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    19 views14 pages

    Removal Exam PDF

    Uploaded by

    KIMBOB

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    © All Rights Reserved
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    of 14
    Macaarnigon, Omelhaie M, YY. Managenent assertions are: Directly related to financial 7 ceporting standards: B. Directly related to standards on auditing. c. Indirectly related to standards on auditing. |. Indirectly related to financial reporting standards B- Regardless of how the allocation of the preliminary judgment about materiality las done, when the audit is complete the auditor mist be confident that «the combined errors in all accounts are |B Less than or equal to the preliminary judgment. B. Less than the preliminary judgment. c. Equal to the preliminary judgment. D. More than the preliminary judgment. 3. Which of the following statements best describes the auditor's responsibility 1 with respect to illegal acts that do not have a material effect on the client’s financial statements? Generally, the auditor is under no obligation to notify parties other ‘than personnel within the client's organization. P B. Generally, the auditer is under an obligation to see that stockholders are notified C. Generally, the auditor is obligated to disclose the relevant facts in che auditor's report. D. Generally, the auditor is expected £0 compel the client tq adhere to reguirenents of the Foreign Corrupt €. Audit evidence can come in different fom: with different degrees of persuasiveness. Which of the following List is the LEAST persuasive type of | evidence? A. Prenumbered client sales invoices. i 1B. Vendor's invoices. C. Bank statement obtained from the client. D. Computations made by the auditor. 5. The preconditions for an audit are TE. Managexent shall not request the auditor to prepare a draft of the Financial statements II. Managenent’s use of an acceptable financial reporting framework III, Managenent’s agreement to the premise on which an audit is ‘conducted A. ¥ and Tr only Zot nrenly € trang art only Dl tz and 119 @. ds the acceptable level of detection isk increases, an auditor my change che: A. ature of substantive test from a "ess effective to a more effective procedure. Timing of substantive test from year fend to an interim date. Assessed level of control risk from below the maximum co the maximum level. Removal Exam AT D.+ Assurance provided by test of controls by using a larger sample size than planned. 7, In testing the existence assertion for fan asset, an auditor ordinarily works from the! A." Supporting evidence to the accounting records. B. Accounting records to the supporting evidence. . Financial statements to the potentially unrecorded itens. 8. Potentially unrecorded items to the financial statements. Proper segregation of functional responsibilities in an effective structure of internal control calls for separation of the functions authorization, execution, and payment Authorization, recording and custody. Custody, execution, and reporting. ‘Authorization, payment, and recording. 9. The primary source of information to be reported about litigation, claims, and assessments is the: A. Independent auditor: (B) Client’s management. C. Client’s lawyer. D. Court records. 10.The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to Enable the CPA firm to attest to the Gntegrity of the client managenent Satisty the CPA firm's duty to che public concerning the acceptance of the new clients c. Anticipate kefore performing any field work whether an unmodified opinion tan be expressed gd Minimize the likelihood of association with clients whose managenent lacks integrity 11. The peimanent f11e section of the working papers that is: kept for each audit client MOST likely contains | A. Correspondence with the client's Legal counsel concerning pending | Litigation, | B. “A schedule of time spent on the engagement by each individual auditor Narrative descriptions of the client's accounting procedures and Antemal controls: D. Review notes pertaining to questions and comments regarding the audit work performed. 12. The primary emphs details of balances i on the to ua in most tests of AD Income statement accounts. B. cash flow statements account Balance sheet accounts. ALL of these. 13. nich of the following represents an inherent Limitation of internal controls? A. Bank reconciliations are not performed on a timely basis. . B. Customer credit checks are not performed. c. The CEO can request @ check with no purchase order. . Shipping documents are not matched to sales invoices. iA.wmich of the following audit procedures is used extensively throughout the audit but does not, by itself, provide sufficient appropriate evidence? A. Inspection of tangible assets. 1B, Inapection of records or documents. inquiry. 7 Observation. 15.Wnich of the following factors would most Likely cause a CPA to decide not to accept a new audit engagement? ‘The CPA’s lack of understanding’ of ‘the prospective client’s internal * auditor's conputer-assisted audit techniques: Managenent’s disregard ofits responsibility to maintain an adequate internal ‘control ‘environment The CPA's inability to determine whether related-party transactions were consummated on texma equivalent to arm’s-length transactions Management's refusal to permit the CPA to perform substantive tests before the year-end U6. which of the following audit techniques would provide’an auditor with the MOST aeaurance about the effectiveness of the operation of an internal control procedure? = i > Observation of client personnel Inquiry of client personnel. Confirmation of the outside parties. Recomputation of account balance 7. tntemal auditing relates to: he ‘Audit which serves the needs of management. Audit which is performed by a professional practitioner as an Undependent contractor. Audit which is incidentally Concerned with the detection and Prevention of fraud. Audit wherein the auditor should be Independent of management both in fact and in mental attitude. 18. The following are the descriptions of assertions about presentation and disclosure. which one refers to completeness? a ‘ALL disclosures that should have been included in the financial statements have been included. Disclosed events, transactions and other matters have ogcurred and pertain to the entity. Financial information is appropriately presented and described, and disclosures are clearly expressed, Financial and other information are disclosed fairly and at appropriate amount. 19. Physical examination of tangible assets is an insufficient form of evidence when tthe auditor wants to determine the: gocly Ownership of the assets. Condition or quality of the assets. Existence of the assets. Quantity and description of the 20.Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor’ s a. Opinion of any subsequent events oecurring since the predecessor's audit report was issued b. Understanding as to the reasons for = che change of auditors cy Awareness of the consistency in the application of GAAP between periods @. Bvaluation of all matters of Continuing accounting significance 2. mich of the following is NOT generally [Considered a financial statement audit Fisk factor? x B. ce fate of change in the entity's Tndustey ia sania. Management operating and financing decisions are dominated by top how elzent with no ptior audit hastory. Profitability of the entity relative to ita andustry 15 inconsistent, 22. Which of the following criteria is Unique to the auditor's attest function? pole» General competence Independence Due professisnal care Familiarity with the particular industry of which the auditor's client is part 23.wnen @ CPA expresses an opinion on financial statements, nis or her Eesponsibilities extend to 24.an audit a ‘he underlying wisdom of the client's management decisions. Whether the results of the client operating decisions are fairly Presented in the financial statements. . Active participation in the Amplenentation of the advice given to ‘the client. An ongoing responsibility for the client's solvency. ‘igned to evaluate the efficiency and effectiveness of an organization or some part thereof would not cone under the title of g Management audit Compliance audit Operational audit Performance audit 25.Which of the following statements would a st Likely appear in an auditor's fengagenent letter? Fees for our services are based on our regular per diem, plus travel and other out-of-pocket expenses During the course of our audit ve may observe opportunities for economy in, or improved controls over, your operations. Our ‘engagement is subject to the isk that material misstatements or fraud, if they exist, will not be detected d. After performing our preliminary analytical procedures we» will Giscuss with you the other Procedures we consider necessary to Complete the engagement 26. Confirmation is the process of obtaining fa representation of information or of an existing condition directly froma third party. Traditionally, confirmations are used to verify A. Individual transactions between organizations, such as sales B. Fixed assets additions. ©. Bank balances and accounts = receivable. D. ALL of the choices. 27.K confirmation request letter should ‘always be sent under the control of: A, The auditor. The recipient. c.° the client. D. Both the auditors and the recipient. 28. Which setting a preliminary judgment about materiality, . Less evidence is required for a low peso amount’ than for a high peso amount. B. The same amount of evidence is required for either low or high peso amounts: More evidence is required for a low peso. amount’ than for a high peso D. There is no relationship between it and the peso amount of evidence needed. 29. Preliminary arrangements agreed to by the auditors and the elient should be reduced by the auditors. The best place to set forth these arrangements isin: A. R client representation letter. B.A confimmation letter attached to the G An engagement letter. 3. A memorandum to be placed in the Permanent section of the auditing working papers. 30. managenent imposes @ restriction or Limitation on the scope of the auditor's work in the terms of the audit engagenent and the restriction would cause the auditor to disclaim an opinion fon the financial statements, the auditor Cannot accept any engagement from the client Can accept the audit engagement but disclaim an opinion en the financial Cannot accept sucha ‘limited engagement as an audit engagement 4. Report the matter to the appropriate regulatory agency S1-What are the three (3) most commonly sought assurance services? A. Rudits, review and compilations. B. Audits, compilations and other = assurance services. S. Reviews, compilations and other D. Audits, reviews and other assurance services. 32.wnen the recipient has accomplished the confirmation request, replies should be Al Sent directly to the client, after which the client gives the replies to the auditor. Sent directly to the auditor, wath another copy of the reply going to the client. ©. Not sent back since a confirmation request does not necessitate reply. Sent directly to the auditor. 2B. which of the following id MOT considered by the CPA when he makes an overall audit plan? AL The effect of information technology fon the audit. B, Identification of complex accounting areas including those involving accounting estimates. C. The nature and timing of reports and — other communication with the entity that are expected under the engagement. D. The content of the representation letter. 34. the "hallmark" of auditing is ‘A. Available audit technology. B. Materiality and audit risk. C! Generally accepted auditing standards D. Professional judgment. aSTWmich of the following documentation is hot required for an audit in accordance with generally accepted auditing standards? aA written audit plan setting forth = tne procedures necessary to accomplish the audit’s objectives b. An indication that the accounting records agree or reconcile with the Einancial statements ©. A client engagement letter that sumarizes the timing and details of the auditor’ s planned fieldwork d. The assessment of the risks of material misstatements 36.Which of the following 1s NOT a valid sequence of steps in the audit process? ‘A; Determining detention risk, assessing” internet risk, performing certain. analytical procedures B. Choosing audit risk, performing certain analytical, “assessing internet risk ©. Performing certain analytical procedures, assessing internet Hisk, assessing control link D. Choosing audit risk, assessing control. risk determining detection risk. PF wnich of the folloving is most correct concerning the understanding of internal control needed by auditor to plan the audit? ‘A. The auditors must understand the = control environment, the accounting system, and must use judgment as to contral Procedures which ‘must Considered. B. The auditors must understand the control environment but not the accounting system, or control procedures. ¢. The auditors mist understand the control environnent the Secounting system, and! not the control procedures. D. The auditors mist understand the Contol environment, the accounting “system, and all ‘control procedures. 38.Wnich of the following statement BEST describes control environment? Ay This. includes “the governance and = nanagenent functions andthe Bi tg ey ey se ee, actinudes, awareness, and attion of _ those charged with’ governance and anagement concerning the entity's Internal control and its importance fo the entity. B. The entity's process for identifying Business Fiske relevant to financial Feporting objectives and deciding absut actions to address those risks, | ‘ and the results thereof. c. The? syste for transferring infomation from transaction processing” systems to be general Tedger or the financial reporting system. 39.0 obtain an understanding of a continuing client's business in planning fan audit, an auditor MosT likely would: &. Review prior year working papers and the permanent file for the client. (B Read specialized industry journals. Performs test of details of transactions and balances. D. Reevaluate client's internal control 40.Acrangenents concerning which of the «following are. least likely. to be included in engagement letter? 8. A predecessor auditor 4B. CPA investment in client securities ‘e. Fees and pillings 4. Other services tS be provided in addition to the audit Alotniéh of the following factors or Conditions is an auditor LEAST Likely to Sion an mudit'to discover? i "tugh tecnover of seicr minspenint. BY Financial pressures affecting exployees. c. Siedeyinte monitoringio€ sighisicant Spertia. B, HeaDLiity to generay posstive cash Flous fea operations. <2. management's attitaie tovards aggrensive ‘nancial reporting and ies emphasis on Eecting, peojected, profit goals nest TeipTucuia signicicanciy.sheluence an Sneiay’d sastcol envseonaene when’ n"Epeeenal "policies vestablianed” ny Purtics cutside the eneity affect ita Sccounting practices. : s. Menegenene Pas doainated by’ one Tnaividual who ia sige shareholder. The audit “comittes is active. in Gvecaseing the entity's financial Zeporting policies. b. Internal’ aoditors have dixect access tothe board of directors and eneity 43. wnch of the following descriptions ~ pertain to physical conerols? athe “aasignment of incompatible Functions to different people. B. Physical security of assets, including % [iequate safeguards “such as. secured faciiicies ‘over eecesa to asocts ad fecords- c. Control’ activities that, include feviews and analyses "of actual performance versus budgets, forecasts, Sha. pricr periea performance p. contcols performed vo check accuracy, Conpletentss, and ‘authorization of transaction + ad.wmich one of these is Non a type of cvidence that would be used for both Ghteining an understanding of eh Conecol semucture and ceating the Conecols? AS" Inguirtes. E Repertormance. inspection. D. observation 45. Which of the following us not considered ani “initial audit”? a. Prior year FSs were audited by the predecessor auditors b. Prior year F5s were not audited © Prior year Fss were rendered with disclainer of opinion d.. None of the above 46.A9 the acceptable level of detection risk decreases, the assurance directly provided tr A. Substantive tests should decrease. B. Tests of controls should increase. Gi Substantive tests should increase. D. Tests of controls should décrease. 47. In which of the following situations would an expert be LEAST Likely ‘contracted by a CPA? A. Determination of fair values using specialized statistical techniques. 8, Legal opinions concerning = interpretations of -engagenents,, statutes and regulations. c. Application of accounting methods in ‘computing inventory balances. b. Valuations of certain types of assets like land and buildings. When setting a preliminary judgnent about matersality A. Less evidence is required for a low peso amount than for a high peso, BL The same amount of evidence is required for either low ar high peso ancunts. é cs More evidence is requied for a low = peso amount than for a high peso D, There is no relationship between it and the peso anount of evidence heeded. 49.Non-assusance engagenants include all of the following, EXCEPT A. agzeed-upon procedures. 2B! Preparation of tax returns where no Conclusion ss expressed, “G, Compliance audie~ D. Management consulting. 50.An auditor accepts or continues an ‘engagement when: I. IE has considered the integrity. of the client 1. Tt can comply with. ethical requirements TIT. Te is competent (capabilities, ‘time and resources) to “perform the ‘engagement SIV, The preconditions for an audit are present Vy, Management “and the auditor have _7© common understanding of the terms of the audit engagement a. All of the abave except IV b. ALL of the above except V0 * ©. All of the above except 111 ; ALL of the above set. wniSh of the follouing characteristics MOST Likely would heighten an auditor's concern about the risk of intentional manipulation of financial statements? A. Turnover of senior accounting personnel i low. fg, Insiders recently purchased = saditional shares of the entity's stock. €. The rate of change in the’ entity's industry 13 low D, Management places substantial fenphasia on meeting earnings projections 52.Withh respect’ to errors and irregularities, the auditer should, plan to, A. Search for irregularities that would have a material effect and for ecrors that would have either material or imaterial effect on the financial statements. B, Search for error that would have a material effect and for iegegularities that would have either material, or imaterial effect ‘on the financial statements. . Discover errors or irregularities chat have either material or Amaterial effect on the financial D. Search for errors or irregularities = that would have a material effect on 53.Wnich of the following procedures ordinarily: performed during an’ audit are ‘also performed in a review engagement? A, Assessment of accounting and internal control systems. . B. Test of controls. CL Test of records and responses to Anguires. D. Inquiry and analytical procedures. S4.The cbsective of performing analytical 3 procedures in planning an audit cnyegenent 25 fo identify the existence AD Tifegal acts that went undetected becsuse of internal control weaknesses. BL Related party transactions. €. Recorded transactions that ere not properly authorized. Unusual eransactions and events. 55. fE‘issues have been identified, and’ the auditor decides to withdray from the engagement, 1. Comunicate | the” reasons ‘to managenent 32. Cominicate the reasons to these jarged with governance HIE. Document the matters. regarding the withdraval (e.g. consultation, conclusions reached, basis) ‘aT and 11 only . T-and 111 only e. tivand IID only 4. 4,11 and 111 56. For assurance engagements regarding historical financial information, linited assurance engagements are called Be Reviews Be Audits. C1 Compilations. D. Examinations. | S0.with respect to planning an audit, which of the following statement 13 always True? Ay Te is acceptable to perform portion of the audit of a continuing Client at interim dates. 5. An engagenent should not be accepted after the client's year end. . An inventory count must be observed at year end? D. Financial staffing decisions must be fade prior to completion of the Planning stage. f-Wnien of the following 49 LEAST Likely sidered by the auditor edeablishing the overall audit strategy. Sand developing the audit plan? ‘A. The ems of Payment to other fuditors and their respective clients. 8. Underatanding of the accounting and snternal control systems. ¢. Risk and materiality DY The involvenent of Other auditors in'the audit of major subsidiaries sf. n designing audit programs, an auditor ‘should establish specific audit objectives that related primarily to the Ay FinaneTal statement assertions af selected audit techniques. €, Timing of audit procedures. D. Cost-benefit of gathering evidence. of Before ‘accepting an audit engagement, 2 successor auditor should make specific inquiries of the predecessor auditor regarding a.[ Disagreements the predecessor had with the client concerning auditing procedures and accounting principles b. The predepessor’s. evaluation of matters of continuing significance ec, The degree of cooperation the predecessor received concerning the inquiry of the client's lawyer d, The predecessors assessments of inherent risk and judgments about maveriality 61. Cosp-benefit considerations are part of “audie planning, in relation to this, ‘which of the following audit procedures YEiusualiy the LEAST costly to perform? A. eats of controls. BB. Analytical procedures, 2, Tests of balances. D: Substantive tests of transactions. 62. The objective of performing analyes procedures in planning an audit Engagement 13 to identify the existence of < ‘A. Elegal acts thae went undecected because of internal control weaknesses B, Unusual transactions and events: "El Related, party -transactions- D. Recorded transactions that were not Properly authorized. fh-tne or the vases parte’ of audit’ planning 42 pre-planning, which of the following 43 HoT involved during the pre-planning Phase? 4." Obtaining an engagement Letter. B. obtaining information about client's legal ‘obligations. €. Selecting staff for the engagement. B Deciding whether to acceptor continue an audit engagement 64. which of ‘the ‘following matters is LEAST Likely to be discussed in an engagement aereer? . UX: The fact that the financial statements are the responsibility of engagement. B. The fact that an auditor does not Plan to detect material Argegularities. ©. Assistance to be provided by client Personnel. D. Timing of ‘the performance of the ‘examination. 65, It involves establishing the overall. audit strategy for the engagement and developing an audit plan we Audit planning ’b. Understanding the entity €. Audit objective d. Audit decunentation 66.0 obtain an understanding of @ Continuing client’a Business 4m plans Sn audit, an auditor MOST Likely" weulae® Read specialized industry journals. Performs test of details of transactions and balances. Review prior year working papers and the permanent file for the client. Reevaluate client's anternal control 67 opetational auditing does not focus on _ BP phe EB Ficiency. B. Bconomiy. -& Compliance. D. Bffectivencss. 60. What particular ‘augit-related services provide NO assurance? R. Review and compilation engagenents. BL Agreed-upon procedure, and review » engagenent's. ~ C. Agreed-upon ‘procedure and ~ conpitation engagements: D, Audit and review engagenents. 69. Philippine Standards ‘on Auditing (PSA) should be Looked upon by practitioners” "A. deals fo strive for, but which are not achievable. B. Maximun standards which denote excellent work. Minimin standards of perfomance which mist be achieved on each audit engagement.” D, Benchmark to be used on afl audits, eviews and compilations 70.which of the following procedures would 2 CPA ordinarily perform during audit planning? Obtain understanding of the client's business and industry. b. Review the, client's bank reconciliation i c. Obtain client's —_ representation letter al Review and evaluate client’ ubvernal control — orn auditor ‘tiould Nor render a répore Aelient internal dontzol 2 Managenent performance. €2 Quarterly financial information.» By the achievability of forecests “ratlnich of the felloving types of audite are Host similar? Al Internal. and independent financial Statement udies. 8. Operational audits and compliance sodits C, Independent nancial statenent,audics tnd operational’ audits >. Compliance suite and independent SSnancial statement audies WD inherent tisk and control xi0k are collectively Youn as Av the dependent: varabIe¥ Of FSIS: Bi he dual eisk Yeam. The Fisk of infommatich dissemination. ‘the tisk of material misstatement Pier developing the ovevalt audit plan fr a" new client, “the auditor does not consider or hatersality levels B. The client's business, including the organization tricture and Sceounting system ocd The amount of entinated aucit fa The audit Feks and procedures to. be performed | co achieve suit Sbjectives 75.1n planning the audit engagement, the tudltor should consider "cach of the Felioning, excert y gos clboen pata a. Matters relating to the entity's business and the industries in which it operates b. The entity's accounting policies and procegures €. Anticipated levels of control risk and materiality d. The Kind of opinion that is likely to be expressed 16. is -an intentional Risstatement or caission of ancunts or disclosures with tile intent to deceive others Fraudulent finaneial reporting Misappropriation of assets Both A and 8 None of the above is correct 77. Peaudulent financial reporting may + "be accomplished through” the manipulation of Assets Revenues Liabilities ALL of the above 7B.vnich of the following is not a factor that relates to opportunities fo commit fraudulent financial reporting? Management's practice of making overly aggressive: forecasts. Significant accounting estimates involving Subjective judgments : Ineffective board of director oversight ‘over financial reporting Migh turnover of accounting, internal audit and information technolégy staff 79.weich of the following statements describes circumstances that b\ < underlie employee incentives to misappropriate assets? Weak internal controls encourage employees to chances. If. management cheats customers and gets away with it, then employees can do the Sane to the company. Dissatistied employes sense of entitlenent Bach of the above describes circumstances underlying “employee, incentives to. misappropriate assevs. may -steal from a 80:wnich of the following is not a factor that relaves to opportunities to misappropriate assets?

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