17.

The auditor's judgment concerning the overall fairness of presentation of financial position, results of operation, and
changes in cash flow is applied within the framework of
a. Generally accepted auditing standards which include the concept of materiality
b. Generally accepted accounting principles.
c. Philippine Financial Reporting Standards
d. Quality control

18. An independent audit is important to readers of financial statements because of the following except:
a. Lends credibility to the financial statements.
b. Objectively examines and reports on management's financial statements
c. Measures and communicates the financial data included in financial statements
d. Provide users with an unbiased opinion about the fairness of information reported in the financial
statements

19. The auditor's judgment concerning the overall fairness of presentation of financial position, results of
operation, and changes in cash flow is applied within the framework of
a. Generally accepted auditing standards which include the concept of materiality
b. Generally accepted accounting principles.
c. Philippine Financial Reporting Standards
d. Quality control

20. In financial statement audits, the audit should be conducted in accordance with
a. Philippine Accounting Standards / Philippine Financial Reporting Standards
b. Generally accepted auditing standards
c. Code of Ethics for CPAs in the Philippines
d. Philippine Standards on Auditing

21. Which of the following statements does not properly describe an element of the theoretical framework of
auditing?
a. An audit benefits the public.
b. The data to be audited are verifiable.
c. Auditor should maintain independence with respect to the audit client.
d. Remoteness of users.

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

23. The benefits of an operational audit generally include all of the following except:
a. Decreased costs.
b. Increased revenue
c. Increased reliability of the financial statements.
d. Increased productivity.

24. The auditor is required to comply with all PSAs relevant to the audit of an entity's financial statements. A
PSA is relevant to the audit when:
I. The PSA is in effect.

a. I only
b. II only
c. Either I or II
d. Both I and II

25. One of the conditions that give rise to a demand for an external audit of financial statements is
expertise. Which of the following best describes the meaning of expertise as used in this context?
a. Auditors usually rely on the work of an expert as a basis for evaluating some assertions
embodied in the financial statements.
b. Users usually lack the necessary expertise to verify the reliability of the financial
information.
c. As experts, auditors are expected to detect all material misstatements in the financial statements.
d. The readers of the financial statements must possess the necessary expertise to be able to
understand the financial statements.

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26. Which of the following statements does not properly describe a limitation of an audit?
a. Many audit conclusions are made on the basis of examining a sample of evidence.
b. Fatigue and human weaknesses can cause auditors to overlook pertinent evidence.
c. Many financial statement assertions cannot be audited.
d. The work, under taken by the auditor is permeated by judgment.

27. An audit designed to evaluate the efficiency and effectiveness of an organization or some or part
thereof would not come under the title of
a. Performance audit.
b. Compliance audit.
c. Management audit.
d. Operational audit.

28. Inherent limitations in an audit stem from the following factors except
a. Incompetence of the auditor.
b. Most audit evidence is persuasive rather than conclusive.
c. Internal control limitation.
d. Use of testing.

29. Auditing services may include which of the following?

a. Attesting to financial statements
b. Evaluation of a division’s performance for management
c. Examination of the economy and efficiency of governmental operations
d. All of the above

30. Which of the following represents the highest to lowest level of assurance provided by auditors in
the performance of the engagement?
a. An audit; a compilation; a review.
b. An audit; a review; a compilation.
c. A review; an audit; a compilation.
d. A compilation; a review; an audit.

31. The statement that the reviewer "is not aware of any material modification that should be made to
the financial statements in order for them to be in conformity with GAAP" is known as:
a. Reasonable assurance.
b. Positive assurance.
c. Negative assurance.
d. Negligent performance.

32. Which of the following is a major difference between a review and an audit of the financial statements?
a. The level of knowledge of professional standards needed to perform the procedures.
b. The type of accounting used -reviews are typically on non-GAAP
accounting, while audits are based upon GAAP accounting.
c. The scope of the procedures performed and the assurance provided.
d. The type of company involved in reviews may only be publicly-held.

33. The review of unaudited financial statements consists of:

a. Inquiry of management and documentation of internal controls.
b. Inquiry of management and analytical procedures.
c. Analytical procedures and compliance with laws and regulations.
d. Internal control evaluation and management representation.

34. In an assurance engagement, this refers to the information obtained by the practitioner in arriving at the
conclusions on which the conclusion is based.
a. Generally accepted auditing standards
b. Assertions
c. Evidence
d. Criteria

35. If it is probable that the judgment of a reasonable person would have been changed or influenced by
the omission or misstatement of information, then the information is
a. Significant.
b. Material.
c. Relevant.
d. Pervasive.

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