SW#1

Question 1
1 / 1 pts
The independent auditor’s objective when conducting an audit of financial statements is to obtain reasonable assurance
about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error,
thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material
respects, in accordance with an applicable financial reporting framework.

Correct!
True
False

Question 2
1 / 1 pts
If the auditor believes that the financial statements are not fairly stated presented or is unable to reach an opinion
because of insufficient evidence or prevailing conditions such as independence issue, the auditor has the responsibility
of communicating the users through the auditor’s report.

Correct!
True
False

Question 3
1 / 1 pts
The auditor is not responsible for preventing noncompliance and cannot be expected to detect non-compliance with all
laws and regulations.

Correct!
True
False

Question 4
1 / 1 pts
An auditor gathers sufficient and competent evidences regarding management assertions to meet audit objectives.

Correct!
True
False

Question 5
1 / 1 pts
A previously long-term notes payable is due for payment on the next reporting fiscal year. The notes payable is
presented on the long-term liability section, instead of current liability, of the Statement of Financial Position for the
current reporting fiscal year. This is an example of misrepresentation which is considered a material misstatement.

Correct!
True
False

Question 6
1 / 1 pts
To obtain reasonable assurance, the audit must be planned and performed with an attitude of professional skepticism in
all aspects of the audit engagement.

Correct!
True
False

Question 7
1 / 1 pts
Part of the audit planning is obtaining knowledge of the client’s business strategies and processes and assess its risks.

Correct!
True
False

Question 8
1 / 1 pts
The auditor is responsible for the fair presentation of the financial statements.

True
Correct!
False

Question 9
0 / 1 pts
The completeness assertion deals with whether asset, liability, equity, revenue and expense accounts have been
presented in the financial statements at appropriate amounts.

You Answered
True
Correct Answer
False

Question 10
1 / 1 pts
Materiality is a matter of professional judgment by the auditor.

Correct!
True
False

ASS#1

1. Which of the following best describes the reason why an independent auditor reports on
financial statements?
a. Different interest exists between the company preparing the financial statements and the
persons using the financial statements.
b. A misappropriation of assets may exist, and it is more likely to be detected by the
independent auditors.
c. Poorly designed internal controls may be in existence.
d. A misstatement if account balances may exist and is generally corrected as the result of
the independent auditor’s work.
2. What assurance does the auditor provide that errors, fraud, and direct-effect illegal acts that
are material to the financial misstatements will be detected?
Errors Fraud Direct-Effect Illegal Acts
a. Reasonable Reasonable Reasonable
b. Reasonable Reasonable Limited
c. Reasonable Reasonable No assurance
d. Reasonable Limited Limited

3. An auditor most likely would analyze inventory turnover ratio to obtain evidence concerning
management’s assertion about
a. Rights
b. Existence
c. Accuracy
d. Presentation and disclosure

4. Who is responsible for the fair presentation of financial statements?

a. Audit partner assigned to the audit engagement.
b. Audit staff who examined each account on the financial statements.
c. Audit client’s management.
d. Users of the financial statements.

5. When an auditor’s assessment of control risk is low, it means that

a. Internal controls are not operating effectively.
b. Internal controls are operating effectively.
c. Inherent risk cannot be avoided.
d. An adverse opinion is needed to be issue.

6. Physical count of inventories is most likely use to test management’s assertions about
a. Existence
b. Accuracy
c. Rights
d. Presentation and Disclosure

7. Absolute assurance is rarely attainable when conducting audit of financial statements this is
due to the following reasons except
a. Most evidences are persuasive rather than conclusive.
b. Collusion of employees to prevent fraud from being detected.
c. Use of sampling when doing tests.
d. Costs of audit procedures to be performed.

8. It uses comparison and relationship to assess whether account balances or other data appear
reasonable.
a. Compliance tests
b. Test of controls
c. Analytical procedures
d. Substantive tests

9. The auditor is responsible for

a. Adoption of sound accounting policies.
b. Maintenance of adequate internal control.
c. Preparation and fair presentation of financial statements.
d. Expression an opinion about the fair presentation of financial statements.
10. These transaction cycle encompasses cost of raw materials, direct labor, and overhead
expenses to produce finished goods.
a. Sales and collection cycle
b. Inventory and warehousing cycle
c. Payroll and personnel cycle
d. Purchasing and disbursement cycle

SW#2

Question 1
1 / 1 pts
Inspecting an executed contract may provide audit evidence relevant to the entity’s application of accounting policies,
such as revenue recognition.

Correct!
True
False

Question 2
1 / 1 pts
Audit program guides and articles of incorporation are best examples of permanent audit files.

True
Correct!
False
Audit program guides are often found in the current audit files.

Question 3
1 / 1 pts
Persuasiveness of audit evidence refers to the characteristics of an audit evidence to make an auditor believe it is
genuine and accurate.

Correct!
True
False

Question 4
0 / 1 pts
Sending confirmation letters to customers of an audit client provides evidence about the existence and accuracy of
accounts receivable presented in the financial statements being audited. Moreover, it provides evidence about the
rights of the audit client to accounts receivables.

Correct Answer
True
You Answered
False

Question 5
1 / 1 pts
Audit documentation prepared during the engagement, including schedules prepared by the client for the auditor, is the
property of the auditor.
Correct!
True
False

Question 6
1 / 1 pts
When the assessment of control risk is low, the auditor will most likely increase the sample size of audit evidences.

True
Correct!
False

Question 7
1 / 1 pts
Audit documentation is the principal record of auditing procedures applied, evidence obtained, and conclusions reached
by the auditor in the audit engagement.

Correct!
True
False

Question 8
1 / 1 pts
Per PSA 500, observation provides audit evidence about the performance of a process or procedure, but is limited to the
point in time at which the observation takes place and by the fact that the act of being observed may affect how the
process or procedure is performed.

Correct!
True
False

Question 9
1 / 1 pts
Confirmations are frequently used in relation to account balances and their components, but need not be restricted to
these items.

Correct!
True
False

Question 10
1 / 1 pts
The abbreviated notations used in audit working papers to denote audit actions taken is referred to as indexing.

True
Correct!
False
It's called audit tick marks. Indexing is the referencing of working papers.

ASS#2

1. Which of the following types of documentary evidence should the auditor consider to be the
most reliable?
a. Confirmation of an account payable mailed by and returned directly to the auditor.
b. A sales invoice issued by the client and supported by a delivery receipt from an outside
trucker.
c. An audit schedule prepared by the client’s controller and reviewed by the client’s
treasurer.
d. A check, issued by the company and bearing the payee’s endorsement, that is included
with the bank statements mailed directly to the auditor.

2. Which of the following is the least persuasive type of audit evidence?

a. Bank statement obtained from the client.
b. Pre-numbered sales invoices.
c. Computations made by the auditor.
d. Vendor’s invoices.

3. All are primary purpose of audit documentation except

a. To support the financial statement.
b. To assist in the preparation of the audit report.
c. To coordinate the audit.
d. To provide evidence of the audit work performed.

4. To test the existence of inventories reported on the financial statements, the audit procedure
that is most likely that will use is
a. Inquiry to client’s personnel
b. Observation
c. Physical count
d. Recalculation

5. Which management assertion is least likely to be revealed by inspection of documents?

a. Existence or occurrence
b. Rights and obligations
c. Presentation and disclosure
d. Completeness

6. All are included on the permanent files except

a. Historical financial statements
b. Prior-year adjustments
c. Trial balance for the current year under audit
d. Articles of incorporation

7. This audit file contains the detailed accounts from the general ledger making up the line item
total.
a. Working Trial Balance
b. Lead Schedule
c. Supporting Schedule
d. Trial Balance

8. It is a listing of line items or general ledger accounts and their year-end balances obtained or
prepared by the auditor.
a. Working Trial Balance
b. Lead Schedule
c. Supporting Schedule
d. Trial Balance
9. The audit file should (choose the exception)
a. Be properly identified with such information as the client’s name, the period covered, a
description of the contents, the initials of the preparer, the date of preparation and index
code.
b. Be indexed and cross-referenced to aid in organizing and filing.
c. Include the adjusted financial statements which is prepared by the auditor.
d. Include conclusions that were reached about the segment of the audit under
consideration should be plainly stated.

10. It refers to any information used by the auditor in arriving at the conclusions on which the
audit opinion is based, and includes the information contained in the accounting records
underlying the financial statements and other information.
a. Risk assessment
b. Audit evidence
c. Audit documentation
d. Audit opinion

ASS#3

1. When approached to perform an audit for the first time, the auditor should make inquiries
of the predecessor auditor. This is a necessary procedure because the predecessor auditor
may be able to provide the successor auditor with information that will assist the successor
auditor in determining whether
a. The predecessor’s work should be used.
b. The company follows the policy of rotating its auditors.
c. In the predecessor’s opinion internal control of the company has been satisfactory.
d. The engagement should be accepted.

2. In an audit engagement, analytical procedures can be done in

In the planning stage During the testing phase During the completion stage
a. Yes Yes Yes
b. No Yes No
c. No Yes Yes
d. Yes No No

3. It is a measure of how willing the auditor is to accept that the financial statements may be
materially misstated after the audit is completed and an unqualified opinion has been issued.
a. Inherent risk
b. Acceptable audit risk
c. Client business risk
d. Control risk

4. An auditor obtains knowledge about a new client’s business and industry to

a. Make constructive suggestions concerning improvements in the client’s internal control.
b. Develop an attitude of professional skepticism concerning management’s financial
statement assertions
c. Evaluate whether the sum of known misstatements causes the financial statements as a
whole to be materially misstated.
d. Understand the events and transactions that may have an effect on the client’s financial
statements.

5. In assessing whether to accept a client for an audit engagement, a CPA should consider
a. Both client business risk and acceptable audit risk
b. Neither client business risk nor acceptable audit risk
c. Acceptable audit risk only
d. Client business risk only

6. Which of the following has the best chance of being detected when an auditor compares 2019
revenues and expenses with the prior year and investigates all changes exceeding a fixed
percentage?
a. An increase in property tax rates has not been recognized in the company’s 2019 accrual.
b. The cashier began lapping accounts receivable in 2019.
c. Because of worsening economic conditions, the 2019 provision for uncollectible accounts
was inadequate.
d. The company changed its capitalization policy for small tools in 2019.

7. It is the risk that the client will fail to achieve its objectives
a. Inherent risk
b. Acceptable audit risk
c. Client business risk
d. Control risk

8. What is the responsibility of a successor auditor with respect to communicating with the
predecessor auditor in connection with a prospective new audit client?
a. The successor auditor has no responsibility to contact the predecessor auditor.
b. The successor auditor should get permission from the prospective client to contact the
predecessor auditor.
c. The successor auditor should contact the predecessor auditor regardless whether the
prospective client authorizes contact.
d. The successor auditor need not contact the predecessor auditor if the successor auditor
is aware of all available relevant facts.

9. Which of the following can be done by an auditor to understand the business operations and
processes of an audit client?
Option 1: Tour the plant and offices.
Option 2: Identify related parties.
a. Both options 1 and option 2.
b. Neither option 1 nor 2.
c. Option 1 only
d. Option 2 only.

10. It is a measure of the auditor’s assessment of the likelihood that there are material
misstatements in an account balance before considering the effectiveness of internal control.
a. Control risk
b. Inherent risk
c. Acceptable audit risk
d. Planned detection risk

SW#4

Question 1
1 / 1 pts
In applying materiality, the next step after estimating the total misstatement in segment and estimating the combined
misstatement is comparing the combined estimate of misstatement with preliminary judgment or revised judgment
about materiality.
Correct!
True
False

Question 2
1 / 1 pts
If tolerable misstatement is the financial misstatement exceeds preliminary judgment about materiality, the financial
statements are not fairly stated.

True
Correct!
False

Question 3
1 / 1 pts
If a client has questionable integrity, the auditor is likely to assess acceptable audit risk to lower level.

Correct!
True
False

Question 4
1 / 1 pts
The direct projection estimate of misstatement is simply like “how many possible misstatements may be detected if the
entire population is examined”.

Correct!
True
False

Question 5
1 / 1 pts
Materiality in auditing is an absolute concept.

True
Correct!
False

Question 6
1 / 1 pts
Accounting and auditing standards provide specific materiality guidelines to practitioners that they can use as a basis in
setting and assessing materiality in audit engagements,

True
Correct!
False

Question 7
1 / 1 pts
Auditors must decide the appropriate acceptable audit risk for an audit, preferably during audit planning.

Correct!
True
 False

Question 8
0 / 1 pts
The auditor will often change the preliminary judgment about materiality during the audit based on several factors such
as the change of audit circumstances. The new judgment is called revised judgment about materiality.

Correct Answer
True
You Answered
False

Question 9
1 / 1 pts
Inherent risk in repeat audit engagement is lower than initial or new audit engagement.

Correct!
True
False

Question 10
1 / 1 pts
There is a direct relationship between planned detection risk and evidence to be accumulated by an auditor.

True
Correct!
False

SW#5

Question 1
0 / 1 pts
When an auditor performs an assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error, the auditor considers internal control relevant to the entity’s preparation of the financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.

Correct Answer
True
You Answered
False

Question 2
0 / 1 pts
An auditor’s primary emphasis is the internal control over classes of transactions rather than account balances, because
the accuracy of accounting system outputs (account balances) depends heavily on the accuracy of inputs and processing
(transactions).

Correct Answer
True
You Answered
False
Question 3
1 / 1 pts
A system of internal control consists of policies and procedures designed to provide management with reasonable
assurance that the company achieves its objectives and goals.

Correct!
True
False

Question 4
1 / 1 pts
Management’s responsibilities related to internal control are usually indicated or acknowledged on the management
representation letter.

Correct!
True
False

Question 5
1 / 1 pts
A sufficient understanding of internal control is to be obtained to plan the audit to determine the nature, timing, and
extent of tests to be performed.

Correct!
True
False

Question 6
1 / 1 pts
In an audit of financial statements, the auditor is required to test the operating effectiveness of internal controls
particularly when his or her preliminary assessment of control risk is low.

Correct!
True
False

Question 7
1 / 1 pts
Auditor should not ignore the internal control over account balances while gaining an understanding of internal control
and assessing control risk.

Correct!
True
False

Question 8
1 / 1 pts
A sufficient understanding of internal control is to be obtained to plan the audit to determine the nature, timing, and
extent of tests to be performed.

Correct!
True
False
Question 9
1 / 1 pts
Monitoring activities deal with ongoing or periodic assessment of the quality of internal control performance of
management to determine that controls are operating as intended and they are modified as appropriate for changes in
conditions.

Correct!
True
False

Question 10
1 / 1 pts
The risk assessment for financial reporting is management’s identification and analysis of risks relevant to the
preparation of financial statements in conformity with generally accepted accounting principles.

Correct!
True
False

SW#6

Question 1
1 / 1 pts
An example of fraudulent financial reporting is the intentional non-disclosure of significant transactions required by the
accounting standards to achieve fair presentation.

Correct!
True
False

Question 2
1 / 1 pts
Failure of management to correct known material weaknesses in internal control on a timely basis is a good example of
fraud risk factor called attitudes/rationalization.

Correct!
True
False

Question 3
1 / 1 pts
When obtaining reasonable assurance, the auditor is responsible for maintaining an attitude of professional skepticism
throughout the audit, considering the potential for management override of controls and recognizing the fact that audit
procedures that are effective for detecting error may not be effective in detecting fraud.

Correct!
True
False

Question 4
1 / 1 pts
Misappropriation of assets can be done by any people from any levels of management.
Correct!
True
False

Question 5
1 / 1 pts
Professional skepticism is an attitude that includes a questioning mind, being alert to conditions which may indicate
possible misstatement due to error or fraud, and a critical assessment of audit evidence.

Correct!
True
False

Question 6
0 / 1 pts
When risks of material misstatements are identified, the auditor may need to discuss these findings with management
and obtain management’s views of the potential fraud and existing controls designed to prevent or detect
misstatements.

You Answered
True
Correct Answer
False
It is not optional. The auditor is required or should discuss these findings with management and obtain management’s
views of the potential fraud and existing controls designed to prevent or detect misstatements.

Question 7
1 / 1 pts
Pressure is a fraud risk factor. An example of pressure as a fraud risk factor related to misstatements arising from
fraudulent financial reporting is the adverse relationship between the entity and employees that maybe created by
known or anticipated future employee layoffs.

True
Correct!
False
This example is related to misstatements arising from misappropriation of assets.

Question 8
1 / 1 pts
A perceived opportunity to commit fraud may exist when an individual believes internal control can be overridden, for
example, because the individual is in a position of trust or has knowledge of specific weaknesses in internal control.

Correct!
True
False

Question 9
1 / 1 pts
Fraudulent financial reporting involves theft of an entity’s assets and often involves the rank-and-file employees.
 True
Correct!
False

Question 10
0 / 1 pts
Documentation of the fraud assessment done by the auditor exhibits objectivity and professional behavior.

You Answered
True
Correct Answer
False

SW#7

Question 1
1 / 1 pts
The substantive tests of transactions are used to determine whether all six transaction-related objectives (existence,
completeness, accuracy, classification, timing, posting and summarization) have been satisfied for each class of
transactions.

Correct!
True
False

Question 2
1 / 1 pts
When an auditor plans to use analytical procedures as a part of the assurance gained through substantive testing, it is
important that the data used in the calculations be considered sufficiently reliable.

Correct!
True
False

Question 3
1 / 1 pts
Control test deviations that are considered to be significant deficiencies or material weaknesses are most likely to cause
the auditor to believe there may be material monetary misstatements in the financial statements.

Correct!
True
False

Question 4
1 / 1 pts
The most expensive type of audit testing is the test of details of balances.

Correct!
True
False

Question 5
1 / 1 pts
Tests of details of balances focus on the ending general ledger balances for both balance sheet and income statement
accounts, but the primary emphasis in most of tests of details of balances is on balance sheet.

Correct!
True
False

Question 6
1 / 1 pts
Inquiries of client personnel is an audit procedure that can be used in any types of audit testing.

Correct!
True
False

Question 7
1 / 1 pts
If tests of controls support the control risk assessment, planned detection risk in the audit risk model is increased, and
planned substantive tests can therefore be reduced.

Correct!
True
False

Question 8
1 / 1 pts
The auditor must also evaluate the effect of the noted control test deviations on the auditor’s report on internal control
over financial reporting when the auditor is also required to express an opinion regarding the effectiveness of internal
controls.

Correct!
True
False

Question 9
1 / 1 pts
The tests of controls and substantive tests of transactions audit program usually includes a descriptive section
documenting the understanding obtained about internal control.

Correct!
True
False

Question 10
1 / 1 pts
An audit program usually includes a list of audit procedures, sample sizes, items to select, and timing of the tests. It can
also include the audit objectives for the segment or area under audit.

Correct!
True
False

SW#8
Question 1
1 / 1 pts
Audit sampling is the application of audit procedures to less than 100% of items within a population of audit relevance
such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which
to draw conclusions about the entire population.

Correct!
True
False

Question 2
1 / 1 pts
In setting desired confidence level and acceptable level of risk of incorrect acceptance, the auditor considers the
significance of the account and the importance of the assertion on which the control provides assurance, as well as the
degree of reliance to be placed on the control.

Correct!
True
False

Question 3
1 / 1 pts
When tolerable deviation rate is greater than the upper deviation rate, it signifies that the internal control is operating
effectively.

Correct!
True
False

Question 4
1 / 1 pts
To determine sample size, the auditor uses the confidence level, tolerable error, and expected error.

Correct!
True
False

Question 5
1 / 1 pts
If an auditor sets a confidence level of 90%, this means the tolerable error is ranging from 5% to 10%.

True
Correct!
False

Question 6
1 / 1 pts
The risk of incorrect acceptance can result to failure to detect material misstatements.

Correct!
True
False
Question 7
1 / 1 pts
Statistical sampling allows auditor to quantify and control sampling risk.

Correct!
True
False

Question 8
1 / 1 pts
Haphazard selection of sample items is the process of selecting a sample following a structured technique.

True
Correct!
False

Question 9
1 / 1 pts
Sampling risk is the risk that the auditor’s conclusion based on a sample may be different from the conclusion if the
entire population were subjected to the same audit procedure.

Correct!
True
False

Question 10
1 / 1 pts
The risk of incorrect acceptance in a substantive test is the risk that the sample supports the conclusion that the
recorded account balance is not materially misstated when it is actually materially misstated.

Correct!
True
False

SW#9

Question 1
1 / 1 pts
Evidential matter obtained from client's inside legal counsel is not a substitute for information client's outside legal
counsel refuses to furnish.

Correct!
True
False

Question 2
1 / 1 pts
The purpose of management representation letter is (1) to impress upon management its responsibility for the
assertions in the financial statements and (2) to document management’s acknowledgement of the auditor’s issued
opinion.

True
Correct!
False
The no. 2 purpose is incorrect. It should be "document the responses from management to inquiries about various
aspects of the audit."

Question 3
1 / 1 pts
At the completion stage of the audit, a thorough review of audit documentation is performed by another member of the
audit firm as part of evaluating the overall audit results.

Correct!
True
False

Question 4
1 / 1 pts
Reviewing records and internal statements prepared by audit client personnel subsequent to the balance sheet date is
an audit procedure to verify subsequent events that are material to the financial statements being audited.

Correct!
True
False

Question 5
1 / 1 pts
Auditor’s need to communicate to the management and those charged with governance all of its planned audit
procedures before it is performed as required by the auditing standards.

True
Correct!
False
Not all planned audit procedures are communicated immediately to management and those charged with governance.
For example, audit procedures to be performed on a surprise basis to detect misstatements or control deviations. Such
audit procedures can be communicated after its performance.

Question 6
1 / 1 pts
The reason why an auditor needs to obtain separate evaluation of the audit client’s potential contingent liability from its
own (auditor) legal counsel is because client’s attorney is an advocate for the client and often loses perspective in
evaluating the likelihood of losing the case and the amount of potential judgment.

Correct!
True
False

Question 7
1 / 1 pts
Refusal of management to prepare and sign the letter would require a qualified opinion or adverse opinion.

True
Correct!
 False
It should qualified opinion or disclaimer of opinion.

Question 8
1 / 1 pts
Auditor to determine whether the disclosures in the financial statements are adequate.

Correct!
True
False

Question 9
1 / 1 pts
A merger or acquisition that took place in the year under audit is a best example of a subsequent event that needs to be
recorded in the financial statements being audited.

True
Correct!
False
Since merger or acquisition took place in the year under audit, it is not a subsequent event.

Question 10
1 / 1 pts
If auditor concludes that sufficient evidence has not been obtained to draw a conclusion about the fairness of client’s
representations, the auditor has two choices; (1) accumulate additional evidence or (2) issue a qualified or an adverse of
opinion depending on the materiality and pervasiveness of uncorrected misstatements.

True
Correct!
False
It should be "qualified or disclaimer of opinion" and not "qualified or adverse opinion" since auditor cannot obtain
evidence to warrant a conclusion that the financial statements are materially misstated.