the *o&r% of %irectors &n% stockhol%ers$
#36$2hich of the followin( st&te'ents th&t rel&te to s!*se7!ent events is in&ppropri&tel)
%escri*e%+
A$ The &!%itor is e/pecte% to con%!ct & contin!in( review of &ll '&tters to which previo!sl)
&pplie% proce%!res h&ve provi%e% s&tisf&ctor) concl!sions$
-$ The &!%itor sho!l% consi%er the effect of s!*se7!ent events on the fin&nci&l st&te'ents
&n% on the &!%itor,s report$
C$ The proce%!res to i%entif) events th&t '&) re7!ire &%.!st'ent of0 or %isclos!re in the
fin&nci&l st&te'ents wo!l% *e perfor'e% &s ne&r &s pr&ctic&*le to the %&te of the &!%itor,s
report$
D$ The proce%!res th&t &re %esi(ne% to o*t&in s!fficientl) &ppropri&te &!%it evi%ence th&t &ll
events !p to the %&te of the &!%it report th&t '&) re7!ire &%.!st'ent of0 or %isclos!re in0
the fin&nci&l st&te'ents &re in &%%ition to ro!tine proce%!res which '&) *e &pplie% to
specific tr&ns&ctions$
#39$2hen0 &fter the fin&nci&l st&te'ents h&ve *een iss!e%0 the &!%itor *eco'es &w&re of & f&ct
th&t e/iste% &t the %&te of the &!%itor,s report0 the &!%itor sho!l% %o the followin(0 e/ceptG
A$ Consi%er whether the fin&nci&l st&te'ents nee% revisions$
-$ Disc!ss the '&tter with '&n&(e'ent$
C$ T&ke the &ction &ppropri&te in the circ!'st&nce$
D$ Infor' those !sers who &re c!rrentl) rel)in( on the fin&nci&l st&te'ents$
#3:$2hich of the followin( is & correct response of the &!%itor when he lowers the &ccept&*le level
of %etection risk+
S!*st&ntive Testin( Proce%!res
N&t!re Ti'in( A'o!nt
A$ Aess effective Ye&rDen% 8ore e/tensive
-$ Aess effective Interi' Aess effective
C$ 8ore e/tensive Ye&rDen% 8ore e/tensive
D$ 8ore e/tensive Ye&rDen% Aess effective
#3;$2hich of the followin( &!%itin( proce%!res is or%in&ril) perfor'e% l&st+
A$ Re&%in( of the 'in!tes of the %irector,s 'eetin(s$
-$ Confir'in( &cco!nts p&)&*le$
C$ O*t&inin( & '&n&(e'ent represent&tion letter$
D$ Testin( of the p!rch&sin( f!nction$
#3?$If no '&teri&l %ifferences &re fo!n% !sin( &n&l)tic&l proce%!res &n% the &!%itor concl!%es th&t
%ifferences sho!l% not h&ve occ!rre%$
A$ it will *e necess&r) to incre&se the tests of *&l&nces$
-$ other tests '&) *e re%!ce%$
C$ it will *e necess&r) to incre&se the tests of tr&ns&ctions$
D$ it will not *e necess&r) to perfor' tests of *&l&nces$
#5@$A represent&tion letter iss!e% *) & client
A$ Is essenti&l for the prep&r&tion of the &!%it pro(r&'$
-$ Is & s!*stit!te for testin($
C$ Does not re%!ce the &!%itor,s responsi*ilit)$
D$ Re%!ces the &!%itor,s responsi*ilit) onl) to the e/tent it is relie% !pon$
#5#$After &n &!%itor h&s iss!e% &n &!%it report on & nonp!*lic entit)0 there is no o*li(&tion to '&ke
&n) f!rther &!%it tests or in7!iries with respect to the &!%ite% fin&nci&l st&te'ents covere% *)
th&t report !nless
A$ New infor'&tion co'es to the &!%itor,s &ttention concernin( &n event th&t occ!rre% prior
to the %&te of the &!%itor,s report th&t '&) h&ve &ffecte% the &!%itor,s report$
-$ 8&teri&l &%verse events occ!r &fter the %&te of the report$
C$ 4in&l %eter'in&tion or resol!tion w&s '&%e on '&tters th&t h&% res!lte% in & 7!&lific&tion
in the &!%itor,s report$
D$ 4in&l %eter'in&tion or resol!tion w&s '&%e of & contin(enc) th&t h&% *een %isclose%$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
#51$The &!%itor,s report '&) *e &ppropri&tel) &%%resse% to the client,sG
A$ -o&r% of %irectors &n% stockhol%ers
-$ -o&r% of %irectors &n% &!%it co''ittee
C$ A!%it co''ittee &n% stockhol%ers
D$ -o&r% of %irectors0 &!%it co''ittee &n% stockhol%ers
#53$2hich of the followin( is e/plicitl) incl!%e% in the scope p&r&(r&ph of the &!%itor,s report+
A$ 4in&nci&l reportin( fr&'ework
-$ Gener&ll) &ccepte% &cco!ntin( principles
C$ Gener&ll) &ccepte% &!%itin( st&n%&r%s
D$ A!%itin( proce%!res
#55$2hen the &!%itor concl!%es th&t the fin&nci&l st&te'ents &re presente% f&irl) in &ll '&teri&l
respects0 in &ccor%&nce with the i%entifie% fin&nci&l reportin( fr&'ework0 he sho!l% iss!eG
A$ St&n%&r% !n7!&lifie% opinion
-$ !&lifie% opinion
C$ Discl&i'er of opinion
D$ Un7!&lifie% opinion with e/pl&n&tor) p&r&(r&ph
#56$The pri'&r) concern in 'e&s!rin( '&teri&lit) when & client h&s f&ile% to follow GAAP is
!s!&ll)
A$ the tot&l peso error in the &cco!nts involve%0 co'p&re% with so'e *&se$
-$ 'e&s!r&*ilit) of the peso error$
C$ the n&t!re of the ite' in error$
D$ whether it c&n '&teri&ll) &ffect so'e f!t!re perio%$
#59$2hen the client f&ils to '&ke &%e7!&te %isclos!re in the *o%) of the st&te'ents or in the
rel&te% footnotes0 it is the responsi*ilit) of the &!%itor to
A$ infor' the re&%er th&t %isclos!re is not &%e7!&te0 &n% to iss!e & 7!&lifie% or &n &%verse
opinion$
-$ infor' the re&%er th&t %isclos!re is not &%e7!&te0 &n% to iss!e &n !n7!&lifie% or 7!&lifie%
opinion$
C$ present the infor'&tion in the &!%it report &n% to iss!e & 7!&lifie% or &n &%verse opinion$
D$ present the infor'&tion in the &!%it report &n% iss!e &n !n7!&lifie% or 7!&lifie% opinion$
#5:$2hen &n &!%itor e/presses &n opinion other th&n !n7!&lifie% opinion0 & cle&r %escription of &ll
s!*st&ntive re&sons for the 'o%ific&tion of the opinion sho!l% *e incl!%e% in the report$ This
e/pl&n&tion sho!l% *e presente%G
A$ As & sep&r&te p&r&(r&ph th&t prece%es the opinion p&r&(r&ph of the &!%it report$
-$ As & sep&r&te p&r&(r&ph0 prefer&*l) &fter the opinion p&r&(r&ph0 of the &!%it report$
C$ In the opinion p&r&(r&ph
D$ As & sep&r&te p&r&(r&ph in the notes to fin&nci&l st&te'ents$
#5;$2here & li'it&tion on the scope of the &!%itor,s work re7!ires 'o%ific&tion of &n !n7!&lifie%
opinion0 the &!%itor,s report sho!l% %escri*e the li'it&tion &n%G
A$ In%ic&te th&t the &!%itor is no lon(er responsi*le to his opinion$
-$ In%ic&te the possi*le &%.!st'ents to the fin&nci&l st&te'ents th&t 'i(ht h&ve *een
%eter'ine% to *e necess&r) h&% the li'it&tion not e/iste%$
C$ Refer the !sers to the p&rtic!l&r note to fin&nci&l st&te'ents th&t &%e7!&tel) %isc!sses the
li'it&tion
D$ In%ic&te th&t the &!%itor is not s&tisfie% of the res!lts of the &ltern&tive proce%!res th&t he
h&% perfor'e%$
#5?$2hich of the followin( is le&st consi%ere% & scope li'it&tion in &n &!%it en(&(e'ent+
A$ The ti'in( of &!%itor,s &ppoint'ent is too l&te which res!lts to in&*ilit) of the &!%itor to
perfor' prescri*e% proce%!res$
-$ The entit),s &cco!ntin( recor%s &re in&%e7!&te$
C$ The &!%itor is !n&*le to c&rr) o!t &n &!%it proce%!re *elieve% to *e %esir&*le$
D$ The &!%it en(&(e'ent re7!ires &n &!%it of *&l&nce sheet onl)$
#6@$2hich of the followin( %is&(ree'ents with '&n&(e'ent is not & possi*le re&son for &n &!%itor
to iss!e &n &%verse opinion+
A$ Accept&*ilit) of &cco!ntin( policies$
-$ 8etho% of &pplic&tion of &cco!ntin( policies$
C$ A%e7!&c) of %isclos!res in the fin&nci&l st&te'ents$
D$ The nee% to o*serve ph)sic&l inventor) co!nt
#6#$2hen the client %oes not %isclose restrictions of f!t!re c&sh %ivi%en%s &n% the CPA %iscloses
the o'itte% infor'&tion in the sep&r&te p&r&(r&ph of the &!%it report0 the opinion sho!l% *eG
A$ Un7!&lifie% C$ A%verse
-$ !&lifie% D$ Discl&i'er of opinion
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
#61$The &!%it report of the inco'in( &!%itor le&st likel) incl!%e &n in%ic&tion
A$ Th&t the fin&nci&l st&te'ents of the prior perio% were &!%ite% *) &nother CPA$
-$ The t)pe of report iss!e% *) the pre%ecessor &!%itor$
C$ The re&son wh) there w&s & ch&n(e of &!%itor$
D$ The %&te of the pre%ecessor &!%itor,s report$
#63$If the &!%itor *elieves th&t re7!ire% %isclos!res &re o'itte% fro' the fin&nci&l st&te'ents0 the
&!%itor sho!l% %eci%e *etween iss!in(
A$ A 7!&lifie% opinion or &n &%verse opinion$
-$ A %iscl&i'er of opinion or & 7!&lifie% opinion$
C$ An &%verse opinion or & %iscl&i'er of opinion$
D$ An !n7!&lifie% opinion or & 7!&lifie% opinion$
#65$2hen & CPA h&s concl!%e% th&t &ction sho!l% *e t&ken to prevent f!t!re reli&nce on his
report0 he sho!l%
A$ &%vise his client to '&ke &ppropri&te %isclos!re of the newl) %iscovere% f&cts &n% their
i'p&ct on the fin&nci&l st&te'ents to persons who &re known to *e c!rrentl) rel)in( or
who &re likel) to rel) on the fin&nci&l st&te'ents &n% the rel&te% &!%itor,s report$
-$ rec&ll the fin&nci&l st&te'ents &n% iss!e revise% st&te'ents &n% incl!%e &n &ppropri&te
opinion$
C$ &%vise the client &n% others not to rel) on the fin&nci&l st&te'ents &n% '&ke &ppropri&te
%isclos!re of the correction in the st&te'ents of & s!*se7!ent perio%$
D$ rec&ll the fin&nci&l st&te'ents &n% iss!e & %iscl&i'er of opinion which sho!l% (ener&ll) *e
followe% *) revise% st&te'ents &n% & 7!&lifie% opinion$
#66$2hen & f&ct0 th&t e/iste% *efore the %&te of the report is %iscovere% &n% the '&n&(e'ent
revises previo!sl) iss!e% &!%ite% fin&nci&l st&te'ents0 the followin( &re &ppropri&te e/ceptG
A$ A new &!%itor,s report sho!l% incl!%e &n e'ph&sis of & '&tter p&r&(r&ph th&t refers to &
note to fin&nci&l st&te'ents th&t %isc!sses the re&son for the revision of the fin&nci&l
st&te'ents &n% to the e&rlier report iss!e% *) the &!%itor$
-$ The new &!%itor,s report sho!l% cont&in the ori(in&l %&te$
C$ The perfor'&nce of the proce%!res th&t &re %esi(ne% to o*t&in s!fficient evi%ence &s to
s!*se7!ent events wo!l% or%in&ril) *e e/ten%e% to the %&te the revise% fin&nci&l
st&te'ents &re &pprove% *) the entit),s '&n&(e'ent$
D$ The &!%itor is per'itte% to restrict the &!%it proce%!res re(&r%in( the fin&nci&l st&te'ents
to the effects of the s!*se7!ent event th&t necessit&te% the revision$
#69$A 'e&s!re of how willin( the &!%itor is to &ccept th&t the fin&nci&l st&te'ents '&) *e
'&teri&ll) 'isst&te% &fter the &!%it is co'plete% &n% &n !n7!&lifie% opinion h&s *een iss!e% is
the
A$ inherent risk C$ st&tistic&l risk$
-$ &ccept&*le risk D$ fin&nci&l risk$
#6:$2hich of the followin( proce%!res is not incl!%e% in & review en(&(e'ent on & nonp!*lic
entit)+
A$ In7!iries of '&n&(e'ent$
-$ In7!iries re(&r%in( events s!*se7!ent to the *&l&nce sheet %&te$
C$ An) proce%!res %esi(ne% to i%entif) rel&tionships &'on( %&t& th&t &ppe&r to *e !n!s!&l$
D$ A st!%) &n% ev&l!&tion of intern&l control str!ct!re$
#6;$An &cco!nt&nt who reviews the fin&nci&l st&te'ents of & nonp!*lic entit) sho!l% iss!e & report
st&tin( th&t & review
A$ is s!*st&nti&ll) less in scope th&n &n &!%it
-$ provi%es ne(&tive &ss!r&nce th&t the intern&l control str!ct!re is f!nctionin( &s %esi(ne%$
C$ provi%es onl) li'ite% &ss!r&nce th&t the fin&nci&l st&te'ents &re f&irl) presente%$
D$ is s!*st&nti&ll) 'ore in scope th&n & co'pil&tion$
#6?$2hen & ch&n(e in the t)pe of en(&(e'ent fro' hi(her to lower level of &ss!r&nce is
re&son&*l) .!stifie%0 the report *&se% on the revise% en(&(e'ent
A$ Sho!l% cont&in & sep&r&te p&r&(r&ph th&t refers to the ori(in&l en(&(e'ent
-$ Sho!l% &lw&)s refer to &n) proce%!res th&t '&) h&ve *een perfor'e% in the ori(in&l
en(&(e'ent
C$ Sho!l% 7!&lif) the opinion %!e to scope li'it&tion
D$ O'its reference to the ori(in&l en(&(e'ent
#9@$2hen &n &cco!nt&nt perfor's 'ore th&n one level of service concernin( the fin&nci&l
st&te'ents of & nonp!*lic entit)0 the &cco!nt&nt (ener&ll) sho!l% iss!e the report th&t is
&ppropri&te for
A$ the lowest level of service ren%ere%$ C$ & co'pil&tion en(&(e'ent$
-$ the hi(hest level of service ren%ere%$ D$ & review en(&(e'ent$
#9#$An &cco!nt&nt '&) &ccept &n en(&(e'ent to &ppl) &(ree%D!pon proce%!res to prospective
fin&nci&l st&te'ents provi%e% th&t
A$ %istri*!tion of the report is to *e restricte% to the specifie% !sers involve%$
-$ the prospective fin&nci&l st&te'ents &re &lso e/&'ine%$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
C$ responsi*ilit) for the &%e7!&c) of the proce%!res perfor'e% is t&ken *) the &cco!nt&nt$
D$ ne(&tive &ss!r&nce is e/presse% on the prospective fin&nci&l st&te'ents t&ken &s &
whole$
#91$2hich of the followin( is le&st consi%ere% if the &!%itor h&s to %eter'ine whether speci&li"e%
CIS skills &re nee%e% in &n &!%it+
A$ The &!%itor nee%s to o*t&in & s!fficient !n%erst&n%in( of the &cco!ntin( &n% intern&l
control s)ste' &ffecte% *) the CIS environ'ent$
-$ The &!%itor nee%s to %eter'ine the effect of the CIS environ'ent on the &ssess'ent of
over&ll risk &n% of risk &t the &cco!nt *&l&nce &n% cl&ss of tr&ns&ctions level$
C$ The nee% of the &!%itor to '&ke &n&l)tic&l proce%!res %!rin( the co'pletion st&(e of
&!%it$
D$ Desi(n &n% perfor' &ppropri&te tests of controls &n% s!*st&ntive proce%!res$
#93$The n&t!re of the risks &n% the intern&l ch&r&cteristics in CIS environ'ent th&t the &!%itors &re
'ostl) concerne% incl!%e the followin( e/ceptG
A$ A&ck of se(re(&tion of f!nctions
-$ CostD*enefit r&tio
C$ A&ck of tr&ns&ction tr&ils
D$ Depen%ence of other control over co'p!ter processin(
#95$2hich of the followin( si(nific&nce &n% co'ple/it) of the CIS &ctivities sho!l% &n &!%itor le&st
!n%erst&n%+
A$ The or(&ni"&tion&l str!ct!re of the client,s CIS &ctivities$
-$ A&ck of tr&ns&ction tr&ils
C$ The si(nific&nce &n% co'ple/it) of co'p!ter processin( in e&ch si(nific&nt &cco!ntin(
&pplic&tion$
D$ The !se of softw&re p&ck&(es inste&% of c!sto'i"e% softw&re$
#96$2hich of the followin( le&st likel) in%ic&tes & co'ple/it) of co'p!ter processin(+
A$ The s)ste' (ener&tes & %&il) e/ception report$
-$ Tr&ns&ctions &re e/ch&n(e% electronic&ll) with other or(&ni"&tions witho!t '&n!&l review
of their propriet)$
C$ The vol!'e of the tr&ns&ctions is s!ch th&t !sers wo!l% fin% it %iffic!lt) to i%entif) &n%
correct errors in processin($
D$ The co'p!ter &!to'&tic&ll) (ener&tes '&teri&l tr&ns&ctions or entries %irectl) to &nother
&pplic&tions$
#99$2hich of the followin( is &n inherent ch&r&cteristic of softw&re p&ck&(e+
A$ The) &re t)pic&ll) !se% witho!t 'o%ific&tions of the pro(r&'s$
-$ The pro(r&'s &re t&ilore%D'&%e &ccor%in( to the specific nee%s of the !ser$
C$ The) &re %evelope% *) softw&re '&n!f&ct!rer &ccor%in( to & p&rtic!l&r !ser,s
specific&tions$
D$ It t&kes & lon(er ti'e of i'ple'ent&tion$
#9:$The %is&%v&nt&(es of !sin( person&l co'p!ters incl!%eG
A$ The) &re rel&tivel) e/pensive
-$ The) &re e&sil) tr&nsport&*le
C$ The) &re e&s) to oper&te
D$ The oper&tin( s)ste' is less co'prehensive
#9;$2hich of the followin( *est protects critic&l &n% sensitive infor'&tion fro' !n&!thori"e% &ccess
in & person&l co'p!ter environ'ent+
A$ The !se of secret file n&'es &n% hi%in( the files$
-$ Usin( &ntiDvir!s softw&re pro(r&'s$
C$ Se(re(&tin( %&t& into files or(&ni"e% !n%er sep&r&te file %irectories$
D$ Jeepin( of *&ck !p copies offsite$
#9?$The testD%&t& 'etho% is !se% *) &!%itors to test the
A$ Acc!r&c) of inp!t %&t&$
-$ F&li%it) of the o!tp!t$
C$ Proce%!res cont&ine% within the pro(r&'$
D$ Nor'&lc) of %istri*!tion of test %&t&$
#:@$2hich of the followin( is tr!e of (ener&li"e% &!%it softw&re+
A$ The) c&n *e !se% onl) in &!%itin( onDline co'p!ter s)ste's$
-$ The) c&n *e !se% on &n) co'p!ter witho!t 'o%ific&tion$
C$ The) e&ch h&ve their own ch&r&cteristics0 which the &!%itor '!st c&ref!ll) consi%er *efore
!sin( in & (iven &!%it sit!&tion
D$ The) en&*le the &!%itor to perfor' &ll '&n!&l co'pli&nce test proce%!res less
e/pensivel)$
#:#$ 2hich of the followin( is likel) to *e of le&st i'port&nce to &n &!%itor when &ssessin( control
risk in & co'p&n) th&t processes %&t& *) co'p!ter+
A$ The se(re(&tion of %!ties within the co'p!ter %ep&rt'ent$
-$ The control over so!rce %oc!'ents$
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
C$ The %oc!'ent&tion '&int&ine% for &cco!ntin( &pplic&tions$
D$ The costD*enefit r&tio of %&t& processin( oper&tions$
#:1$In consi%erin( & client,s intern&l control str!ct!re in & co'p!ter environ'ent0 the &!%itor will
enco!nter (ener&l controls &n% &pplic&tion controls$ 2hich of the followin( is &n &pplic&tion
control+
A$ Or(&ni"&tion ch&rts C$ H&sh tot&l$
-$ S)ste's flowch&rts D$ Control over pro(r&' ch&n(es
#:3$Hitech0 Inc$0 h&s ch&n(e% fro' & convention&l to & co'p!teri"e% p&)roll clock c&r% s)ste'$
4&ctor) e'plo)ees now recor% ti'e in &n% o!t with '&(netic c&r%s0 &n% the co'p!ter s)ste'
&!to'&tic&ll) !p%&tes &ll p&)roll recor%s$ -ec&!se of this ch&n(e0
A$ The &!%itor '!st &!%it thro!(h the co'p!ter$
-$ Intern&l control h&s i'prove%$
C$ P&rt of the &!%it tr&il h&s *een lost$
D$ The potenti&l for p&)rollDrel&te% fr&!% h&s *een %i'inishe%$
#:5$Controls which &re %esi(ne% to &ss!re th&t the infor'&tion processe% *) the co'p!ter is v&li%0
co'plete0 &n% &cc!r&te &re c&lle%
A$ inp!t controls$ C$ o!tp!t controls$
-$ Processin( controls D$ Gener&l controls
#:6$The &!%itor,s o*.ective to %eter'ine whether the client,s co'p!ter pro(r&' c&n correctl)
h&n%le v&li% &n% inv&li% tr&ns&ctions &s the) &rise is &cco'plishe% thro!(h the
A$ test %&t& &ppro&ch C$ 'icroco'p!terD&i%e% &!%itin( &ppro&ch
-$ (ener&li"e% &!%it softw&re &ppro&ch D$ (ener&ll) &ccepte% &!%itin( st&n%&r%s
#:9$The &!%it &ppro&ch in which the &!%itor r!ns his or her own pro(r&' on & controlle% *&sis in
or%er to verif) the client,s %&t& recor%e% in & '&chine l&n(!&(e is
A$ the test %&t& &ppro&ch$
-$ the (ener&li"e% &!%it softw&re &ppro&ch$
C$ the 'icroco'p!terD&i%e% &!%itin( &ppro&ch$
D$ c&lle% &!%itin( &ro!n% the co'p!ter$
#::$Intern&l control is ineffective when co'p!ter personnel
A$ p&rticip&te in co'p!ter softw&re &c7!isition %ecisions$
-$ %esi(n %oc!'ent&tion for co'p!teri"e% s)ste's$
C$ ori(in&te ch&n(es in '&ster files$
D$ provi%e ph)sic&l sec!rit) for pro(r&' files$
#:;$An &!%itor,s investi(&tion of & co'p&n),s electronic %&t& processin( control proce%!res h&s
%isclose% the followin( fo!r circ!'st&nces$ In%ic&te which circ!'st&nce constit!tes &
we&kness in intern&l control$
A$ 8&chine oper&tors %o not h&ve &ccess to the co'plete r!n '&n!&l$
-$ 8&chine oper&tors &re closel) s!pervise% *) pro(r&''ers$
C$ Pro(r&''ers %o not h&ve the &!thori"&tion to oper&te e7!ip'ent$
D$ Onl) one (ener&tion of *&ckD!p files is store% in &n offDpre'ises loc&tion$
#:?$A collection of files th&t is sh&re% &n% !se% *) & n!'*er of %ifferent !sersG
A$ D&t&*&se C$ Per'&nent file
-$ Archive file D$ 4l&t file
#;@$The) &re control proce%!res th&t provi%e re&son&*le &ss!r&nce th&t &ll tr&ns&ctions &re
&!thori"e% &n% recor%e%0 &n% &re processe% co'pletel)0 &cc!r&tel) &n% on & ti'el) *&sis$
A$ Gener&l controls C$ H&r%w&re controls
-$ Applic&tion controls D$ Softw&re controls
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AUDITING THEORY CPA Review School of the Philippines Preweek !i""er
Answer Key
#$ 3#$ 9#$ ?#$ #1#$ #6#$
1$ 31$ 91$ ?1$ #11$ #61$
3$ 33$ 93$ ?3$ #13$ #63$
5$ 35$ 95$ ?5$ #15$ #65$
6$ 36$ 96$ ?6$ #16$ #66$
9$ 39$ 99$ ?9$ #19$ #69$
:$ 3:$ 9:$ ?:$ #1:$ #6:$
;$ 3;$ 9;$ ?;$ #1;$ #6;$
?$ 3?$ 9?$ ??$ #1?$ #6?$
#@$ 5@$ :@$ #@@$ #3@$ #9@$
##$ 5#$ :#$ #@#$ #3#$ #9#$
#1$ 51$ :1$ #@1$ #31$ #91$
#3$ 53$ :3$ #@3$ #33$ #93$
#5$ 55$ :5$ #@5$ #35$ #95$
#6$ 56$ :6$ #@6$ #36$ #96$
#9$ 59$ :9$ #@9$ #39$ #99$
#:$ 5:$ ::$ #@:$ #3:$ #9:$
#;$ 5;$ :;$ #@;$ #3;$ #9;$
#?$ 5?$ :?$ #@?$ #3?$ #9?$
1@$ 6@$ ;@$ ##@$ #5@$ #:@$
1#$ 6#$ ;#$ ###$ #5#$ #:#$
11$ 61$ ;1$ ##1$ #51$ #:1$
13$ 63$ ;3$ ##3$ #53$ #:3$
15$ 65$ ;5$ ##5$ #55$ #:5$
16$ 66$ ;6$ ##6$ #56$ #:6$
19$ 69$ ;9$ ##9$ #59$ #:9$
1:$ 6:$ ;:$ ##:$ #5:$ #::$
1;$ 6;$ ;;$ ##;$ #5;$ #:;$
1?$ 6?$ ;?$ ##?$ #5?$ #:?$
3@$ 9@$ ?@$ #1@$ #6@$ #;@$
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