ACC 656 PRINCIPLES OF AUDITING

LEVEL 300
4.Which of the following IFAC
1…is the difference between what the users fundamental ethical requirements will be
of financial statements and other members breached when auditors act in favor of
of the public think that the auditors should directors instead of acting in the interest of
do, and what the auditors are actually shareholders and the general public?
required by the law and the
A. Confidentiality
profession to do
B. Independence
A. Engagement gab
C. Objectivity
B Expectations gap
D. Professional competence
C. Reasonable Assurance
D. Reasonable gap
5. Which of the following is NOT included
in the principal content of the engagement
letter?
2…refers to the examination of the
financial Statement by an auditor who is A. Arrangement to meet previous auditor
free from any influence by the client or any
B. Objective of the audit
other party, but allowing him to act with
integrity, and exercise objectivity and C. Responsibility of the auditor
professional skepticism.
D. Responsibility of the management
A. Independence Examination
B. Interim Examination
6. The highest level of assurance given, as
C. Private Audit in the case of statutory audit because of
inherent limitations of the audit is called...
D. Statutory Audit
A. Absolute Assurance
3.Ghana Republic Bank a listed in Ghana
Stock Exchange published their audited B. Limited Assurance
financial statement every year. The audits
C. Reasonable Assurance
carry out on the financial, compliance and
operational activities of Ghana Republic D. Review
Bank can be termed us...
A. Interim audit
7. Which of the following is not IFAC
B. Internal audit ethical principle
C. Private audit A Not being bias
D. Statutory audit B. Not being skeptical
C. Not disclose information to a third party
D. Trustworthy
8. The main object of an audit is…
A Detection and Prevention of fraud
B. Establish effective internal control
C. Expression of opinion
D. Prevention of risks
9. Which of the following is not true about
the auditor's responsibility on a financial
statement?
A The auditor should express an opinion on
financial statements
B. His opinion is no guarantee to future
viability of business
C. He is responsible for detection and
prevention of frauds and errors in financial
statements
D. He should examine whether recognized
accounting principle have been consistently
10 It is appropriate for internal auditors to
report
A. Finance Director
B. Account Clerk
C. Those charged with governance
D. Chief Accountant
11 Which of the following is not a
similarity between external and internal
auditors?
A. Both must be independent of the
company
B. Both must be exercise professional
competent and due care
C. Both exercise professional skepticism
when conducting the audit
D. Both should detect and prevent fraud.
12 The Ethical principle that states that
auditors comply with the relevant laws and
regulations in accordance with 1SA 250
and also avoid any action that discredits the
profession is called.
A. Objectivity
B Integrity
C. Professional behavior
D. Professional due care
13. An audit designed to evaluate the
economy, efficiency and effectiveness of an
organization or some part of an
organization operations would be called
a(n):
A Compliance audit
B Management audit.
C Operational audit.
D Performance audit
14. Priscilla, a partner of O & E business, C. The director of Gidimadjor Limited
was not convinced about her share of profit Liability
for the year. She was expecting more profit
D. PWC engagement team for the audit of
than she actually received from the
Gidimudjor Limited Liability
business, and for this reason, she requested
for the financial statement to be audited.
The audit engagement is what
16. Which of the following procedures
A. Private Audit would you recommend for PWC us perform
when accepting a client?
B. Statutory Audit
A Seeking reference from client director
C Interim Audit
B Speaking to previous auditors
D. Independence Audit
C. Considering the independence of stuff
see the information to answer questions
15 to 16 D. Seek re-election
Gidimador Limited Liability Company
commenced business on 1 January, 2011.
17.... is an attitude of an auditor to make
The management of the company has over
critical assessment, with a questioning
the years had difficult times detecting
mind, of the validity of audit evidence
fraud, assessing risks and preparing
obtained and alert to audit evidence that
Financial statements of the Business due to
contradicts or brings into question the
recent expansion. PWC is an audit firm
reliability of document and response to
who has been given an offer to audit
inquiries
companies
A. Judgement
on 28 February 2019 for the third time. Mr.
In-Charge, the Director of the Company has B. Expression an opinion
made clear to the firm that it is their
C. Professional Skeptical
responsibility to assess risk and prepare the
financial statement should they sept the D. Independence
offer.
15. Whose responsibility is to prepare the
18. At what stage of the audit is
financial statement of Gidimadjoe Limited
professional skepticism necessary?
Liability?
A Planning stage
A. The Audit committee of Gidimajor
Limited Liability B Risk assessment stage
B The Internal Auditor of Gidimadjor C Performance stage
Limited Liability
D Throughout the whole audit process

19. inherent limitations in audit prevent the
auditor from…
A detecting immaterial misstatement
B. giving reasonable assurance
C. giving an absolute assurance-
D. detecting insignificant misstatement
20. The written confirmation of auditors'
acceptance of the appointment refers to
A Letter of Engagement
B. Post Accepting Letter
C. Post-Accepting Condition
D. Pre-Accepting condition
2022
1. Audit is founded on... theory?
A. Agency
B. Independency
C. Resource-based
D. Stewardship
2. If a partner of partnership personally
requested for an audit of the financial
statement of the partnership for which he is
a partner, the type of audit requested for
is... audit.
A. Continuous
B. Interim
C. Private
D. Statutory
3. A client internal control system displays
fundamental and material weaknesses, and
hence, will require a check of a higher
proportion of transactions than would
otherwise be necessary. The type of audit
suitable for such client is... audit
A. Continuous
B. Interim
C. Private
D. Statutory
4. An objective of audit is to...
A. detect immaterial misstatement.
B. detect misstatements which are
significant.
C. ensure that management reports disclose
any information.
D. Prepare a financial statement.
5. The mismatch of the role of the auditor
and what auditing is meant for creates....
A. audit gap.
B. expectation gap.
C. Loss of confidence in the audit report.
D. opinion gap.
6. The inherent limitation in audit prevents
the auditor from...
A. detecting immaterial misstatement.
B. detecting material misstatement.
C. giving an absolute assurance A designing, implementing and maintaining
internal control.
D. giving reasonable assurance.
B. gathering of audit evidence
C making accounting estimates that are
7. The inherent limitations in an audit arise
reasonable in the circumstances.
from the fact that, audit...
D. selecting and applying appropriate
A. does not cover the entire operations of
accounting policies
the entity.
B. evidence is not conclusive.
11. Internal Auditor reports to...
C. is based on judgment
A. Board of director
D. procedures are not exhaustive.
B. Government
C. Shareholders
8. An auditor exercise professional
skepticism during D. Tax authorities.
A. formation of opinion based on the
conclusion drawn.
12. Evaluation of the background of the
B. planning and performance of the audit. client's business by an incoming auditor in
the pre acceptance stage of audit
C. reporting to shareholders.
appointment is meant to...
D. removal from office as an auditor.
A. decide on the kind of staff and resource
needed to perform the audit.
9. Which quality of an auditor requires the
B. Determine the amount of the audit fee to
auditor to make a critical assessment, with a
be charged.
questioning mind, of the validity of an audit
evidence? C. identifies risks associated with accepting
the offer.
A. Professional competence
D. plan the audit.
B. Independence
C. Objectivity
13. Which audit principle is compromised,
D. professional skepticism
if an auditor knowingly associated himself
with reports or returns where the auditor
believes that information contains
10. Management responsibility covers all
materially false?
these areas except...
A. Due competence
B. Integrity D. protect the shareholders as means of
professional courtesy.
C. Objectivity
D. Professional behavior
17. A formal confirmation of auditors'
acceptance of audit engagement is a ...
14. An auditor acted in favor of directors
A Letter of Engagement
instead of acting in the interest of
shareholders and the general public. Which B. Post Accepting Letter
of the following principles has been
C. Post-Accepting Condition Letter
breached?
D. Pre-Accepting Condition Letter
A. Confidentiality
B. Independence
18. The first auditor of a company is
C. Objectivity
casually appointed by...
D. Professional behaviour
A. Audit committee
B: Directors
15. The ethical principle that requires
C. Management
auditors to comply with the relevant laws
and regulations and also avoid D. Shareholders
any action that discredits the profession is
called...
19. The right of the auditor does not extend
A. Objectivity. to the…
B. Integrity. A. bidding for an asset of the client.
C. Professional behavior. B. inquiry from management, any
information needed for the audit work.
D. Professional due care.
C. Receipt of notice relating to general
16. A new auditor needs to communicate
meeting
with the previous auditors before accepting
engagement because, it helps to D. request for documentations needed to
assist the audit.
A. decide on the kind of staff and resource
needed to perform the audit. 20. An audit designed to evaluate value for
money of the organization's operations is
B. identify if there are professional reasons
known as...audit.
for terminating the offer.
A. Compliance
C. obtain their permission to audit the
business B. Management
C. Operational recommendations where control
improvements are needed?
D. Performance
A. Board of Directors
B. External Auditor
21. Control system put in place to ensure
that risks do not occur is called...control. C. Internal Auditor
A. Corrective D. Managers and supervisory personnel
B. Detective
C. External 25. Peace firm is an audit firm of BBB
Company limited. Which of the following
D. Preventive
is not a major area in the BBB Company
limited for Peace to obtain business
knowledge when planning the audit?
22. 0.5% - 1 % is used by most audit firm
as a starting point for the consideration of A. Financial records including related party
Gross profit as material. This consideration transactions.
is based on professional...
B. Industry-specific guidance.
A. due care
C. Regulatory framework.
B. experience
D. Warehouse Inventory counts and plant
C. judgment premises.
D. Skepticism
26. Which of the following activities would
you recommend an auditor to perform at
23. International Standard of Audit Board
the beginning of a current audit
(ISAB)... external auditors to use the
engagement?
internal auditors for direct assistance on the
audit. A. Determine the complexity of the client
business.
A. discourage
B. Evaluate compliance of ethical
B. encourage
requirements.
C. prohibit
C. Form an opinion.
D. requires
D. The involvement of an expert.
24. Whose responsibility is to examine the
adequacy and effectiveness of the entity's
internal controls and make 27. An audit plan contains...
A. Documentation of the assertions under 30. The following are the reasons for an
audit, the evidence obtained, and the auditor to have knowledge of the client
conclusions reached. business except...
B. Reconciliation of the account balances in A. Plan the Audit.
the financial statements with the account
B. Develop an efficient approach to meet
balances in the client's general ledger.
the letters of laws in the business.
C. Specifications of audit standards relevant
C. Assessing risks and identifying problems
to the financial statements being audited.
Specifications of procedures the auditors D. Evaluate audit evidence.
believe
D. appropriate for the financial statements
31. The difference in materiality levels or
under audit.
thresholds depend on the following
except...
28. Generally accepted auditing standards A. legal and regulatory requirement.
require that auditors always prepare and use
B. class of transactions and disclosures.
a/the written…
C. compliance requirement.
A. audit plan.
D. the aspect of the financial statement
B. client consent to discuss audit matters
being audited.
with prospective auditors.
C. planning memorandum explaining the
auditor's understanding of the client's 32. The three main types of corruption
business. fraud are... bribery, and extortion
D. time budgets and schedules for A. abetting
performing each audit.
B. conflicts of interest
C. misappropriation
29. Which of the following is not an aim of
D. stealing
planning audit work?
A. Assisting in the direction of the work
33. When planning an audit, which of the
B. Ensure that the work is completed
following is not a factor that affects
expeditiously
auditors' decisions about the quantity, type,
C. Evaluate the objective of the audit work and content of audit documentation"?
D. Facilitating review of the audit work
A. Auditors' need to verify the existence of
new sales contracts important for the
client's business
B. The auditors' judgment about their
independence with regard to the client.
C. The auditors' judgments about
materiality.
D. The auditors' need to document
compliance with generally accepted
auditing standards.
34. Which of the following procedures
would most likely be performed during
planning?
A. Identifying related parties
B. Performing a search for unrecorded
liabilities.
C. Reporting internal control deficiencies to
the audit committee.
D. Surprise counts of the client's petty cash
fund.
35. Which of the following is not a benefit
claimed for the practice of determining
materiality in the initial planning stage of
an audit?
A. Being able to fine-tune the audit work
for effectiveness and efficiency.
B. Avoiding the problem of doing more
work than necessary (over auditing).
C. Being able to decide early what type of
audit opinion to issue
D. Avoiding the problem of doing too little
work (under auditing)
36. Which of the following engagement
planning procedures would most likely
assist the auditor in identifying related-
party transactions before the balance-sheet
date?
A. Inspecting communications with the
client's legal counsel regarding recorded
contingent liabilities.
B. Interviewing internal auditors about their
reporting responsibilities. Reviewing
accounting records for recurring
C. transactions occurring near year-end.
D. Scanning the minutes for significant
transactions with members of the board of
directors.
37. An auditor's permanent file audit
documentation most likely will contain...
A. excerpts of the corporate charter and
bylaws.
B. internal control analysis for the current
year.
C. memoranda of conference with
management.
D. the most recent engagement letter.
Use the following information to answer
question 38 to 40
APK is an audit firm, who has been given
an offer to audit Otabil's company Limited
on 30 November, 2021. APK is planning to
use Risk-Based Audit Strategy for the audit
engagement when they accept the offer.
38. As an audit student, which of the A. To perform detailed audit test to identify
following advice would you give to APK all related risks
prior to acceptance of the audit work?
B. To focus on high risks areas
A. APK should make sure their opinion
C. To understands in detailed the
on the financial statement reflect true and components of risks
fair view
D. To Prioritize the risk and develop a risk
B. APK should plan the audit by gathering register
sufficient and appropriate evidence
including identification of risk and its
impact on the business
C. APK should obtain sufficient and
detailed knowledge about the client's
business
D. APK should draw appropriate audit
programme for testing transactions and
balances

39. Which of the following procedures

would you recommend to APK for their
Risk-Based Audit plan?
A. Understanding the business, detect and
prioritize is and develop risk register
B. Performing detailed audit test and
identifying the risk associated with the
business
C. Drawing appropriate audit programme
for testing transactions and balances
D. Evaluating the compliance of ethical
requirement and Performing detailed audit
test

40. What do you think will make APK use

such a strategy for their audit work?