Richard J.

Lamagna
BSA 42E1

PROFESSIONAL STANDARDS
1. c. Conclusive evidence of negligence
2. b. Provide reasonable assurance that the financial statements are not materially
misstated.
3. b. Elements of materiality and risk.
4. c. Measures of the quality of the auditor’s performance.
5. b. General
6. c. Due professional care be exercised by the auditor.
7. d. The assignment of audit personnel to an engagement when they have no financial
interest.
8. a. Criteria for competence, independence, and professional care of individuals
performing the audit.
9. c. The criteria of audit planning and evidence-gathering
10. d. Technical training and proficiency.
11. a. Reasonable
12. d. Apply judgments in a conscientious manner, carefully weighing the relevant factors
before reaching a decision.
13. d. Reconciliation
14. d. Conformity of financial statements with GAAP
15. c. Adequacy of disclosures.
16. d. The comparability of financial statements between periods is not materially affected
by changes in accounting principles without disclosure.
17. b. Indicate the character of the auditor’s examination and the degree of responsibility
assumed by the auditor.
18. d. Misinterpretations regarding the degree of responsibility the auditor is assuming
19. d. Errors in application judgment
20. c. Neither a guarantor nor an insurer of financial statements
21. d. Any of the given three choices is correct.
22. c. Defining the minimum standards of performance for an auditor,
23. c. To promulgate auditing standards, practices and procedures that shall be generally
accepted by the accounting profession in the Philippines.
24. a. Yes Yes Yes Yes
25. c. These statements are issued to provide practical assistance to auditors in
implementing PSAs or to promote good practice.
26. b. Interpretations
27. b. No No Yes Yes
28. d. Under no circumstances.
29. a. In accordance with PSA.
30. c. An evidence of negligence.
31. d. Give reasonable assurance that the firm as a whole will comply with professional
standards.
32. d. All of the above.
33. a. Yes Yes Yes
34. a. Policies and procedures to ensure that firm personnel are actively engaged in
marketing strategies
35. a. Risk assessment
36. b. Engagement partner
37. c. Independence
38. a. Yes Yes Yes
39. c. Determination of audit fee
40. a. Ethical Requirements
41. a. Emphasize independence of mental attitude in training programs and in supervision
and review of the audits.
42. c. Independence
43. c. Monitoring
44. c. Seek assistance from persons having appropriate levels of knowledge, judgment and
authority.
45. c. Consultation
46. b. Direction
47. c. Knowledge required to fulfill assigned responsibilities.
48. b. Assignment of engagement teams
49. b. Requiring timely identification of the staffing requirements of specific engagements
so that enough qualified personnel can be made available.
50. c. Require preparation of time budgets for audits to determine manpower requirements
and to schedule the audit work.
51. b. There is a sufficient direction, supervision, and review of work performed at all levels
to provide reasonable assurance that the work performed meets appropriate standards
of quality.
52. d. Whether the engagement personnel maintained independence.
53. d. Independence
54. c. Minimize the likelihood of association with clients whose management lacks integrity.
55. d. All three should be considered.
56. c. Inquiry of third parties, such as the prospective client’s bankers and attorneys, about
information regarding the prospective client and its management.
57. d. Monitoring
58. d. Neither a nor b
59. a. Quality review
60. a. Quality Review Committee (QRC)
61. d. To conduct a review on applicants for registration to practice public accountancy and
render a report which shall be attached to the application for registration
62. d. Auditing and Assurance Standards Council
AUDITOR’S RESPONSIBILITY
1. d. Inadequacy of accounting records
2. a. Reasonable Assurance
3. c. Fraud
4. a. A misstatement is made and there is both knowledge of its falsity and the intent to
deceive
5. c. Client management
6. a. With the management.
7. c. Implementing adequate accounting and internal control system
8. b. The audit should be designed to provide reasonable assurance that material errors
and frauds will be detected.
9. c. The audit was conducted in accordance with PSA.
10. c. No
11. c. Both statements are correct
12. a. When the failure clearly results from noncompliance to PSA.
13. a. An error is unintentional, whereas fraud is intentional.
14. d. Whether the underlying cause of misstatement is intentional or unintentional .
15. c. All of the above statements are false
16. d. Misapplication of accounting policies.
17. c. Clerical mistakes in the processing of transactions
18. d. Misappropriation of assets or group of assets.
19. c. Management fraud and employee fraud
20. a. Management fraud
21. a. Company management changes inventory count tags and overstates ending
inventory, while understating cost of goods sold.
22. c. Entity’s management
23. c. Misappropriation
24. a. An auditor should assess the risk that errors and fraud may cause the financial
statements to contain material misstatements and should design the audit to provide
reasonable assurance of detecting errors and fraud that are material to the financial
statements.
25. b. The auditor planned the audit in a negligent manner.
26. b. An attitude of professional skepticism.
27. c. Corroborate the evidence with other supporting documentation whenever possible.
28. b. It is usually easier for the auditor to uncover errors than fraud.
29. b. Greater for management fraud because of management's ability to override existing
internal control.
30. b. The nonrecording of transactions
31. a. Very low.
32. b. Errors in postings or recorded transactions
33. b. The auditor is not and cannot be held responsible for the detection of fraud or error.
34. d. The likelihood of detecting fraud is ordinarily higher than that of detecting error.
35. c. Quality of managements’ business decisions
36. b. Auditors give assurance that the financial statements are accurate.
37. b. Fund ordinarily involves acts designed to conceal it, such as collusion, forgery, or
deliberate failure to record transactions.
38. b. Fraud
39. a. Yes Yes Yes
40. b. Factor whose presence often has been observed in circumstances where fraud has
occurred.
41. a. Yes Yes Yes
42. a. Condition of internal control
43. d. Use of unusually conservative accounting practices.
44. a. Observe test counts of inventory at certain locations on an unannounced basis.
45. c. Management places substantial emphasis on meeting earnings projections.
46. a. Yes Yes
47. c. Negative cash flows from operations.
48. b. Improper revenue recognition
49. d. Lack of transaction trail.
50. c. Missing documents.
51. b. Management does not correct material internal control weaknesses that it knows
about
52. a. Management is dominated by several individuals.
53. a. The turnover of senior accounting personnel is exceptionally low.
54. d. There were substantial payments for services that appear excessive in relation to
services provided.
55. a. The accounting department is overstaffed.
56. a. The entity’s industry is experiencing declining customer demand
57. b. There are frequent changes of auditors or legal counsel.
58. d. There is a significant and prolonged understaffing of tin accounting department.
59. b. Use less predictable audit procedures.
60. c. Perform appropriate modified or additional procedures to confirm or dispel the
auditor’s suspicion.
61. a. Consider the implications and discuss the matter with appropriate levels of
management.
62. a. Consider the implications for other aspects of the audit.
63. b. If the auditor suspects that an error may exist, he should immediately communicate it
to the management even if the potential effect on financial statements is immaterial
64. b. Qualified on adverse opinion
65. d. Either qualified opinion or a disclaimer of opinion
66. d. Any differences between management and the auditor on accounting matters have
been resolved to the auditor’s satisfaction.
67. c. Equally on discovering either one.
68. c. The auditor should plan and audit to provide a guarantee that the financial
statements are free of material misstatements, whether due to fraud or error.
69. a. Report the fraud to the audit committee
70. b. The auditor is required to provide reasonable assurance that the both material errors
and fraud are detected.
71. c. Understanding the entity's internal control.
72. a. Plan and perform the engagement with an attitude of professional skepticism.
73. c. Noncompliance
74. b. Only indirectly
75. c. Consider the effects on the financial statements, including the adequacy of disclosure.
76. c. Management
77. c. Contact the local law enforcement regarding potential criminal wrongdoing.
78. d. The determination of whether a particular act constitutes noncompliance is ultimately
based on the judgment of the auditor.
79. d. Payment for goods or services to the country from which the goods or services
originated.
80. c. Purchasing a real property for a price that is significantly higher than the seller‘s book
value.
81. a. Media comment
82. b. Auditors usually rely on lawyers’ representations to detect noncompliance.
83. c. Obtain understanding of the nature of the act, and the circumstances in which it has
occurred and sufficient other information to evaluate the possible effect on the financial
statements.
84. b. Client does not take remedial action that the auditor considers necessary.
85. a. Apply audit procedures specifically directed to ascertaining whether noncompliance
has occurred.
86. c. The auditor should obtain oral representation that management has disclosed to the
auditor all known actual or possible noncompliance with laws and regulations.
87. d. Obtain a representation letter from the client’s legal counsel.
88. b. Perform procedures to help identify instances of noncompliance with laws and
regulations.
89. b. Inspecting correspondence with relevant regulatory agencies.
90. a. Withdraw from the engagement and indicate the reasons to the audit committee in
writing.
91. c. Management representation letter.
92. c. Employees’ actions affect the auditor’s ability to rely on management’s
representations.