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ACC 139: Auditing and Assurance Class number: _____________________

Student number: _____________________
Principles Date: _____________________
SY2023-2024, First Semester
Score: _____________________
Quiz no. 4

1. Statement 1: Auditors often place greater
emphasis on addressing Type II risks as they
relate to audit effectiveness.
Statement 2: Monetary unity sampling (MUS) is
a subset of probability-proportional-to-size
sampling that is based on attribute sampling
theory but expresses conclusions in monetary
terms.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
2. Statement 1: Audit sampling refers to the
application of audit procedures to less than
100% of the items in an account balance or
class of transactions for the purpose of
evaluating some of its characteristics.
Statement 2: Stratification leads to multiple
subpopulations and thus increases the total
sample size required to test a population.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
5. Which of the following is true about alpha and
beta errors?
a. The alpha error is of greater concern to
the auditor than the beta error.
b. The beta error is greater concern to the
auditor than the alpha error.
c. The beta error and the alpha error are of
equal importance to the auditor.
d. Neither the alpha error nor the beta error
needs to be considered by the auditor.
6. An error that arises from an isolated event that
has not recurred other than on specifically
identifiable occasions and is therefore not
representative of errors in the population.
a. Tolerable error
b. Anomalous error
c. Sample error
d. Expected population error
7. A refusal by a lawyer to furnish information
related to litigation included in the letter of
inquiry is likely to result in:
a. Confirmation of related lawsuits with the
claimants.
b. Qualification of the audit report.
c. An assessment that loss of the litigation
is probable.
d. An adverse opinion.

3. Statement 1: Written representations are

considered audit evidence. 8. When auditing related party transactions, an
auditor places primary emphasis on
Statement 2: One of the key communications to a. Ascertaining the rights and obligations of
those charged with governance is the audit the related parties.
timetable, key milestones, and deadlines. b. Confirming the existence of the related
parties.
a. Only Statement 1 is true. c. Verifying the valuation of the related
b. Only Statement 2 is true. party transactions.
c. Both statements are true. d. Evaluating the disclosure of the related
d. Neither of the statements is true. party transactions.

4. Statement 1: The auditor shall communicate with 9. The auditor’s failure to recognize a misstatement
those charged with governance on a quarterly in an amount or a deviation in an internal control
basis. data processing procedure is described as a:
a. Statistical error.
Statement 2: If written management b. Sampling misstatement.
representations are not provided, the auditor c. Standard error of the mean.
shall assess its possible effects on the auditor’s d. Non-sampling error.
opinions.
10. An advantage of statistical sampling over non-
a. Only Statement 1 is true. statistical sampling is that statistical sampling
b. Only Statement 2 is true. helps the auditor to:
c. Both statements are true. a. Eliminate the risk of non-sampling
d. Neither of the statements is true. errors.
b. Measure the sufficiency of the evidential
matter obtained.
c. Reduce the level of audit risk materiality
to a relatively low amount.
d. Minimize the failure to detect errors and
irregularities.
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11. A schedule set up to combine similar general
ledger accounts, the total of which appears on
the working trial balance as a single amount, is
referred to as a:
a. Supporting schedule.
b. Lead schedule.
c. Corroborating schedule.
d. Reconciling schedule.
12. It is the record of audit procedures performed,
relevant audit evidence obtained, and
conclusions the auditor reached.
a. Audit report
b. Audit programs
c. Working papers
d. Audit memoranda
13. If a selected random number matches the
number of a voided voucher, the voucher
ordinarily should be replaced by another voucher
in the sample if the voucher
a. Constitutes a deviation.
b. Has been properly voided.
c. Cannot be located.
d. Represents an immaterial peso amount.
14. To reduce the sampling risk, the auditor should:
a. Apply the appropriate sample selection
method.
b. Properly plan the engagement.
c. Increase the extent of supervision
d. Increase the extent of review
15. The auditor is most likely to discover omitted
audit procedures during
a. Preparation of the management letter.
b. Follow-up procedures performed in
compliance with generally accepted
auditing standards.
c. The conference held with the client prior
to issuing the audit report.
d. A post-engagement review performed
as part of the firm’s quality control
inspection program.
16. The primary objective of analytical procedures
used in the overall review stage of an audit is to
a. Identify which areas that represent
specific risks relevant to the audit.
b. Assist the auditor in assessing the
validity of the conclusions reached.
c. Obtain evidence from details testing to
corroborate particular assertions.
d. Satisfy doubts when questions arise
about a client’s ability to continue in
existence.
17. Tolerable misstatements for overstatements and
understatements:
a. May be different amounts.
b. Must be different amounts.
c. Must be set at the same amount.
d. Must be expressed in percentages.
18. If an auditor desires a greater level of assurance
in auditing a balance, the acceptable risk of
incorrect acceptance:
a. Is not changed.
b. Is reduced.
c. Is increased.
d. May be reduced or increased depending
upon other circumstances.
19. In conducting a substantive test of an account
balance, an auditor hypothesizes that no
material error exists. The risk that sample
results will support the hypothesis when a
material error actually does exist is the risk of
a. Incorrect rejection.
b. Alpha error.
c. Incorrect acceptance.
d. Type I error
20. The audit inquiry letter to the client's legal
counsel should be mailed only by the
a. Client after the auditor has reviewed it
for appropriate content.
b. Auditor after preparation by the client
and review by the auditor.
c. Auditor's attorney after preparation by
the client and review by the auditor.
d. Client after review by the auditor's
attorney.
21. An auditor should obtain written representations
from management concerning litigation claims
and assessments. These representations may
be limited to matters that are considered either
individually or collectively material, provided an
understanding on the limits of materiality for this
purpose has been reached by
a. The auditor and the client's lawyer.
b. Management and the auditor.
c. Management, the client's lawyer, and
the auditor.
22. Statement 1: When auditing disclosure-related
objectives, the primary concern is the complete
presentation of all required disclosures.
Statement 2: Wrap-up procedures are optional
since they have only an indirect impact on the
opinion to be expressed.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
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23. Statement 1: The auditor is only responsible to
perform procedures for events subsequent to the
auditor’s report date if such events are material.
Statement 2: If a legal counsel refuses to
provide information regarding material litigations
and claims, the auditor should modify the
opinion to reflect the material misstatement if
noted.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
24. Statement 1: To determine the amount to be
proposed as an adjustment in the accounting
records, the misstatements found must be
projected to the whole population.
Statement 2: When evaluating the results of
specific items selected for testing, their effects
must be projected to the whole projection.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
25. Statement 1: Audit sampling is highly useful
when identifying plausible relationships between
account balances and classes of transactions.
Statement 2: Mean per unit estimation is a
technique that estimates the value of a
population by extending the sample audited
mean as the true population mean.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
26. An auditor will ordinarily examine the invoices
from lawyers primarily in order to:
a. Substantiate accruals.
b. Assess the legal ramifications of
litigation in progress.
c. Estimate the dollar amount of contingent
liabilities.
d. Identify possible unasserted litigation,
claims, and assessments.
27. Which of the following is not a procedure that is
designed to provide evidence about the
existence of loss contingencies?
a. Obtaining a lawyer’s letter.
b. Confirming accounts payable.
c. Reviewing the minutes of the board of
directors’ meetings.
d. Review of correspondence with banks.
28. An auditor’s working papers serve mainly to
a. Provide the principal support for the
auditor’s report.
b. Satisfy the auditor’s responsibilities
concerning the Code of Ethics.
c. Monitor the effectiveness of the CPA
firm’s quality control procedures.
d. Document the level of independence
maintained by the auditor.
29. The audit working paper that reflects the major
components of an amount reported in the
financial statements is the
a. Inter-bank transfer schedule.
b. Supporting schedule.
c. Carry-forward schedule.
d. Lead schedule.
30. An auditor searching for related party
transactions should obtain an understanding of
each subsidiary’s relationship to the total entity
because:
a. The business structure may be
deliberately designed to obscure related
party transactions.
b. This may reveal whether transactions
would have taken place if the parties
had been unrelated.
c. Transactions may have consummated
on terms equivalent to arm’s length
transactions.
d. This may permit the audit of
intercompany account balances to be
performed as of concurrent dates.
31. The existence of related party transactions may
be indicated when another entity
a. Sells real estate to the corporation at a
price that is significantly different from its
book value.
b. Borrows from the corporation at a rate of
interest equal to the current market rate.
c. Lends to the corporation at a rate of
interest equal to the current market rate.
d. Absorbs expenses of the corporation.
32. If all other factors specified in an attributes
sampling plan remain constant, decreasing the
tolerable rate and decreasing the risk of
assessing control risk too low would have what
effect on sample size?
a. Increase
b. Remain the same
c. Decrease
d. Indeterminate, depends upon exact
change being made.
33. If all other factors specified in an attributes
sampling plan remain constant, decreasing the
tolerable rate and increasing the estimated
population deviation rate would have what effect
on sample size?
a. Increase
b. Remain the same
c. Decrease
d. Indeterminate, depends upon exact
change being made.
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34. When should auditors perform audit procedures
relating to subsequent events?
a. Through year-end.
b. Through the issuance of the audit report.
c. Through the last day of field work.
d. For a reasonable period after year-end.
35. Which of the following subsequent events might
require an adjustment to the client’s financial
statements?
a. A business combination with another
company.
b. Loss on the sale of a closely-held
investment.
c. Loss of plant and equipment due to a
fire.
d. Retirement of bonds payable at a loss.
36. Which of the following is not correct relating to
the representation letters?
a. They are ordinarily dated as of the date
of the audit report.
b. They are signed by members of top
management.
c. They must be obtained for audits.
d. They often serve as a substitute for the
application of other procedures.
37. Management’s refusal to furnish a written
representation on a matter, which the auditor
considers essential, constitutes
a. Prima facie evidence that the financial
statements are not presented fairly.
b. A violation of the Foreign Corrupt
Practices Act.
c. An uncertainty sufficient to preclude an
unqualified opinion.
d. A scope limitation sufficient to preclude
an unqualified opinion.
38. An auditor concludes that a substantive auditing
procedure considered necessary during the prior
period’s audit was omitted. Which of the
following factors would most likely cause the
auditor promptly to apply the omitted procedure?
a. There are no alternative procedures
available to provide the same evidence
as to the omitted procedure.
b. The omission of the procedure impairs
the auditor’s present liability to support
the previously expressed opinion.
c. The source documents needed to
perform the omitted procedure are still
available.
d. The auditor’s opinion on the prior
period’s financial statements was
unqualified.
39. Analytical procedures are required as a part of
the
a. Detailed tests of balances.
b. Internal control assessment.
c. Overall review at the at the conclusion of
the audit.
d. Substantive testing.
40. Sampling risk refers to the possibility that:
a. The auditor may use a less than optimal
statistical method for the circumstances,
e.g., difference estimation instead of
ratio estimation.
b. The auditor may fail to recognize an
error that is included in the sample.
c. Even though a sample is properly
chosen, it may not be representative of
the population.
d. The confidence level and/or precision
established by the auditor are not
appropriate.
41. The primary reason for an auditor to use
statistical sampling is to
a. Obtain a smaller sample than would be
required by non-statistical sampling
techniques.
b. Obtain a sample more representative of
the population than would be obtained
by non-statistical sampling techniques.
c. Allow the auditor to quantify, and
therefore control, the risk of making an
incorrect decision based on sample
evidence.
d. Meet requirements of Statements on
Auditing Standards.
42. To determine the number of items to be selected
in a sample for a particular substantive test of
details, the auditor should consider all of the
following except
a. Tolerable error.
b. Expected error.
c. Allowable risk of incorrect acceptance.
d. Characteristics of the population.
e. The auditor independently of
management.
43. Which of the following auditing procedures is
ordinarily performed last?
a. Reading of the minutes of the director's
meetings.
b. Confirming accounts payable.
c. Obtaining a management representation
letter.
d. Testing of the purchasing function.
44. Statement 1: The addressee of the
representation letter is the intended users of the
financial statements.
Statement 2: The communication of findings
from the audit may include requesting further
information from those charged with governance
in order to complete the audit evidence obtained.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
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45. Statement 1: Effective communication may
involve structured presentations and written
reports but not less structured communications
such as discussions.
Statement 2: For recurring audits, management
letters may include a follow-up of the prior year’s
recommendations and the status of their
resolutions.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
46. Statement 1: Meetings with external legal
counsel do not require management’s
permission to maintain the integrity of
information.
Statement 2: The auditor may follow a
subsequent events questionnaire in order to
inquire from the client about material subsequent
events that may affect the financial statements.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
47. Statement 1: Subsequent events are events
occurring between the date of the financial
statements and the last day of audit fieldwork.
Statement 2: Reviewing the accounts payable
subsidiary ledger would enable the auditor to
uncover liabilities existing at period-end but are
not yet recorded.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Neither of the statements is true.
48. A schedule listing account balances for the
current and previous years, and columns for
adjusting and reclassifying entries proposed by
the auditors to arrive at the final amount that will
appear in the financial statements, is referred to
as a
a. Working trial balance
b. Summarizing schedule
c. Lead schedule
d. Supporting schedule
49. Audit documentation serves a number of
purposes except for
a. Assisting the engagement team to plan
and perform the audit.
b. Assisting members of the engagement
team responsible for supervision to
direct and supervise the audit work, and
to discharge their review responsibilities.
c. Enabling the engagement team to be
accountable for its work.
d. Retaining a record of matters of
continuing significance to prior audits.
50. When an auditor goes through a population and
selects items for the sample without regard to
their size, source, or other distinguishing
characteristics, it is called
a. Block selection
b. Haphazard selection
c. Systematic selection
d. Statistical selection
51. One of the ways to control non-sampling risk is
through
a. Proper supervision and instruction of the
client’s employees.
b. Proper supervision and instruction of the
audit team.
c. The use of attributes sampling rather
than variables sampling.
d. Control which ensures the sample
drawn is random and representative.
52. The main advantage of properly indexed working
papers is to
a. Reduce the size of the file.
b. Allow division of labor within the audit
team.
c. Better organize the working papers.
d. Facilitate the efficient use of audit staff.
53. The principal purpose for cross-indexing audit
working papers is to
a. Give the working papers a professional
appearance.
b. Explain the use of tick marks.
c. Provide an explanation of the audit
steps performed.
d. Provide a trail for the auditor and the
reviewer.
54. The auditor shall communicate with those
charged with governance
a. On a timely basis.
b. Quarterly.
c. Annually.
d. At the start, middle, and end of the
engagement.
55. Which of the following statements relating to
communication of audit matters of governance
interest is incorrect?
a. Audit matters of governance interest
include only those matters that have
come to the attention of the auditor as a
result of the performance of the audit.
b. In an audit in accordance with PSAs, the
auditor should design audit procedures
for the specific purpose of identifying
matters of governance interest.
c. The auditor should identify relevant
persons who are charged with
governance and with whom audit
matters of governance interest are to be
communicated.
d. The auditor’s communications with
those charged with governance may be
made orally or in writing.
*** End of Quiz ***
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ACC 139: Auditing and Assurance Class number: _____________________

Student number: _____________________
Principles Date: _____________________
SY2023-2024, First Semester
Score: _____________________
Quiz no. 4

Answer Sheet

1. 11. 21.
2. 12. 22.
3. 13. 23.
4. 14. 24.
5. 15. 25.
6. 16. 26.
7. 17. 27.
8. 18. 28.
9. 19. 29.
10. 20. 30.

31. 41. 51.

32. 42. 52.
33. 43. 53.
34. 44. 54.
35. 45. 55.
36. 46.
37. 47.
38. 48.
39. 49.
40. 50.

“Learn everything. Fill your mind with knowledge—it’s the only kind of power no one can take away from you.”
-Lee Min Jin, Pachinko