1.

The following are components of internal control, except

 Control environment
 The entity's risk assessment process
 Control activities
 Business risk

2. Which of the following forms may the subject matter of an assurance engagement
take?

 Behavior
 All of them Students
 Historical and prospective financial information
 Systems and processes

3. Which of the following is a correct statement about internal control?

 The cost-benefit relationship is a primary criterion that should be considered

in designing internal control.

 The internal auditor has the responsibility to establish and maintain internal
control.
 The auditor can eliminate substantive tests on significant account balances
and classes of transactions for an entity that has exceptionally strong internal
control.
 Properly maintained internal control reasonably ensures that collusion among
employees cannot occur.

4. The purpose of an audit of financial statements is to

 Assure the future viability of the entity by expressing an opinion on the

entity's financial statements.
 Obtain an absolute level of assurance that the financial statements as a whole
are free from material misstatement.
 Relieve management or those charged with governance of the responsibility
for the preparation and presentation of the financial statements in accordance
with the applicable financial reporting framework.
 Enhance the degree of confidence of intended users in the financial
statements.

5. The objective of performing analytical procedures in planning an audit

engagement is to identify the existence of:

 Related party transactions

 Unusual transactions and events
 Recorded transactions that were not properly authorized
 lllegal acts that went undetected because of internal control weaknesses

6. The audit program usually cannot be finalized until the

 Consideration of the entity's internal control has been completed

 Engagement letter has been signed by the auditor and the client
  Search for unrecorded liabilities has been performed and documented
 Reportable conditions have been communicated to the audit committee

7. When performing a financial statement audit, auditors are required to explicitly

assess the risk of material misstatement due to

 Fraud
 Illegal acts Students
 Business risk
 Errors

8. 928,000
9. Which one of the following would the auditor's concern with when examining the
billing function of the client?

 All shipments made have been billed.

 No shipment has been billed more than once.
 Each shipment has been billed for the proper amount.
 All of the above are of concern to the auditor.

10. Absolute assurance is generally not attainable as a result of such factors as:

 All of these
 The inherent limitations of control systems
 The use of selective testing
 The use of judgment

11. In designing audit programs, an auditor should establish specific audit objectives
that related primarily to the

 Timing of audit procedures

 Cost-benefit of gathering evidence
 Selected audit techniques
 Financial statement assertions

12. Relationship between control risk and detection risk is ordinarily

 Direct
 Parallel
 Inverse
 Equal

13. 215,000
14. A request by an authorized employee for goods or services is made on the:

Debit memo

Purchase order

Acquisition transaction file

Purchase requisition
15. 3,625,000

16. The primary responsibility for the prevention and detection of fraud and error rests
with

The company's management and those charged with governance

Those charged with governance

The external auditor, the company's management, and those charged with governance

The company's management

17. If the auditors do NOT perform tests of controls of certain assertions:

They must issue a qualified opinion.

They must assess control risk at the MAXIMUM level for those assertions.

They have performed a substandard audit.

They are not required to communicate reportable conditions relating to those

accounts to management.
18. 564,200

19. To minimize the opportunities for fraud, unclaimed cash payroll should be

Held by the payroll custodian.

Held by the controller.

Deposited in a special bank account.

Deposited in a safe deposit box.

20. The business owners obtain financing from outside investors, which result to an
inflow of cash into the company. This transaction is considered to be part of which
cycle?

• Financing cycle

Revenue cycle

Production cycle

Payroll cycle

21. Auditing is based on the assumption that financial data and statements are

consistently applied.

presented fairly.

verifiable.

in conformity with appropriate criteria

22. Evaluate the following statements:

I. Internal controls are effected by those charged with governance, management, and
other personnel

II. Internal controls provide absolute assurance about the achievement of the entity's
objectives on financial reporting, operations, and compliance.

III. Internal controls have inherent limitations. Teachers S True, True, True

True, False, True

False, False, False

True, False, False

23. When setting a preliminary judgment about materiality:

More evidence is required for a low peso amount than for a high peso amount.

There is no relationship between it and the peso amount of evidence needed.

The same amount of evidence is required for either low or high peso amounts.

Less evidence is required for a low peso amount than for a high peso amount.

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

Withdraw from the engagement.

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

Qualify the report on the original engagement.

Refuse to agree to management's request on the change of engagement and continue

with the original engagement.
25. 45,710
26. 2,500
27. 303,000

28. Narratives, flowcharts, and internal control questionnaires are three commonly
used methods of

Testing the internal control structure

Documenting the auditor's understanding of client's organizational structure

Designing the audit manual and procedures

Documenting the study of internal controls

29. Which of the following is not typically included in initial audit planning?
  Obtain an understanding with the client
 Determination of the purpose of the audit
 Perform analytical procedures as substantive tests
 Client acceptance/continuation decisions
30.