SAINT PAUL SCHOOL 49 of PROFESSIONAL STUDIES Accountancy Department 1 Diagnostic Examination in ATEOREV Name of student: tericin imal wenn F Seow Class Schedule: tier 3:29-unn Date: Read each tem caretily Select he correctibest arawer for each of te toloweg questors. Witte re letter of your choice on the table below Strictly no ersaures are slowed. ye 3, Hansen Corporation's stock's sted on a national sock exchange anc registered wn tie Secures ‘and Exchange Commission. Hansen's management hres 3 CPA to pectarm an independent aut (of Hansen's financial staternents. The primary Cojecive of this auct = to prove assurance he: A. Investors in Hansen Corporation's stock C Stock excrange B. Secunties and Exchange Comenission D. Management o Hansen Corperaticn 4. The following CPAs hold Masters’ Degrees and Doctorat Decrees, are CPA-Lawyers anc Certinc Internal Auditors, and all of them are reviewing forthe Certfied Fraud Examner (CFE) exams Al are senior associates and are members of PIGPA Which of the folowing Rusirates 2 volar of ‘the ethical requirements on pubicty? A. “George Santos, member PICPA B “Leslie J. Aguere, BSA CPA CIA MBA, Pr” 1G “Enca D. det Rosario, BSA CPA. CIA CFE, MBA. PhO D. “Roseanne F Francisco, Senior Audt Associste" 5. Inthe contest of agency theory, information asymmetry refers to the idea that A. Information can vary ints rekabity. 8. Information can vary in its relevance s@. Management has more information about the entty's tue francial postion then do he acsertee owners (Le. stockholders). D. Management inely wil not actin the best interests cf the abserine owners 6. This PSA covers audits of financial statements in accordance wih spac purpose Framework? ™ PSA B00 c PSA aS B PSABIO D. PSAs 2° somester AY 2018 ~ 2019 Page { of7 asmeiqasto©. 7, According to PSA 200, in conducting an audit of financial statements, the vera bess ote |g wares ee ene ro mgrove fancal eclon of company manage seaunotne [1 Ta ava nana ceil one eran staal we {ree from material masstatemert, whether due to fraud or error, thereby er ang tas to om mateal maitre we! franca sateen a reas tateolrespechacordance wah an appcabetrancil ep08N9 AMON Tea ees ancl ast, on curate a8 equFed By if Texiincultne soars heron A tanditoae ° & item & | oniy Wand i only ‘A: 8. The purpose of acceptance and continuance process is to focus on identifying risks, ascertaining Initigating actions and linking these actions tothe audit planning proces to determine that we: ‘A. Accept and continue to serve only those clients that represent a manageable level of detection risk Meet expectations with respect to our professional performance, Maximize our ligation risk and protect our reputation Select the type of analytical procedure used end the techniques involved in investigating @ ‘ignficantdfleence vee ©. 8. An operational aualt differs in many ways from an audit of financial statements. Which of the following isthe best example of one of these differences? ‘A. The usual audt of financial statements covers the four basic statements, whereas the ‘operational audit is usually limited to ether the balance sheet or the income statement 1B: The Doundaries of an operational audit are often drawn from an organization chart and are not limited toa single accounting perio, CC. Operational aucits do not ordinarily result inthe preparation of @ report. 1. The operational audit deals with pre-tax income. [A 10, Which of he fllowing comes closest to cutining the auditor's responsiblity for internal control on ‘alfinancial statement aucits? ae ‘of the contiol environment and the accounting system is necessary: an Understanding of he control procedures is Necessary fr areas in which the aiator fs performing teat of controls 1B. The auditor must obtain an understanding of each ef the five intemal control elements sufficient toplan the auc C. When tests of controls have been performed, contro isk must be assessed ata level les than the maximum, . An understanding ofthe control environment is necessary, but not ofthe accounting system or Control procedures unless control rik is to be assessed at a level oss than the maximum A 11. When auditor becomes aware of possible noncompliance, the auditor should obtain an Understanding ofthe nature ofthe act to: ‘A. Consider whether ether similar acts have occurred B. Recommend remedial actions tothe audt committee {G. Evaluate the effec onthe financial statements 1D. Determine the reibiity of managements representations C. 12.\Which of the folowing statements best describes the auditor's responsibly to detect conditions Telating to financial stress of employees or adverse relationships between a company and its employees? ‘A "The auditor is required to plan the aust to detect these conditions on al aut 'B. These conditions relate to fraudulent financial reporting, and an auditor is required to plan the aud to detect thave conditions whenever they may resut in misstatements, \c: The auditor is not required to pan the audit to discover these conditions, but should consider them fhe of she becomes aware of them during the aucit 1, The autor is required to plan the audit to detect these conditions whenever they may result in misstatements |g 413.4 finance lease agreement would normaly be fled in ‘A The administrative working paper We, |G! The permanent working paper fe 1B. The current working paper fe 1D. The bulk working fe, 24 somestor AY 2018-2019 Pago 2017 asmalquisto= 14. XYZ Brick Company decided to inflate sales by recording ficttious sales. Several non-existent ents were created and the sales were added into the sales joumal throughout the year. The ‘general transaction related audit objective affected with these action ‘A. posting and summarization, C. completeness. B. accuracy, "Di occurrence or existence 15. An objective of a walk-through isto: A. Verify that the structure has been placed in operation B. Replace test of controls C. Evaluate the major strengths and weaknesses in the client's structure . The aucitors must perform test of controts. + © 48. Which ofthe following is incorrect regarding PSA 3157. a VA This PSA discusses the auditors responsibly to determine overall responses and to design and perform further audit procedures whose nature, timing, and extent are responsive to the risk assessments. | 1B. The purpose of this PSA i to establish standards and to provide guidance on obtaining an understanding of the entity and its environment, including its intemal control, and on assessing the risks of material misstatement in a financial statement audi. ©. This PSA requires the auditor to make risk assessments at the financial statement and assertion levels based on an appropriate understanding of the entity and its environment, including its internal control ' D. The requirements and guidance of this PSA are to be applied in conjunction with the requirements and guidance provided in other PSAS, 1D. 17.A conceptually logical approach to the auditor's consideration of intemal control consists of the following four steps: Tr Determine whether the necessary procedures are prescribed and are being followed satisfactory. IL Consider the types of errors and fraud that could occur. Ill, Determine the intemal controls that should prevent or detect errors and fraud. IV. Evaluate any weakness to determine its effect on the nature, timing, er extent of auditing prooadures fo be applied and suggestions to be made to the client. ‘What should be the order in which these four steps are performed? AWA ‘o nmu Bo Mtv, Omit {(-18, Which of the folowing isa correct response ofthe aucitor when he allows a lower acceptable level (of detection risk? ‘Substantive Testing Procedures Timing ‘Amount Year-end More extensive Aten Lass extensive Yeer-end More extensive ‘Year-end Loss extensive ‘A. 19. The independent auditors’ audit program prepared prior to the start of fiekiwork is appropriately Considered documentation of Ae planning ©. supervision. B. Information evaluation B. quality assurance, 8.20. Tolerable misstatement is ‘A. Materiality allocated to an assertion B. Materiaty forthe balance sheet as a CC. Materiaty for the income statement: \D) Materiaty allocated to a specific account le whole 2 21. Which ofthe folowing is not a specialist upon whose work an auditor may rely? A. Actuary. . Appraiser. {Bp Internal audtor. D. Engineer. 2 somostor AY 2018 - 2019 Pago 3017 asmalquisto