Op Aud Quizzes 9 Files Merged

Cash and Accrual
Due Oct 2, 2021 at 8:30pm Points 10 Questions 1

Available Oct 2, 2021 at 8pm - Oct 2, 2021 at 8:30pm 30 minutes Time Limit 30 Minutes
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This quiz was locked Oct 2, 2021 at 8:30pm.
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Submitted Oct 2, 2021 at 8:29pm
This attempt took 29 minutes.
Question 1 1 / 1 pts
Zamboanga Enterprises records all transactions on the accrual basis. The company's
accountant prepared the following income statement at the end of the company's
first year of operations:
Zamboanga Enterprises
Income Statement
For the Year Ended December 31, 2020
Sales 2,016,000
Selling and administrative
expenses
Salaries Expense 624,000
Rent Expense 360,000
Utilities Expense 232,000
Depreciation Expense 240,000
Commission Expense 302,400
Insurance Expense 48,000
Interest Expense 24,000 1,830,400
Net income 185,600
You have been asked to prepare an income statement on the cash basis. The following
information is given to you to assist in the preparation:
(a) Amounts due from customers at year-end were 224,000. Of this amount, 24,000
will probably not be collected (not yet recorded).
(b) Salaries of 88,000 for December 2020 were paid on January 5, 2021.
(c) Zamboanga rents its building for 24,000 a month, payable quar terly in advance. The
contract was signed on January 1, 2020.
(d) The bill for December's utility costs of 21,600 was paid on January 10, 2021.
(e) Equipment of 240,000 was purchased on January 1, 2020. The expected life is 5
years, no salvage value. Assume straight-line depreciation.
(f) Commissions of 15% of sales are paid on the same day cash is received from the
customers.
(g) A 1-year insurance policy was issued in company assets on July 1, 2020. Premiums are
paid annually in advance.
(h) Zamboanga borrowed 400,000 for on year on May 1, 2020. Interest payments
based on an annual rate of 12% are made quar terly, beginning with the first payment
on August 1, 2020.
How much is the net income before income tax under the cash basis of accounting?
Correct!
56,800
orrect Answers 56,800 (with margin: 0)

0 (with margin: 0)
0 (with margin: 0)
0 (with margin: 0)
Quiz Score: 10 out of 10

This quiz score has been manually adjusted by +9.0 points.
Audit Theory - Code of Ethics and RA 9298
Due Oct 16, 2021 at 8:30pm Points 45 Questions 45
Available Oct 16, 2021 at 8pm - Oct 16, 2021 at 8:30pm 30 minutes Time Limit 30 Minutes
Instructions
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This quiz was locked Oct 16, 2021 at 8:30pm.
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LATEST Attempt 1 29 minutes 25 out of 45
Score for this quiz: 25 out of 45

The code of professional ethics for CPAs promulgated by the Board of Accountancy
applies to
Correct!
All CPAs in public practice, employed in private business and industry, in the
government, and in education.
All CPAs in public practice and employed in private business.
All CPAs in public practice.
All CPAs in government.

The underlying reason for the code of professional ethics is

To provide the licensing agencies with the basis for measuring the performance of the
practitioners.
That it provides a safeguard against unscrupulous people.
Correct! The need for public confidence in the quality of service of the profession.
That it is required by legislation.
Which of the following is not one of the characteristics of a profession?
Adherence by its members to a common code of conduct
Correct! A responsibility to protect exclusively the interest of a client or employer.
Mastery of a particular intellectual skill acquired by training and education
Acceptance of a duty to society as a whole.

The principle of professional competence and due care imposes cer tain obligations on
professional accountants. Which of the following is not one of those obligations
required by this principle?

To obtain professional knowledge and experience to enable them to fulfil their
responsibilities.

To act diligently in accordance with applicable technical and professional standards.
Correct! To be fair, intellectually honest and free of conflict of interest.

To become aware and understand relevant technical, professional and business
developments.
An auditor who accepts an audit engagement and does not possess the industry
exper tise of the business entity should

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
Correct! Obtain knowledge of matters that relate to the nature of the entity’s business
Engage financial experts familiar with nature of the business entity
The phase of professional competence that requires a professional accountant to

adopt a program designed to ensure quality control in the per formance of
professional services consistent with technical and professional standard is:
attainment of professional competence
You Answered application of professional competence
orrect Answer maintenance of professional competence
review of professional competence
The essence of the due care principle is that the auditor should not be guilty of:
orrect Answer Negligence.
You Answered Errors in judgement.
Bias.
Fraud
The principle of confidentiality imposes an obligation on professional accountants to

refrain from:
Disclosing information to defend themselves in case of litigation.
Correct!
Using confidential information acquired as a result of professional and business
relationships to their personal advantage or the advantage of third parties.

Responding to an inquiry or investigation conducted by the Professional Regulatory
Board of Accountancy.

Disclosing confidential information to another party even if the client authorizes the
disclosure.
A CPA shall not disclose confidential information obtain during an audit engagement in
which one of the following situations?
When the security of the state is required.
With the consent of the client.
Correct! To a successor auditor without the client’s consent.

In defense of himself when sued by his client.
The Code of Ethics for Professional Accountants states that a CPA shall not disclose
any confidential information obtained in the course of professional engagement
except with the consent of his client. In which of the situations given below would a CPA
be in violation of the principle of confidentiality?

Disclosing of confidential information in an investigation conducted by the PRC thru
the Board of Accountancy.

Disclosing confidential information in compliance with a subpoena issued by a court.
Correct!
Disclosing confidential information to another accountant interested in purchasing
the CPA’s practice.

Disclosing confidential information in order to properly discharge the CPA’s
responsibilities in accordance with his professional standards.
Which of the following is considered a violation of rules on confidentiality?

The CPA discloses information to a successor af ter obtaining the client’s permission.

The CPA discloses information to protect his own interest in the course of legal
proceedings.

The CPA discloses information to another CPA in compliance with quality control review
conducted by the Quality Review Committee (QRC).
Correct! The CPA divulges information disclosed to him by a prospective client.
A professional accountant’s name can be associated with information that:
Intentionally omits or obscure information.

Contains information without any real knowledge of whether they are true or false.
Contains a misleading statement.
Correct! Uses estimates.
When a professional accountant per forms several services in a country other than
the home country and dif ferences in specific matters exist between ethical
requirement of the two countries, the professional accountant should apply
Correct! The stricter of the two ethical requirements.
The ethical requirements of his or her home country.
The less strict ethical requirements.
The ethical requirements of the country of which services are being performed.
Which of the following most accurately states how objectivity has been defined by the
Code of Ethics?
You Answered
A state of mind that permits the provision of an opinion without being af fected by
influences that compromise professional judgement.
Being honest and straight forward in all professional and business relationship.

Avoiding facts and circumstances that could reduce the public confidence in the
professional accountant’s report
orrect Answer
A combination of impartiality, intellectual honesty and a freedom from conflict of
interest.
A CPA, while per forming an audit, strives to achieve independence in appearance in
order to
Reduce risk and liability.
You Answered Comply with the generally accepted standards of fieldwork.
Become independent in mind.
orrect Answer Maintain public confidence in the profession.
The concept of materiality would be least impor tant to an auditor in determining
Transaction that should be reviewed.
Correct! The ef fect of an auditor’s direct financial interest in a client.
The extent of audit work planned for particular accountant.
The need for disclosing a particular transaction or event.
Ultimately, the decision as to whether the CPA is independent or not, will be made by the
Client
Audit committee
Public
Correct! Auditor
This occurs as a result of the financial or other interests of a professional

accountant or of an immediate or close family member.
self-review threat
familiarity threat
Correct! self-interest threat
advocacy threat
This occurs when any product or judgment of a previous assurance engagement or

non-assurance engagement needs to be revaluated in reaching conclusions on the
assurance engagement or when a member of the assurance team was previously a
director or of ficer of the assurance client, or was an employee in a position to exer t
direct and significant influence over the subject matter if the assurance
engagement.
advocacy threat
You Answered familiarity threat
orrect Answer self-review threat
self-interest threat
Which of the following circumstances would least likely create self-interest threat?
orrect Answer
Having a close personal relationship between a member of the assurance team and the
assurance client, its directors, of ficers or employees

A loan or guarantee to or from an assurance client or any of its directors or
of ficers

A direct financial interest or material indirect financial interest in an assurance
client
You Answered Contingent fees relating to assurance engagements
Which of the following would least likely create “self-interest threat”?
Correct!
Pressure to reduce inappropriately the extent of work performed in order to reduce
fees
Having a close business relationship with an assurance client
Undue dependence on total fees from an assurance client
Concern about the possibility of losing the engagement
Acting for an audit client in the resolution of a dispute or litigation would most likely
create
intimidation threat
Correct! advocacy threat
familiarity threat
The preparation of accounting records or financial statements for an audit client will
most likely create
intimidation threat
familiarity threat
Correct! self-review threat
Using the same senior personnel on an assurance engagement over a long period of
time would most likely create
Correct! familiarity threat
advocacy threat
intimidation threat
Which of the following circumstances would least likely create familiarity threat?

a former partner of the firm being a director, of ficer of the assurance client or
an employee in a position to exert direct and significant influence over the subject
matter of the assurance engagement.
You Answered
a member of the assurance team having an immediate family member or close family
member who is a director or of ficer of the assurance team.
orrect Answer a former director or of ficer of the assurance client.

a member of the assurance team having an immediate family member or close family
member who, as an employee of the assurance client, is in a position to exert direct
and significant influence over the subject matter of the assurance engagement.
Safeguards fall into two broad categories. Safeguards created by the profession,
legislation or regulation does not include
You Answered Continuing professional development requirements.
Educational, training and experience requirements for entry into the profession.
orrect Answer
Documented policies regarding identification of threats to compliance with the
fundamental principles.
Corporate governance regulations.

The Philippine Code of Ethics requires that lead engagement par tners of listed entities
be rotated at least once every
7 years
2 years
Correct! 5 years
3 years
Independence of an auditor in relation to the enterprise may be impaired under the

following cases, except
Having a direct or material indirect financial interest in the enterprise.

Having a loan to or from the enterprise or any of ficer, director or principal
stockholder thereof with certain exceptions.
Correct! Engaged to render management advisory services to the enterprise.

Connection with the enterprise as a promoter, underwriter, voting trustee, director,
of ficer or employee.
The CPA should not under take an engagement if his fee is to be based upon
the findings of a tax authority
per diem rates plus expenses
Correct! a percentage of audited net income
the complexity of the service rendered.
The primary duty to enforce the provisions of RA 9298 and its IRR rests with
Correct! The BOA
The FRSC
The PFRC
The A ASC
Which of the following is not among the qualifications of a member of the Board of
Accountancy?
He/She must be of good moral character.
You Answered
He/She must not be a director or of ficer of the accredited national professional
organization at the time of appointment.
orrect Answer
He/She must have at least 10 years of experience in the practice of public
accountancy.
He/She must be natural-born Filipino citizen and a resident of the Philippines.
Which of the following is not a valid ground of suspension or removal of members of the
Board of Accountancy?
Violating 9298.
Rigging the CPA licensure examination results.
Correct! Being charged of crimes involving moral turpitude.
Neglect of duty or incompetence
The Financial Repor ting Standards Council shall be composed of a chairman and
orrect Answer 14 members
8 members
You Answered 15 members
17 members
Which of the following is not represented in the AASC?
Board of Accountancy
You Answered Securities and Exchange Commission
orrect Answer Bureau of Internal Revenue
Commission on Audit
The term of of fice of each member of AASC is
4 years, nonrenewable
2 years, renewable
3 years, nonrenewable
Correct! 3 years, renewable
The sector that is most represented in the Auditing and Assurance Standards
Council is the
Government
Correct! Public practice
Commerce and Industry
Academe
Which of the following is correct?

Any candidate who fails in two (2) complete CPA board examinations will no longer be
allowed to take another set of examinations
You Answered
The examination in which the candidate was conditioned and the removal examination on
the subject in which he / she failed shall be counted as two (2) complete examinations.

The refresher course should be completed within two 920 years from the preceding
examination.
orrect Answer
Any candidate who fails in two (2) complete CPA board examinations shall be
disqualified from taking another set of examinations unless he / she submits evidence
to the satisfaction of the Board that he / she enrolled in and completed at least
twenty-four (24) units of subjects given in the Licensure examination.
Which of the following shall be issued to a candidate who passes the CPA licensure
examination?

Personal identification card and a certificate of accreditation to practice public
accountancy.
You Answered Certificate of accreditation to practice public accountancy and PRCID.
orrect Answer Certificate of registration and professional identification card
Certificate of full compliance and PRCID.
A CPA whose cer tificate has been revoked may be reinstated if he has acted in
exemplary manner and has not committed any illegal, immoral or dishonorable conduct
for a period not less than
You Answered Five years
One year
The period depends on the seriousness of his of fense.
orrect Answer Two years
Unanswered Question 40 0 / 1 pts
Mel, CPA is applying for renewal of his professional license. He is exempted from the
CPE requirements
Neither a nor b.
orrect Answer Either a or b.

b. If he is working abroad and he has been out of the country for at least two years
immediately prior to the date of renewal.
a. If he is atleast 65 years old.
A CPA cer tificate is evidence of

orrect Answer Basic competence at the time of certification
Completion of continuing professional education program.
Membership in the accredited association
Independence as a professional
Special / temporary permit may be issued by the Board to the following persons
except:
orrect Answer
A foreign CPA who can prove that the contrary of which he / she is a citizen admits
citizens of the Philippines to the practice of the same profession without restriction.

A foreign CPA called for consultation or for specific purpose which is essential for
the development of the country and that there are no Filipino CPAs qualified for such
consultation or specific purpose and that his / her practice shall be limited only to the
particular work that he / she is being engaged.

A foreign CPA with specialization in any branch of accountancy and his / her service is
essential for the advancement of accountancy in the Philippines.

A foreign CPA engaged as a professor or lecturer in the fields essential to
accountancy education in the Philippines and his / her engagement is confined to
teaching only.
A cer tificate of accreditation shall be issued to CPA’s in public practice only upon
showing, in accordance with rules and regulations promulgated by the Board and
approved by the PRC, that such registration has acquired a minimum of ___ years
meaningful experience in any of the areas of public practice including taxation.
2
5
4
orrect Answer 3
All CPAs who are considered in the practice of Accountancy shall abide by the
requirements, rules and regulations on continuing professional education. For this
purpose, it is required that all registered CPAs must complete a minimum of
15 credit units in three years.
orrect Answer 60 credit units in three years.

Any person who shall violate any of the provisions of the Accountancy Act or any of
its implementing rules and regulations promulgated by the Board of Accountancy
subject to the approval of the PRC, shall upon conviction, be punished by

A fine not less than P500, 000 or by imprisonment for a period not exceeding two
years or both.
orrect Answer None of the other choices.
A fine of not more than P50, 000
Imprisonment for a period not exceeding two years.

Audit Theory - Overview of Auditing
Due Oct 16, 2021 at 9pm Points 30 Questions 30
Available Oct 16, 2021 at 8:30pm - Oct 16, 2021 at 9pm 30 minutes Time Limit 30 Minutes
Instructions
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This quiz was locked Oct 16, 2021 at 9pm.
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In all cases, audit repor ts must
Be signed by the individual who performed the audit procedures.
Communicate the auditor’s finding to the general public.
Certif y the accuracy of the quantitative information which was audited.
Correct!
Inform readers of the degree of correspondence between the quantifiable
information and the established criteria.
The auditor communicates the results of his or her work through the medium of the
Management letter
Financial statements
Correct! Audit report
Engagement letter
As used in auditing, which of the following statements best describes "asser tions"?
Assertions are found only in the footnotes to the financial statements.
Correct!
Assertions are the representations of management as to the fairness of the
financial statements.
Assertions are the auditor's findings to be communicated in the audit report.

Assertions are the representations of management as to the reliability of the
information system.
The framework for auditing and related services as addressed by PSA excludes
Correct! Tax services
Agreed upon procedure
Compilation
Review
It refers to the level of auditor’s satisfaction as to the reliability of an asser tion

being made by
one par ty for use by another par ty.
Confidence level
Correct! Assurance level
Reasonableness level
Tolerable level
Which of the following is true of the repor t based on agreed-upon-procedures?
Correct!
The report is restricted to those parties who have agreed to the procedures to be
performed.

The CPA provides the recipients of the report limited assurance as to reasonableness
of the assertion(s) presented in the financial information.


Which of the following is an objective of a review engagement?
You Answered
Reporting that the financial statements, in all materials respects, fairly present the
financial position and operating results of the client.
orrect Answer Rhich of the following is an objective of a review engagement?

Expressing a limited assurance to users who have agreed as to procedures that will be
performed by the CPA.

Expressing a positive opinion that the financial information is presented in conformity
with generally accepted accounting principles.
The three types of attestation services are:
Audits, compilations, and other attestation services
Correct! Audits, reviews, and other attestation services
Reviews, compilations, and other attestation services
Audits, review, and compilations
Which of the following criteria is unique to the independent auditor’s attest function?
Correct! Independence
Familiarity with the particular industry of each client
General competence
Independence
The single feature that most clearly distinguishes auditing, attestation, and assurance
is
Type of service.
CPA's approach to the service
Correct! Scope of services
Training required to perform the service
Which of the following types of audit uses as its criteria laws and regulations?
Operational audit
Financial audit
Correct! Compliance audit
Financial statement audit

The criteria for evaluating quantitative information vary. For example, in the audit of
historical
financial statements by CPA firms, the criteria are usually
Regulations of the Internal Revenue Service.
Correct! Generally accepted accounting principles
Regulations of the Securities and Exchange Commission.
Generally accepted auditing standards
An operational audit is designed to
Correct!
Assess the ef ficiency and ef fectiveness of management’s operating procedures

Determine whether the audit committee of the board of directors is ef fectively
discharging its responsibility to oversee management’s operations

Assess the presentation of management’s financial statements in accordance with
generally accepted accounting principles
Determine whether management has complied with applicable laws and regulations
Which one of the following is more dif ficult to evaluate objectively?
Compliance with government regulations.
All other choices are equally dif ficult
Correct! Ef ficiency and ef fectiveness of operations.

Presentation of financial statements in accordance with generally accepted
accounting principles
A financial statement audit:
Correct! Lends credibility to the financial statements.
Confirms that financial statement assertion are accurate
Assures that fraud had been detected.
Guarantees that financial statements are presented fairly
Which of the following best describes the objective of an audit of financial
statements?

To express an assurance about the management’s ef ficiency or ef fectiveness in
conducting the operations of entity.
Correct!
To express an opinion whether the financial statements are prepared, in all material
respect, in accordance with an identified financial reporting framework.

To express an opinion whether the financial statements are prepared in accordance
with prescribed criteria.

To express an assurance as to the future viability of the entity whose financial
statements are being audited.
Because an external auditor is paid a fee by a client company, he or she

Must receive approval of the Securities and Exchange Commission before conducting
an audit
You Answered Is absolutely independent and may conduct an audit
Is never considered to be independent
orrect Answer May be suf ficiently independent to conduct an audit

Which of the following is responsible for an entity’s financial statements?
The entity’s internal auditors
Correct! The entity’s management
The entity’s audit committee
The entity’s board of directors
The best statement of the responsibility of the auditor with respect to audited
financial statement is:
The audit of the financial statements relieves management of its responsibilities

TThe auditor is responsible only to his unqualified opinion but not for any other type
of opinion.
Correct!
The auditor’s responsibility is confined to his expression of opinion about the audited
financial statements.

The responsibility over the financial statements rests with the management and the
auditor assumes responsibility with respect to the notes of financial statements.
Which of the following least likely limits the auditors ability to detect material
misstatement?

Audit procedures that are ef fective in detecting ordinary misstatements are
inef fective in detecting intentional misstatements.
Correct! Most audit evidences are conclusive rather than being persuasive.
Audit is based on testing
The inherent limitations of any accounting and internal control system
Because an examination in accordance with generally accepted auditing standards is

influenced by the possibility of material errors, the auditor should conduct the
examination with an attitude of
Professional responsiveness
Conservative advocacy
Correct! Professional skepticism
Objective judgment
To operate ef fectively, an internal auditor must be independent of

The employer-employee relationship which exists for other employees in the
organization
All other choices are correct
The entity
Correct! The line functions of the organizations
Internal auditors cannot be independent
Because they don’t audit financial statements.
Unless their immediate supervisor is a CPA
Since they do not possess the CPA license.
Correct! As long as an employer-employee relationship exists.

Which of the following is an incorrect phrase?
Correct! Auditing subjectively obtains and evaluates evidence.
Auditing evaluates evidence regarding assertions.
Auditing communicates results to interested users
Auditing is a systematic process
Which of the following is a correct statement relating to the theoretical framework

of auditing?
Correct! The financial data to be audited can be verified.
An audit has a benefit only to the owners.
Auditors do not necessarily need independence.

Short-term conflicts do not exist between managers who prepare data and auditors
who examine data
When the professional accountant has obtained suf ficient appropriate evidence to
conclude that the subject matter conforms in all material respects with identified
suitable criteria, he or she can provide what level of assurance?
Absolute
Moderate
None
Correct! High
The Framework of PSA applies to
orrect Answer Compilation
You Answered Accounting advice
Taxation
Consultancy
Agreed-upon procedures provides what level of assurance?
You Answered High
Absolute
orrect Answer None
Moderate
Which of the following procedures ordinarily per formed during an audit are also
per formed in review?
Test of records and of responses to inquiries
Test of controls
Assessment of accounting and internal controls
Correct! Inquiry and analytical procedures
The auditor's opinion

Is an assurance as to the ef ficiency with which management has conducted the
af fairs of the entity, but not ef fectiveness.
Is an assurance as to the future viability of the entity
Correct! Enhances the credibility of the financial statements
Certifies the correctness of the financial statements

Midterm Long Exam 01
Due Oct 28, 2021 at 11:59am Points 35 Questions 35
Available Oct 28, 2021 at 10am - Oct 28, 2021 at 11:59am about 2 hours Time Limit 120 Minutes
Instructions
PLEASE READ THE QUESTIONS CAREFULLY and Select the best answer.
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Submitted Oct 28, 2021 at 11:57am
You were able to gather the following in connection with our audit of the Wowie Corp.
for the year
ended December 31, 2018:
December 31, 2017 December 31,

2018
Accounts receivable P6,400,000
P4,000,000
Unpaid merchandise invoices ?
2,621,000
Accrued wages 85,000
125,000
Adver tising supplies inventory 35,000
75,000
Accrued adver tising expense 14,250
40,000
Prepaid insurance 25,000
0
Unexpired insurance 0
41,000
During the year:

• Amount collected from customers, P10,000,000
• Total payments to suppliers of merchandise, P13,618,000
• Total payments to suppliers of merchandise of prior years, P4,632,000
• Wages paid, P3,050,000
• Adver tising paid which includes, P300,000
• Insurance premium paid, P125,000
Total sales for 2018 under accrual basis
14,000,000
6,400,000
12,400,000
7,600,000
On January 2, 2019, Harith Company entered into a five-year lease requiring payments
of P220,000
each lease year at the beginning of each year. The periodic payments include P20,000
in periodic
repairs and maintenance to be done by the lessor. Harith Company’s incremental
borrowing rate is
12%, while the lessor’s implicit interest rate, known to Harith Company, is 10%. The
estimated
residual value of the asset af ter five year lease term is at P40,000 while af ter its 10
year useful life is
at P20,000.
What is the carrying value of the right of use asset on the books of Harith Company
as of
December 31, 2019?
543,220
667,178
633,973
750,576
Incorrect Question 3 0 / 1 pts
The accountant of Cosine Corp. presented to you the following information in line with
your audit of
Cosine Corp.’s income tax related balances:
Pre-tax financial income P12,000,000
Non-taxable income 1,200,000
Non-deductible expenses 400,000
Provision for warranties which are tax deductible
upon settlement in the future 600,000
Prepaid adver tising expenses which are tax
deductible upon payment in the current period 500,000
Excess tax depreciation over financial depreciation 400,000
The current tax rate is at 32% but is expected to increase in the following year to
33%.
What is the current tax expense for the year?
3,584,000
3,587,000
3,596,000
3,488,000
The accountant of Try Corp. presented to you the following information in line with
your audit of Try
Corp.’s income tax related balances:
Pre-tax financial income

P10,000,000
Estimated litigation loss which is tax deductible
upon settlement in the future
600,000
Installment sale which will be recognized as taxable
income as received over the next two years
1,200,000
Unearned rental income
300,000
Dividend income
500,000
Life insurance expense
300,000
Income tax rate is constant at 33% for all years.
What is the total tax expense for the year?

3,234,000
3,036,000
3,135,000
3,300,000
Bee Co.’s net income for 2016, 2017 and 2018 were P100,000, P145,000 and P185,000;
respectively.
The following items were not handled properly.
a. Rent of P6,500 for 2019 was received from a lessee on December 23, 2018, and
recorded as
outright income in 2018.
b. Salaries payable at the end of the following years were omitted:

December 31, 2015 2,500
December 31, 2016 5,500
December 31, 2017 7,500
December 31, 2018 4,700
c. The following unused of fice supplies were omitted in the accounting records:
December 31, 2015 3,500
December 31, 2016 6,500
December 31, 2017 3,700
December 31, 2018 7,100
d. On January 1, 2016, the company completed major repairs on the company’s

machinery and
equipment totaling P220,000, which was expensed outright. The said equipment is 5
years old as
of January 1, 2016. As of December 31, 2018, the equipment had an original cost of
P500,000
and a carrying value of P250,000.
The correct 2018 depreciation expense is:
31,250
61,250
51,250
50,000
Accrual adver tising expense in 2018 for Wowie Corp.
260,000
245,750
300,000
285,750
The corrected 2016 net income for Bee Co is:

400,000
80,000
300,000
240,000
Which of the following statements best describes assurance services?

Services designed for the improvement of operations, resulting in better outcomes.

Services designed to express an opinion on the fairness of historical financial
statements based on the results of an audit.

The preparation of financial statements or the collection, classification, and
summarization of other financial information.

Independent professional services that are intended to enhance the credibility of
information to meet the needs of an intended user.
Competence as a cer tified public accountant includes all of the following except
Warranting the infallibility of the work performed.
Having the technical qualifications to perform an engagement.
Possessing the ability to supervise and evaluate the quality of staf f work.
Consulting others if additional technical information is needed.
Total purchases for 2018 under accrual basis for Wowie Corp.
16,239,000
15,629,000
13,618,000
11,607,000
Which of the following is not one of the characteristics of a profession?
Adherence by its members to a common code of conduct

Mastery of a particular intellectual skill acquired by training and education
Acceptance of a duty to society as a whole.
A responsibility to protect exclusively the interest of a client or employer.
The concept of materiality would be least impor tant to an auditor in determining
Transaction that should be reviewed.
The ef fect of an auditor’s direct financial interest in a client.
The extent of audit work planned for particular accountant.
The need for disclosing a particular transaction or event.
If requested to per form a review engagement for a nonpublic entity in which an

accountant has an immaterial direct financial interest, the accountant is
not independent and, therefore, may issue a review report.
not independent and, therefore, may not issue a review report.
independent and, therefore, may issue a review report.

not independent and, therefore, may not be associated with the financial statements.
126,700
113,700
120,020
120,200
CPAs in public practice who per form assurance engagements are governed by the
following, except
Code of Ethics for Professional Accountants in the Philippines
Philippine Standards on Quality Control
Philippine Framework for Assurance Engagements
Philippine Standards on Related Services

The ef fect of the errors on the 2018 beginning retained earnings of Bee Co is:
3,800 overstatement
136,200 understatement
Accrual wages expense for 2018 for Wowie Corp.
3,090,000
3,100,000
3,900,000
3,010,000
What is the current tax expense for the year for Try Corp.?
3,300,000
3,135,000
3,036,000
3,234,000
The ef fect of the errors on 2018 working capital of Bee Co is:
8,900 overstatement
4,100 overstatement
Assuming that Harith Company guaranteed the residual value of the asset, what is the
interest
expense in 2019?
85,881
98,312
70,812
65,881
Accrual insurance expense in 2018 for Wowie Corp.
84,000
141,000
190,000
109,000
If future tax rate is expected to increase to 35%, what is the total tax expense for
Try Corp.?
3,330,000
3,320,000
3,240,000
3,430,000
Which of the following professional services does not require independence?
Examination of financial forecast
Direct reporting engagements
Tax consultancy services
Assertion-based engagements
What is the carrying value of the right of use asset on the books of Harith Company
as of
December 31, 2019 for Harith Company?
560,769
667,178
750,576
697,370
164,700
170,900
184,700
165,600
In asser tion-based assurance engagements, the evaluation or measurement of the

subject matter against criteria is per formed by the
Practitioner
A ASC
Responsible party
Intended users
How much is the deferred tax asset as of December 31, 2018 for Try Corp.?
495,000
297,000
49,000
396,000
Assuming that Harith Company guaranteed the residual value of the asset and that
by the end
of 2019 the estimated residual value did not change, what is the depreciation expense
in
2019?
163,762
85,810
171,762
167,762
How much is the deferred tax liability as of December 31, 2018 for Try Corp.?
49,000
396,000
495,000
297,000
All CPAs who are considered in the practice of Accountancy shall abide by the
requirements, rules and regulations on continuing professional education. For this
purpose, it is required that all registered CPAs must complete a minimum of
What is the current tax expense for the year for Cosine Corp.?
3,584,000
3,596,000
3,488,000
3,587,000
According to Philippine Accountancy Act of 2004 (RA9298), the following are the
qualifications of applicants for CPA Examinations, except
BS Accountancy degree holder
Has not been convicted of any criminal of fense involving moral turpitude.
Of good moral character
A natural born Filipino citizen
What is the amount of depreciation expense on the books of Harith Company for
2019?
126,795
186,795
166,795
266,795
How much is the deferred tax liability as of December 31, 2018 in the books of Cosine
Corp.?
297,000
288,000
198,000
192,000
Which of the following is not an assurance service?
Audit of historical financial statements
Compilation of financial information
Review of financial statements
Examination of prospective financial information

This quiz score has been manually adjusted by +2.0 points.
Audit Theory - Planning
Due Nov 13, 2021 at 8:30pm Points 30 Questions 30
Available Nov 13, 2021 at 8pm - Nov 13, 2021 at 8:30pm 30 minutes Time Limit 30 Minutes
Instructions
Select the best option.
This quiz was locked Nov 13, 2021 at 8:30pm.
Attempt History
Attempt Time Score

Submitted Nov 13, 2021 at 8:30pm
The risk that financial statements are likely to be misstated materially without
regard to the ef fectiveness of internal control is which type of risk?
orrect Answer Inherent risk
Client risk
Audit risk
You Answered Control risk

The type of transactions that ordinarily have a high inherent risk because they involve
management judgment or assumptions are referred to as
routine transactions
related-party transactions
Correct! estimation transactions
nonroutine transactions
The probability that an auditor’s procedures leading to the conclusion that a material
error does not exist in an account balance when, in fact, such error does exist is
referred to as
control risk
prevention risk
inherent risk
Correct! detection risk
Which of the following is not ordinarily considered a factor indicative of increased
financial repor ting risk when an auditor is considering a client’s risk assessment
policies?
Implementation of a new information system
Corporate restructuring
Correct! Fixed monthly salaries of sales personnel
Rapid growth of the organization
Which of the following conditions identified during the audit increases the risk of
employee fraud?
Correct! Inventory items of small size, but high value
Large amount of cash in the bank
Existence of mandatory vacation policy for employees performing key factors
Presence of reconciling items on a client prepared year-end proof of cash
Which of the following is not an example of a likely adjustment in the auditor's overall
audit approach when significant risk is found to exist?
Apply increased professional skepticism about materials transactions
orrect Answer Increase in assessed level of detection risk

Obtain increased evidence about the appropriateness of management’s selection of
accounting principle.
You Answered Assign personnel with particular skill to areas of high risk
Which of the following is an example of fraudulent financial repor ting?

An employee steals inventory and the shrinkage is recorded in cost of goods sold.

An employee diverts customer payments to his personal use, concealing his actions by
debiting an expense account, thus overstating expenses.

An employee borrows tools from the company and neglects to return them; the cost
is reported as a miscellaneous operating expense.
Correct!
The company management falsifies inventory count tags thereby overstating ending
inventory and understating cost of goods sold.
Which of the following matters is generally included in an auditor’s engagement letter?
Management’s liability for non-compliance to laws committed by its employees

The auditor’s responsibility to obtain negative assurance relating ton the occurrence
of non-compliance to laws
Correct! Limitations of the engagement
Factors to be considered in establishing preliminary judgment about materiality
Which of the following factors most likely would lead a CPA to conclude that a potential
audit engagement should not be accepted?
Correct!
It is unlikely that suf ficient evidence is available to support an opinion on the financial
statements.

There are significant related party transactions that management claims occurred in
the ordinary course of business.

Internal control activities requiring the segregation of duties are subject to
management override.

Management continues to employ an inef ficient system of information technology to
record financial transactions.
In deciding whether to use the work of internal auditors, external auditors must
evaluate the internal auditors
Education and certification
Age and gender
Independence and professionalism
Correct! Objectivity and competence
Which of the following is not true regarding planning in an electronic environment?
Auditing standards are not changed.
The definition of auditing is not changed
The purposes of auditing are not changed
Correct! The procedures used are not changed.

An audit program is

A budget of the time that should be necessary to complete each phase of the audit
procedures.

A generic document that auditing firms have developed to lead the process of the
audit through a systematic and logical process.
Correct!
The detailed plan of audit procedures to be performed in the course of the audit.

An overview of the company and a general plan for the audit work to be accomplished.
One of the primary uses of an audit program is to
Correct! Serve as a tool for planning, directing, and controlling the audit work
Document an auditor's understanding of the internal control.
Provide for a standardized approach to the audit engagement
Delineate the audit risk accepted by the auditor

The principal reason for developing a written audit program is to help assure that the
Work of dif ferent auditors are properly coordinated
Audit work is properly supervised
Audit report contains only significant findings
Correct! Audit work is properly planned and documented
An audit program provides a proof that
Correct! The work is adequately planned and documented
There is a proper study and evaluation of internal controls
There is compliance with generally accepted standards of of reporting
Suf ficient competent evidential matter is obtained
Which of the following concepts is most useful in assessing the scope of an auditor’s
program relating to various accounts?
Correct! Materiality
Attribute sampling
Management fraud
The reliability of information
Of the following procedures, which one is not considered a par t of “obtaining an

understanding of the client’s environment?”
Correct! Confirming customer accounts receivable for existence and valuation

Touring the client’s manufacturing and warehousing facilities to gain a clearer
understanding of the entity’s operations
Studying the internal controls over cash receipts and disbursements

Reading trade publications to gain a better understanding of the client’s industry
With respect to the auditor’s planning of a year-end examination, which of the

following statements is always true?
orrect Answer
It is an acceptable practice to carry out substantial parts of the examination at
interim dates.
You Answered An inventory count must be observed at the balance sheet date.

The client’s audit committee should not be told of the specific audit procedures that
will be performed.
An engagement proposed af ter the fiscal year ends should not be accepted.
Which of the following is not a consideration in the development of audit programs?

Internal control over the recording of plant asset additions and repairs and
maintenance expenditures is found to be weak.

The client constructed a major addition to its central manufacturing facility during
the year under audit.
You Answered The client is a private university located in Southern Philippines.
orrect Answer
The members of the board of directors are elected by the stockholders during the
annual meeting.
The element of the audit planning process most likely to be agreed upon with the client
before the implementation of the audit strategy is the determination of the
Procedures to be undertaken to discover litigation, claims, and assessments.
Pending legal matters to be included in the inquiry of the client’s attorney.
Evidence to be gathered to provide a suf ficient basis for the auditor’s opinion.
Correct! Timing of inventory observation procedures to be performed.
In which of the following would the auditor most likely find information about
compensation of corporate of ficers?
orrect Answer Corporate minutes
Corporate charter
Audit engagement letter
You Answered Corporate by-laws
How is the auditor program best described at the beginning of the audit process?
Optional
Correct! Temporary
Conclusive
Confirmed
An auditor compares expenses as a percent of sales to expectations. This is an

example of:
Ratio analysis
Correct! Vertical analysis
Trend analysis
Internal control analysis
Which of the following statements is correct with respect to the auditor’s use of
analytical procedures?
You Answered
Analytical procedures are powerful tools that are required to be used during the
planning and testing phases of the audit.

Analytical procedures may be used to identif y misstatements in a client’s accounts.

Analytical procedures are time saving procedures that auditors may employ at their
discretion.
orrect Answer
Analytical procedures are required to be used during the planning and completion
phases of the audit.
Which of the following statements identifies potential weakness when comparing client
data with the industry?
Industry data may not be representative of the client’s business.

Data bases are comprised of data from thousands of companies of various sizes,
which may limit the ef fectiveness of the comparisons.
Correct! All other given choices are weaknesses

Other companies in the industry could use accounting principles dif ferent from what
the client is using.
Whom should the auditor contact when they suspect a fraud?
Audit committee of the board of directors
Correct! Either the senior management or the audit committee
Senior management
Expected perpetrators of the fraud
With respect to errors and fraud, the auditor should plan to

Search for errors that would have a material ef fect and for fraud that would have
either material or immaterial ef fects on the financial statements.

Search for errors or fraud that would have a material ef fect on the financial
statements.
Correct!
Discover errors or fraud that would have a material ef fect on the financial
statements

Search for fraud that would have a material ef fect and for errors that would have
either material or immaterial ef fects on the financial statements.
In which of the following order would the auditors per form the following steps?

Determine audit risk; assess control risk; determine detection risk; set materiality.
orrect Answer
Set materiality; determine audit risk; assess control risk; detection determine risk.

Set materiality; assess control risk; determine detection risk; determine audit risk.
You Answered
Determine audit risk; set materiality; assess control risk; determine detection risk.
Which of the following conditions justifies an auditor’s decision of raising the

materialilty level?

Application of analytical procedures reveals a significant increase in sales revenue in
December, the last month of the fiscal year.

Study of the business reveals that the client recently acquired a new company in an
unrelated industry.
Correct! Internal control over revenue and receipts cycle is excellent.
Internal control over shipping, billing, and recording of sales revenue is weak.
Which of the following does an auditor least likely per form in assessing audit risk?
Correct! Gather audit evidence in support of recorded transactions.
Understand the entity and the industry in which it operates.
Obtain an understanding of the client’s system of internal control.

Understand the economic substance of significant transactions completed by the
client.

Audit Theory - Internal Controls
Due Nov 13, 2021 at 9pm Points 30 Questions 30
Available Nov 13, 2021 at 8:30pm - Nov 13, 2021 at 9pm 30 minutes Time Limit 30 Minutes
Instructions
This quiz was locked Nov 13, 2021 at 9pm.
Attempt History
Attempt Time Score

An auditor considers internal control in order to:
Suggest improvements in internal control
Determine whether assets are safeguarded
Correct! Plan the audit procedures
Express an opinion
The primary purpose of the auditor’s consideration of internal control is to provide a

basis for

Determine whether procedures and records that are concerned with the safeguarding
of assets are reliable.
Constructive suggestions to clients concerning deficiencies in internal control.
The expression of an opinion.
Correct! Determine the nature, timing and extent of audit tests to be applied.
Once an understanding of the internal control structure that is suf ficient for audit
planning is obtained, then the auditor must first assess
The level of control risk supported by the understanding obtained.
Correct! Whether the financial statements are auditable.
Whether a lower level of control risk could be supported.
The level of control risk to use.
Af ter obtaining an understanding of internal control and assessing control risk, an
auditor decided to per form tests of controls. The auditor most likely decided that:
You Answered
Additional evidence to support a further reduction in control risk is not available.

An increase in the assessed level of control risk is justified for certain financial
statement assertion.
orrect Answer
It would be ef ficient to perform tests of controls that would result in a reduction in
planned substantive tests.

There were many internal control weaknesses that could allow errors to enter the
accounting system.
Which of the following statements is correct concerning repor table conditions in an

audit?
Correct!
An auditor may communicate reportable conditions during an audit or af ter the
audit’s completion.
An auditor may report that no reportable conditions were noted during an audit.
An auditor is required to search for reportable conditions during an audit.

All reportable conditions are also considered to be material weakness.
Which of the following statements is true? If control risk is assessed at the

maximum, the

Nature of related substantive tests should be changed from more to less ef fective.

Timing of related substantive tests should be changed from year-end to an interim
date.

Extent of related substantive tests should be changed from a larger to a smaller
sample.
Correct!
Nature of related substantive tests should be changed from less to more ef fective.
A control that reduces the risk that an existing or potential control weakness will
result in a failure to meet a control objective is referred to as a:
Conditional control.
Walkthrough control.
Correct! Compensating control.
Non-routine control.
In the assessment of control risk, the auditor is basically concerned that the client’s
internal control provides reasonable assurance that
Management cannot override the system.
Operational ef ficiency has been achieved in accordance with management plans.
Controls have not been circumvented by collusion.
Correct! Errors and fraud have been presented or detected.
In assessing control risk, the auditor must, as a minimum,
Obtain an understanding of the design of the client’s internal control.
Perform tests of all significant controls.

Correct!
Obtain an understanding of the design and implementation of the client’s internal
control.

Obtain an understanding of the design, implementation, and operating ef fectiveness
of the client’s internal control.
In studying internal control and assessing control risk, the auditor applies the following
steps:
A. Determine the internal control policies and procedures necessary to prevent or

detect errors or fraud that could occur in case of the absence of controls.
B. Identif y control weakness.
C. Determine whether the necessary policies and procedures have been designed and
whether they have been placed in operation.
D. Design substantive audit programs.
E. Consider the types of errors that could occur in the absence of necessary
controls.
CBAED
Correct! EACBD
AECBD
CDEAB
Tests of controls are directed toward the control’s
Ef ficiency
Cost benefit ratio
Correct! Ef fectiveness
Ef ficiency and ef fectiveness
The auditor is examining copies of sales invoices only for the initials of the person
responsible for checking the extensions.
Correct! Test of controls.
Dual purpose test.
Test of balances.
Substantive test.
Which of the following statements about tests of controls is not valid?

The auditor may perform inquiry and observation and gathering audit evidence about
the ef fectiveness of the control.

Observation of who applies a control procedure is useful as a test of control
procedures when evaluating control ef fectiveness of both computerized and manual
system.

Audit evidence obtain by doing observation pertains only to the point in time at which
the procedure was applied.
Correct!
Ordinarily, making inquiries provides more reliable audit evidence than doing observation
when testing segregation of functional responsibilities.
Which of the following audit tests would be a test of controls?

Tests of the specific items making up the balance in a financial statement account.
Tests of the additions to property, plant, and equipment by physical inspections.
Correct! Tracing signatures on canceled checks to board of director’s authorizations.
Comparing inventory prices to vendor’s invoices.

Which of the following procedures most likely would be included as par t of an auditor’s
tests of control procedures?
Correct! Inspection
Reconciliation
Confirmation
Analytical procedures
A procedure that would most likely be used by an auditor in per forming tests of
control regarding segregation of functions on which no audit trail is available:
Reconciliation.
Reprocessing.
Correct! Observation.
Inspection.
Tests of controls least likely include:
Inspection of documents.
Observation of the application of an accounting procedure.
Reperformance of a control.
Correct! Inquiries of appropriate client vendors.
Auditors can use several types of audit procedures to test controls. Which of the
following type of audit procedures is least likely to be used during tests of controls?
Examination of documents, records, and reports
Inquiries of client personnel
Correct! Physical examination of assets
Observation of control-related activities.
An auditor evaluate the existing internal control in order to

orrect Answer determine the extent of substantive tests which must be performed.
You Answered determine the extent of control tests which must be performed.
ascertain whether irregularities or probable.
ascertain whether any employees have incompatible functions.
Which of the following statements with respect to the independent auditor’s

evaluation of internal control is correct?

The auditor should increase control testing when weaknesses in billing procedures are
mitigated by strong controls in collection procedures.
You Answered
The auditor should decrease control testing when weaknesses in cash receipts are
mitigated by strong controls in cash disbursement procedures.
orrect Answer
The auditor generally should not evaluate the overall ef fectiveness of internal
control, but should separately evaluate each of the transaction cycles.

The auditor should evaluate all internal control weaknesses before determining the
control procedures that should prevent or detect errors or irregularities.
Which of the following procedures is essential in determining whether necessary

control activities are prescribed are being followed
Correct! Documentation of and testing controls.
Observing employees and making inquiries.
Evaluation of the entity’s procedures for risk assessment.
Development of questionnaires and checklists.
The understanding of internal control that relates to a financial statement

asser tion should be used to do all of the following except:

Consider factors that af fect the risk of material misstatement for that assertion
and asses control risk.
Correct! Determine the inherent risk for that assertion
Identif y types of potential misstatements for that assertion.
Design substantive tests that correspond with the assessment of control risk.
In an audit of financial statements, an auditor’s primary consideration regarding
internal control is whether it
Correct! Af fects management’s financial statement assertions.
Provides adequate safeguards over access to assets.
Supports management’s decision-making processes.
Incorporates management’s philosophy and operating style.
Of the following statements about an internal control system, which one is not valid?

Transactions must be properly authorized before such transactions are processed.

No one person should be responsible for the custodial responsibility and the recording
responsibility for an asset.
Correct!
Control procedures reasonably ensure that collusion among employees cannot occur.

Because of the cost benefit relationship, a client may apply control procedures on a
test basis.
When considering internal control, an auditor must be aware of the concept of

reasonable assurance which recognizes that
Correct!
The cost of internal control should not exceed the benefits expected to be derived
from internal control.

The establishment and maintenance of a system of internal control is an important
responsibility of the management and not of the auditor.

The segregation of incompatible functions is necessary to obtain assurance that the
internal control is ef fective.

The employment of competent personnel provides assurance that the objectives of
internal control will be achieved.
A par t of a periodic planning exercise, a company discovers that an eastern European

political dispute may inter fere with supply sources. This is an example of:
Monitoring
Control activities
Control environment
Correct! Risk assessment
Internal control procedures are not designed to provide reasonable assurance that

Access to assets is permitted only in accordance with management’s authorization.
Transactions are executed in accordance with management’s authorization.
Correct! Irregularities will be eliminated.

The recorded accountability for assets is compared with the existing assets at
reasonable intervals.
Emir is responsible for the custody of finished goods in the warehouse. If his company
wishes to maintain strong internal control, which of the following responsibilities are
incompatible with his primary job?
He is also responsible for the company’s fixed asset control ledger.
Correct!
He is responsible for the accounting records for all receipts and shipments of goods
from the warehouse.
He is responsible for issuing goods for shipment.
He is responsible for receiving of goods into the warehouse.
In general, material irregularities perpetrated by which of the following are most

dif ficult to detect?
Computer operator
Cashier
Correct! Controller
Internal auditor
Proper segregation of functional responsibilities in an ef fective system of internal

control calls for separation of the functions on:
Correct! Authorization, recording, and custody.
Custody, execution, and reporting.
Authorization, payment, and recording.
Authorization, execution, and payment.

Midterm Major Exam
Due Nov 18, 2021 at 12:30pm Points 70 Questions 70
Available Nov 18, 2021 at 9:30am - Nov 18, 2021 at 12:30pm about 3 hours Time Limit 180 Minutes
Instructions
This quiz was locked Nov 18, 2021 at 12:30pm.
Attempt History
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The audited income statement of GRASS SNAKE CO. shows a net income of P175,000
for the year ended December 31, 2021. Adjustments were made for the following
errors:
1. December 31, 2020, inventory overstated by P22,500
2. December 31, 2021, inventory understated by P37,500
3. A P10,000 customer's deposit received in December 2021, was credited to sales in

2021. The goods were actually shipped in January 2022.
What is the unadjusted net income of GRASS SNAKE CO.
170,000
Correct! 125,000
234,000
225,000
The primary factor that should be considered in determining the extent of

supervision needed by an assistant is the assistant’s
Professional certification
Correct! Competence
Willingness to exercise due care
Independence
The condensed income statement of CERASTES, INC. for the year ended December
31, 2021, is presented below:
Sales P1,000,000
COGS 600,000
Gross Income 400,000
Operating Expenses 150,000
Net Income P250,000

The December 31, 2021, audit of the company's financial statements disclosed the
following errors:
1. December 31, 2021, inventory understated P31,000.
2. Accrued expenses of P4,000 and prepaid expenses of P6,000 were not recognized in
the company's books.
3. Sales of P5,000 were not recorded until January 2022, although the goods were
shipped in December 2021, and were excluded from the December 31 physical inventory.
4. Purchases of P30,000 made in December 2021, were not recorded although the goods
were received and properly included in the December 31 physical inventory.
5. A machine was sold for P10,000 on July 1, 2021, and the proceeds were credited to the
sales account. The machine was acquired on January 1, 2018, for P60,000. At that time,
it had an estimated life of 6 years with no residual value. Depreciation was recorded on
this machine in 2021.
What is the correct sales for the year ended December 31, 2021?
1,005,000
990,000
Correct! 995,000
1,000,000
An auditor decides to increase the assessed level of control risk from that originally
planned on
the basis of audit evidence gathered and evaluated. To achieve an overall audit risk level
that
is substantially the same as the planned audit risk level, the auditor would
Correct! Decrease detection risk.
Increase materiality levels
Decrease substantive testing
Increase inherent risk
In connection with the element of assignment, a CPA firm’s system of quality control
should ordinarily establish procedures that

Establish qualifications deemed necessary for various levels of responsibility within
the firm.

Provide adequate supervision at all levels, considering the training, ability and
experience of the personnel assigned.
Encourage personnel to use authoritative sources on complex or unusual matter.
Correct!
Require preparation of time budgets for audits to determine manpower requirements
and to schedule the audit work.
SOOTHING SONG carries a wide variety of musical instruments, sound reproduction

equipment, recorded music, and sheet music. To promote the sale of its products,
SOOTHING uses two promotion techniques - premiums and warranties.
PREMIUMS
The premium is of fered on the recorded and sheet music. Customers receive a coupon
for each P20 spent on recorded music and sheet music. Customers may exchange 200
coupons and P200 for a CD player. SOOTHING pays P340 for each CD player and
estimates that 60% of the coupons given to customers will be redeemed. A total of
6,500 CD players used in the premium program were purchased during the year and
there were 1,200,000 coupons redeemed in 2021.
WARRANTIES
Musical instruments and sound reproduction equipment are sold with a one-year
warranty for replacement of par ts and labor. The estimated warranty cost, based on
past experience, is 2% of sales. Replacement par ts and labor for warranty work
totaled P1,640,000 during 2021.
SOOTHING uses the accrual method to account for the warranty and premium costs
for financial repor ting purposes. SOOTHING's sales for 2021 totaled P72,000,000 -
P45,000,000 from musical instruments and sound reproduction equipment and
P18,000,000 from recorded music and sheet music, the remaining amount from other
products. The balances in the accounts related to warranties and premiums on
January 1, 2021, were as shown below:
Inventory of premium CD players 399,500
Estimated premium on claims outstanding 548,000
Estimated liability from warranties 1,360,000
Based on the preceding information, determine the amounts that will be shown on the
2021 financial statements for the following:
Warranty expense
1,080,000
1,640,000
Correct! 900,000
800,000
Interest income of RONIN for the year 2019?
16,000
15,272
Correct! 18,775
18,701
In per forming an audit of financial statements, the auditor should have or obtain
knowledge of the client’s business suf ficient to
Correct! identif y transactions and events that may af fect the financial statements
assess the level of control risk
develop an attitude of professional scepticism

makes constructive suggestions concerning improvements in internal control
What is the corrected net income of CERASTES, INC. for the year ended December
31, 2021?
Correct! 233,000
224,000
228,000
258,000
This occurs when any product or judgment of a previous assurance engagement or

non-assurance engagement needs to be revaluated in reaching conclusions on the
assurance engagement or when a member of the assurance team was previously a
director or of ficer of the assurance client, or was an employee in a position to exer t
direct and significant influence over the subject matter if the assurance
engagement.
Correct! self-review threat
familiarity threat
advocacy threat
What level of assurance does the CPA provide under the following engagements?
Agreed-upon
Audit Review procedure

Compilation
orrect Answer Reasonable moderate none none
You Answered Reasonable limited low none
Reasonable negative none low
Moderate moderate none none
Which of the following would an auditor most likely use in determining the auditor’s
preliminary judgment about materiality?
Correct! The entity’s annualized interim financial statements
The contents of the management representation letter.
The results of the internal control questionnaire.

The anticipated sample size of the planned substantive tests.
What is the corrected net income for CUTE BUNNY, INC. for 2021?
185,300
Correct! 178,800
197,700
184,700
What amount of current liabilities should be repor ted on the December 31, 2021,
statement of financial position of CARROT HAMMER, INC.?
7,500,000
You Answered 5,500,000
orrect Answer 3,000,000
6,500,000
Quality Control of Audits of financial information states, in par t, that for audits of
financial statements of listed entities, the engagement par tner should not issue the
auditor’s repor t until the completion of the
Engagement Team Review
Engagement Partner Review
Management Review
Correct! Engagement Quality Control Review
ORANDA CORP. has been producing high quality disposable diapers for more than two
decades. The company's fiscal year runs from April 1 to March 31. The following
information relates to the obligations of ORANDA as of March 31, 2021.
BONDS PAYABLE
ORANDA issued P10,000,000 of 10% bonds on July 1, 2019. The prevailing market rate of
interest for these bonds was 12% on the date of issue. The bonds will mature on July 1,
2029, Interest is paid semiannually on July 1 and January 1. ORANDA uses the
ef fective interest rate method to amor tize bond premium or discount.
NOTES PAYABLE
ORANDA has signed several long-term notes with financial institutions. The maturities
of these notes are given in the schedule below. The total unpaid interest for all of
these notes amounts to P600,000 on March 31, 2021
Due Date Amount Due
April 1, 2021 P400,000

July 1, 2021 600,000
October 1, 2021 300,000

January 1, 2022 300,000
April 1, 2022 - March 31, 2023 1,200,000
April 1, 2023 - March 31, 2024 1,000,000
April 1, 2024 - March 31, 2025 1,400,000
April 1, 2025 - March 31, 2026 800,000
April 1, 2026 - March 31, 2027 1,050,000
Total P7,000,000
ESTIMATED WARRANTIES
ORANDA has a one-year product warranty on some selected items in its product line.
The estimated warranty liability on sales made during 2019 - 2020 fiscal year and still
outstanding as of March 31, 2020, amounted to P180,000. The warranty costs on sales
made from April 1, 2020, through March 31, 2021, are estimated at P520,000. The actual
warranty costs incurred during the current 2020 - 2021 fiscal year are as follows:
Warranty claims honored on 2019 - 2020 sales P180,000
Warranty claims honored on 2020 - 2021 sales 178,000
Total warranty claims honored 358,000
OTHER INFORMATION
1. TRADE PAYABLES
Accounts payable for supplies, goods and services purchased on open account amount
to P740,000 as of March 31, 2021.
2. PAYROLL RELATED ITEMS
Accrued salaries and wages P300,000
Withholding taxes payable 94,000
Other payroll deductions for remittance 10,000
Total P404,000
3. MISCELLANEOUS ACCRUALS
Other accruals separately classified amount to P150,000 as of March 31, 2021
4. DIVIDENDS
On March 15, 2021, ORANDA's board of directors declared a cash dividend of P0.20 per
ordinary share and a 10% share dividend . Both dividends were to be distributed on April
12, 2021, to the shareholders of record at the close of business on March 31, 2021. Data
regarding ORANDA ordinary share capital are as follows:
Par value P5.00 per share
Number of shares issued and outstanding 6,000,000 shares
Market value of ordinary shares:
March 15, 2021 P22.00 per share
March 31, 2021 21.50 per share
April 12, 2021 22.50 per share
How much was received by ORANDA from the sale of the bonds on July 1, 2019?
10,000,000
10,500,000
Correct! 8,852,960
10,647,040
Pronouncements of Auditing Assurance Standards Council (AASC) do not cover
Agreed-upon procedures engagement
Compilation engagement
Review engagement
Correct! Consultancy
What is the current por tion of ORANDA's notes payable at March 31, 2021?
2,800,000
1,300,000
3,800,000
Correct! 1,600,000
The balance of the estimated warranties payable of ORANDA at March 31, 2021, is
180,000
18,000
520,000
Correct! 342,000
On March 31, 2021, ORANDA's statement of financial position would repor t total
current liabilities of
Correct! 5,286,000
5,336,000
5,642,000
4,386,000
On March 31, 2021, ORANDA's statement of financial position would repor t total
noncurrent liabilities of
14,352,217
14,389,350
2021 estimated liability from warranties for SOOTHING

800,000
Correct! 620,000
1,920,000
1,080,000
2021 inventory of premium CD players for SOOTHING
Correct! 569,500
2,210,000
399,500
751,500
2021 estimated premium claims outstanding for SOOTHING
Correct! 86,000
840,000
364,000
672,000
CARROT HAMMER, INC. is a manufacturer and retailer of household furniture. Your

audit of the company's financial statements for the year ended December 31, 2021
discloses the following debt obligations of the company at the end of its repor ting
period. CARROT'S financial statements are authorized for issuance on March 6, 2022.
1. A P150,000 shor t-term obligation due on March 1, 2022. Its maturity could be
extended to March 1, 2024, provided CARROT agrees to provide additional collateral. On
February 12, 2022, an agreement is reach to extend the loan's maturity to March 1,
2024.
2. A shor t-term obligation of P3,600,000 in the form of notes payable due February 5,
2022. The company issued 75,000 ordinary shares for P36 per share on January 25,
2022. The proceeds from the issuance, plus P900,000 cash, were used to fully settle
the debt on February 5, 2022
3. A long-term obligation of P2,500,000 due December 1, 2031. On November 10, 2021,

CARROT, breaches a covenant on its debt obligation and the loan becomes payable on
demand. An agreement is reached to provide a waiver of the breach on February 11,
2022.
4. A long-term obligation of P4,000,000. The loan is maturing over 4 years in the

amount of P1,000,000 per year. The loan is dated September 1, 2021, and the first
maturity is September 1, 2022.
5. A debt obligation of P1,000,000 maturing on December 31, 2024. The debt is callable on
demand by the lender at any time.
What amount of current liabilities should be repor ted on the December 31, 2021,
statement of financial position?
3,750,000

4,750,000
On December 31, 2020, SERIOUS CO. signs a 10-year noncancelable lease agreement to
lease a storage building from a Storage Company.
The following information per tains to this lease agreement:
1. The agreement requires equal rental payments of P720,000 beginning n December 31,
2020.
2. The fair value of the building on December 31, 2020, is P4,600,000.
3. The building has an estimated economic life of 12 years, with an unguaranteed

residual value of P100,000. SERIOUS depreciates similar buildings using the straight-line
method.
4. The lease is nonrenewable. At the termination of the lease, the building rever ts to
the lessor.
5. The interest rate implicit in the lease is 12% per annum.
6. The yearly rental payment is exclusive of 24,705 of executory costs related to

taxes on the proper ty.
The following present value factors are for 10 periods at 12% annual interest rate:
Prevent value of an ordinary annuity of 1 5.65022
Present value of 1 0.32197
What amount should be capitalized as the cost of the leased storage building?
4,400,000
4,432,197
What amount should be included in the current liabilities section of Serious' statement
of financial position at December 31, 2021
Correct! 290,796
695,295
414,477
280,818
What amount should be included in the noncurrent liabilities section of Serious'

statement of financial position at December 31, 2021
Correct! 3,285,905
3,173,157
5,562,360
3,453,975
What is the total lease related expenses to be repor ted in Serious' income statement
for the year ended December 31, 2021?
You Answered 909,270
879,182
464,705
orrect Answer 940,700
The deferred tax asset to be repor ted in GODA's statement of financial position at
December 31, 2021, is
720,000
450,000
The amount of current income tax payable to be repor ted in GODA's statement of
financial position at December 31, 2021, is
Correct! 720,000
540,000
546,000
630,000
GODA's pretax accounting loss for 2021 is
3,900,000
2,400,000
GODA's net loss for 2021 is

3,630,000
2,730,000
The audit of procedure that will give the least assurance of the validity of the general
ledger balance of investment in stocks and bonds at the audit date is
orrect Answer Examination of paid checks issued in payment of securities purchased
Inspection and count of stocks and bonds
You Answered Vouching all charges during the year to the broker's advices and statements
Confirmation from the broker
Which of the following statements is the least accepted reason/purpose for acquiring
long-term investments?
orrect Answer To generate cash for operating purposes

You Answered To establish business relationships
To yield a relatively permanent other income
To create specific funds
Of the following, which is the most ef ficient audit procedure for testing accrued
interest earned on bond investments?
Vouching the receipt and deposit of interest checks
Tracing interest declarations to an independent record book
Correct! Recalculation of interest earned.
Confirming interest rate with the issuer of the bonds
An audit procedure applicable to testing the year-end cut-of f of liabilities is
Correct!
Examining vendor invoices received subsequent to year-end for shipment date and
terms of shipment
Tracing recorded liabilities to supporting documents

Reviewing the general journal for unusual entries recorded immediately af ter year-
end
Preparing an aging schedule for accounts payable
Which of the following is a substantive test that an auditor most likely would per form
to verif y the existence and valuation of recorded accounts payable?

Confirming accounts payable balances with known suppliers who have zero balances
Correct!
Vouching selected entries in the accounts payable subsidiary ledger to purchase
orders and receiving reports

Receiving the client's mail, unopened, for a reasonable period of time af ter the year-
end to search for unrecorded vendor's invoices.

Investigating the open purchase order file to ascertain that prenumbered purchase
orders are used and accounted for.
An auditor's purpose in reviewing the renewal of a note payable shor tly af ter the end
of the repor ting period most likely is to obtain evidence concerning management's
asser tion about
Completeness
Existence
Correct! Presentation and disclosure
Valuation and allocation
The proceeds from issuance of conver tible bonds by POCKY, INC. to be allocated to
the equity component is
221,664
0
The auditor should design and per form fur ther audit procedures whose nature,
timing, and
extent are responsive to the assessed risks of material misstatement at the
asser tion level.
Which of the following is the most impor tant consideration in responding to the
assessed risks?
All of these are equally important.
The extent of the audit procedures.
The timing of the audit procedures.
Correct! The nature of the audit procedures.
The carrying amount of the bonds payable of POCKY, INC on December 31. 2019 is
2,000,502
2,000,000
1,389,400
Correct! 1,900,502
The interest expense of POCKY, INC. for the year 2020 is

138,940
187,318
Correct! 190,050
160,000
RONIN Corporation purchased P200,000 8% bonds for P184,557 on January 1, 2018.

RONIN classified the bonds as available for sale. The bonds were purchased to yield 10%
interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on
January 1, 2023. RONIN uses the ef fective interest method to amor tize premium or
discount. On January 2, 2020, the fair value of the bonds did not change from previous
repor ting period end. On this date RONIN sold the bonds for its fair value af ter
receiving interest to meet its liquidity needs.
The market value of the bonds are as follows:
December 31, 2018 P190,449
December 31, 2019 186,363
Interest income for the year 2018
18,456
16,000
You Answered 14,869

Unrealized gain on available for sale securities for RONIN as of December 31, 2018?
You Answered 3,436
5,892
orrect Answer 3,375
0
Unrealized gain or loss on available-for-sale securities of RONIN for the year ended
December 31, 2019?
8,053 gain
orrect Answer 6,861 loss
3,486 loss
You Answered 3,351 gain
Which of the following statements is correct?

The auditor should use professional judgment to assess audit risk and to design audit
procedures to ensure it is eliminated.
Correct!
The auditor should obtain an understanding of the accounting and internal control
systems suf ficient to plan the audit and develop an ef fective audit approach.

The subsequent discovery that a material misstatement exists in the financial
statements is evidence of inadequate planning, performance, or judgment on the part
of the auditor.
The auditor is an insurer, and his or her report constitutes a guarantee.
Inherent risk and control risk dif fer from detection risk in that they
Arise from the misapplication of auditing procedures
May be assessed in either quantitative or nonquantitative terms.
Correct! Exist independently of the financial statement audit.
Can be changed at the auditor’s discretion

Which of the following statements is true?

If control risk is assessed at maximum, the nature of related substantive tests
should be changed from more to less ef fective.

If control risk is assessed at maximum, the extent of related substantive tests
should be changed from a larger to a smaller sample
Correct!
If control risk is assessed at maximum, the nature of related substantive tests
should be changed from less to more ef fective

If control risk is assessed at maximum, the timing of related substantive tests should
be changed from year-end to an interim date.
Which statement is incorrect regarding the extent of fur ther audit procedures?
Correct!
The auditor ordinarily decreases the extent of audit procedures as the risk of
material misstatement increases

The extent of an audit procedure is determined by the judgment of the auditor
af ter considering the materiality, the assessed risk, and the degree of assurance the
auditor plans to obtain.

Increasing the extent of an audit procedure is ef fective only if the audit procedure
itself is relevant to the specific risk.
Extent includes the quantity of a specific audit procedure to be performed.
Which statement is incorrect regarding the nature of tests of controls?

Those controls subject to testing by performing inquiry combined with inspection or
reperformance ordinarily provide more assurance than those controls for which the
audit evidence consists solely of inquiry and observation.

As the planned level of assurance increases, the auditor seeks more reliable audit
evidence.

A material misstatement detected by the auditor’s procedures that was not
identified by the entity ordinarily is indicative of the existence of a material weakness
in internal control.
Correct!
The absence of misstatements detected by a substantive procedure provides audit
evidence that controls related to the assertion being tested are ef fective.
Which statement is incorrect regarding evaluation of the suf ficiency and

appropriateness of
audit evidence obtained?

Based on the audit procedures performed and the audit evidence obtained, the
auditor should evaluate whether the assessments of the risks of material
misstatement at the assertion level remain appropriate.
Correct!
In developing an opinion, the auditor considers only the audit evidence which
corroborate the assertions in the financial statements.

If the auditor is unable to obtain suf ficient appropriate audit evidence, the auditor
should express a qualified opinion or a disclaimer of opinion

As the auditor performs planned audit procedures, the audit evidence obtained may
cause the auditor to modif y the nature, timing, or extent of other planned audit
procedures.
Which statement is incorrect regarding the nature, timing and extent of

substantive
procedures?

The greater the risk of material misstatement, the greater the extent of
substantive procedures.
Correct! Substantive procedures cannot be performed at an interim date.

Substantive analytical procedures are generally more applicable to large volumes of
transactions that tend to be predictable over time.

Tests of details are ordinarily more appropriate to obtain audit evidence regarding
certain assertions about account balances, including existence and valuation
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

Acceptable if the CPA refers in the audit report to reliance upon the predecessor
auditor’s work.
Required if the CPA is to render an unmodified opinion.
Correct! Acceptable if the client and the predecessor auditor agree to it.

Unacceptable because the CPA should bring an independence viewpoint to a new
engagement.
An inherent risk (IR) of 40% and a control risk of (CR) of 60% af fect planned
detection risk and planned evidence dif ferently than an
IR of 100% and CR of 24%
Correct! IR of 70% and CR of 30%
A basic premise underlying analytical procedure is that
Correct!
Plausible relationships among data may reasonably be expected to exist and continue in
the absence of known conditions to the contrary.

Statistical tests of financial information may lead to the discovery of material
misstatements in the financial statements.
These procedures cannot replace tests of balances and transactions.

The study of financial ratios is an acceptable alternative to the investigation of
unusual fluctuations.
On January 2, 2019, the POCKY, Inc. issued P2,000,000 of 8% conver tible bonds at 105.
The bonds will mature on January 1, 2023 and interest is payable annually every
January 1. The bond contract entitles the bondholders to receive 6, P100 par value,
ordinary shares in exchange for each P1,000 bond. On the date of issue, the prevailing
market interest rate for similar debt without the conversion option is 10%.
On January 1, 2023, the holders of the bonds with total face value of 1,000,000
exercised their conversion privilege. On that date, the bonds were selling at 110 and the
ordinary share at P42. (Round of f present value factors to 4 decimal places)
The proceeds from issuance of conver tible bonds to be allocated to the liability
component is
2,000,000
1,366,000
1,778,336
Correct! 1,873,184
Which of the following circumstances would least likely create self-interest threat?
orrect Answer
Having a close personal relationship between a member of the assurance team and the
assurance client, its directors, of ficers or employees

A direct financial interest or material indirect financial interest in an assurance
client
You Answered Contingent fees relating to assurance engagements

A loan or guarantee to or from an assurance client or any of its directors or
of ficers
When threats to independence that are other than those clearly insignificant are
identified, the professional accountant should
Correct!
apply appropriate safeguards to eliminate threats to independence or to reduce them
to an acceptable level.
downgrade the nature of engagement to one that does not require independence.
assign more experienced staf f to the assurance engagement.

continue the assurance engagement but with heightened level of professional
skepticism.
CUTE BUNNY, INC. has been using the accrual basis of accounting. However, an
examination of the records reveals that some expenses and revenues have been
handled on a cash basis by the inexperienced bookkeeper of the company. Income
statements prepared by the bookkeeper repor ted P145,000 net income for 2020 and
P185,000 net income for 2021. Fur ther review of the records reveals that the following
items were handled improperly:
1. Rent of P6,500 was received from a lessee on December 23, 2019. It was recorded as
income at that time even though the rental per tains to 2020.
2. Salaries payable on December 31 have been inconsistently omitted from the records
of that date and have been recorded as expenses when paid in the following year. The
salary accruals recorded in this manner were:
December 31, 2019 P6,500
December 31, 2020 3,700
December 31, 2021 7,100
3. Invoices for of fice supplies purchased have been charged to expense accounts
when received. Inventories of supplies on hand at the end of each year have been
ignored, and no entry has been made for them.
December 31, 2019 P5,500
December 31, 2020 7,500
December 31, 2021 4,700
What is the corrected net income for 2020?
Correct! 156,300
146,700
133,700
143,300
The audit of procedure that will give the greatest assurance of the validity of the
general ledger balance of investment in stocks and bonds at the audit date is
You Answered Examination of paid checks issued in payment of securities purchased
Vouching all charges during the year to the broker's advices and statements
Inspection and count of stocks and bonds
orrect Answer Confirmation from the broker
The total amount of credit to Share Premium - issuance in the conversion of the
bonds of POCKY, INC is
400,000
1,026,816
Which of the following will least likely impair independence?

A partner or employee of the firm serves as an of ficer or as a director on the
board of an assurance client.
orrect Answer
A partner or an employee of the firm receives a token gif t from an assurance
client.
You Answered
A member of the assurance team participates in the assurance engagement while
knowing, or having reason to believe, that he or she is to, or may, join the assurance
client some time in the future.

An immediate family member of a member of the assurance team is a director, an
of ficer or an employee of the assurance client in a position to exert direct and
significant influence over the subject matter of the assurance engagement.
2021 premium expense for SOOTHING
756,000
Correct! 378,000
1,836,000
840,000
Engagement to apply agreed-upon procedures on cer tain accounts within a financial

statements may be accepted provided
orrect Answer The distribution of the report is limited only to specified parties involved
The CPA has ex[ressed opinion on the financial statements taken as a whole

The CPA provides only a limited assurance about the reliability of the financial
statements
You Answered
The CPA takes full resposibility for the adequacy of the procedures to be
performed
According to PSA 3000, assurance engagement should exhibit five elements including
Correct! A written assurance report
Financial information
A two party relationship
Financial reporting framework

The following data per tain to the GODA COMPANY.
1. At December 31, 2021, the company has a P900,000 liability repor ted for estimated
litigation claims. This P900,000 balance represents amounts that have been charged to
income but are not tax deductible until they are paid. the company expects to pay the
claims and thus have tax-deductible amounts in the future in the following manner:
2024 P150,000
2025 690,000
2026 60,000
2. The company uses dif ferent depreciation methods for financial repor ting and tax
purposes. Consequently, at December 31, 2021, the company has a cumulative temporary
dif ference due to depreciable proper ty of P2,400,000. This P2,400,000 cumulative
temporary dif ference is to result in deductible amounts in future years in the
following manner:
2022 P480,000
2023 480,000
2024 480,000
2025 480,000
2026 480,000
3. The income tax rate is 30%.
4. The taxable income for 2021 is P2,400,000. The company expects to repor t taxable
income for the next five years.
5 No temporary dif ferences existed at the end of 2020.
The deferred tax liability to be repor ted in GODA's statement of financial position at
December 31, 2021, is
orrect Answer 0
480,000
450,000
Which of the following best describes the function of Auditing and Assurance
Standards Council (AASC)?
To investigate violations of Accountancy Act.

To establish and promulgate generally accepted accounting principles in the Philippines.

To determine the minimum requirements for admission in the accounting profession.
Correct!
To promulgate auditing standards, practices and procedures that shall be generally
accepted by the accounting profession in the Philippines.
Quality control policies and procedures should provide the firm reasonable assurance
that the policies and procedures relating to the other elements of quality control are
being ef fectively applied. This statement defines the quality control element of
orrect Answer Monitoring

You Answered Independence, integrity, objectivity
Planning
Assignment
The firm should establish policies and procedures designed to promote an internal
culture based on the recognition that quality is essential in per forming engagements.
Such policies and procedures should require the firm’s chief executive of ficer (or
equivalent) or, if appropriate, the firm’s managing board of par tners (or equivalent), to
assume ultimate responsibility for the firm’s system of quality control.
Monitoring
Human resources
Correct! Leadership responsibilities for quality within the firm
Ethical requirements

PPE, Intangibles and Other Assets
Due Dec 11, 2021 at 6:30pm Points 30 Questions 25
Available Dec 11, 2021 at 5pm - Dec 11, 2021 at 6:30pm about 2 hours Time Limit 70 Minutes
Instructions
Select the best option or provide the answer (Round your answers to the nearest peso, a P5 margin of error has been
provided for the correct answer).
This quiz was locked Dec 11, 2021 at 6:30pm.
Attempt History
Attempt Time Score

Submitted Dec 11, 2021 at 6:25pm
MAY NABAGO BA MANUFACTURING COMPANY began operations on October 1, 2019.

The Company's accountant has star ted to gather per tinent information about each
of the company's proper ty, plant and equipment as shown below. When he was about to
prepare a schedule of PPE and depreciation, he was assigned to maintain the books of
the company's foreign operations. You have been asked to assist in the preparation of
this schedule. In addition to ascer taining that the summarized data below are correct,
you have accumulated the following information from the company's records and
personnel.
a) MAY NABAGO BA computed depreciation from the first of the month of acquisition
to the first of the month of disposition.
b) Land A and Building A were purchased from MUKHANG WALANG NABAGO Company.
MAY NABAGO BA paid P12,300,000 for the land and building together. At the time of
acquisition, the land had a fair value of P1,350,000 and the building had a book value of
P12,150,000 in MUKHANG WALANG NABAGO Company's books.
c) Land B was acquired on October 3, 2019, in exchange for 37,500 ordinary shares of
MAY NABAGO BA. On the acquisition date, Land B had a fair value of P1,365,000 and the
company's P5 par value ordinary shares had a fair value of P35 per share.
d) Construction of Building B on the newly acquired land began on October 1, 2020. By

September 30, 2021, MAY NABAGO BA had paid P4,800,000 of the total construction
costs of P6,750,000. The building was completed and occupied by July 2022.
e) Cer tain equipment was donated to the corporation by the national government. An
independent appraisal of the equipment when donated placed the fair market value at
P450,000 and the salvage value at P45,000.
f) Machinery A's total cost of P2,473,500 includes installation cost of P9,000 and
normal repairs and maintenance of P223,500. Salvage value is estimated at P90,000. It
was sold on February 1, 2021, for P1,600,000.
g) On October 1, 2020, Machinery B was acquired with a down payment of P86,100 and
the remaining payments to be made in 11 annual installments of P90,000 each, beginning
October 1, 2020. The prevailing interest rate was 8%. The following data were
abstracted from present value tables (rounded):
10 Years 11 Years 15 Years

Present Value of 1
0.463 0.429 0.315
at 8%
Present Value of an
ordinary annuity of 6.710 7.139 8.559
1 at 8%
Land A
Acquisition date: October 1, 2019
Building A
Salvage value: P741,750
Depreciation method: Straight-line

Depreciation expense: Year ended Sept. P261,750
30, 2020
Land B
Building B
Acquisition date: Under construction
Cost: P4,800,000 to date
Salvage value: P0
Estimated life: 30 years

Depreciation expense: Year ended
P0
September 30, 2020
Donated equipment
Acquisition date: December 15, 2019
Depreciation method: 150% declining balance
Machinery A
Depreciation method: Sum-of-the-year's-digits (SYD)
Machinery B

Salvage value: P0
What is the cost of Land A?
P11,070,000
P12,150,000
You Answered P1,230,000
orrect Answer P1,350,000
What is the cost of Building A?
P12,150,000
P11,000,000
What is the estimated useful life of Building A?

40 Years
42 Years
41 Years
Correct! 39 Years
What is the depreciation expense for Building A for the year ended September 30,
2016?
P261,750
P523,500
P288,750
Correct! 0
What is the cost of Land B?
Correct! P1,365,000
P1,552,500
P1,125,000
P1,312,500
What is the depreciation expense on Building B for the year ended September 30,
2021?
Correct! P0
P120,000
P288,750
P168,750
At what amount should the donated equipment be measured and recognized?
Correct! P450,000
P405,000
P0
P45,000
What is the depreciation expense on the donated equipment for the year ended
September 30, 2020?
P60,750
Correct! P56,250
P74,250
P67,500
What is the depreciation expense on the donated equipment for the year ended
September 30, 2021?
P51,638
P67,500
Correct! P59,063
P57,375
What is the cost of Machinery A?
P2,473,500
P2,151,000
Correct! P2,250,000
P2,160,000
What is the depreciation expense on machinery A for the year ended September 30,
2020?
P478,000
P500,000
P529,667
Correct! P480,000
What is the depreciation expense on machinery A for the year ended September 30,
2021?
P130,926
P175,000
P113,426
Correct! P140,000
What amount of gain (loss) should be recognized on the sale of Machinery A?
P5,000 gain
P60,000 gain
P0
Correct! P30,000 loss
What is the cost of Machinery B?

Correct! P780,000
P731,670
P728,610
P685,434
What is the depreciation expense on Machinery B for the year ended September 30,
2021?
P36,430
P36,584
P34,272
Correct! P39,000
Total depreciation expense for the year ended September 30, 2020?
Correct!
798,000
orrect Answers 0 (with margin: 0)

0 (with margin: 0)
0 (with margin: 0)
798,000 (with margin: 5)
Total depreciation expense for the year ended September 30, 2021?
Correct!
499,813
orrect Answers 499,813 (with margin: 5)

0 (with margin: 0)
0 (with margin: 0)
0 (with margin: 0)
Total Proper ty Plant and Equipment to be presented in the Statement of Financial

Position as of September 30, 2020.
You Answered
16,365,000
orrect Answers 0 (with margin: 0)

0 (with margin: 0)
0 (with margin: 0)
15,567,000 (with margin: 5)
You Answered
14,895,000
orrect Answers 19,017,188 (with margin: 5)

0 (with margin: 0)
0 (with margin: 0)
0 (with margin: 0)

You Answered
21,645,000
orrect Answers 20,559,984 (with margin: 5)

0 (with margin: 0)
0 (with margin: 0)
0 (with margin: 0)
When there are few proper ty and equipment transactions during the year, the
continuing auditor usually makes a

Preliminary review of the related internal controls and performs a thorough
examination of the balances at the beginning of the year.
Correct!
Preliminary review of the related internal controls and performs extensive tests of
current year property and equipment transactions.

Complete review of the related internal controls and performs analytical review tests
to verif y current year additions to property and equipment

Complete review of the related internal controls and assesses control risk relative to
them.
Which of the following techniques would best result in suf ficient evidence with regard
to an audit of the quantity of fixed assets on hand in a par ticular depar tment?
Examination of the account balances contained in general and subsidiary ledgers.
Analytical review of purchase requests and subsequent invoices.
Correct! Physical observation.
Interviews with department management.
The most significant audit step in substantiating additions to the of fice furniture
account balance is
Correct!
Examination of vendor's invoices and receiving reports for current year's acquisitions.
Comparison to prior year's acquisitions.
Calculation of ratio of depreciation expense to gross of fice equipment cost.

Review of transactions near the end of the reporting period for proper period
cutof f.
In audition plant assets and accumulated depreciation for proper valuation, the auditor
should do all of the following, except:
Correct! Physically inspect major plant assets additions,
Vouch mahor additions by reference to underlying documentation.
Recalculate depreciation expense on a test basis.
Vouch repairs and maintenance expense on a test basis.
An auditor is verif ying the existence of newly acquired fixed assets recorded in the
accounting records. Which of the following is the best evidence to help achieve this
objective?
Correct! Physical examination of a sample of newly recorded fixed assets.

Documentary support obtained by vouching entries to subsidiary records and invoices.
Oral evidence obtained by discussions with operating management.
Documentary support obtained by reviewing titles and tax returns.

Cash and Cash Equivalents
Due Dec 11, 2021 at 7:30pm Points 20 Questions 18
Available Dec 11, 2021 at 6:30pm - Dec 11, 2021 at 7:30pm about 1 hour Time Limit 60 Minutes
Instructions
This quiz was locked Dec 11, 2021 at 7:30pm.
Attempt History
Attempt Time Score

Submitted Dec 11, 2021 at 7:30pm
The cash account in the ledger of AYAWAN NA Company had a balance of P844,800 at
December 31, 2020. An examination of the account, however, disclosed the following:
The sales book was lef t open up to January 5, 2021, and cash sales totaling
P120,000 were considered as sales in December.
Checks of P74,400 in payment of liabilities were prepared before December 31,
2020, recorded in the books, but not mailed or delivered to payees.
Post-dated checks totaling P62,400 are being held by the Cashier as par t of cash.
The company's experience shows that post-dated checks were eventually realized.
Customer's check for P12,000 deposited with but returned by Bank, "NSF on
December 27, 2020.
The cash account includes P320,000 earmarked for the purchase of inventory
which will soon be delivered.
The cash balance to be shown on the statement of financial position at December 31,
2020 should be
P416,800
orrect Answer P724,800
P799,200
You Answered P404,800
You noted the following composition of PAGOD NA AKO Company's "cash account" as of
December 31, 2020 in connection with your audit:
Demand deposit
2,000,000
account
Time deposit -
1,000,000
30 days
NSF check of
40,000
customer
Money market
placement (due 1,500,000
June 30, 2021)
Savings deposit
100,000
in a closed bank
IOUs from
20,000
employee
Pension fund 3,000,000
Petty cash
10,000
fund
Customer's 50,000
check dated
January 1, 2021
Customer's
check
40,000
outstanding
for 18 months
Total 7,760,000
Additional information follows:
a) Check of P200,000 in payment of accounts payable was recorded on December 31,

2020 but mailed to suppliers on January 5, 2021.
b) Check of P100,000 dated January 15, 2021 in payment of accounts payable was not
recorded but mailed on December 31, 2020.
c) The company uses the calendar year. The cash receipts journal was held open until
January 15, 2021, during which time P400,000 was collected and recorded on December
31, 2020.
The cash and cash equivalents to be shown on the December 31, 2020 statement of
financial position is
P3,010,000
P1,910,000
You were able to gather the following from the December 31, 2020 trial balance of MAY
PINALITAN BA Corporation in connection with your audit of the company:
Cash on hand 500,000
Petty cash fund 10,000
BPI current
1,000,000
account
Security Bank
current account No. 1,080,000
01
Security Bank
current account No. (80,000)
02
PNB savings
1,200,000
account
PNB time deposit 500,000
Cash on hand includes the following items:
a. Customer's check for P40,000 returned by bank on December 26, 2020 due to
insuf ficient fund but subsequently redeposited and cleared by the bank on January 8,
2021.
b. Customer's check for P20,000 dated January 2, 2021, received on December 29,
2020.
c. Postal money orders received from customers, P30,000.
The petty cash fund consisted of the following items as of December 31, 2020.
Currency and coins P2,000
Employees' vales 1,600

Currency in an
envelope marked
"collections for 1,200
charity" with names
attached
Unreplenished petty
1,300
cash vouchers
Check drawn by MAY
PINALITAN BA
4,000
Corporation, payable to
the petty cashier
Total P10,100
Included among the checks drawn by MAY PINALITAN BA against the BPI current
account and recorded in December 2020 are the following:
a. Check written and dated December 29, 2020 and delivered to payee on January 2,
2021, P80,000.
b. Check written on December 27, 2020, dated January 2, 2021, delivered to payee on
December 29, 2020, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks
drawn in excess of the deposit balance. These checks were still outstanding at
December 31, 2020.
The savings account deposit in PNB has been set aside by the board of directors for
the acquisition of new equipment. This account is expected to be disbursed in the next
3 months af ter the end of the repor ting period.
Cash on hand
P410,000
Correct! P440,000
P530,000
P470,000
Petty cash fund to be repor ted by MAY PINALITAN BA as at December 31, 2020
P2,000
P7,200
P4,900
Correct! P6,000
BPI Current account to be repor ted by MAY PINALITAN BA as at December 31, 2020
P1,000,000
P1,080,000
Correct! P1,120,000
P1,040,000
Cash and cash equivalents to be repor ted by MAY PINALITAN BA as at December 31,
2020
Correct! P3,066,000
P3,074,900
P2,917,200
P3,052,000
In considering internal control within the revenue/receipt cycle, what is the purpose of
a transaction walk through?
Correct! To confirm the auditor's understanding of the internal control structure.
To select documents for detailed tests of controls.
To verif y the results of the auditor's sampling plan.
To assure that employees are performing assigned functions accurately.
Which of the following internal control procedures most likely would deter lapping of
collections from customers?

Authorization of write-of fs of uncollectible accounts by a supervisor independent of
credit approval.
Correct!
Segregation of duties between receiving cash and posting in the accounts receivable
ledger.

Independent internal verifications of dates of entry in the cash receipts journal with
dates of daily cash summaries.

Supervisory comparison of the daily cash summary with the sum of the cash receipts
journal entries.
An auditor would consider a cashier's job description to contain compatible duties if the
cashier receives remittance from the mailroom and also prepares the:
Correct! Daily deposit slip
Monthly bank reconciliation
Remittance advices
Prelist of individual checks
The cash receipts function should be separated from the related record keeping in an
organization to
Physically safeguard the cash receipts.
Establish accountability when the cash is first received.
Prevent paying cash disbursements from cash receipts.
Correct! Minimize undetected misappropriation of cash receipts

A proof of cash is used by an auditor to

Prove that the client's bank did not make an error during period under examination.

Prove the correctness of the cash balance in the client's year-end statement of
financial position.
Correct!
Determine if there were any unauthorized disbursements or unrecorded deposits
during the reconciliation period.
Comply with the Philippine Auditing Practice Statements
A client maintains two bank accounts. One of the accounts, Bank A, has an overdraf t
of P100,000. The other account, Bank B, has a positive balance of P50,000. To conceal
the overdraf t from the auditor, the client may decide to

Draw a check for at least P100,000 on Bank A for deposit in Bank B. Record the
disbursement but not the receipt and list the disbursement as an outstanding check.
Record the receipt at the beginning of the following year.

Draw a check for at least P100,000 on Bank A for deposit in Bank B. Record the
receipt but not the disbursement and list the receipt as a deposit in transit. Record
the disbursement at the beginning of the following year.

Draw a check for P100,000 on Bank B for deposit in Bank A. Record the disbursement
as an outstanding check, but do not list the receipt as a deposit in transit . Record
the receipt at the beginning of the following period.
Correct!
Draw a check for at least P100,000 on Bank B for deposit in Bank A. Record the
receipt but not the disbursement and list the receipt as a deposit in transit. Record
the disbursement at the beginning of the following year.
As one of the year-end audit procedures, the auditor instructed the client's personnel
to prepare a standard bank confirmation request for a bank account that had been
closed during the year. Af ter the client's treasurer had signed the request, it was
mailed by the assistant treasurer. What is the major flaw in this audit procedure?
The confirmation request was signed by the treasurer.
The CPA did not sign the confirmation request before it was mailed.

Sending the request was meaningless because the account was closed before year-
end.
Correct! The request was mailed by the assistant treasurer.

You were engaged to audit the accounts of GUSTO KO NG SUMUKO for the year ended
December 31, 2020. In your examination, you determined that the cash account
represents both cash on hand and cash in bank. You fur ther noted that the
company's internal control over cash is very poor.
You star ted the audit on January 15, 2021. Based on your cash count on this date, cash
on hand amounted to P19,200. Examination of the cash book and other evidence of
transactions disclosed the following:
a. January collections per duplicate receipts, P75,200.
b. Total duplicate deposit slips, all dated January, P44,000. This amount includes a
deposit representing collections on December 31.
c, Cash books balance at December 31, 2020 amounted to P186,000, representing both
cash on hand and cash in bank.
d. Bank statement for December showed a balance of P170,400.
e. Outstanding checks at December 31:
November checks December checks

No. 280 P1,800 No. 331 P2,400
No. 290 6,600 No. 339 1,600
No. 345 20,000
No. 353 3,600
No. 364 10,000
f. Undeposited collections at December 31, 2020 amounted to P20,000.
g. An amount of P4,400 representing proceeds of a clean draf t on a customer was

credited by bank, but is not yet taken in the company's books.
h. Bank service charges for December, P400.
The cashier presented to you the following reconciliation statement for December,
2020 which he has prepared:
Balance per books, P180,600

December 31, 2020
Add outstanding
checks:
No. 331 P2,400
No. 339 1,600
No. 345 2,000
No. 353 3,600
No. 364 1,000 10,600
Total 191,200
Bank service charge (400)

Undeposited
(20,400)
collections
Balance per bank,
P170,400
December 31, 2020
How much is the adjusted cash balance as of December 31, 2020?
P0
P180,200
How much is the cash shor tage as of December 31, 2020 for GUSTO KO NG SUMUKO?

P37,200
P4,600
How much is the cash shor tage for the period January 1 to 15, 2021 for GUSTO KO NG
SUMUKO?
P30,800
P32,400
Which of the following is not a method used by the cashier to cover up the shor tage
as of December 31, 2020 for GUSTO KO NG SUMUKO?
Understanding the book balance by P5,400
Overstatement of undeposited collections by P400

Correct! Understating outstanding checks by P27,000
Not recording the bank collection of P4,400
Select the correct answer.
correct answer,
the correct answer,
correct answer.
Correct! the correct answer.

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Cash and Accrual

Due Oct 2, 2021 at 8:30pm Points 10 Questions 1

This quiz was locked Oct 2, 2021 at 8:30pm.

* Some questions not yet graded

Score for this quiz: 10 out of 10 *

orrect Answers 56,800 (with margin: 0)

Quiz Score: 10 out of 10

This quiz was locked Oct 16, 2021 at 8:30pm.

Score for this quiz: 25 out of 45

All CPAs in public practice and employed in private business.

All CPAs in public practice.

All CPAs in government.

The underlying reason for the code of professional ethics is

That it provides a safeguard against unscrupulous people.

That it is required by legislation.

Which of the following is not one of the characteristics of a profession?

Adherence by its members to a common code of conduct

Correct! A responsibility to protect exclusively the interest of a client or employer.

Mastery of a particular intellectual skill acquired by training and education

Acceptance of a duty to society as a whole.

Correct! To be fair, intellectually honest and free of conflict of interest.

First inform management that an unqualified opinion cannot be issued

The phase of professional competence that requires a professional accountant to

attainment of professional competence

You Answered application of professional competence

orrect Answer maintenance of professional competence

review of professional competence

orrect Answer Negligence.

You Answered Errors in judgement.

The principle of confidentiality imposes an obligation on professional accountants to

Disclosing information to defend themselves in case of litigation.

When the security of the state is required.

With the consent of the client.

Correct! To a successor auditor without the client’s consent.

Which of the following is considered a violation of rules on confidentiality?

Correct! The CPA divulges information disclosed to him by a prospective client.

A professional accountant’s name can be associated with information that:

Intentionally omits or obscure information.

Contains a misleading statement.

Correct! Uses estimates.

Correct! The stricter of the two ethical requirements.

The ethical requirements of his or her home country.

The less strict ethical requirements.

Reduce risk and liability.

You Answered Comply with the generally accepted standards of fieldwork.

Become independent in mind.

orrect Answer Maintain public confidence in the profession.

The concept of materiality would be least impor tant to an auditor in determining

Transaction that should be reviewed.

Correct! The ef fect of an auditor’s direct financial interest in a client.

The extent of audit work planned for particular accountant.

The need for disclosing a particular transaction or event.

This occurs as a result of the financial or other interests of a professional

Correct! self-interest threat

This occurs when any product or judgment of a previous assurance engagement or

You Answered familiarity threat

orrect Answer self-review threat

You Answered Contingent fees relating to assurance engagements

Having a close business relationship with an assurance client

Undue dependence on total fees from an assurance client

Concern about the possibility of losing the engagement

Correct! advocacy threat

Correct! self-review threat

Correct! familiarity threat