Audit- Theory-Assignment PDF

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AUDIT THEORY: Review Questions (Assignment) Certain fundamental beliefs called "postulates" underlie auditing theory. Which of the following is not a postulate of auditing? a. No long-term conflict exists between the auditor and the management of the enterprise under audit. b. Econ...

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AUDIT THEORY: Review Questions (Assignment) 1. Certain fundamental beliefs called "postulates" underlie auditing theory. Which of the following is not a postulate of auditing? a. No long-term conflict exists between the auditor and the management of the enterprise under audit. b. Economic assertions can be verified. c. The auditor acts exclusively as an auditor. d. An audit has a benefit only to the owners. 2. In all cases, audit reports must a. Be signed by the individual who performed the audit procedures. b. Certify the accuracy of the quantitative information which was audited. c. Communicate the auditor’s finding to the general public. d. Inform readers of the degree of correspondence between the quantifiable information and the established criteria. 3. As used in auditing, which of the following statements best describes "assertions"? a. Assertions are the representations of management as to the reliability of the information system. b. Assertions are the auditor's findings to be communicated in the audit report. c. Assertions are the representations of management as to the fairness of the financial statements. d. Assertions are found only in the footnotes to the financial statements. 4. The expertise that distinguishes auditors from accountants is in the a. Ability to interpret generally accepted accounting principles. b. Requirement to possess education beyond the Bachelor’s degree. c. Accumulation and interpretation of evidence. d. Ability to interpret ASC Statements. 5. Which of the following is true of the report based on agreed-upon-procedures?

a. The report is restricted to those parties who have agreed to the procedures to be performed. b. The CPA provides the recipients of the report limited assurance as to reasonableness of the assertion(s) presented in the financial information. c. The report states that the auditor has not recognized any basis that requires revision of financial statements. d. The report should state that the procedures performed are limited to analytical procedures and inquiry. 6. According to Philippine Standard on Auditing, the procedures employed in doing compilation are: a. Designed to enable the accountant to express a limited assurance. b. Designed to enable the accountant to express a negative assurance. c. Not designed to enable the accountant to express any form of assurance. d. Less extensive than review procedures but more extensive than agreed-upon procedures. 7. The three types of attestation services are: a. Audits, review, and compilations b. Audits, compilations, and other attestation services c. Reviews, compilations, and other attestation services d. Audits, reviews, and other attestation services 8. Which of the following is not primary category of attestation report? a. Compilation report b. Review report c. Audit report d. Special audit report based on a basis of accounting other than generally accepted accounting principles. 9. The primary goal of the CPA in performing the attest function is to a. Detect fraud b. Examine individual transactions so that the auditor may certify as to their validity c. Determine whether the client's assertions are fairly stated d. Assure the consistent application of correct accounting procedures 10. The criteria for evaluating quantitative information vary. For example, in the audit of historical financial statements by CPA firms, the criteria are usually

a. Generally accepted auditing standards. b. Generally accepted accounting principles. c. Regulations of the Internal Revenue Service. d. Regulations of the Securities and Exchange Commission. 11. Because an external auditor is paid a fee by a client company, he or she a. Is absolutely independent and may conduct an audit b. May be sufficiently independent to conduct an audit c. Is never considered to be independent d. Must receive approval of the Securities and Exchange Commission before conducting an audit 12. Adequate planning of the audit work helps the auditor of accomplishing the following objectives, except: a. Gathering of all corroborating audit evidence. b. Ensuring that appropriate attention is devoted to important areas of the audit. c. Identifying the areas that need a service of an expert. d. The audit work is completed efficiently. 13. The extent of planning will vary according to any of the following, except: a. Size of the audit client. b. Auditor’s experience with the entity and knowledge of the business. c. The nature and complexity of the audit engagement d. The assessed level of control risk.

14. Which of the following is least likely considered by the auditor in developing the overall audit plan? a. Understanding of the accounting and internal control systems. b. Relevant risk and materiality. c. The involvement of other auditors in the audit of major component of financial statements d. The general level of competence of audit assistants. 15. The audit program should contain the following, except: a. Audit objective

b. Time budget for the various audit areas c. Set of planned audit procedures d. The combined assessed level of inherent and control risk 16. Which of the following will most likely help the auditor to identify and understand the events, transactions and practices of his audit client? a. Obtaining a sufficient knowledge of the business of his client. b. Understanding of accounting and internal control. c. Testing control policies and procedures. d. Obtaining a representation letter from the client management. 17. Understanding the business and using this information appropriately assists the auditor in, except: a. Deciding whether to do tests of controls. b. Evaluating audit evidence. c. Assessing risks and identifying potential problems. d. Planning and performing the audit effectively and efficiently. 18. Which of the following is the ultimate concern of the knowledge about the business? a. Consideration of how it affects the financial statements taken as a whole. b. Assists the auditor in enforcing quality control procedures. c. To assure that sufficient audit evidence is obtained. d. It assists in determining the type of audit report to be issued. 19. The development of a general strategy and a detailed approach for the expected nature, timing, and extent of audit refers to : a. Supervision b. Audit procedures c. Directing d. Planning 20. Which of the following would a successor auditor normally perform after acceptance of an audit client? a. Inquiry of predecessor auditor regarding the client. b. Review the SEC filings of the client.

c. Inquiry of bankers regarding the client. d. Review of predecessor auditor working papers.

21. Analytical procedures used in planning an audit should focus on a. Reducing the scope of tests of controls and substantive tests. b. Providing assurance that potential material misstatements will be identified. c. Enhancing the auditor’s understanding of the client’s business. d. Assessing the adequacy of the available evidential matter. 22. In evaluating an entity's accounting estimates, one of the auditor's objectives is to determine whether the estimates are a. Prepared in a satisfactory control environment. b. Consistent with industry guidelines. c. Based on verifiable objective assumptions. d. Reasonable in the circumstances. 23. Assertions with high inherent risk are least likely to involve: a. Complex calculations. b. Difficult accounting issues. c. Routine transactions. d. Significant judgment by management....