ACT 631 - Auditing PDF

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Recording, Classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called: A. Finance B. Auditing C. Accounting D. Economics Broadly defined, the subject matter of any audit consists of A. Financial statement...

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ACT631 Assurance Principles, Professional Ethics and Good Governance 1. Recording, Classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called: A. Finance B. Auditing C. Accounting D. Economics 2. Broadly defined, the subject matter of any audit consists of A. Financial statements B. Economic data C. Assertions D. Operating Data 3. The criteria for evaluating quantitative information vary. For example, example in the case of an independent audit of financial statements by CPA firms, the criteria are usually the A. Philippine Standards on Auditing B. Philippine Financial Reporting Standards C. National Internal Revenue Code D. Regulations of the Securities and Exchange Commission 4. Under GAAS, which of the following reflects a concept from the general group? A. The confirmation of accounts receivable B. Completing an internal control questionnaire C. The initial planning of the audit with the audit partner, manager, senior, staff and client personnel D. The assignment of audit personnel to an engagement where they have no financial interest 5. What is the general character of the three generally accepted auditing standards classified as standards of the field work? A. The competence of persons performing the audit B. Criteria for the content of the auditor’s report on financial statements and related footnote disclosures. C. The criteria of audit planning and evidence-gathering D. The need to maintain an independence in mental attitude in all matters relating to the audit 6. While performing audit services for their clients, professional accountants have a duty to provide a level of care which is A. Reasonable C. Superior B. Greater than average D. Guaranteed to be free from error 7. Which of the following statements is correct regarding errors and fraud? A. An error is unintentional, whereas fraud is intentional B. Frauds occur more often than errors in financial statements C. Errors are always fraud and frauds are always errors D. Auditors have more responsibility for finding fraud than errors 8. The term “error” refers to unintentional misrepresentation of financial information. Examples of errors are when I. Assets have been misappropriated II. Transactions without substance have been recorded III. Records and documents have been manipulated and falsified IV. The effects of the transactions have been omitted from the records A. All of the above statements are true C. All of the above statements are false B. Only statements I and III are true D. Only statements II and IV are true 9. The level of assurance provided by an audit of detecting a material misstatement is referred to as: A. Reasonable assurance B. Moderate assurance

C. Absolute assurance D. Negative assurance

10. Management assertions are: A. Directly related to the financial reporting framework used by the company B. Stated in the footnotes to the financial statements C. Explicitly expressed representations about the company’s financial condition

ACT631 Assurance Principles, Professional Ethics and Good Governance D. Provided to the auditor in the assertions letter, but are not disclosed on the financial Statements 11. Which of the following statements is not correct? A. It would be a violation of the completeness assertion if management would record a sale that did not take place B. The completeness assertion deals with matters opposite from those of the existence assertion C. The completeness assertion is concerned with the possibility of omitting items from the financial statements that should have been included D. The existence assertion is concerned with inclusion of amount that should not have been 12. Which of the following statements is correct? A. Existence relates to whether the amounts in accounts are understated B. Completeness relates to whether balance exist C. Existence relates to whether the amounts included exist D. Occurrence relates to whether the amounts in accounts occurred in the proper year 13. In performing an audit of financial statements, the auditor should obtain knowledge of the client’s business sufficient to A. Make constructive suggestion concerning improvements in internal control B. Identify transactions and events that may affect the financial statements C. Develop an attitude of professional skepticism D. Assess the level of control risk 14. To obtain an understanding of a continuing client’s business in planning audit, an auditor most likely would A. Perform tests of detail of transactions and balances B. Review prior year working papers and the permanent file for the client C. Read specialized industry journals D. Re-evaluate the client’s internal control system 15. Information about the client’s business appropriately assists the auditor in: Assessing risks and Planning and performing Evaluating audit Identifying potential the audit effectively and evidence problems efficiently A. YES YES YES B. YES NO YES C. NO YES YES D. YES YES NO 16. The primary responsibility for establishing and maintaining an internal control rests with A. The external auditors C. Management and those charged with governance B. The internal auditors D. The controller of the treasurer 17. Which of the following is not one of the three primary objectives of effective internal control? A. Reliability of financial reporting B. Efficiency and effectiveness of operations C. Compliance with laws and regulations D. Assurance of elimination of business risks 18. Which statement is correct concerning the relevance of various types of controls to a financial audit? A. An auditor may ordinarily ignore a consideration of controls when a substantive audit approach is taken B. Control over the reliability of financial supporting are ordinarily most directly relevant to an audit but other controls may also be relevant C. Controls over safeguarding of assets and liabilities are of primary importance, while controls over the reliability financial reporting may also be relevant D. All controls are ordinarily relevant to an audit 19. Evidence is usually more persuasive for balance sheet accounts when it is obtained:

A. As close to the balance sheet date as possible B. Only from transactions occurring on the balance sheet date C. From various time throughout the client’s year

ACT631 Assurance Principles, Professional Ethics and Good Governance D. From the time period when transactions in that account were most numerous during the fiscal period 20. Often, auditor procedures result in significant differences being discovered by the auditor. The auditor should investigate further if: Significant differences are not Significant differences are expected but do exist expected but do not exist A. YES YES B. NO NO C. YES NO D. NO YES 21. Auditors may decide to replace tests of details with analytical procedures when possible because the: A. Analytical procedures are more reliable B. Analytical procedures are considerably less expensive C. Analytical procedures are more persuasive D. Tests of details are more difficult to interpret 22. One of the causes of non-sampling error is A. Failure to draw a random sample B. Failure to draw a representative sample C. The use of inappropriate or ineffective audit procedures D. The use of attributes sampling instead of variables sampling 23. Which of the following is the risk that audit tests will not uncover existing expectations in a sample? A. Sampling risk C. Audit risk B. Non-sampling risk D. Detection risk 24. Which of the following constitutes audit sampling? A. Selecting and examining specific items to determine whether or not a particular procedure is being performed B. Examining items to obtain information about matters such as the client’s business, the nature of transactions, accounting and internal control systems C. Examining items whose values exceed a certain amount so as to verify a large proportion of the total amount of an account balance or class of transactions D. Applying audit procedures to less than 100% of items within an account balance or class of transactions such that all sampling units have a chance of selection 25. An auditor has the responsibility to actively search for subsequent events that occur subsequent to the. A. Balance sheet date B. Date of the auditor’s report C. Balance sheet date, but prior to the audit report D. Date of the management representation letter

26. When completing the audit, the auditor performs procedures designed to identify subsequent events that may require adjustment of, or disclosure in, the financial statements. Accordingly Those that provide evidence about Those that are indicative of conditions Conditions that existed at period end that arose subsequent to period end A. Will require adjustment Will require adjustment B. Will require adjustment Will require disclosure C. Will require disclosure Will require disclosure D. Will require disclosure Will require adjustment 27. Which of the following procedures should an auditor generally perform regarding subsequent events? A. Compare the latest available interim financial statements with the financial statements being audited B. Send second requests to the client’s customers who failed to respond to initial accounts receivable C. Communicate material weaknesses in the internal control structure to the client’s audit committee D. Review the cut-off bank statements for several months after the year-end

28. Pronouncement of Auditing and Assurance Standard Council (AASC) do not cover? A. Review engagement C. Consultancy B. Compilation engagement D. Agreed – upon procedures engagement...