SAS DAY 6 ACC 140 QUIZ ANSWER - Docx-1

ACC 140 Auditing and Assurance: Concepts and Applications 1
Module #6
Name: John Lorenz M. Dayanghirang Class number: 019-0059

Section: 3A-A8 Schedule: THURS 5:30-7:00PM Date: OCT/14/2021
Lesson title: Quiz #2 Materials:

Lesson Objectives: SAS, Pen, Pencil, Eraser
At the end of this module, I should be able to:
Assess my understanding on the following topics:
 Performing Risk Assessment Procedures – Entity
Wide and Business Process Level
 Risks Response
Productivity Tip:
 Don’t stress.
 Do your best.
 Forget the rest.
A. LESSON PREVIEW/REVIEW
1) Introduction
Oh, welcome! Are you ready to participate in your second quiz? I hope
that before coming in today, you checked your modules.
There's hope for the best results. Oh, good luck!
For each part of this quiz, carefully read the particular instructions. Avoid
deletions. Cheating is prohibited.
B. MAIN LESSON
Thoroughly read the instructions and answer what is needed in each set of questions.
Test I: True or False. Write TRUE if the statement is correct and FALSE if otherwise. Write your
answer on the blank space provided.
TRUE 1. Audit planning involves developing an overall strategy for the expected conduct and
scope of the examination; the nature, extent, and timing of which vary with the size and
complexity, and experience with and knowledge of the entity.
FALSE 2. Audit planning is a discrete phase of an audit.
This document is the property of PHINMA EDUCATION

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Module #6

TRUE 3. Audit planning is a continual and iterative process.

TRUE 4. In a recurring audit, planning often begins shortly after (or in connection with) the
completion of the previous audit and continues until the completion of the current audit
engagement.
TRUE 5. In planning an audit, the auditor considers the timing of certain planning activities and
audit procedures that are to be completed prior to the performance of further audit procedures.
FALSE 6. The auditor has a responsibility to identify or assess all business risks.
TRUE 7. Regardless of the assessed levels of inherent and control risks, the auditor should
always perform some substantive procedures for material account balances and classes of
transactions.
TRUE 8. The higher the assessment of inherent and control risks, the more evidence the auditor
should obtain from the performance of substantive procedures.
TRUE 9. After obtaining an understanding of the accounting and internal control systems, the
auditor should make a preliminary assessment of control risk, at the assertion level, for each
material account balance or class of transactions.
FALSE 10. The assessed level of inherent risk need not be considered in determining the
nature, timing, and extent of substantive procedures required to reduce audit risk to an
acceptably low level.
Test II. Multiple Choice

Encircle the letter of the correct answer.
1. After gaining an understanding of internal control and assessing the risks of material
misstatement, an auditor decided to perform tests of controls. The auditor most likely decided
that
A. Additional evidence to support a further decision in control risk is not available.
B. It is not possible or practicable to reduce the risks of material misstatement at the
assertion level to an acceptably low level with audit evidence obtained only from
substantive procedures.
C. There were many internal control weaknesses that could allow misstatements to enter
the accounting system.
D. An increase in the assessed level of control risk is justified for certain financial
statement assertions.
2. Which of the following best describes an inherent limitation that should be recognized by
an auditor when considering the potential effectiveness of an internal control structure?
A. Procedures whose effectiveness depends on segregation duties can be circumvented by
collusion.
B. The competence and integrity of client personnel provide an environment conducive to
control and provides assurance that effective control will be achieved.

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Module #6

C. Procedures designed to assure the execution and recording of transactions in

accordance with proper authorizations are effective against fraud perpetrated by
management.
D. The benefits expected to be derived from effective internal control usually do not exceed
the cost of such control.
3. Inherent limitations in an internal control must be considered in evaluating its

effectiveness in preventing and detecting errors and fraud. Inherent limitations do not include
A. Misunderstanding of instructions, mistakes of judgment, personal carelessness,
distraction, or fatigue.
B. Incompatible functions performed by the same person.
C. Collusion among employees.
D. Management override of certain policies or procedures.
4. The overall attitude and awareness of an entity’s board of directors concerning the
importance of the internal control usually is reflected in its
A. Computer-based controls
B. System of segregation of duties
C. Control environment
D. Safeguards over access to assets
5. Which of the following is a step in an auditor’s decision to assess control risk at less than
high level?
A. Apply analytical procedures to both financial data and nonfinancial information to detect
conditions that may indicate weak controls
B. Perform tests of details of transactions and account balances to identify potential errors
and fraud
C. Identify specific internal control policies and procedures that are likely to detect or
prevent material misstatements
D. Document that the additional audit effort to perform tests of controls exceed the potential
reduction in substantive testing
6. After considering a client’s internal control, an auditor has concluded that the system is
well designed and is functioning as anticipated. Under these circumstances, the auditor would
most likely
A. Cease to perform further substantive tests
B. Not increase the extent of planned substantive tests
C. Increase the extent of anticipated analytical procedures
D. Perform all tests of controls to the extent outlined in the pre-planned audit program.

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7. After considering the internal control, an auditor might decide to

A. Increase the extent of tests of controls and substantive tests in areas where internal
control is strong
B. Increase the extent of substantive tests in areas where internal control is weak
C. Reduce the extent of tests of controls in areas where internal control is strong
D. Reduce the extent of both substantive tests and tests of controls in areas where internal
control is strong
8. The auditor would most likely assess control risk at a high level when
A. It would be efficient to perform test of control
B. The entity’s accounting and internal control systems are not reliable.
C. The auditor wishes to rely on the entity’s accounting and internal control systems.
D. The auditor wants to restrict substantive tests.
9. When control risk is assessed at high level, the auditor should document his
Understanding of Conclusion that Basis for concluding that

the internal control control risk is at a control risk is at high
components high level
A. Yes Yes Yes
B. Yes Yes No
C. Yes No No
D. No Yes No
10. The auditor will perform tests of controls when controls are initially assessed as
Low Moderate High
A. Yes Yes Yes
B. Yes No Yes
C. No Yes No
D. Yes Yes No
Test III. Essay

How does adequacy or inadequacy of internal control affect audit procedures? Explain briefly.
Internal control audit deficiencies might potentially have an impact on financial statement audits. Controls are
frequently used by auditors in integrated audits to decrease substantive examination of financial statement
accounts and disclosures. Deficits in testing and assessing internal control might therefore result in insufficient
testing of accounts and disclosures in the financial statement audit. This implies that investors may not have
the same level of certainty regarding the financial statements on which they rely that an audit should offer.

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Module #6

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
Congratulations for finishing this module! Shade the number of the module that you finished.
Are you having difficulty in learning the concepts in this module? If none, which parts of the module
helped you learn the concepts?
None. Cause some of it are explained well.
Some question/s I want to ask my teacher about this module is/are:

None.
Learning Scores Action Plan

Date
Target/Topic
What module# did
What contributed to the quality of your
you do? What were What were your
What’s the performance today? What will you do
the learning targets? scores in the
date today? next session to maintain your performance
What activities did activities?
or improve it?
you do?
OCT/14/20
QUIZ 6 I’ll study more
21

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ACC 140 Auditing and Assurance: Concepts and Applications 1

Name: John Lorenz M. Dayanghirang Class number: 019-0059

Lesson title: Quiz #2 Materials:

There's hope for the best results. Oh, good luck!

This document is the property of PHINMA EDUCATION

Name: John Lorenz M. Dayanghirang Class number: 019-0059

TRUE 3. Audit planning is a continual and iterative process.

Test II. Multiple Choice

This document is the property of PHINMA EDUCATION

Name: John Lorenz M. Dayanghirang Class number: 019-0059

C. Procedures designed to assure the execution and recording of transactions in

3. Inherent limitations in an internal control must be considered in evaluating its

This document is the property of PHINMA EDUCATION

Name: John Lorenz M. Dayanghirang Class number: 019-0059

7. After considering the internal control, an auditor might decide to

Understanding of Conclusion that Basis for concluding that

Test III. Essay

This document is the property of PHINMA EDUCATION

Name: John Lorenz M. Dayanghirang Class number: 019-0059

Some question/s I want to ask my teacher about this module is/are:

Learning Scores Action Plan

This document is the property of PHINMA EDUCATION

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