11. If a change in the type of engagement from higher to lower level of assurance is not justified, the auditor.

should:

A. Qualify the report on the original engagement.

B. Continue with the revised engagement but make explicit reference about the original engagement.

C. Refuse to agree to management's request on the change of engagement and continue with the original
engagement.

D. Withdraw from the engagement.

12. This refers to the development of a general strategy and a detailed approach for the expected nature, timing and
extent of audit:

A. Audit planning

B. Supervision

C. Pre-engagement

D. Direction

13. An auditor obtains knowledge about a new client's business and its industry to

A. Make constructive suggestions concerning improvements to the client's internal control.

B. Develop an attitude of professional skepticism concerning management's financial statement

assertions.

C. Evaluate whether the aggregation of known misstatements causes the financial statements taken as a
whole to be materially misstated、

D. Understand the events and transactions that may have an effect on the client's financial statements.

14. 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 that information is:

A. Material

B. Significant

C. Insignificant

D. Relevant
15. Religious Corp. has a few large accounts receivable that total P1,000,000. Pilgrim Corp, has a large number of
small accounts receivable that also total P1,000,000. The importance of an error in any one account is, therefore,
greater for Religious Corp. than for Pilgrim Corp. This is an example of the auditor's concept of:

A. Materiality.

C. Reasonable assurance.

B. Comparative analysis

D. Relative risk.

6. Which of the following statements is not correct about materiality?

A. The concept of materiality recognizes that some matters are important for fair presentation of financial
statements in conformity with GAAP, while other matters are not important.

B. An auditor considers materiality for planning purposes in terms of the largest aggregate level of
misstatements that could be material to any one of the financial statements.

C. Materiality judgments are made in light of surrounding circumstances and necessarily involve both
quantitative and qualitative judgments.

D. An auditor's consideration of materiality in influenced by the auditor's perception of the needs of a

reasonable person who will rely on the financial statements.

7. Which of the following relatively small misstatements most likely could have a material effect on an entity's financial
statements?

A. An illegal payment to a foreign official that was not recorded.

B. A piece of obsolete office equipment that was not retired

C. A petty cash fund' disbursement that was not properly authorized.

D. An uncollectible account receivable that was not written off.

18. The concept of materiality would be least important to an auditor in determining the

A. Transactions that should be reviewed.

B. Need for disclosure of a particular fact or transaction.

C. Scope of the CPA's audit program relating to various accounts

D. Effects of direct financial interest in the client upon the CPA's independence.
19.Risk in auditing means that the auditor accepts some level of uncertainty in performing the audit function. An
effective auditor will:

A. Take any means available to reduce the risk to the lowest possible level.

B. Set the risk level between 5% and 10%.

C. Perform the audit procedures first and quantitatively set the risk level before forming an opinion and
writing the report.

D. Recognize that risks exist and deal with them in an appropriate manner.

20.The risk of a material misstatement occurring in an account, assuming an absence of internal control, is referred to
as:

A. Control risk

B. Audit risk

C. Detection risk

D. Inherent risk