INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC

Alimannao Hills, Peñablanca, Cagayan 3502

COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

DRILL No. 1
INSTITUTIONAL REVIEW BATCH 4

INSTRUCTIONS: Select the best answer for each of the following questions. Mark only one answer
for each item on the answer sheet provided. Don’t forget to shade your set on the answer sheet.
Strictly NO ERASURES ALLOWED. Erasures will render your examination answer sheet INVALID.
Use PENCIL NO. 2 only. GOODLUCK!

AUDITING PROBLEMS

CASE I
In the audit of BCC (BALAGTAS CARSOLA CASTRO) Company’s cash account, you
obtained the following information:

The company’s bookkeeper prepared the following bank reconciliation as of June 30, 2018:
Bank balance-June 30, 2018 P90,800
Undeposited collections 5,000
Bank service charges 100
Bank collection of customer’s note
(8,000)
Outstanding checks:
Number Amount
12559 P3,000
12567 5,000
12615 2,000 (10,000)
Book balance-June 30, 2018 P77,900

Additional data are given as follows:

a. Company recording for July:
Total collections from customers P165,000
Total checks drawn 98,000
a. Bank Statement totals for July:
Charges P123,800
Credits 169,000
b. Check no.12559 dated June 23, 2018, was entered as P3,000 in payment of a voucher
forP30,000. Upon examination of the checks returned by the bank, the actual
amount of check was P30,000
c. Check no. 12613 dated July 15, 2018 was issued to replace a mutilated check
(no.12567), which was returned by payee. Both checks were recorded in the amount
drawn P5,000 but no entry was made to cancel check no. 12567
d. The July bank statement included a check drawn by BBC Company for P1,500
e. Undeposited collections on July 31, 2018-P8,000
f. The service charge for July was P150 which was charged by the bank to another
client.
g. The bank collected a note receivable of P7,000 on July 26, 2018 but the collection was
not received on time to be recorded by BCC.
h. The outstanding checks on July 31, 2018 were:
Check No. Amount
12567 P5,000
12756 1,300
12810 2,300
12825 4,100
QUESTIONS: Based on the above and the result of your audit, determine the
following:

1. Unadjusted cash balance per books as of July 31, 2018

a. P152,800 b.P144,900 c. P152,750 d. P165,700

2. Adjusted cash balance as of June 30, 2018

a. P85,000 b. P63,800 c. P58,800 d. P90,800

3. Adjusted book receipts foe July 2018

a. P170,500 b. P172,000 c. P182,000 d. P173,000

4. Adjusted bank disbursement for July 2018

a.P120,150 b. 172,000 c. P182,000 d. P173,000

5. Adjusted cash balance as of July 31, 2018

a. P132,650 b. P137,800 c. P137,650 d. P134,650

CASE II
Your audit of the petty cash (P10,000) of Juliet Company as of December 31, 2006
revealed the following: (cash count date is January 3, 2007 at 5:00 pm)

Bills: 10 - P500 bill 15 - P100 bill 18 - P50 15 - P20 5 - P10

Coins: P180 in P5 pieces; P42 in P1.00 pieces; P23 in P0.25 pieces.
IOU’s submitted were:
Dec. 18 Nap R. - P 750
Dec. 28 Ruel R. 125
Dec. 30 Sonny S. 500
Cashed checks:
Dec. 28, 2006 check drawn by the manager P 1,125
Dec. 28, 2006 check drawn by an employee 500
Dec. 30, 2006 check drawn by a customer 350
Jan 1, 2007 check drawn by an employee 1,250

The cashier informed you that owing to the lack of cash it was necessary for him to open
certain payroll envelopes unclaimed by employees and use the cash found herein.
They were as follows:
Dec. 15, 2006 - Ed A. P 1,250
Dec. 30, 2006 - Andoy 1,750
Dec. 30, 2006 - Macky 650
Dec. 30, 2006 - Paz 1,000

The cashier also informed you that all cash sales receipts were passed through his fund
and that cash sales tickets Nos. 2059 to 2061 under dates of Dec. 30, Jan. 3 and Jan. 4
for P350, 500 and P545, respectively, had not yet been turned over to the general
cashier.

The petty cash vouchers found in the petty cash box were as follows:
Dec. 30, 2006 Transportation P515
Dec. 30, 2006 Token gifts to visitors 650
Dec. 30, 2006 Freight for office supplies purchase 215
Jan. 1, 2007 Freight for mdse. purchased 125
Jan. 2, 2007 Freight for mdse. sold 575
Questions

6. JULIET COMPANY’S cash shortage at December 31, 2006 is:

a. P 2,072.75 b. P 1,370.00 c. P 1,027.75 d. P 327.75

7. The adjusted petty cash balance of JULIET COMPANY at December 31, 2006 is:
 a. P 10,000 b. P 9,625 c. P 5,975 d. P 4,625

8. The entry to adjust the unclaimed payroll at December 31, 2006 is:
a. Petty Cash Fund c. Cash
Salaries expense Accrued salaries
b. Salaries expense d. Accrued salaries
Petty cash fund Cash

9. The cashed check dated January 1, 2007

a. Should be adjusted since it was dated January 1, 2007, hence a postdated check.
b. Should be adjusted since it was received December 31, 2006 but the check is dated
January 1, 2007, hence a postdated check.
c. Should not be adjusted since the check is dated January 1, 2007.
d. Should not be adjusted since the check was received December 31, 2007.

10. The Cash account (excluding PCF) of JULIET COMPANY is understated at December
31, 2006 by:
a. P 4,650 b. P 4,900 c. P 6,045 d. P 6,370

AUDITING THEORY

11. An operational audit is designed to

a. Assess the efficiency and effectiveness of management's operating procedures.
b. Assess the presentation of management's financial statements in accordance
with generally accepted accounting principles.
c. Determine whether management has complied with applicable laws and
regulations.
d. Determine whether the audit committee of the board of directors is effectively
discharging its responsibility to oversee management's operations.

12. The market for auditing services is driven by

a. The regulatory authority of the Securities and Exchange Commission.
b. A demand by external users of financial statements.
c. Pronouncements issued by the Auditing Standards Board.
d. Congress at the federal level and elected legislative bodies at the state level.

13. The purpose of a compliance audit for a governmental entity is to determine whether
a. Financial statements comply with GAAP and whether the entity is operating
efficiently.
b. Financial statements comply with GAAP and the entity has complied with
applicable laws and regulations.
c. The entity has complied with applicable laws and regulations.
d. Financial statements comply with GAAP.

14. The audit process is

a. A special application of the scientific method of inquiry.
b. Regulated by the AICPA.
c. The only service a CPA is allowed to perform by law.
d. Performed only by CPAs.

15. Independent auditing can best be described as

a. A subset of accounting.
b. A professional activity that attests to the fair presentation of financial statements.
c. A professional activity that measures and communicates financial accounting
data.
d. A regulatory activity that prevents the issuance of improper financial information.
(AICPA ADAPTED)
16. An independent audit is important to readers of financial statements because it
a. Provides a measure of management's stewardship function.
b. Measures and communicates the financial data included in financial statements.
c. Objectively examines and reports on management's financial statements.
d. Reports on the accuracy of information in the financial statements.
(AICPA ADAPTED)

17. The reason an independent auditor gathers evidence is to

a. Form an opinion on the financial statements.
b. Detect fraud.
c. Evaluate management.
d. Evaluate internal controls.

18. The best description of the scope of internal auditing is that it encompasses
a. Primarily operational auditing.
b. Both financial and operational auditing.
c. Primarily the safeguarding of assets and verifying the existence of such assets.
d. Primarily financial auditing.

19. A typical objective of an operational audit is to determine whether an entity's

a. Financial statements fairly present financial position and cash flows.
b. Financial statements present fairly the results of operations.
c. Financial statements fairly present financial position, results of operations, and
cash flows.
d. Specific operating units are functioning efficiently and effectively.

20. The scope and nature of an auditor's contractual obligation to a client is ordinarily set
forth in the
a. Scope paragraph of the auditor’s report.
b. Opinion paragraph of the auditor’s report.
c. Management letter.
d. Engagement letter.