CHAPTER 8: OVERVIEW OF RISK-BASED AUDIT PROCESS

BBBDDADBBBBDDD

Multiple Choice Questions

1. Which of the following is included as part of the principles governing an audit?

b. An audit has inherent limitations such that auditor cannot provide absolute assurance about whether the
financial statements are free of misstatement.
2. Which of the following statements is true about the audit opinion formulation process?
b. The audit opinion formulation process is based on the premise that management has responsibility to
prepare the financial statements and maintain internal control over financial reporting.
3. Which of the following activities is not part of the activities within the audit opinion formulation process?
b. The auditor determines the appropriate nonaudit consulting services to provide to the client.
4. Which of the following is not one of the management assertions?
1. Completeness
2. Existence
3. Rights and obligations
d.They are all management assertions.
5. Which management assertion addresses whether the components of the financial statements are properly
classified, described, and disclosed?
d. Presentation and disclosure
6. Which of the following is a true statement regarding audit evidence and audit procedures?
a. The auditor has a responsibility to design and perform audit procedures to obtain sufficient appropriate
audit evidence.
7. Which of the following items should be included in audit documentation?
1. Procedures performed
2. Audit evidence examined
3. Conclusions reached with respect to relevant financial statement assertions
d.All of the above should be included
8. Which of the following statements is a false statement regarding audit documentation?
b.The only purpose of audit documentation is to provide evidence that the audit was planned and performed
in accordance with auditing standards.
9. Which of the following procedures is least likely to be performed during the final phase of the audit opinion
formulation process?
b. Performance of preliminary analytical review procedures.
10. Which of the following factors does not create a demand for external audit services?
b.Requirement of PICPA.
11. Which of the following expectations can users of the audit report reasonably expect with regards to the audited
financial statements?
b.The financial statements are presented fairly according to the substance of PFRS.
12. Which of the following parties are involved in preparing and auditing financial statements?
d. External auditor
13. Which of the following are the responsibilities of the external auditor in auditing financial statements?
1. Maintaining internal controls and preparing financial reports
2. Providing internal assurance on internal control and financial reports
3. Providing internal oversight of the reporting process
d.None of the above.
14. In terms of technical knowledge and expertise, which of the following should external auditors do?
1. Understand accounting and auditing authoritative literature.
2. Develop industry and client-specific knowledge.
3. Develop and apply computer skills
d.All of the above.