Multiple Choice Questions

1. This involves developing an overall strategy for the expected conduct and scope of the
examination; the nature, extent, and timing of which vary with the size and complexity, and
experience with and knowledge of the entity.

a. Audit planning

b. Audit procedure

c. Audit program

d. Audit working papers

2. An auditor who accepts an audit engagement and does not possess the industry expertise of the
business entity should

a. engage financial experts familiar with the nature of the business entity.

b. obtain a knowledge of matters that relate to the nature of the entity's business.

c.refer a substantial portion of the audit to another CPA who will act as the principal auditor.

d. first inform management that an unqualified opinion cannot be issued.

3. A measure of the auditor's assessment of the likelihood that there are material
misstatements in an account before considering the effectiveness of the client's internal control
is

a. control risk

b. acceptable audit risk

c. statistical risk

d. inherent risk

4. A CPA is conducting the first examination of a client's financial statements. The CPA hopes to
reduce the audit work by consulting with the predecessor auditor and reviewing the predecessor's
working papers. This procedure is
a. Acceptable if the client and the predecessor auditor agree to it.

b. Acceptable if the CPA refers in the audit the predecessor auditor's work.

c. Required if the CPA is to render an unmodified opinion.

d. Unacceptable because the CPA should bring an independent viewpoint to a new engagement.

5. In this phase, the primary objective is to minimize the likelihood of being associated to a
client whose management lacks integrity.

a. Pre-engagement

b. Consideration of internal controls

c. Evidence gathering

d. Issuance of the audit report

6. In this phase, the primary objective is to assess and evaluate the quality of the audit
services delivered by the engagement team.

a. Audit planning

b. Completing the audit

c. Post-audit responsibilities

d. Issuance of the audit report

7. In this phase, the primary objective is to assess the different risks associated with the
audit to determine the nature, timing and extent of audit procedures to be performed.

a. Audit planning

b. Completing the audit

c. Post-audit responsibilities

d. Issuance of the audit report

8. Which of the following statements is incorrect?

a. PSA 520 – Analytical Procedures

b. PSA 300 – Planning an Audit of Financial Statements
c. PSA 320 – Materiality in Planning and Performing Audit
d. PSA 200 – Identifying and Assessing the risk of Material Misstatement through
Understanding the Entity and its Environment

9. Analytical procedure may be done thru except

a. Horizontal and trend analysis

b. Vertical Analysis
c. Ratio Analysis
d. Diagonal Analysis

10. The auditor can obtain knowledge of the business thru except

a. Hearsays
b. Review of prior years’ working papers
c. Tour of the client’s facilities
d. Reading relevant books, periodicals and other publications