1.

Which of the following represents an additional cost of transmitting business transactions by means of electronic data interchange (EDI)
rather than in a traditional paper environment?
a. Redundant data checks are needed to verify that individual EDI transactions are not recorded twice.
b. Internal audit work is needed because the potential for random data entry errors is increased.
c. Translation software is needed to convert transactions from the entity’s internal format to a standard EDI format.
d. More supervisory personnel are needed because the amount of data entry is greater in an EDI system.

2. In assessing control risk for purchases, an auditor vouches a sample of entries in the voucher register to the supporting documents. Which
assertion would this test of controls most likely support?
a. completeness c. valuation or allocation
b. existence or occurrence d. rights and obligations
3. Which of the following comparisons would an auditor most likely make in evaluating an entity’s costs and expenses?
a. The current year’s accounts receivable with the prior year’s accounts receivable.
b. The current year’s payroll expense with the prior year’s payroll expense.
c. The budgeted current year’s sales with the prior year’s sales.
d. The budgeted current year’s warranty expense with the current year’s contingent liabilities.

4. An auditor is planning an audit engagement for a new client in a business that is unfamiliar to the auditor. Which of the following would be
the most useful source of information for the auditor during the preliminary planning stage, when the auditor is trying to obtain a general
understanding of audit problems that might be encountered?
a. Client manuals of accounts and charts of accounts.
b. Industry audit guides
c. Prior year documentation of predecessor auditor
d. Latest annual and interim financial statements issued by the client.

5. Financial statements prepared in accordance with a financial reporting framework designed to meet the financial information needs of specific
users are referred to as
a. special purpose financial statements
b. special purpose framework
c. general purpose financial statements
d. specific purpose financial statements

6. Which of the following statements best express the objective of the traditional audit of financial statements?
a. To express an opinion on the fairness with which the statements present financial position, financial performance, and cash flows in
accordance with PFRS.
b. To express an opinion on the accuracy with which the statements present financial performance, and cash flows in accordance with
PFRS.
c. To make suggestions as to the form or content of the financial statements or to draft them in whole or in part.
d. To assure adoption of sound accounting policies and the establishment and maintenance of internal control.

7. Which of the following statements concerning related party transactions is correct?

a. In the absence of evidence to the contrary, related party transactions should be assumed to be outside the ordinary course of business.
b. The audit procedures directed toward identifying related party transactions should include considering whether transactions are occurring
but are not being given proper accounting recognition.
c. An auditor should determine whether a particular transaction would have occurred if the parties had not been related.
d. An auditor should substantiate that related party transactions were consummated on terms equivalent to those that prevail in arm’s
length transactions.

8. Which of the following procedures should an auditor ordinarily perform regarding subsequent events?
a. Review the cutoff bank statements for several months after year end.
b. Compare the latest available interim financial statements with the financial statements being audited.
c. Send second requests to the client’s customers who failed to respond to initial accounts receivable confirmation requests.
d. Communicate material weaknesses in internal control to the client’s audit committee.

9. Which of the following statements best expresses the auditor’s responsibility with respect to facts which become known to the auditor after
the date of the auditor’s report but before the date the financial statements are issued?
a. The auditor should amend the financial statements.
b. If the facts discovered will materially affect the financial statements, the auditor should issue a new report which contains either a
qualified opinion or an adverse opinion.
c. The auditor should consider whether the financial statements need amendment, discuss the matter with management, and consider
taking actions appropriate in the circumstances.
d. The auditor should withdraw from the engagement.

10. Harry, CPA, believes there is substantial doubt about the ability of ABC Corp. to continue as a going concern for a reasonable period of time.
In evaluating ABC’s plans for dealing with the adverse effects of future conditions and events, Harry most likely would consider, as a mitigating
factor, ABC’s plan to
a. Purchase equipment and production facilities currently being leased.
b. Accumulate treasury stock at prices favorable to ABC’s historic price range.
c. Negotiate reductions in required dividends being paid on preferred stock.
d. Accelerate research and development projects related to future products.

11. The following statements are ordinarily included in a management representation letter, except
a. The completeness and availability of minutes of stockholders’ and directors’ meetings.
b. Sufficient appropriate audit evidence has been made available to permit the expression of an unqualified opinion.
c. The financial statements are free from material misstatements, including omissions.
d. There have been no irregularities involving management or employees who have a significant role in internal control or that could have a
material effect on the financial statements.

12. The standard states that the auditor may decide to select specific items from a population based on such factors as the auditor’s
understanding of the entity, the assessed risk of material misstatement, and the characteristics of the population being tested. Specific items that
may be selected for testing usually include the following, except
a. Items that are of high value.
b. Items that are suspicious, unusual, risk-prone, or have a history of error.
c. All items whose values do not exceed a certain amount so as to verify only a small proportion of the total amount of class of transactions
or account balance.
d. Items that provide information about matters such as the nature of the entity, the nature of transaction, and internal control.
13. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the
a. effectiveness of the audit c. audit quality controls
b. efficiency of the audit d. selection of the sample

14. An error that arises from an isolated event that has not recurred other than on specifically identifiable occasions and is therefore not
representative of similar errors in the population is a/an
a. anomalous error c. individual error
b. isolated error d. non-recurring error

15. An auditor may decide to increase the risk of incorrect rejection when
a. The cost and effort of selecting additional sample items are low.
b. Increases reliability from the sample is desired.
c. Many differences (audit value minus recorded value) are expected.
d. Initial sample results do not support the planned level of control risk.

16. Auditors have learned that increased computerization has created more opportunities for computer fraud but has also led to the development
of computer audit techniques to detect frauds. A type of fraud that has occurred in the banking industry is a programming fraud in which the
programmer designs a program to calculate daily interest on savings accounts to four decimal points. The programmer then truncates the last two
digits and adds it to his account balance. Which of the following CAATs would be most effective in detecting this type of fraud?
a. Generalized audit software that selects account balances for confirmation with the depositor.
b. Snapshot.
c. Parallel simulation
d. SCARF (Systems Control and Audit Review File)

17. Which of the following usually not a factor to consider in designing and implementing an online, real-time system?
a. priority allocation c. interrupts
b. queues d. hardware diagnostics

18. Online computer systems use workstations or terminals that are located either locally or at remote sites. There are two types of workstations:
general purpose terminals and special purpose terminals. General purpose terminals include the following, except
a. basic keyboard and monitor c. intelligent terminal
b. point of sale devices d. personal computers

19. Which of the following is the greatest advantage of a database system?

a. Data redundancy can be reduced.
b. Backup and recovery procedures are minimized.
c. Multiple occurrences of data items are useful for consistency checking.
d. Conversion to a database system is inexpensive and can be accomplished quickly.

20. The auditor is required to complete the administrative process of assembling the final audit file on a timely basis after the date of the auditor’s
report. The tome limit within which to complete the assembly of the audit file is ordinarily
a. Not more than 30 days after the date of the auditor’s report.
b. Not more than 60 days after the date of the auditor’s report.
c. Not more than 90 days after the end of the entity’s reporting period.
d. Not more than 60 days after the date the entity’s financial statements are authorized for issue.

21. The auditor shall assemble the audit documentation in a /an

a. working paper c. audit file
b. workpaper d. audit memorandum

22. According to Section 9(A) of the IRR, the Commission upon the recommendation of the Board, shall create an auditing standard setting body
to be known as the
a. Auditing and Assurance Standards Council
b. Auditing Standards and Practices Council
c. Auditing Standards Board
d. Auditing Standards Council

23. The following documents shall be submitted by applicants for the CPA licensure examination, except
a. Certificate of Live Birth in National Statistics Office security paper
b. Marriage contract in NSO security paper for all married applicants
c. Marriage contract in NSO security paper for married female applicants
d. Transcript of records with indication therein of date of graduation and Special Order number unless it is not required.

24. The following documents are to be submitted by a foreign applicant whose letter/document and the copy of the law on foreign reciprocity of
his/her country/state are satisfactory to the BOA, except

a. Original or authenticated copy of transcript of records or equivalent document of the course for licensure examination where he/she
studied duly authorized or accredited by his/her country/state.
b. Certificate of Religious Affiliation
c. The original or certified copy of any official documents issued by the Bureau if Immigration and Deportation allowing the applicant to
enter and reside in the Philippines.
d. Certificate of registration or its equivalent stating that the foreign applicant is duly registered or licensed CPA or its equivalent in his/her
country/state.

25. Which part of the Code of Ethics applies to professional accountants in public practice?
a. Part A c. Part C
b. Part B d. Part D

26. Which of the following fundamental ethical principles prohibits association of professional accountants with reports, returns,
communication or other information that is believed to contain a materially false or misleading statement?
a. Integrity c. Professional competence and due care
b. Objectivity d. Confidentiality

27. Safeguards created by the profession, legislation or regulation include the following, except
a. Continuing professional development requirements
b. Professional standards
c. Firm-wide and engagement specific safeguards
d. Educational, training and experience requirements for entry into the profession.
28. On which of the following safeguards a professional accountant in public practice cannot rely solely to reduce threats to an
acceptable level?
a. Safeguards created by the profession, legislation or regulation
b. Firm-wide safeguards
c. Engagement specific safeguards
d. Safeguards within the client’s systems and procedures

29. If the fee quoted for a professional service is so low, it may be difficult for the CPA to perform the engagement in accordance with applicable
technical and professional standards for that price. This situation may create a self-interest threat to
a. Professional competence and due care
b. Objectivity
c. Integrity
d. Professional behavior

30. Which of the following is not a contingent fee?

a. A fee that is dependent upon the approval of the assurance client’s loan application.
b. An audit fee that is based on 5% of the client’s adjusted net income for the current year.
c. A fee that is fixed by a court or other public authority.
d. An arrangement whereby no fee will be charged unless a specified finding or result is attained.

31. A self-interest threat would be created if the firm, or a member of the assurance team, makes a loan to an assurance client that is not a bank
or similar institution, or guarantees such an assurance client’s borrowing. The self-interest threat created would be so significant that no safeguard
could reduce the threat to acceptable level unless the loan or guarantee is
a. Made under normal lending terms, procedures and requirements.
b. Immaterial to the firm or the member of the assurance team.
c. Immaterial to both the firm or the member of the assurance team and the assurance client.
d. Made under normal lending terms, procedures and requirements and the loan or guarantee is immaterial to both the firm and member of
the assurance team and the assurance client.

32. The auditor’s risk assessment procedures should always include the following, except
a. Inquiries of management and of others within the entity.
b. Analytical procedures
c. Observation and inspection
d. Substantive test procedures and tests of controls

33. The auditor’s risk assessment procedures

a. By themselves, do not provide sufficient appropriate audit evidence on which to base the audit opinion.
b. Should not consider information obtained from the auditor’s previous experience with the entity.
c. Are designed to detect material misstatements at the assertion level for classes of transactions, account balances an disclosures.
d. Are designed to test the effectiveness of the entity’s controls.

34. Which of the following statements concerning audit risk and its components is incorrect?
a. Regardless of the assessed levels of inherent and control risks, the auditor should always perform some substantive procedures for
material account balances and classes of transactions.
b. The higher the assessment of inherent and control risks, the more evidence the auditor should obtain form the performance of substantive
procedures.
c. The assessed level of inherent risk need not be considered in determining the nature, timing and extent of substantive procedures required
to reduce audit risk to an acceptably low level.
d. After obtaining an understanding of the accounting and internal control systems, the auditor should make a preliminary assessment of
control risk, at the assertion level, for each material account balance or class of transactions.

35. The following are components of internal control, except

a. control activities
b. entity’s risk assessment process
c. control environment
d. business risk

36. An entity’s internal control system contains manual elements and often contains automated elements. Manual elements in internal
control may be less reliable than automated elements because
a. Manual control elements can be more easily bypassed, ignored, or overridden and they are also more prone to simple error and mistakes.
b. Manual control elements facilitate the additional analysis of information.
c. Consistency of application of manual control elements can always be assumed.
d. Manual control elements include reliance on systems or programs that are inaccurately processing data, processing inaccurate data, or
both.

37. Which of the following components of an entity’s internal control includes development and use of training policies that communicate
prospective roles and responsibilities to employees?
a. Monitoring of controls c. Control environment
b. Control activities d. Information and communication

38. Application controls are

a. Manual or automated procedures that typically operate at a business process level and apply to the processing of transactions by individual
applications.
b. Policies and procedures that relate to many applications.
c. Controls that maintain the integrity of information and security of date such as controls over system software acquisition, change and
maintenance.
d. Controls that relate to many applications and support the effective functioning of general controls.

39. Control activities relate to the following, except

a. Segregation of duties
b. Performance reviews
c. An internal audit function
d. Authorization

40. Internal controls should be designed to provide reasonable assurance that

a. Management’s planning, organizing, and directing processes are properly evaluated.
b. Management’s plans have not been circumvented by employee collusion.
 c. Material errors or fraud will be prevented, or detected and corrected, within a timely period by employees in the course of performing their
assigned duties.
d. The internal auditing department’s guidance and oversight of management’s performance is accomplished economically and efficiently.

41. An audit is conducted on the premise that management and, where applicable, those charged with governance, have acknowledged and
understand that they have responsibilities that are fundamental to the conduct of an audit in accordance with PSAs. Which of the following is
not one of those responsibilities?
a. The preparation of financial statements in accordance with relevant pronouncements issued by the AASC.
b. The establishment and maintenance of an adequate internal control system that is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
c. To provide the auditor with access to all information that is relevant to the preparation of the financial statements such as records,
documentation, and other matters.
d. To provide the auditor with unrestricted access to persons within the entity from which the auditor determines it necessary to obtain audit
evidence.

42. In performing an audit of financial statements, the auditor should obtain a sufficient knowledge of a client’s business and industry to
a. Develop the attitude of professional skepticism concerning management’s financial statement assertions.
b. Make constructive suggestions concerning improvements to the client’s internal control
c. Evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated.
d. Under the events and transactions that may have an effect on the client’s financial statements.

43. The establishment of an overall audit strategy involves

I. Determining the characteristics of the engagement that define its scope.
II. Ascertaining the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required.

III. Considering the important factors that will determine the focus of the engagement team’s efforts.
a. I and II only c. I and III only
b. II and III only d. I, II, and III

44. Which of the following should be included in the audit plan?

I. The nature, timing and extent of planned risk assessment procedures, as determined under PSA 315.
II. The nature, timing and extent of planned further audit procedures at the assertion level, as determined under PSA 330.
a. I only c. Both I and II
b. II only d. Neither I nor II

45. Which of the following matters would an auditor most likely consider when establishing the scope of the audit?
a. The expected audit coverage, including the number and locations of the entity’s components to be included.
b. The entity’s timetable for reporting, such as at interim and final stages.
c. The discussion with the entity’s management concerning the expected communications on the status of audit work throughout the
engagement and the expected deliverables resulting from the audit procedures.
d. Audit areas where there is a high risk of material misstatement

46. Audit programs are modified to suit the circumstances of particular engagements. A complete audit program usually should be developed
a. When the engagement letter is prepared.
b. After obtaining an understanding of the control environment and control activities components of the entity’s internal control.
c. After the auditor has obtained an understanding of the entity and its environment, including is internal control and assessed the risks of
material misstatements.
d. Prior to beginning the actual audit work.

47. In connection with the planning phase of an audit engagement, which of the following statements is always correct?
a. Final staffing decisions must be made prior to completion of the planning stage.
b. Observation of inventory count should be performed at year end.
c. A potion of the audit of a continuing audit client can be performed at interim dates.
d. An engagement should not be accepted after the client’s financial year-end.

48. The accounts payable department generally should

a. Cancel supporting documents after a cash payment is mailed.
b. Approve the price and quantity of each purchase requisition.
c. Assure that the quantity ordered is omitted from the receiving department’s copy of the purchase order.
d. Agree the vendor’s invoice with the receiving report and purchase order.

49. Which of the following audit procedures would allow an auditor to test whether receiving department procedures are applied properly?
a. Test a sample of receiving documents.
b. Observe receiving procedures on a surprise basis.
c. Review procedures manuals.
d. Interview receiving department personnel.

50. The primary objective of security software is to

a. Control access to information system resources.
b. Restrict access to prevent installation of unauthorized utility software.
c. Detect the presence of viruses.
d. Monitor the separation of duties within applications.

51. To achieve audit efficiency and effectiveness with a personal computer, the two crucial requirements are selecting
a. The appropriate audit tasks for personal computer applications and the appropriate software to perform the selected audit tasks.
b. The appropriate software to perform the selected audit tasks and data that can be accessed by the auditor’s personal computer.
c. Company data that can be accessed by the auditor’s personal computer and the appropriate audit tasks for personal computer applications.
d. The appropriate sample of company data to test with the auditor’s personal computer and the appropriate software to perform selected
audit tasks.

52. Which of the following represents a limitation on the use of generalized audit software (GAS)?
a. It requires lengthy detailed instructions in order to accomplish specific tasks.
b. It has limited application without significant modification.
c. It requires substantial programming knowledge to be used effectively.
d. It can only be used on hardware with compatible operating systems.
53. When assessing application controls, which one of the following input controls or edit checks is most likely to be used to detect a data input
error in the customer account number field?
a. Limit check c. Control total
b. Validity check d. Hash total

54. The two broad grouping of information systems control activities are general controls and application controls. General controls include
controls
a. Relating to the correction and resubmission of faulty data.
b. For developing, modifying, and maintaining computer programs.
c. Designed to assure that only authorized users receive output from processing.
d. Designed to ensure that all data submitted for processing have been properly authorized.

55. An adequate system of internal controls is most likely to detect a fraud perpetrated by a
a. Group of employees in collusion c. Group of managers in collusion
b. Single employee d. Single manager

56. Controls should be designed to provide reasonable assurance that

a. Organizational objectives and goals will be achieved economically and efficiently.
b. Management’s plans have not been circumvented by worker collusion.
c. The internal audit activity’s guidance and oversight of management’s performance is accomplished economically and efficiently.
d. Management’s planning, organizing, and directing processes are properly evaluated.

57. Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
a. Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior
period.
b. Investigating payable recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by
receiving reports.
c. Examining unusual relationships between monthly accounts payable balances and recorded cash payments.
d. Reconciling vendor’s statements to the file of receiving reports to identify items received just prior to the balance sheet date.

58. In a computerized payroll system environment, an auditor would be least likely to use test data to rest controls related to
a. Missing employee numbers
b. Proper approval of overtime by supervisors
c. Time tickets with invalid job numbers
d. Agreement of hours per clock cards with hours on time tickets

59. Equipment acquisitions that are misclassified as maintenance expense most likely would be detected by an internal control procedures that
provides for
a. Segregation of duties of employees in the accounts payable department.
b. Independent verification of invoices for disbursements recorded as equipment acquisitions.
c. Investigation of variances within a formal budgeting system.
d. Authorization by the board of directors of significant equipment acquisitions.

60. Criteria that are embodied in laws or regulations, or issued by authorized or recognized bodies or experts that follow a transparent due
process are called
a. Suitable criteria
b. Established criteria
c. Specifically developed criteria
d. General criteria

61. Auditors may use positive and/or negative forms of confirmation requests. An auditor most likely will use
a. The negative form for small balances.
b. The positive form, when the combined assessed level of inherent and control risk for related assertions is acceptably low, and the
negative form when it is unacceptably high.
c. The positive form to confirm all balances regardless of size.
d. A combination of the two forms, with the positive form used for trade balances and the negative form for other balances.

62. The following are characteristics of “direct reporting” assurance engagements, except
a. The subject matter information is in the form of an assertion by the responsible party that is made available to the intended users.
b. The subject matter information is provided to the intended users in the assurance report.
c. The practitioner either directly performs the evaluation or measurement of the subject matter or obtains a representation from the
responsible party that has performed the evaluation or measurement.
d. The representation of the responsible party that has performed the evaluation or measurement of the subject matter is not available to the
intended users.

63. What type of assurance engagement is involved when the practitioner expresses a negative form of conclusion?
a. Reasonable assurance engagement
b. Negative assurance engagement
c. Assertion-based assurance engagement
d. Limited assurance engagement

64. Assurance engagement risk is the risk

a. That the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated.
b. Of expressing an inappropriate conclusion when the subject matter information is not materially misstated.
c. Through loss from litigation, adverse publicity, or other events arising in connection with a subject matter reported on.
d. Of expressing an inappropriate conclusion when the subject matter information is either materially misstated or not materially misstated.

65. The following statements relate to the performance of an assurance engagement other than an audit or review of historical financial
information covered by PSAs and PSREs. Which is incorrect?
a. Those persons who are to perform the engagement should collectively possess the necessary professional competence.
b. The practitioner is not allowed to use the work of persons from other professional disciplines.
c. The practitioner should consider materiality and assurance engagement risk when planning and performing an assurance engagement.
d. The assurance report should be in writing and should contain a clear expression of the practitioner’s conclusion about the subject matter
information.
66. Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of the following factors, except
a. The use if selective testing.
b. The fact that much of the evidence available to the practitioner is persuasive rather than conclusive.
c. The practitioner may not have the required assurance knowledge and skills to gather and evaluate evidence.
d. The use of judgment in gathering and evaluating evidence and forming conclusions based on that evidence.

67. The Philippine Standards on Quality Control (PSQCs) are to be applied to

a. Assurance engagements only.
b. Review engagements only.
c. Compilation and review engagements only.
d. All services that fall under the AASC’s engagement standards.

68. The following statements relate to a review of interim financial information performed by the entity’s independent auditor. Which is incorrect?
a. Similar to a financial statement audit, a review of interim financial information is designed to obtain reasonable assurance that the interim
financial information is free from material misstatements.
b. A review of interim financial information does not provide a basis for expressing an opinion whether the financial information is presented
fairly, in all material respects, in accordance with an applicable financial reporting framework.
c. In a review of interim financial information, the auditor should have an understanding of the entity and its environment, including its
internal control, as it relates to the preparation of both annual and interim financial information, sufficient to plan and conduct the
engagement.
d. A review of interim financial information may bring significant matters affecting the interim financial information to the auditor’s attention,
but it does not provide all of the evidence that would be required in an audit.

69. The overall objectives of the auditor in conducting an audit of financial statements are
I. To obtain reasonable assurance about whether the financial statements are free from material misstatements, whether caused by fraud or
error.
II. To report on the financial statements.
III. To obtain conclusive rather than persuasive evidence.
IV. To detect all misstatements, whether due to fraud or error.

a. I and II only c. I, II, and III only

b. II and IV only d. I, I, III, and IV

70. The auditor is required to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether
due to fraud or error. In all cases when reasonable assurance cannot be obtained, the auditor’s report should contain a/an
a. Unqualified opinion
b. Qualified or adverse opinion
c. Qualified or disclaimer of opinion
d. Disclaimer of opinion

71. The auditor is required to maintain professional skepticism throughout the audit. Which of the following statements concerning professional
skepticism is false?
a. A belief that management and those charged with governance are honest and have integrity relieves the auditor of the need to maintain
professional skepticism.
b. 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.
c. Professional skepticism is necessary to the critical assessment of audit evidence.
d. Professional skepticism is an attitude that includes questioning contradictory audit evidence obtained.

72. Professional judgment

a. Should be exercised in planning and performing an audit of financial statements but need not be documented.
b. Can be used as the justification for the decisions made by the auditor that are not supported by the facts and circumstances of the
engagement.
c. Is necessary in the evaluation of management’s judgments in applying the entity’s applicable financial reporting framework.
d. Is not used in making decisions about materiality and audit risk.

73. The internal auditing profession has advanced primarily as a result of

a. Increase interest by Bachelor or Science in Accountancy graduates and experienced auditors.
b. Job qualification specifications that included added emphasis on background knowledge and skills.
c. The limitation of financial statement audit scope.
d. Increased complexity and sophistication of business operations.

74. As defined in PSA 500, ________ is an individual or organization possessing the expertise in a field other than accounting or auditing, whose
work in that field is used by the entity to assist the entity in preparing the financial statements.
a. Auditor’s expert
b. Management’s expert
c. Auditor’s internal expert
d. Auditor’s external expert

75. Which of the following statements concerning the management’s expert’s competence, capabilities, and objectivity is correct?
a. Objectivity relates to the ability of the management’s expert to exercise the competence in the circumstances.
b. Competence relates to the possible effects that bias, conflict of interest or the influence of others may have on the professional or business
judgment of the management’s expert.
c. Capability relates to the nature and level of expertise of the management’s expert.
d. The management’s expert’s competence, capabilities, and objectivity are important factors in relation to the reliability of any information
prepared by the management’s expert.

76. Audit evidence is information used to draw reasonable conclusions on which to base the auditor’s opinion. Audit evidence is obtained by
performing
I. Risk assessment procedures
II. Further audit procedures
a. I only c. Either I or II
b. II only d. Both I and II

77. Which of the following statements concerning the auditor’s use of assertion is correct?
a. The auditor may combine the assertions about transactions and events with the assertions about account balances.
 b. In every audit engagement, the auditor should use the assertions as described in PSA 500, i. e., the assertions should always fall into three
categories: assertions about classes of transactions and events, account balances, and presentation and disclosures.
c. There should always be a separate assertion related to cutoff of transactions and events.
d. The completeness assertion deals only with whether all transactions and events that should have been recorded have been recorded.

78. Which of the following would at least likely affect the appropriateness of evidence available to an auditor?
a. The sampling method employed by the auditor to obtain a sample of such evidence.
b. The relevance of such evidence to the financial statement assertion being verified.
c. The relationship of the preparer of such evidence to the entity being audited.
d. The timeliness of such evidence.
79. The objective of tests of details of transactions performed as substantive tests is to
a. Attain assurance about the reliability of the accounting system.
b. Evaluate whether management’s policies and procedures operated effectively.
c. Detect material misstatements in the financial statements.
d. Comply with generally accepted auditing standards.

80. In determining whether transactions have been recorded, the direction of the audit testing should be from the
a. General journal entries
b. Original source documents
c. General ledger balances
d. Adjusted trial balance

81. Which of the following elements ultimately determines the specific auditing procedures that are necessary in the circumstances to afford a
reasonable basis for an opinion?
a. Materiality c. Auditor’s judgment
b. Audit risk d. Reasonable assurance

82. Which of the following statements is correct with respect to an auditor’s report expressing an opinion on a specific element on a financial
statement?
a. The auditor who has expressed an adverse opinion on the financial statements as a whole can never express an unmodified opinion on a
specific element in these financial statements.
b. The materiality determined for a specific element of a financial statement may be lower than the materiality determined for the entity’s
complete set of financial statements.
c. Such a report can only be issued if the auditor is also engaged to audit the entire set of financial statements.
d. The attention devoted to the specific element is usually less than it would be if the financial statements as a whole were audited.

83. An auditor may express an opinion on an entity’s accounts receivable balance even if the auditor has disclaimed an opinion on the financial
statements taken as a whole provided the
a. Report on the accounts receivable is presented separately from the disclaimer of opinion on the financial statements.
b. Auditor also reports on the current asset portion of the entity’s balance sheet.
c. Use of the report on the accounts receivable is restricted.
d. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial statements.

84. In which of the following circumstances would an auditor most likely add an emphasis of matter paragraph to the auditor’s report while
expressing an unqualified opinion?
a. There is a substantial doubt about the entity’s ability to continue as a going concern.
b. Management’s estimates of the effects of future events are unreasonable.
c. No depreciation has been provided in the financial statements.
d. Certain transactions cannot be tested because of management’s records retention policy.

85. An auditor who uses the work of an expert may refer to and identify the expert in the auditor’s report if the
a. Expert is employed by the entity.
b. Expert’s work provides the auditor greater assurance of reliability.
c. Auditor expresses a qualified opinion or an adverse opinion related to the work of the expert.
d. Auditor indicates a division of responsibility related to the work of the expert.

86. A modified opinion on the financial statements is necessary when

I. The auditor concludes, based on the audit evidence obtained, that the financial statements as a whole are not free from material
misstatements.
II. The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from
material misstatements.
a. I only c. Either I or II
b. II only d. Neither I nor II

87. Which of the following terms is used in the standard to describe the effects on the financial statements of misstatements or the possible
effects on the financial statements, if any, that are undetected due to an inability to obtain sufficient appropriate audit evidence?
a. Persuasive c. Material
b. Pervasive d. Extensive

88. A limitation on the scope of the audit may arise from

a. Circumstances beyond the control of the entity.
b. Circumstances relating to the nature and timing of the auditor’s work
c. Limitations imposed by management.
d. All of the above.