AUDITING AND ASSURANCE: SPECIALIZED INDUSTRIES

AUDIT OF PETROLEUM SECTOR EXAMINATION REVIEWER

1. What law was created to regulate and normalize the hydrocarbon activities in the country, adjusting the production and
management of the oil and gas sector to the new political reforms that follow an economic liberalization?
A. Law 1698
B. Law 1689
C. Law 3058
D. Law 3085

2. True or False
In May 2005, the Bolivia government passed Law 3085, a new version of the Hydrocarbon Law, repealing the former Law
1689.
Answer: False

3. True or False
Law 1689 and subsequent foreign investment allowed the discovery of significant reserves of natural gas in southern
Bolivia.
Answer: True

4. Who is considered the first indigenous president in Bolivia?

A. Evo Morales Ayma
B. Eduardo Rodriguez Veltze
C. Levi Saturo Bolivar
D. Carlos de Meza Gisbert

5. True or False
In May 2005, the Bolivia government passed Law 3058, a new version of the Hydrocarbon Law, repealing the former Law
1689.
Answer: True

6. What decree obliges all transnational and international companies to return to the state, through YPFB, the production
of oil and gas fields and sign new contracts ensuring a greater percentage of the gas revenues for the state and
reasonable profit for the oil companies?
A. Supreme Decree3 of Nationalization 27801
B. Supreme Decree33 of Nationalization 28017
C. Supreme Decree3 of Nationalization 28701
D. Supreme Decree3 of Nationalization 28701

7. He is a successor in the office of Carlos de Meza Gisbert, a transitional government, and who called for new
presidential elections.
A. Rodrigo Ruiz Santisteban
B. Eduardo Rodriguez Veltze
C. Evo Morales Ayma
D. Eduardo Vasquez Veltze

8. True or False
Environmental Auditing is a feature of good environmental management practice throughout much of the petroleum
industry along with the chemical industry.
Answer: True

9. True or False
Under the decree of nationalization, companies had a 190-day transition period to renegotiate and sign new contracts with
YPFB if they want to operate in Bolivia, otherwise, they must leave the country.
Answer: False

10. True or False

Oil and Gas industry is one of the vital industries in the world, largely because of its strategic role in every economy and
the world, at large.
Answer: True
11. In what year did the new hydrocarbon law created in order to regulate and normalize the hydrocarbon activities in the
country, adjusting the production and management of the oil and gas sector to the new political reforms that follow an
economic liberalization?
A. 1696
B. 1969
C. 1996
D. 1999

12. What does YPFB stands for?

A. Yamicientos Petroliferos Fiscalis Bolivianos
B. Yacimientos Petroliferos Fiscales Bolivianos
C. Yacimentos Petroliferos Fiscalus Bolivianos
D. Yacintimentos Petroliferos Fiscales Bolivianos

13. True or False

Hydrocarbons Law was not a subject of many debates about the distribution of the benefits of gas and oil, and the
potential favoritism with the Hydrocarbon Law toward transnational corporations.
Answer: False

14. True or False

Hydrocarbon sector not only represents an important economic sector but also a political and social instrument for
negotiations, mobilization and social participation.
Answer: True

15. In May 2005, the Bolivia government passed this Law, a new version of the Hydrocarbon Law, repealing the former
Law. What is this law?
A. Law 3058
B. Law 3085
C. Law 5830
D. Law 5803

16. An entity's accounting records generally include the records of initial entries and supporting records including
A. Confirmations from third parties.
B. Information obtained by the auditor from such audit procedures as, inquiry observation and inspection.
C. Worksheets and spreadsheets supporting cost allocations.
D. Other information developed by, or available to, the auditor department him/ her to reach conclusions through valid
reasoning.

17. When few property and equipment transactions occur during the year, the continuing auditor usually obtains an
understanding of the related internal controls and perform
A. Extensive test of current year property and equipment transactions.
B. Test of controls.
C. Analytical procedures to substantiate current year additions to property and equipment.
D. A thorough examination of the balances at the beginning of the current year.

18. Every procedure must state the following except:

A. The auditor conducting the audit
B. Assertion tested
C. Reason for the procedure
D. Audit procedure

19. This criterion for the selection of subjects for examination for the audit answers the following questions: Is the area
amenable to audit? Will information and evidence be available? Can a past methodology be used or will the methodology
be reusable?
A. Risk
B. Impact
C. Coverage
D. Auditability/efficiency

20. Before accepting an engagement with a new client, the CPA firm shall assess the following except
A. If the following is competent to perform the engagement, has the capabilities including time and resources to do so.
B. The auditor can comply with the relevant ethical requirement.
C. If the client has integrity.
D. If the client has the financial capacity to pay the estimated audit fee.
21. Which of the following statements is correct concerning both an engagement to compile and an engagement to
review a nonpublic entity’s financial statements?
A. The accountant does not contemplate obtaining an understanding of the internal control structure.
B. The accountant must be independent in fact and appearance.
C. The accountant expresses no assurance on the financial statements.
D. The accountants should obtain a written management representation letter.

22. It is a systematic process whose purpose is to determine whether accouting standards have been correctly applied, if
the tax legal regulations have been correctly interpreted and the taxpayers' returns have been adequately prepared.
A. Tax audit
B. Auditing
C. Audit examination

23. In Tax Auditing processes an analysis is made up of the tax generating event which is completed at the examination
point.
Statement 1: The taxpayer has a thirty (30) day unextendable term as of the day of the notification of the intervention
Statement 2: Resolution to pay or submit the objections he may deem convenient.
A. Both statements are true
B. Both Statements are false
C. Only 1 statement is correct

24 An analysis of information dealing with taxes and others which includes background on taxpayer’s behavior, financial
statements, previous audits by SIN and internal auditors, annual report and etc.
A) Taxpayer History
B) Customer’s business and industry
C) Information of the company
D) Comparative analysis of balance sheet stories

25. All pertains to identification of industry risk factors, except:

A) Obtaining an understanding of the company and its environment
B) Obtaining an understanding of internal control over financial reporting
C) Performing analytical procedures
D) Review of expenses and foreign staff costs

26. Which of the following are defined as exploration costs?

a. Drilling and equipping exploratory wells
b. Drilling exploratory-type stratigraphic test wells
c. Dry-hole contributions
d. Bottom-hole contributions
e. All of these

27 Which of the following costs would always be charged expense under the full cost method? (Choose all that apply)
a. Exploratory dry holes
b. Salary and benefits of a company geologist
c. Salary and benefits of the company CEO
d. Production costs
e. All of these apply

28. Under successful efforts, exploration costs are generally

a. cost remain capitalized and amortized
b. expensed as incurred
c. capitalized
d. charge to expense, capitalized cost net any salvage

29. Under successful efforts, exploratory well in progress are generally

a. charge to expense, capitalized cost net any salvage
b. capitalized
c. cost remain capitalized and amortized
d. expensed as incurred

30. Under successful efforts, if an exploratory well in progress finds proved reserves
a. charge to expense, capitalized cost net any salvage
b. capitalized
c. expensed as incurred
d. cost remain capitalized and amortized
31. Under successful efforts, if an exploratory well in progress is a dry hole, the costs are
a. capitalized
b. charge to expense, capitalized cost net any salvage
c. cost remain capitalized and amortized
d. expensed as incurred

32. Reserves expected to be recovered from either

1. New wells drilled on undrilled acreage (must be offsetting productive units)
2. Existing wells where a relatively minor expenditure is required for recompletion
3. Improved recovery techniques, only if effective actual tests in the same area and in same reservoir

a. Proved Reserves
b. Unproved Reserves
c. Proved Developed Reserves
d. Proved Underdeveloped Reserves

33. those reserves that are:

1. Reasonably certain to be recovered in the future
2. From known reservoirs under existing economic and operating conditions, such as
a. Current prices and costs
b. Current technology
3. Economic producibility supported by actual production or conclusive formation test.

a. Proved Reserves
b. Unproved Reserves
c. Proved Developed Reserves
d. Proved Underdeveloped Reserves

34. Reserves expected to be recovered through

1. Existing wells with existing equipment and operating methods
2. Improved recovery techniques, if
a. Successful pilot project, or
b. Successful installed program

a. Proved Reserves
b. Unproved Reserves
c. Proved Developed Reserves
d. Proved Underdeveloped Reserves

35 Cost incurred in lifting the oil and gas to the surface and in gathering, treating, and storing oil/gas

a. Production costs
b. Development costs
c. Exploration costs
d. Acquisition costs

36 Costs incurred in preparing proved reserves for production: obtain access to proved reserves and to provide facilities
for extracting, treating, gathering, storing oil/gas.

a. Production costs
b. Exploration costs
c. Development costs
d. Acquisition costs

37 Costs incurred in acquiring property: rights to explore, drill, and produce oil and natural gas.
a. Production costs
b. Acquisition costs
c. Exploration costs
d. Development costs

38. A(n) ____________________ is an interest created by a lease agreement whereby the owner is responsible for
paying all of the cost of exploring, drilling, developing, and producing the property.
a. Surface rights interest
b. Working interest
c. Undivided working interest
d. Answer is not given.

39. Which of the following is not a mineral interest?

a. Surface rights interest
b. Working interest
c. Undivided working interest
d. Answer is not given.

40. A(n) __________________ exists when multiple working interest owners share and share alike in any and all reserves
as well as the minerals severed from the earth.
a. Surface rights interest
b. Working interest
c. Undivided working interest
d. Answer is not given.

41. The test of details of balances procedure which requires a “recalculation of investment credit” satisfies the audit
objective of:

a. classification.
b. detail tie-in.
c. existence.
d. accuracy.

42.Which of the following statements about the audit of fixed assets is not correct?

a. The primary accounting record for manufacturing equipment and other property, plant and equipment is generally a
fixed asset master file.
b. Manufacturing equipment and current assets are normally audited in the same fashion regardless of the activity within a
particular account.
c. The emphasis on auditing fixed assets is on verification of current-period acquisitions.
e. Failure to record the acquisition of a fixed asset affects the income statement until the assets is fully depreciated.

43.During the audit of prepaid insurance, the auditor should keep in mind that the amount in insurance expense is based
on:

a. the beginning balance in prepaid insurance.

b. the payment of premiums during the year.
c. the ending balance in prepaid insurance.
d. all three of the above.

44. For efficiency, tests of controls are frequently done at the same time as:
Easy
a. analytical procedures.
b. compliance tests.
c. tests of transactions.
d. tests of details of balances.

45. Which of the following procedures are frequently performed in response to the auditor’s
assessment of the risk of material misstatement?
a. Ratio analysis
b. Tests of controls
c. Tests of details of balances
d. Risk assessment procedures

46. In which stage(s) of an audit are analytical procedures not performed?

a. In the planning stage.
b. In the test of controls stage.
c. In the completion stage.
d. In conjunction with tests of transactions and tests of details of balances.

47. Which of the following types of evidence is not available when using substantive tests of transactions?
a. Documentation.
b. Confirmation.
c. Inquiries of the client.
d. Reperformance.

48. An exception in a test of control indicates the _______ of misstatements.

a. the amount
b. the likelihood
c. the amount, likelihood, and classification
d. the amount and the classification

49. Which of the following is not a valid basis for omitting an audit test?
a. the difficulty and expense involved in testing a particular item.
b. the relative risk involved.
c. the degree of reliance on the relevant internal controls.
d. the relationship between the cost of obtaining evidence and its usefulness

50. Analytical procedures must be performed in:

a. the planning and test of control stages.
b. conjunction with tests of transactions and tests of details of balances.
c. the planning and completion stages.
d. the planning, test of control, and completion stages.