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