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Dashboard/My courses/ College of Business Administration and Accountancy (CBAA)/ Accountancy/ ACT141 A1, A2 and A3 TMSP / SUMMATIVE TEST/ Practice TestStarted on Monday, 18 January 2021, 3:55 PM State Finished Completed on Friday, 22 January 2021, 5:35 PM Time taken 4 days 1 hourQuestion 1Correct M...

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1/22/2021

Practice Test: Attempt review

Dashboard / My courses / College of Business Administration and Accountancy (CBAA) / Accountancy / ACT141 A1, A2 and A3 TMSP / SUMMATIVE TEST / Practice Test

 Started on Monday, 18 January 2021, 3:55 PM State Finished Completed on Friday, 22 January 2021, 5:35 PM Time taken 4 days 1 hour Question 1 Correct Mark 1.00 out of 1.00

Which of the following best describes “high level of assurance”? a.

It refers to the professional accountant having obtained evidence based on procedures agreed upon between the practitioner and the intended users to be satisfied that findings be reported to the intended users.

b. It refers to the professional accountant having obtained sufficient evidence to conclude that he has no knowledge of any required modifications to be made in the financial statements in order for them to conform of prescribed criteria c. It refers to the professional accountant having obtained sufficient external and internal appropriate evidence to be satisfied that the subject matter is plausible in the circumstances d.

It refers to the professional accountant having obtained sufficient appropriate evidence to conclude that the subject matter



conforms in all material respects with identified suitable criteria.

Your answer is correct. The correct answer is: It refers to the professional accountant having obtained sufficient appropriate evidence to conclude that the subject matter conforms in all material respects with identified suitable criteria.

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Question 2 Incorrect Mark 0.00 out of 1.00

An auditor, in accepting an audit engagement where he does not possess the expertise on the client’s industry, should a. First inform client’s management that an unqualified opinion cannot be issued



This is unfair for the client, as it is the responsibility of the audit to obtain the necessary knowledge about the client's industry

b. Engage financial experts familiar with the nature of the client c. Refer substantial portion of the audit to another CPA who will act as the principal auditor d. Obtain knowledge about the nature and industry of the client’s business

Your answer is incorrect. The correct answer is: Obtain knowledge about the nature and industry of the client’s business

Question 3 Incorrect Mark 0.00 out of 1.00

Which of the following audit phases would generally be conducted before all of the others listed below? a. Evaluation of audit evidence b. Consideration of internal control systems



Though this is part of risk assessment, but this comes after obtaining an understanding of the client's industry.

c. Auditing business processes and related accounts d. Gaining an understanding of the client's industry

Your answer is incorrect. The correct answer is: Gaining an understanding of the client's industry

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Question 4 Correct Mark 1.00 out of 1.00

Which of the ff. procedures would a CPA ordinarily perform during audit planning? a. Perform audit sampling b. Obtain understanding of the client’s business and industry



After obtaining understanding of the client's business and industry, the auditor may find the need to make adjustments to the audit plan before implementing the audit plan

c. Obtain client’s representation letter d. Review the client’s bank reconciliation

Your answer is correct. The correct answer is: Obtain understanding of the client’s business and industry

Question 5 Correct Mark 1.00 out of 1.00

Audit programs are modified to suit the circumstances of the particular engagement. A complete audit program is usually developed: a. After obtaining an understanding of the entity and its environment, including its internal control and assessed the risks of material  misstatement b. When the engagement letter is prepared c. Prior to beginning the actual audit work d. After obtaining an understanding of the control environment, control activities component of the entity’s internal control

Your answer is correct. The correct answer is: After obtaining an understanding of the entity and its environment, including its internal control and assessed the risks of material misstatement

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Question 6 Incorrect Mark 0.00 out of 1.00

Which of the following is not a reason an auditor obtains understanding of the elements of an entity’s internal control structure in planning an audit?

a. Consider factors that affect the risk of material misstatements b. Consider the operating effectiveness of the internal control structure c. Identify the types of potential misstatements that can occur



d. In considering the design of substantive tests

Design is part of planning under development of audit program

Your answer is incorrect. The correct answer is: Consider the operating effectiveness of the internal control structure

Question 7 Incorrect Mark 0.00 out of 1.00

Audit programs should be designed so that a. Most of the required procedures can be performed as interim work. b. The audit evidence gathered supports the auditor’s conclusions c. Inherent risk is assessed at a sufficiently low level. d. The auditor can make constructive suggestions to management.



The audit program is not a tool to document findings and recommendations for client's management

Your answer is incorrect. The correct answer is: The audit evidence gathered supports the auditor’s conclusions

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Question 8 Correct Mark 1.00 out of 1.00

The purpose of analytical procedures during the audit planning stage is to:

a. Flag individual transactions for further review b.

Identify unusual circumstances that the auditor may need to investigate further



c. Aid in planning the observation of physical inventory

d. Determine whether sales transactions are approved.

Your answer is correct. The correct answer is: Identify unusual circumstances that the auditor may need to investigate further

Question 9 Correct Mark 1.00 out of 1.00

In the planning stage of an audit engagement, the auditor is required to perform audit procedures to obtain an understanding of the entity and its environment, including its internal control. These procedures are called: a. Compliance tests b. Risk assessment activities c. Risk assessment procedures



The purpose of these procedures in the planning phase is to enable the auditor to assess the risks of material misstatement and plan the appropriate audit procedures

d. Substantive tests

Your answer is correct. The correct answer is: Risk assessment procedures

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Question 10 Correct Mark 1.00 out of 1.00

Which of the following is not a reason for using analytical review procedures in the planning phase? a.

To highlight changes from the prior year to the current year so that trends can be identifies which will influence the development of the audit program

b. To assess the entity’s ability to continue as a going concern



See PSA 315 A7-A8.

c. To identify areas with no unusual fluctuations so that fewer detailed tests may be performed on those accounts d. To identify areas with higher risks and determine the magnitude of errors in the financial statements

Your answer is correct. The correct answer is: To assess the entity’s ability to continue as a going concern

Question 11 Incorrect Mark 0.00 out of 1.00

The risk that the financial statements are likely to be misstated materially, without regard to the effectiveness of internal control a. Audit risk



b. Inherent risk c. Control risk d. Detection risk

Your answer is incorrect. The correct answer is: Inherent risk

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Question 12 Incorrect Mark 0.00 out of 1.00

An auditor assesses control risk because it a. Indicates to the auditor where inherent risk may be the greatest b. Provides assurance that the auditor’s materiality levels are appropriate

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c. Is relevant to the auditor’s understanding of the control environment d. Affects the level of detection risk that the auditor may accept

Your answer is incorrect. The correct answer is: Affects the level of detection risk that the auditor may accept

Question 13 Incorrect Mark 0.00 out of 1.00

The risk of material misstatement refers to: a. Control risk and acceptable audit risk

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b. Control risk and detection risk c. Inherent risk d. Combination of inherent risk and detection risk

Your answer is incorrect. The correct answer is: Combination of inherent risk and detection risk

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Question 14 Incorrect Mark 0.00 out of 1.00

The existence of audit risk is recognized by the statement in the auditor's report that the a. Financial statements are presented fairly, in all material respects, in accordance with Philippine Financial reporting standards b. Auditor is responsible for expressing an opinion on the financial statements, which are management's responsibility



c. Audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements d. Auditor obtains reasonable assurance about whether the financial statements are free of material misstatement

Your answer is incorrect. The correct answer is: Auditor obtains reasonable assurance about whether the financial statements are free of material misstatement

Question 15 Correct Mark 1.00 out of 1.00

Which of the ff. is not a component of assurance engagement risk? a. Detection risk b. Business risk



This is not a component of assurance engagement risk or audit risk, but it is a type of risk a company is exposed to.

c. Control risk d. Inherent risk

Your answer is correct. The correct answer is: Business risk

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Question 16 Incorrect Mark 0.00 out of 1.00

Inherent risk and control risk are:

a. Inversely related to audit risk b. Directly related to detection risk



c. Inversely related to each other d. Inversely related to detection risk

Your answer is incorrect. The correct answer is: Inversely related to detection risk

Question 17 Incorrect Mark 0.00 out of 1.00

The risk that the auditor may express an inappropriate opinion on the financial statement is a. Audit risk b. Inherent risk c. Detection risk



d. Control risk

Your answer is incorrect. The correct answer is: Audit risk

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Question 18 Incorrect Mark 0.00 out of 1.00

Which of the following topics is not normally included in an engagement letter? a. A description for the responsibility for the detection of fraud b. The auditors’ estimate of the fee for the engagement



c. The auditor’s preliminary assessment of internal control d. Limitations on the scope of the audit

Your answer is incorrect. The correct answer is: The auditor’s preliminary assessment of internal control

Question 19 Correct Mark 1.00 out of 1.00

The auditor is required to determine different levels of materiality: a) materiality for the financial statements as a whole, b) specific materiality and:

a. Materiality for particular classes of transactions, account balances or disclosure b. Planning materiality c. Overall materiality d. Performance materiality



Your answer is correct. The correct answer is: Performance materiality

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Question 20 Correct Mark 1.00 out of 1.00

Which of the following would an auditor most likely use in determining a preliminary judgement about materiality? a. The results of the internal control questionnaire b. The content of the management representation letter c. The entity’s annualized interim financial statements



One of the basis is the annual financial statements for the year in audit. If it is not yet year end, the interim FS can be annualized and serve as basis for preliminary judgement about materiality

d. The anticipated sample size of the planned substantive tests

Your answer is correct. The correct answer is: The entity’s annualized interim financial statements

Question 21 Correct Mark 1.00 out of 1.00

The concept of materiality as it applies to a financial statement audit:

a. Generally involves less professional judgment for public companies b. Relates primarily to the quantity of audit procedures performed c. Relates primarily to the audit fees involved d. Is determined, in part, based on how financial statement users may be influenced in making decisions



Your answer is correct. The correct answer is: Is determined, in part, based on how financial statement users may be influenced in making decisions

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Question 22 Incorrect Mark 0.00 out of 1.00

Which of the following statements concerning materiality is incorrect? a. When establishing the overall audit strategy, the auditor shall determine materiality for the financial statements as a whole b. Determining materiality levels does not involve the use of professional judgement c. The auditor shall also determine materiality levels to those particular classes of transactions, account balances or disclosures. d. The materiality level for the financial statements as a whole determined in the planning stage of the audit may be affected by



changes in the circumstances of the engagement

Your answer is incorrect. The correct answer is: Determining materiality levels does not involve the use of professional judgement

Question 23 Incorrect Mark 0.00 out of 1.00

Preliminary judgement about materiality and the amount of audit evidence accumulated are

a. Not related b. Directly related



c. Inversely related d. Indirectly related

Your answer is incorrect. The correct answer is: Inversely related

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Question 24 Correct Mark 1.00 out of 1.00

Which of the required materiality levels is calculated by multiplying a certain percentage by the appropriate benchmark which is either a component of the entity's financial statements? a. Planning materiality b. Overall materiality



c. Performance materiality d. Specific materiality

Your answer is correct. The correct answer is: Overall materiality

Question 25 Correct Mark 1.00 out of 1.00

The primary concern when a successor auditor is required to communicate with the predecessor auditor is: a. To save the successor auditor time and money in gathering data b. To enable the auditor to perform a more efficient audit c. To learn about a client by examining predecessor’s working papers d. Information will help the successor auditor determine whether there are issues about management integrity



Your answer is correct. The correct answer is: Information will help the successor auditor determine whether there are issues about management integrity

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Question 26 Incorrect Mark 0.00 out of 1.00

Which of the ff. is not one of the pre-engagement activities? a. Investigate new clients and existing clients



b. Assign partner, manager and staff to the engagement c. Obtain an engagement letter d. Obtain knowledge of the client’s business

Your answer is incorrect. The correct answer is: Obtain knowledge of the client’s business

Question 27 Incorrect Mark 0.00 out of 1.00

Which of the ff. would the firm least consider in making a decision to accept or retain a client? a. Its ability to comply with ethical requirements b. Its competence in providing the service



Required under PSA 220

c. The integrity of client’s management d. Its decision on whether to provide assurance services or non-assurance services

Your answer is incorrect. The correct answer is: Its decision on whether to provide assurance services or non-assurance services

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Question 28 Incorrect Mark 0.00 out of 1.00

Before accepting an engagement to audit a new client, an auditor is required to: a. Make inquiries of the predecessor auditor after obtaining consent of the prospective client b. Prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan 

This is in audit planning

c. Discuss the management representation letter with the client’s audit committee d. Obtain a copy of the client’s financial statements

Your answer is incorrect. The correct answer is: Make inquiries of the predecessor auditor after obtaining consent of the prospective client

Question 29 Incorrect Mark 0.00 out of 1.00

Which of the ff. is not normally one of the preli...