NATIONAL FEDERATION OF JUNIOR PHILIPPINE

INSTITUTE OF ACCOUNTANTS REGION IV

R4 Accounting Varsity Auditing – Level 1
Batch 2019-2020
Instructions: Identify the choice that best completes the statement or answers the question.
You have (1) hour to answer this 40-item exam. Good luck!

____1. A distinction must be made between general audit objectives and specific audit
objectives for each account balance

a) The general audit objective are stated in term tailored to the engagement
b) The general audit objectives are applicable to every account balance on the financial
statements.
c) The specific audit objectives are stated in terms tailored to the agreement
d) The specific audit objectives are applicable to every account balance on the financial
statements

____2. The primary objective of analytical procedures used in the final review of an audit
is to ____

a) assist the audit in assessing the validity of the conclusions reached

b) identify areas that represent specific risks relevant to the audit
c) obtain evidence from details tested to corroborate particular assertions
d) satisfy doubts when questions arise about a clients ability to continue in existence

____3. The audit program usually cannot be finalized until the

a) search for unrecorded liabilities has been performed and documented

b) consideration of the entitys internal control has been completed
c) engagement letter has been signed by the auditor and the client
d) Reportable conditions has been performed and documented

____4. An auditors decision concerning whether or not to dual date the audit report is based
upon the auditors willingness to:

a) assume responsibility for events subsequent to the issuance of the auditors report
b) permit inclusion of a note captioned: event (unaudited) subsequent to the date of the
auditors report
c) extend auditing procedures
d) accept responsibility for subsequent events

____5. Which is true about the audit of summary financial statements?

a) The auditor of the summary financial statements must be the auditor of the audited
financial statements
b) The form of the opinion is similar to the audited financial statements
c) The auditor of the summary financial statements may or may not be the auditor of the
audited financial statements.
d) Summary financial statements are a substitute for reading the audit financial statements.

____6. Regardless of how the allocation of the preliminary judgment about materiality was
done, when the audit is complete the auditor must be confident that the combined errors in
all accounts are

a) less than the preliminary judgment

b) equal o the preliminary judgement
c) less than or equal to the preliminary judgment
d) more than the preliminary judgment
____7. Which is true about review?

a) level of assurance is reasonable b) it is a non-assurance engagement.

c) requires only inquiry and analytical procedures d) no assurance is provided

____8. Which of the following is not a proper match of auditors objective with management
assertion?

a) completeness matches with completeness

b) classification matches with presentation
c) validity matches with existence/occurrence
d) ownership matches with rights and obligations

____9. An audit designed to evaluate the efficiency and effectiveness of an organization or

some part thereof would not come under the title of

a) performance audit b) management audit c) compliance audit d) operational audit

____10. Which is correct when it comes to reporting to summary financial statements coming
from an audited financial statement with an adverse opinion?

a) an adverse opinion is given to the summary financial statements

b) unmodified opinion on the summary financial statement is still possible
c) a qualified opinion is given to the summary financial statements
d) it is inappropriate to give an opinion on the summary financial statements

____11. Most of the independent auditors work in formulating an opinion on financial

statements consists of

a) examining cash transactions

b) comparing recorded accountability with physical existence of property
c) obtaining and examining evidential matter
d) studying and evaluating internal control

____12. The subject matter of an assurance engagement can take the following forms, except

a)evaluation of a capital investment proposal

b) performance of an entity that could indicate efficiency and effectiveness.
c) companys internal control
d)historical or prospective financial statements

____13. What are the two most important qualities for an operational auditor?

a) academic background and sufficient experience b) personality and appearance

c) independence and competence d) competence and technical training

____14. Internal auditing is considered to part of organizations

a) internal control procedures b) accounting system

c) control environment d) external controls

____15. One of the major parts of audit planning is pre-planning. Which of the following is
not involved during the pre-planning phase?

a) obtaining information about clients legal obligations

b) deciding whether to accept or continue an audit engagement
c) obtaining an engagement letter
d) selecting staff for the engagement

____16. In testing the existence assertion for an asset, an auditor ordinarily works from
the

a) potentially unrecorded items to the financial statements

b) financial statements to the potentially unrecorded items
c) accounting records to the supporting evidence
d) supporting evidence to the accounting records
____17. Which of the following statements best describes the auditors responsibility with
respect to illegal acts that do not have a material effect on the clients financial
statements?

a) Generally, the auditor is expected to compel the client to adhere to requirements of the
Board of Accountancy
b) Generally, the auditor is obligated to disclose the relevant facts in the auditors report
c) Generally, the auditor is under no obligation to notify parties other than personnel
within the clients organization.
d) Generally, the auditor is under an obligation to see that stockholders are notified

____18. An auditor should not render a report on

a) quarterly financial information b) management performance

c) achievability of forecasts d) client internal control

____19. Which of the following is not a function of working paper?

a) aid seniors in reviewing and supervising the work of managers and partners
b) documents staff compliance with standards on auditing
c) aid partners in planning and conducting future audits
d) provide support for the auditors report

____20. Philippine Standards on Auditing should be looked upon by practitioners as

a) benchmark to be used on all audits, reviews and compilations

b) maximum standards which denote excellent work
c) minimum standards of performance which must be achieved on each audit engagement
d) ideals to strive for, but which are not achievable

____21. Which of the following matters is least likely to be discussed in an engagement

letter?

a) assistance to be provided by client personnel

b) the fact that an auditor does not plan to detect material irregularities
c) timing of the performance of the examination
d) the fact that the financial statements are the responsibility of management

____22. Which of the following statements does not properly describe a limitation of an
audit?

a) same evidence supporting peso representations in the financial statements must be

obtained by oral or written representations of management
b) many audit conclusions are mad eon the basis of examining a sample of evidence
c) many financial statement assertions cannot be audited
d) fatigue and carelessness can cause auditors to overlook pertinent evidence

____23. In which of the following situations would an expert be least likely contracted by a
CPA?

a) legal opinions concerning interpretations of engagements, statutes and regulations

b) application of accounting methods in computing inventory balances
c) valuations of certain types of assets like land and buildings
d) determination of fair values using specialized statistical techniques

____24. For assurance engagements regarding historical financial information, limited

assurance engagements are called

a) audits b) reviews c) examinations d) compilations

____25. The primary source of information to be reported about litigation, claims, and
assessments is the

a) court records b) clients lawyer c) clients management d) independent auditor

____26. A requirement of the application of Philippine Standards on Auditing is for the
auditor:

a) not to obtain clients by solicitations

b) to inspect all fixed assets acquired during the year
c) to undertake a proper study and evaluation of the existing internal control
d) to charge fees fairly and reasonably in relation to costs of engagements

____27. A purpose of a management representation letter is to replace

a) The scope of an auditors procedures concerning related party transactions and subsequent
events.
b) The possibility of a misunderstanding concerning managements responsibility for the
financial statements.
c) Audit risk to an aggregate level of misstatement that could be considered material.
d) An auditors responsibility to detect material misstatements only to the extent that the
letter is relied on.

____28. If management declines to present supplementary information required by the

Commission on Audit , the auditor should issue a (an)

a) unqualified opinion with additional explanatory paragraph

b) adverse opinion
c) unqualified opinion
d) qualified opinion with an explanatory paragraph

____29. The auditor should obtain evidence of managements acknowledgement of responsibility

for:
I. The fair presentation of the financial statements in accordance with GAAP in the
Philippines.
II. Approval of the financial statements

a) Neither I nor II b) I only c) II only d) Both I and II

____30. A basic premise underlying analytical procedures is that

a) relationships among data may reasonably be expected to exist and continue in the absence
of known conditions to the contrary
b) these procedures cannot replace tests of balances and transactions
c) the study of financial ratios is an acceptable alternative to the investigation of
unusual fluctuations.
d) statistical tests of financial information may lead to the discovery of material errors
in the financial statements

____31. As the acceptable level of detection risk increases, an auditor may change the

a) nature of substantive tests from a less effective to a more effective procedure

b) timing of substantive tests from year end to an interim date
c) assurance provided by tests of controls by using a larger sample size than planned
d) assessed level of control risk from below the maximum to the maximum level

____32. Which of the following statements describes the processing function of an accounting
system?

a) the preparation of financial reports as well as other information, in electronic or

printed format, that the entity uses in measuring and reviewing the entitys financial
performance
b) editing and validation, calculating, measuring, valuing, summarizing and reconciling
functions
c) identifying and capturing the relevant information for transactions or events
d) all of the choices describe the processing function.

____33. Operational auditing does not focus on

a) effectiveness b) economy c) efficiency d) compliance

____34. Which is true about prospective financial information?

a) If presentation and disclosure is incomplete then the opinion is unqualified

b) No opinion is given on the achievability of the forecast
c) If a significant assumption is unrealistic then the opinion is unmodified
d) All of the statements are true

____35. What is the expected response if the expected deviation rate is significantly higher
than the tolerable deviation rate?

a) control risk is assessed as high and no test of controls are performed

b) control risk is assessed as less than high and no test of controls are performed
c) control risk is assessed as less than high and test of controls are performed
d) control risk is assessed as high and test of controls are performed

____36. Which of the following describes most completely how the profession defines
independence?

a) resisting a clients reluctance to reveal evidence

b) performing an audit from the publics point of view
c) avoiding the appearance of a significant interest in an audit client; s interest
d) accepting responsibility to act professionally and in accordance with the professional
Code of Conduct

____37. Which of the following is not required by the Philippine Standards on Auditing?

a) Management representation
b) Attorney letter
c) Engagement letter
d) Management letter

____38. What particular audit-related services provide no assurance?

a) agreed-upon procedure and compilation engagements

b) audit and review engagements
c) review and compilation engagements
d) agreed-upon procedure and review engagements

____39. An external audit

a) contradicts an internal audit
b) overlaps an internal audit
c) complements an internal audit
d) confirms an internal audit

____40. Which of the following types of audits would be intended to cover environmental
matters that may impact on the financial statements?

a) a program audit
b) an operation audit
c) an environmental audit
d) a financial statement audit

---- Thank you for taking the exam. We will be informing you about the results. ----
Answer Key:
1. b AVERAGE
2. a AVERAGE
3. b AVERAGE
4. c AVERAGE
5. a AVERAGE
6. c AVERAGE
7. c AVERAGE
8. b AVERAGE
9. c AVERAGE
10. d AVERAGE
11. c AVERAGE
12. a AVERAGE
13. d AVERAGE
14. c AVERAGE
15. a AVERAGE
16. c AVERAGE
17. c AVERAGE
18. c AVERAGE
19. a AVERAGE
20. c AVERAGE
21. b AVERAGE
22. c AVERAGE
23. b AVERAGE
24. b EASY
25. c AVERAGE
26. c AVERAGE
27. b AVERAGE
28. a AVERAGE
29. d AVERAGE
30. a AVERAGE
31. b AVERAGE
32. b AVERAGE
33. d AVERAGE
34. b AVERAGE
35. a AVERAGE
36. d AVERAGE
37. d AVERAGE
38. a AVERAGE
39. c AVERAGE
40. c AVERAGE