Auditing Theory Quiz on Chapter 1 and 2 * Required 1. Name* Skip to question 2 Please choose the correct answer Auditing is based on the assumption that financial data and statements are in conformity with 1 point appropriate criteria. Mark only one oval. tne OO ralseThe auditor communicates the results of his or her work through the medium of the audit report ‘Mark only one oval. ‘An operational audit is designed to determine whether the audit committee of the board of directors is effectively discharging its responsibility to oversee management's operations. Mark only one oval, Tue © False The responsibility over the financial statements rests with the management and the auditor assumes responsibility with respect to the notes of financial statements. Mark only one oval, Otne O False 1 point 1 point 1 point6 Because an examination in accordance with generally accepted auditing standards is 1 point influenced by the possibility of material errors, the auditor should conduct the examination with an attitude of objective judgement Mark only one oval, Otne False In connection with the element of professional development, a CPA firm’s system of quality | point control should ordinarily provide that all personnel have the knowledge required to enable them to fulfill responsibilities assigned. Mark only one oval, (we O False8 10. The general standards stress the importance of personal qualities which the auditor should have. Mark only one oval. Owe OFalse The purpose of an audit to financial statements is to enhance the degree of intended users of financial statements. ‘Mark only one oval. ) True (O False The auditor's opinion certifies the correctness of the financial statements. Mark only one oval. Orne ) False 1 point 1 point 1 point" 12 When the professional accountant has obtained sufficient appropriate evidence to conclude 1 point that the subject matter conforms in all material respects with identified suitable criteria, he or she can provide high level of assurance. ‘Mark only one oval. > True False In determining the primary responsibility of the external auditor for an audit of acompany's point financial statements, the auditor owes primary allegiance to: Mark only one oval. (__) the management of the audit client because the auditor is hired and paid by management __) the audit committee of the audit client because that committee is responsible for coordinating and reviewing all audit activities within the company (_) stockholders, creditors, and the investing public ( the Auditing and Assurance Standards Council, because it determines auditing standards and auditor's responsiblity. > Other:13. The criteria for evaluating quantitative information vary. For example, in the audit of historical 1 point financial statements by CPA firms, the criteria are usually Mark only one oval. ) Generally accepted auditing standards ») Generally accepted accounting principles (Regulations of the Internal Revenue Service. () Regulations of the Securities and Exchange Commission 14, The best statement of the responsibility of the auditor with respect to audited financial 1 point statement is Mark only one oval. (_) The audit of the financial statements relieves management of its responsibilities __) The auditor's responsibility is confined to his expression of opinion about the audited financial statements The responsibilty over the financial statements rests with the management and the auditor assumes responsibility with cespect tothe notes of financial statements ) The auditor is responsible only to his unqualified opinion but not for any other type of opinion15. Which of the following least likely limits the auditors ability to detect material misstatement 1 point Mark only one oval. Most ausit evidences are conclusive rather than being persuasive, ) The inherent limitations of any accounting and internal control system (> Audit is based on testing . Audit procedures that are effective in detecting ordinary misstatements are ineffective in detecting Intentional misstatements 16. Which of the following best describes why an independent auditor reports on financial 1 point statements? Mark only one oval. ) Independent auditors are ikely to detect fraud O Competing interests may exist between management and the users ofthe statemente (—) Misstated account balances are generally corrected by an independent audit. ) ineffective internal controls may exist17. Which of the following is an incorrect phrase? Mark only one oval. ) Audi C ng is a systematic process. (> Auditing subjectively obtains and evaluates evidence. _) Auditing evaluates evidence regarding assertions. (Auditing communicates results to interested users. 18, Users of financial statements demand independent audit because Mark only one oval. (—) Users demand assurance that fraud does not exist >) Management may not be objective in reporting > users expect auditors to correct management errors ) Management relies on the auditor to improve internal contral 1 point 1 point19. It involves informing assistants of their responsibilities and the objectives of the procedures they have to perform Mark only one oval. supervision onitoring directing > Consultation 20. Generally Accepted Auditing Standards (GAAS) and Philippine Standards on Auditing (PSA)should be looked upon by practitioners as: Mark only one oval. ) Ideals to work towards, but which are not achievable ) Maximum standards which denote excellent work —) Minimum standards of performance which must be achieved on each audit engagement. (—) Benchmark to be used on all audits, reviews, and compilations. 1 point 1 point21. Which of the following best describes what is meant by Generally Accepted Auditing 1 point Standards? Mark only one oval. ) Pronouncements issued by the Auditing Standards and Practices Couneil ») Procedure to be used to gather evidence to support financial statements, (> Rules acknowledged by the accounting profession because of their universal compliance. (Measures ofthe quality ofthe auditor's performance 22. Anauditor need not abide by an auditing standard if the auditor believes that 1 point Mark only one oval. The amount is immaterial ) The requirement of the standard is impractical to perform — The requirement of the standard is impossible to perform Any of the three above is correct.23. ACPA should comply with applicable generally accepted auditing standards on every engagement Mark only one oval. —_) Without exception » Except in examinations that result in a qualified report Except in engagements where the CPA is associated with unaudited financial statements. > Except in examinations of interim financial statements. 24, Who should take responsibility for the overall quality on each audit engagement? Mark only one oval. ( Engagement quality control review — Engagement Partner ) Engagement team cea firm 1 point 1 point25. Which of the following is not required by the Generally Accepted Auditing Standards that 1 point states that due professional care is to be exercised in the performance of the audit? Mark only one oval. ) observance ofthe standards of field work and reporting Critical review of the audit work performed at every level of supervision Degree of skill commonly possessed by others in the profession Responsibitty for losses because of errors of judgment 26. An auditor who accepts an audit engagement and does not possess the industry expertise of || point the business entity, should Mark only one oval. —) Engage financial experts familiar with the nature of the business entity > obtain a knowledge of matters that relate to the nature of the entity's business >) Refer a substantial portion of the audit to another CPA who will act as the principal auditor. (First inform management that an unqualified opinion cannot be issued27. 28. In any case in which the CPA or the CPA's assistants are not qualified to perform the work, 1 point professional obligation exists to Mark only one oval. Acquire the requisite knowledge and skills ( Suggest someone else who is qualified to perform the work ( beeline the engagement Any of the above ‘ACPA, while performing an audit, strives to achieve independence in appearance in order to 1 point Mark only one oval. (_) Reduce risk and liability. (—) Comply with the generally accepted standards of field work ( Become independent in fact. Maintain public confidence in the profession,29. The standard of due audit care requires the auditor to Mark only one oval. “decision, (—) Ensure that the financial statements are free from error. ( Make perfect judgment decisions in all eases. Possess skills clearly above the average for the profession 30. The third general standard states due care is to be exercised in the performance of an audit. This standard is generally interpreted to require Mark only one oval. Objective review of the adequacy of the technical training and proficiency of firm personnel > Critical review of work done at every level of supervision ( Thorough review ofthe existing internal control structure ) Periodic review of a CPA firm's quality control procedures. Apply judgment in a conscientious manner, carefully weighing the relevant factors before reaching a 1 point 1 point31. Which of the following statements is incorrect? 1 point Mark only one oval. () The auditor's report must state whether the financial statements were prepared with GAAP ( The auditor's report must state whether GAAP was consistently followed from the prior period to the current period, ( The auditor's report must imply whether the client has provided adequate disclosure on the financial statements and in the accompanying notes (The auditor's report must express an opinion on the financial statements taken as a whole, or explain why there is no opinion provided 32. Which of the following factors most likely would cause a CPA to decline to accept anew audit 1 point ‘engagement? Mark only one oval. —) The CPA does not understand the entity's operations and industry. ( Management acknowledges that the entity has had recurring operating losses. The CPA is unable to review the predecessor auditor's working papers. (Management is unwilling to permit inquiry ofits legal counsel.33. 34. A basic objective of a CPA firm is to provide professional services that conform with 1 point professional standards. Reasonable assurance of achieving this basic objective is provided through Mark only one oval. (_) A system of peer review —) Continuing professional education, ( Asystem of quality controls. — Compliance with generally accepted reporting standards. The auditor is required to maintain professional skepticism throughout the audit. Which of the 1 point following statements concerning professional skepticism is false? Mark only one oval. (—)Abelief that management and those charged with governance are honest and have integrity relieves the auditor of the need to maintain professional skepticism. (Maintaining professional skepticism throughout the audit reduces the risk of using inappropriate assumptions in determining the nature timing, and extent of the audit procedures and evaluating the results thereof. Professional skepticism is necessary tothe ctical assessment of audit evidence, (—) Professional skepticism is an attitude that includes questioning contradictory audit evidence obtained.35. Which of the following terms best describes the audit of a taxpayer's return by a BIR auditor? 1 point Mark only one oval —_) Operational audit Internal audit ) Compliance audit > Government audit 36. Which of the following is the most appropriate action to be taken bya CPAwhohas been point asked to perform a consulting services engagement concerning the analysis of a potential merger if he/she has little experience with the industry involved? Mark only one oval ) Accept the engagement but he/she should conduct research or consult with others to obtain sufficient competence (_) Decline the engagement because he/she lacks sufficient knowledge. __) Accept the engagement and issue a report that contains his/her opinion on the achievability of the results of the merger. ») Accept the engagement and perform it in accordance with Philippine Standards on Auditing (PSAs).‘An objective of a performance/operational audit is to determine whether an entity's 1 point 37 Mark only one oval. (D operational information Ie in accordance with government auditing standards. © Speeifie operating unite are functioning economically and efficiently. Finanelal statements present faily the results of operations. >) Internal control is adequately operating as designed 38. For audits of financial statements of listed entities, the engagement partner should not issue 1 point the auditor's report until the completion of the Mark only one oval. Engagement Quality Control Review ) Management Review Engagement Team Review > Engagement Partner ReviewThe internal auditing department's responsibility for deterring fraud is to 1 point 39. Mark only one oval. Establish an effective internal control system, —) Maintain internal control () Examine and evaluate the system of internal control, (> Exercise operating authority over fraud prevention activities, 40. As far as financial statement are concerned, this is the attribute that mostly differentiates an 1 point external auditor from client management Mark only one oval. ) Integrity ) Competence ) Independence ) Updated Informationa 42. Representation by management, explicit or otherwise, that are embodied in the financial 1 point statements as used by the auditors to consider different types of potential misstatements that may occur ‘Mark only one oval. > Financial statement assertions > Audit evidence Notes to financial statements (__) Disclosure requirements The primary responsibility for the prevention and detection of fraud and error in financial 1 point statement rest with Mark only one oval. ) The external auditor, the company management and those charged in governance ) The company's management Those charged in governance >) The company's management and those charged in governance.43. Which of the following types of audits are most similar? 1 point Mark only one oval —_) Operational audit and compliance audit ») Independent financial statement audit and operational audit D Compliance auait and independent financial statement aut > Internal audits and independent financial statement audits 44, structured representation of historical financial information , including related notes , 1 point intended to communicate an entity's economic resources or obligations at a point in time or the changes there in for a period of time in accordance of financial accounting framework Mark only one oval. ») Annual Report C_) Engagement documentation (Accounting Records __) Financial Statements45. This means the gathering of audit evidence necessary for auditor to conclude that there are 1 point no material misstatements in the financial statements, taken as a whole, Mark only one oval. —) Professional judgement conservatism Audit Risk > Reasonable Assurance 46. The following are fundamentals principles of ethical requirements except for 1 point ‘Mark only one oval. Independence ) Professional competence and due care > objectivity ) Integrity47. 48. ‘Submission ID (skip this field) * A, DO NOT EDIT this field or your time will not be recorded. ‘Submission Tracking ID - DO NOT CHANGE * This is important for tracking purposes. Do not change. Any change inthis will make your submission void This content is neither created nor endorsed ty Google.