Teamprtc MOCK Board OCT 2020 AUDTeamprtc MOCK Board OCT 2020 AUDTeamprtc MOCK Board OCT 2020 AUDTeamprtc MOCK Board OCT 2020 AUD PDF

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AUDITINGMULTIPLE CHOICEPART 1 – THEORIES The subject matter of auditing consists of: A. Assertions. B. Established criteria. C. Evidence. D. Written reports. ANS: A In forming an opinion on the financial statements, A. the auditor should evaluate the conclusions drawn from the audit evidence obtaine...

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TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING MULTIPLE CHOICE PART 1 – THEORIES 1.

The subject matter of auditing consists of: A. Assertions. B. Established criteria. C. Evidence. D. Written reports. ANS: A 2.

In forming an opinion on the financial statements, A. the auditor should evaluate the conclusions drawn from the audit evidence obtained during the course of the audit B. the auditor evaluates whether there is a reasonable assurance about whether the financial statements are free from any misstatements C. the auditor evaluates whether sufficiently appropriate audit evidence has been obtained to eliminate the risk of material misstatements D. the auditor verifies that all errors that misstate the financial statements have been corrected by the client ANS: A 3.

A CPA firm is considered independent when it performs which of the following services for a publicly traded audit client? A. Serving as a member of the client's board of directors. B. Determining which accounting policies will be adopted by the client. C. Accounting information system design and implementation. D. Tax return preparation as approved by the board of directors. ANS: D 4.

Which of the following is not a major emphasis in the design of effective internal control? A. Assets are properly protected. B. Duties are segregated. C. Transactions are authorized. D. Processes are efficient. ANS: D 5.

Management's assertions in the financial statements are of relevant to the audit process because: A. they embody the procedures that will be performed by the audit team B. they include representations of financial statements in accordance with the applicable reporting criteria C. they provide evidence that auditors have prepared financial statements in accordance with GAAP D. they relate to regulator's expectations about audit results ANS: B 6.

The assertion of existence can be audited directionally by considering balances and transactions from: A. recorded amounts to evidence regarding the source B. evidence regarding the source to recorded amounts C. general ledgers to trial balances D. all of these choices ANS: A 7.

The auditor's objectives for the sales and cash collections activities when the client is primarily an e-commerce business as compared to a "bricks and mortar" business are: A. unchanged. B. expanded. C. mitigated.

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TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING D. decreased. ANS: A 8.

What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected? A. Determination of correct delivery address B. Credit approval C. Matching of shipping document with sales invoice D. Receipt of sales order from the customer ANS: B 9.

In the accounts receivable subsidiary ledger the length of time the account has been due can be useful to the client and the auditor in preparing the: A. trial balance. B. working trial balance. C. accounts receivable trial balance. D. aged accounts receivable trial balance. ANS: D 10.

One of the causes of nonsampling risk is: A. improper supervision and instruction of the client's employees. B. ineffective audit procedures. C. inadequate sample size. D. exceptions being found in the sample. ANS: B 11.

Which of the following statements is most correct with concerning the quantification of sampling risk? A. Sampling risk cannot be quantified. B. Sampling risk can be quantified only when nonprobabilistic selection techniques are used to select the sample. C. Sampling risk can be quantified only when probabilistic selection techniques are used to select the sample. D. None of the above. ANS: C 12.

Which of the following types of receivables would not deserve the special attention of the auditor? A. Accounts receivables with credit balances B. Accounts that have been outstanding for a long time C. Receivables from related parties D. Each of the other choices would receive special attention. ANS: D 13.

An important statistic to consider when using a statistical sampling audit plan is the population variability. The population variability is measured by the: A. sample mean. B. standard deviation. C. standard error of the sample mean. D. estimated population total minus the actual population. ANS: B 14.

Absent disputed amounts and minor timing differences, the vendor's statements should reconcile to the: A. acquisition journal. B. accounts payable master file. C. cash disbursements amount for purchases. D. vouchers payable amount for vendors. ANS: B

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TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING 15.

Which of the following would generally not be a component of the audit of the acquisition and payment cycle? A. Adequacy of controls over acquisitions of long-lived assets B. Tracing disposals of long-lived assets to the fixed asset master file C. Determining the adequacy of the funds available for capital expenditures D. Reperformance of recorded depreciation expense ANS: C 16.

Which of the following statements about the audit of fixed assets is the least correct? A. The primary accounting record for manufacturing equipment and other property, plant and equipment is generally a fixed asset master file. B. Manufacturing equipment and current assets are normally audited in the same fashion regardless of the activity within a particular account. C. The emphasis on auditing fixed assets is on verification of current-period acquisitions. D. Failure to record the acquisition of a fixed asset affects the income statement until the assets are fully depreciated. ANS: B 17.

Auditors test the quantity of materials charged to work-in-process by tracing these quantities to: A. cost ledgers. B. perpetual inventory records. C. receiving reports. D. material requisitions. ANS: D 18.

The reliability of perpetual inventory master files affects the timing and ________ of the auditor's physical examination of inventory. A. cutoff B. accuracy C. nature D. extent ANS: D 19.

Which of the following is not one of the business functions for the payroll and personnel cycle? A. Payment of payroll B. Timekeeping and payroll preparation C. Reconciliation of payroll account D. Human resources and employment ANS: C 20.

Which of the following statements regarding the capital acquisition and repayment cycle is most correct? A. Relatively few transactions affect the cycle, and most are smaller amounts. B. Large numbers of transactions affect the cycle, and most are smaller amounts. C. Relatively few transactions affect the cycle, and most are highly material. D. Large number of transaction affect the cycle, and most are highly material. ANS: C 21.

The product of inherent risk and control risk is assessed as low. How would an auditor with this assessment most likely test depreciation expense? A. As a ratio of total assets B. As a percent of sales C. By recomputing all depreciation figures D. By tagging and tracing transactions through the system ANS: A 22.

Balboa, a senior auditor, is the team leader of the audit team assigned in the audit of HCB Company. His first assignment as audit assistant was the audit of inventory of HCB Company.

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TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING Since then, he has been a member, and for the last 5 years, the in-charge of the team for the audit of HCB. What kind of threat to independence, if any, has been created by the foregoing fact? A. Advocacy threat. B. Self-interest threat. C. Self-review threat. D. Familiarity threat. ANS: D 23.

Which of the following is prohibited by the Code of Professional Ethics for CPAs? A. Use of a firm name which includes the name of a retired partner. B. Announcement in a newspaper of the opening of a public accounting firm. C. Engaging in civic activities during business hours. D. Accepting an engagement or employment which one cannot reasonably expect to complete or discharge with professional competence. ANS: D 24.

In the audit risk model, if an auditor wanted to keep audit risk at a low level, but there was a great inherent risk of material misstatement and the internal control was ineffective, then procedures would need to be designed so that A. detection risk was at a low level. B. detection risk was at a high level. C. control risk was at a low level. D. inherent risk was at a high level. ANS: A 25.

Physical observation by an auditor would include A. examination of a sales invoice. B. recalculation of depreciation. C. examination of securities certificates. D. scanning the expense accounts for unusual transactions. ANS: C 26.

Which of the following would not be considered a motivation to commit fraud? A. Personal financial problems. B. Stock compensation program. C. Ineffective internal controls. D. Tight debt covenants. ANS: C 27.

In attribute estimation, a 10 percent change in which of the following factors normally will have the least effect on the size of the statistical sample? A. Population size. B. Reliability. C. Precision interval. D. Standard deviation ANS: A 28.

The acceptable risk of assessing control risk too low in relation to the sample size is A. direct. B. inverse. C. parallel. D. not defined. ANS: B 29.

The auditor’s judgment regarding whether the financial statements give a “true and fair view” or “are presented fairly”, in all material respects, is made in the context of: A. generally accepted auditing standards B. standards of reporting of generally accepted auditing standards C. applicable financial reporting framework

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TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING D. applicable Philippine Standards on Auditing (PSAs) ANS: C 30.

An explanatory paragraph that describes an uncertainty is as follows: As discussed in Note X to the financial statements, the company is a defendant in a lawsuit alleging infringement of certain patent rights and claiming damages. Discovery proceedings are in progress. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon adjudication has been made in the accompanying financial statements. What type of opinion should the auditor express in this circumstance? A. Unqualified B. Disclaimer C. Qualified D. adverse ANS: A 31.

In extreme cases such as situations involving multiple uncertainties that are significant to the financial statements, the auditor A. may consider to express a disclaimer of opinion B. may qualify his opinion instead of issuing an unqualified opinion with emphasis of matter paragraph C. may issue an adverse opinion because of their significance D. may issue a “subject to” opinion because the situations related to uncertainties ANS: A 32.

A client company has issues that cause substantial doubt regarding the entity's ability to continue as a going concern. If this is the only major audit issue, which type of opinion will the auditor usually refrain from issuing? A. Adverse B. Unqualified with explanatory language C. Clean opinion D. Disclaimer of opinion ANS: A 33.

In which of the following situations would qualified opinion be inappropriate? A. Financial statements are materially misstated. B. A doubt that is more than substantial about the ability of the company to continue as a going concern. C. A significant scope limitation. D. The management insisted of not attaching the statement of cash flows. ANS: B 34.

According to Revised Rules on Advertising adopted by the BOA, the following form of advertising or publicity is prohibited: A. Publicity of the appointment or other activity in a matter of local or national importance or the award of any distinction to a professional accountant. B. Listing of professional accountant in directories. C. Publishing services in billboard (e.g., tarpaulin, streamers, etc.) advertisements. D. Stating the professional accountant’s name and his/her professional qualifications and name of the organization connected with the professional accountant in the books or articles on professional subjects that he/she authored. ANS: C 35. Immediate family includes: A. parent. B. sibling. C. non-dependent child. D. spouse. ANS: D

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TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING PART 2 - PROBLEMS PROBLEM 1 Presented below are unaudited balances of selected accounts of Proactive Corporation as of December 31, 2021. During the course of your audit of Proactive’s books you obtained additional information affecting these accounts.

Cash Accounts receivable Inventory Accounts payable Sales, net

Debit P 2,000,000 6,000,000 10,000,000

Credit

P 4,000,000 50,000,000

Additional information: a) On December 28, 2021, the entity wrote and recorded checks to creditors totaling P300,000 that were mailed on January 5, 2022. b) Checks in the amount of P250,000 were written to vendors and recorded on December 29, 2021. The checks were dated January 5, 2022. c)

At December 31, 2021, the entity has a P60,000 debit balance in its accounts payable to a supplier resulting from advance payment. This was offset against the accounts with credit balances.

d) On December 26, 2021, a supplier authorized the entity to return goods shipped and billed at P80,000 on December 3, 2021. The goods were returned on December 28, 2021. The supplier’s credit memo was received and recorded on January 5, 2022. e) Goods shipped to the entity, f.o.b. seller on December 20, 2021, from a vendor were lost in transit. The invoice price was P20,000. This transaction was not recorded since the common carrier has acknowledged responsibility for the loss of the merchandise. f)

The bank returned on December 29, 2021 a customer check for P30,000 marked “DAIF” but no entry was made.

g) On December 31, 2021, the company received and recorded customer’s postdated check amounting to P90,000. h) You observed the taking of the physical inventory of the entity on December 30, 2021. Only merchandise shipped by the entity to customers up to and including December 30, 2021 have been eliminated from inventory. The inventory of P10,000,000 is based on the physical inventory count. All sales are on account and made on an FOB shipping point basis. The following sales invoices were entered in the sales books for the month of December 2021 and January 2022, respectively.

1) 2) 3) 4) 5)

Sales invoice amount P150,000 100,000 50,000 200,000 500,000

6) 7) 8)

P300,000 200,000 600,000

DECEMBER 2021 Sales invoice date Cost Dec. 21 P100,000 Dec. 31 40,000 Dec. 29 30,000 Dec. 31 120,000 Dec. 30 280,000 JANUARY 2022 Dec. 31 Jan. 02 Jan. 03

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P200,000 115,000 475,000

Date shipped Dec. 31, 2021 Nov. 03, 2021 Dec. 30, 2021 Jan. 03, 2022 Dec. 29, 2021 (shipped to consignee) Dec. 30, 2021 Jan. 02, 2022 Dec. 31, 2021

TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING QUESTIONS: Based on the above and the result of your audit, answer the following: 1.

The adjusted cash as of December 31, 2021 is A. P2,430,000 B. P2,520,000 C. P2,460,000 D. P2,550,000 ANS: A 2.

The adjusted accounts receivable as of December 31, 2021 is A. P6,220,000 B. P6,290,000 C. P6,230,000 D. P6,320,000 ANS: D 3.

The adjusted inventory as of December 31, 2021 is A. P9,585,000 B. P9,825,000 C. P9,705,000 D. P10,180,000 ANS: C 4.

The adjusted accounts payable as of December 31, 2021 is A. P4,490,000 B. P4,550,000 C. P4,530,000 D. P4,630,000 ANS: B 5.

The adjusted net sales for the year ended December 31, 2021 is A. P50,080,000 B. P50,200,000 C. P50,100,000 D. P50,320,000 ANS: B PROBLEM 2 The following trial balance relates to EIM Corporation at 31 March 2021:

Closing inventories - 31 March 2021 (note (i)) Land and building – at valuation (note (iii)) Plant and equipment - cost (note (iii)) Accumulated depreciation 1 April 2020 - plant and equipment Investment property -valuation 1 April 2020 (note (iii)) Trade receivables Cash in bank Trade payables Ordinary shares of P0.25 each 10% Redeemable preference shares of P1 each Revaluation reserve (note (iii)) Retained earnings – 1 April 2020 Profit or loss summary

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P'000 Debit 18,900 113,400 64,800

P'000 Credit

30,240 28,800 38,700

. 264,600

1,620 21,240 36,000 18,000 37,800 31,500 88,200 264,600

TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING

The following notes are relevant: (i)

At 31 March 2021, an inventory list based on a physical count had a total cost of P18.9 million. Some damaged goods that had cost P 1.44 million were included in these. The realizable value of these goods is expected to be P 1.71 million, provided a remedial work costing P0.81 million is done before they could be sold.

(ii)

Included in the computation of profit or loss are finance costs consisting of interest on overdraft, the full year's preference dividend and an ordinary dividend of P0.04 per share that was paid in September 2020.

(iii)

Non-current assets: Land and building A professional valuer submitted a report on 1 April 2020, revaluing the land at P27 million and building at P86.4 million. The directors decided to incorporate these values in the accounts. On that date the land and building had a carrying value of P75.6 million and the building had a remaining life of 15 years. Charge depreciation on a straight-line basis. in respect of excess depreciation.

EIM does not make a transfer to retained earnings

Plant All plant is depreciated at 12.5% on the reducing balance basis. Investment property On 31 March 2021 the investment property was revalued at P24.3 million. model.

EIM uses the fair value

QUESTIONS: Based on the above and the result of your audit, answer the following: (Ignore income taxes) 6.

The adjusted profit or loss for the year ended 31 March 2021 is A. P78,840,000 B. P73,080,000 C. P79,380,000 D. P80,640,000 ANS: A 7.

The comprehensive income for the year ended 31 March 2021 is A. P117,180,000 B. P118,440,000 C. P 79,380,000 D. P116,640,000 ANS: D 8.

The total assets as of 31 March 2021 is A. P219,240,000 B. P217,620,000 C. P219,780,000 D. P218,160,000 ANS: A

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TEAM PRTC ONLINE NATIONAL MOCK BOARD OCTOBER 2020 AUDITING 9.

The total liabilities as of 31 March 2021 is A. P22,860,000 B. P39,240,000 C. P40,860,000 D. P21,240,000 ANS: C 10.

The retained earnings balance as of 31 March 2021 is A. P107,100,000 B. P104,580,000 C. P 98,820,000 D. P105,120,000 ANS: B PROBLEM 3 You were able to obtain the following information during your audit of PFTF Company: Reconciling items:

Undeposited collections Outstanding checks Customer’s notes collected by bank Bank service charges Erroneous bank debits Erroneous bank credits NSF checks not redeposited Customer's check deposited December 10, returned by bank on December 16 marked NSF, and redeposited immediately; no entry made on books for return or redeposit

Nov. 30 P200,000 80,000 100,000 2,000 10,000 40,000 5,000

You noted the following from the December bank statement: • • •

Balance as of November 30 – P230,000 Receipts – P420,000 Disbursements – P500,000

QUESTIONS: Based on the above and the result of your audit, answer the following: 11.

How much is the unadjusted cash balance per books as of November 30? A. P413,000 B. P287,000 C. P320,000 D. P227,000 ANS: D 12.

How much is the unadjusted book receipts for December? A. P427,000 B. P29...