Question 1Which statement is incorrect regarding audit
evidence?Audit evidence is all the information used by the auditor
in arriving at the conclusions on which the audit opinion is
based.Audit evidence includes the information contained in the
accounting records underlying the financial statements and other
information.Audit evidence is cumulative in nature.Auditors are
expected to address all information that may exist.Auditing Theory
- Evidence (Average)Question 2Which of the following procedures
would provide the most reliable audit evidence?Inquiries of the
clients internal audit staff held in private.Inspection of
prenumbered client purchase orders filed in the vouchers payable
department.Analytical procedures performed by the auditor on the
entitys trial balance.Inspection of bank statements obtained
directly form the clients financial institution.Auditing Theory -
Evidence (Average)Question 3Negative confirmation requests is
unlikely to be used to reduce audit risk to an acceptable level
when:The assessed level of inherent and control risk is low.A large
number of small balances is involved.A substantial number of errors
is expected.The auditor has no reason to believe that respondents
will disregard these requests.Auditing Theory - Evidence
(Average)Question 4When a CPA observes that the recorded interest
expense seems to be excessive in relation to the balance in the
bonds payable account, the CPA might suspect thatDiscount on bonds
payable is understatedBonds payable are understatedBonds payable
are overstatedPremium on bonds payable is overstatedAuditing Theory
- Evidence (Average)Question 5For audit purposes, a corporation's
articles of incorporation are normally:Copied and placed on the
owners' equity lead scheduleCopied and placed in the permanent
fileConfirmed with the transfer agentIgnored since they are not
normally considered to be related to the internal control
structureAuditing Theory - Evidence (Average)Question 6Which of the
following procedures would an auditor least likely perform in
planning a financial statement audit?Coordinating the assistance of
entity personnel in data preparationDiscussing matters that may
affect the audit with firm personnel responsible for non-audit
services to the entitySelecting a sample of vendors invoices for
comparison to receiving reportsReading the current years interim
financial statementsAuditing Theory - Audit Planning
(Average)Question 7When an auditor expresses an opinion other than
unqualified opinion, a clear description of all substantive reasons
for the modification of the opinion should be included in the
report. This explanation should be presented:As a separate
paragraph that precedes the opinion paragraph of the Audit
Reporting.As a separate paragraph, preferably after the opinion
paragraph, of the Audit Reporting.In the opinion paragraphAs a
separate paragraph in the notes to financial statements.Auditing
Theory - Audit Reporting (Uncategorized)Question 8An auditor would
issue an adverse opinion ifThe audit was begun by other independent
auditors who withdrew from the engagement.The statements taken as a
whole do not fairly present the financial condition and results of
operations of the company.A qualified opinion cannot be given
because the auditor lacks independence.The restriction on the scope
of the audit was significant.Auditing Theory - Audit Reporting
(Uncategorized)Question 9Which of the following statements is best
described in the scope paragraph of the independent auditors
report?The audit was planned and performed to obtain reliable
assurance about whether the financial statements are free of
material misstatements.The audit was conducted in accordance with
financial reporting framework.The auditor makes the significant
estimates in the preparation of the financial statements.A
statement by the auditor that the audit provides a reasonable basis
for the opinion.Auditing Theory - Audit Reporting
(Uncategorized)Question 10When the financial statements of the
prior period were not audited, the incoming auditor should:Insist
that an audit of prior years financial statements must be made.Not
allow the inclusion of the corresponding figures in the financial
statements of the current period.Disclaim his opinion and treat the
unaudited corresponding figures as basis of scope limitation.Obtain
sufficient appropriate audit evidence that the corresponding
figures meet the requirements of the relevant financial reporting
framework.Auditing Theory - Audit Reporting (Uncategorized)Question
11When management prepares financial statements on the basis of a
going concern and the auditor believes the company may not continue
as a going concern, the auditor should issue a(n)qualified
opinionunqualified opinion with an explanatory paragraphdisclaimer
of opinionadverse opinionAuditing Theory - Audit Reporting
(Difficult)Question 12When the financial statements of the prior
period were not audited, the incoming auditor should:Insist that an
audit of prior years financial statements must be made.Not allow
the inclusion of the corresponding figures in the financial
statements of the current period.Disclaim his opinion and treat the
unaudited corresponding figures as basis of scope limitation.Obtain
sufficient appropriate audit evidence that the corresponding
figures meet the requirements of the relevant financial reporting
framework.Auditing Theory - Audit Reporting (Difficult)Question
13The entire set of data about which the auditor wishes to draw
conclusions is calledPopulationSampling frameSampleSampling
unitAuditing Theory - Audit Sampling (Average)Question 14Which of
the following comments best illustrates the concept of sampling
risk?A randomly chosen sample may not be representative of the
population as a whole on the characteristic of interestAn auditor
may select audit procedures that are not appropriate to achieve the
specific objectiveAn auditor may fail to recognize errors in the
documents examined for the chosen sampleThe documents related to
the chosen sample may not be available for inspectionAuditing
Theory - Audit Sampling (Average)Question 15Receipt of ordered
materials by the receiving department will generate the completion
of a form called the:bill of ladingreceiving reportmaterials
requisitioninventory acquisition summaryAuditing Theory - Audit of
Inventory (Average)Question 16The audit tests to verify that the
client is using an inventory method which is generally accepted and
to verify that physical counts were correctly summarized are
performed during the audit of the:acquisition and payments
cyclepayroll and personnel cycleinventory and warehousing
cyclesales and collection cycleAuditing Theory - Audit of Inventory
(Average)Question 17After accounting for a sequence of inventory
tags, an auditor traces a sample of tags to the physical inventory
listing to obtain evidence that all items:included in the listing
have been countedrepresented by inventory tags actually
existrepresented by inventory tags are included in the
listingincluded in the listing are represented by inventory
tagsAuditing Theory - Audit of Inventory (Average)Question
18Controls which provide a means of ensuring that the physical
counts are properly summarized, priced at the same amount as the
unit records, correctly extended and totaled, and included in the
general ledger at the proper amount are known as:standard cost
controlspricing internal controlscompilation internal controlscount
quantity internal controlsAuditing Theory - Audit of Inventory
(Average)Question 19Compared to a public company, the most
important difference in a nonpublic company in assessing control
risk is the ability to assess control risk at _______ for any or
all control-related objectivesLowModerately lowMediumHighAuditing
Theory - Internal Control (Difficult)Question 20To obtain an
understanding of an entitys control environment, an auditor should
concentrate on the substance of managements policies and procedures
rather than their form because:Management may establish appropriate
policies and procedures but not act on themThe board of directors
may not be aware of managements attitude toward the control
environmentThe auditor may believe that the policies and procedures
are inappropriate for that particular entityThe policies and
procedures may be so weak that no reliance is contemplated by the
auditorAuditing Theory - Internal Control (Difficult)Question
21This type of inquiry often elicits yes or no responses to the
auditors
questions.AssessmentDeclarativeInterrogativeInformationalAuditing
Theory - Evidence (Average)Question 22A CPA may wish to emphasize
specific matters regarding the financial statements even though an
unqualified opinion will be issued. Normally, such explanatory
information is:Included in the scope paragraphIncluded in the
opinion paragraphIncluded in a separate paragraph in the
reportIncluded in the introductory paragraphAuditing Theory - Audit
Reporting (Easy)Question 23When the auditor cannot perform
procedures and the amounts are so material that a disclaimer of
opinion rather than a qualified opinion is required, the:Opinion
paragraph will state does not present fairlyOpinion paragraph will
state presents fairlyScope paragraph will be unchanged from the
standard unqualified opinionScope paragraph will be deletedAuditing
Theory - Audit Reporting (Difficult)Question 24Which of the
following sampling plans would be designed to estimate a numerical
measurement of a population, such as a peso value?Numerical
samplingDiscovery samplingSampling for attributesSampling for
variablesAuditing Theory - Audit Sampling (Average)Question 25Which
of the following circumstances would ordinarily not impair the
auditors independence?Litigation by a client against an audit firm
related to tax services.Litigation by a client against an audit
firm claiming a deficiency in the previous audit.Litigation by an
audit firm against a client claiming management fraud or
deceit.Clients intent to start a lawsuit at some future date, after
the current audit is completed, claiming a deficiency in the
previous audit.Auditing Theory - CPA Profession (Average)Question
26Many companies use outside payroll services to process payroll.
Auditors _____ rely on the internal controls of these outside
payroll services.MustCannotRarelyCan oftenAuditing Theory - Audit
of Payroll (Average)Question 27In rare cases, the auditor may
believe it is necessary that a complete physical inventory of fixed
assets be taken to make sure they actually exist. If an inventory
is taken, the auditor normally:Takes the inventoryRequires client
to take the inventory and provide documentation to the
auditorObserves the countRequires that it be done by an outside,
independent third partyAuditing Theory - Audit of Property, Plant
and Equipment (Average)Question 28Expense accounts analysis is
closely related to tests of controls and substantive tests of
transactions. The major difference is:The difference in the types
of underlying documentation which is examinedThe degree of
concentration on an individual accountThe use or nonuse of cutoff
testsThat one emphasizes transactions and the other emphasizes
amountsAuditing Theory - Audit of Property, Plant and Equipment
(Average)Question 29Which of the following audit tests is usually
the least costly to perform?Analytical proceduresTests of
controlsTests of balancesSubstantive tests of transactionsAuditing
Theory - Evidence (Average)Question 30The reliance placed on
substantive tests in relation to the reliance placed on internal
control varies in a relationship that is
ordinarily:ParallelInverseDirectEqualAuditing Theory - Evidence
(Average)Question 31A positive confirmation is more reliable
evidence than a negative confirmation because:Fewer confirmations
can be sent outThe auditor has a document which can be used in
courtThe debtors lack of response indicates agreement with the
stated balanceFollow-up procedures are performed if a response is
not received from the debtorAuditing Theory - Audit of Accounts
Receivable (Average)Question 32An auditor should perform
alternative procedures to substantiate the existence of accounts
receivable when:No reply to a positive confirmation request is
receivedNo reply to a negative confirmation request is
receivedCollectibility of the receivables is in doubtPledging of
the receivables is probableAuditing Theory - Audit of Accounts
Receivable (Average)Question 33For most audits, a proper cash
receipts cutoff is less important than the sales cutoff because the
improper cutoff of cash:Is detected and correct when cash is
separately auditedIs unlikely to have a material impact on the
balance sheet or the income statementAffects on the cash and
accounts receivable balances on the balance sheet and does not
affect net incomeRarely occurs given the control consciousness of
most entitiesAuditing Theory - Audit of Accounts Receivable
(Average)Question 34Comparing expenses to prior years is an
effective analytical procedure for accounts payable because
expenses from year to year are:ErraticVariableDynamicRelatively
stableAuditing Theory - Audit of Current Liabilities
(Average)Question 35At what point do most companies recognize
liabilities in the acquisition and payment cycle?The issuance of a
purchase orderReceipt of acknowledgement of order by vendorReceipt
of goods or servicesThe receipt of a vendor statementAuditing
Theory - Audit of Current Liabilities (Average)Question 36Proper
authorization for acquisition is essential because it:Ensures that
goods/services are used efficiently by company employeesEnsures
that goods/services were purchased from approved vendorsEnsures
that goods/services are for authorized company purposesEnsures that
goods/services were purchased at the lowest possible priceAuditing
Theory - Audit of Current Liabilities (Average)Question 37To gather
evidence regarding the balance per bank in a bank reconciliation,
an auditor would examine all of the following except the:General
ledgerBank confirmationCutoff bank statementYear-end bank
statementAuditing Theory - Audit of Cash (Average)Question 38Which
of the following items would not normally appear on bank
reconciliation?Balance per bankList of deposits in
transitOutstanding depositsOutstanding checksAuditing Theory -
Audit of Cash (Average)Question 39Upon receipt of customers checks
in the mailroom, a responsible employee should prepare a remittance
listing that is forwarded to the cashier. A copy of the listing
should be sent to the:Internal auditor to investigate the listing
for unusual transactionsTreasurer to compare the listing with the
monthly bank statementAccount receivable bookkeeper to update the
subsidiary accounts receivable recordsEntitys banks to compare the
listing with the cashiers deposit slip.Auditing Theory - Evidence
(Average)Question 40An auditor concluded that no excessive costs
for idle plant were charged to inventory. This conclusion most
likely related to the auditors objective to obtain evidence about
the financial statement assertions regarding inventory:Rights and
obligationValuationExistenceCompletenessAuditing Theory - Evidence
(Average)Question 41A client erroneously recorded a large purchase
twice. Which of the following internal accounting control measures
would be most likely to detect this error in a timely and efficient
manner?Footing the purchases journalReconciling vendors monthly
statements with subsidiary payable ledger accountsTracing totals
from the purchases journal to the ledger accountsSending written
quarterly confirmations to all vendorsAuditing Theory - Evidence
(Average)Question 42The following are the benefits claimed for the
practice of determining materiality in the initial planning stage
of starting an audit, exceptAvoiding the problem of doing too
little work (underauditing)Avoiding the problem of doing more work
than necessary (overauditing)Being able to decide early what kind
of audit opinion to expressBeing able to fine tune the audit work
for effectiveness and efficiencyAuditing Theory - Audit Planning
(Average)Question 43Which of the following situations represents a
risk factor that relates to misstatements arising from
misappropriation of assets?A high turnover of senior management.A
lack of independent checks.A strained relationship between
management and the predecessor auditor.An inability to generate
cash flow from operations.Auditing Theory - Risk Assessment
(Average)Question 44When considering internal control an auditor
must be aware of the concept of reasonable assurance, which
recognizes thatEmployment of competent personnel provides assurance
that the objectives of internal control will be
achieved.Establishment and maintenance of internal control is an
important responsibility of the management and not of the
auditor.Cost of internal control procedures should not exceed the
benefits expected to be derived from the control.Segregation of
incompatible functions is necessary to ascertain that the control
procedures are effective.Auditing Theory - Internal Control
(Average)Question 45General purpose financial statements may be
prepared in accordance with the following framework
except:International Financial Reporting StandardsInternational
Financial Reporting Standards for SMEsInternational Auditing
StandardsInternational Accounting StandardsAuditing Theory - Audit
Planning (Average)Question 46Fraudulent financial reporting is
often calledManagement fraudTheft of assetsDefalcationEmployee
fraudAuditing Theory - Internal Control (Average)Question 47Which
of the following should an auditor obtain from the predecessor
auditor prior to accepting an audit engagement?Analysis of balance
sheet accountsAnalysis of income statementAll matter of continuing
accounting significanceFacts that might bear on the integrity of
managementAuditing Theory - Audit Planning (Average)Question
48Which of the following would an auditor most likely use in
determining the auditors preliminary judgment about materiality?The
results of the initial assessment of control riskThe anticipated
sample size for planned substantive testsThe entitys financial
statements of the prior yearThe assertions that are embodied in the
financial statementsAuditing Theory - Risk Assessment
(Average)Question 49An effective procedure to test for unbilled
shipments is to trace from theSales journal to the shipping
documentsShipping documents to the sales invoiceSales journal to
the accounts receivable ledgerSales journal to the general ledger
sales accountAuditing Theory - Evidence (Average)Question 50The
element of the auditors report that distinguishes it from reports
that might be issued by others isTitleAddresseeAuditors
signatureOpinion paragraphAuditing Theory - Audit Reporting
(Average)Question 51What level of assurance is provided by the
auditor in a review engagement?No assuranceHigh, but not
absoluteReasonableLimitedAuditing Theory - Audit Reporting
(Average)Question 52In a compilation engagement, the accountant is
engaged to use accounting expertise as opposed to auditing
expertise to collect, classify, and summarize financial
information. What type of assurance is provided by the accountant
when he/she performs this engagement?Positive assuranceNegative
assuranceNo assuranceLimited assuranceAuditing Theory - Audit
Reporting (Average)Question 53Which of the following is not one of
the elements of an assurance engagement?Sufficient appropriate
evidenceA subject matterSuitable criteriaAn opinion about whether
the subject matter conform, in all material respects, with
identified criteriaAuditing Theory - Audit Planning
(Average)Question 54During the initial planning for an audit, a CPA
obtains a level of knowledge of the clients business to help him
evaluate:The reasonableness of estimates, such as valuation of
inventories and allowances for bad debts.Whether to accept the
engagement or notThe nature of the audit report he will issueThe
profitability of the businessAuditing Theory - Audit Planning
(Average)Question 55Most companies recognize sales when
a/the:Merchandise is received by the customerCustomer order is
receivedMerchandise is shippedCash is received on accountAuditing
Theory - Evidence (Average)Question 56To strengthen control
procedures over the custody of heavy mobile equipment, the client
would most likely institute a policy requiring a periodicIncrease
in insurance coverageVerification of liens, pledges, and
collateralizationsAccounting for work ordersInspection of equipment
and reconciliation with accounting recordsAuditing Theory -
Evidence (Average)Question 57Reports that are designed to create an
audit trail for each online transaction. Such reports often
document the source of a transaction (terminal, time and user) as
well as the transactions details.Batch processing logsTransmittal
sheetsTransaction logsEmbedded audit modulesAuditing Theory -
Computerized Auditing (Average)Question 58The single feature that
most clearly distinguishes auditing, attestation, and assurance
isType of serviceTraining required to perform the serviceScope of
servicesCPAs approach to the serviceAuditing Theory - Audit
Planning (Easy)Question 59A CPA firm studies its personnel
advancement experience to ascertain whether individuals meeting
stated criteria are assigned increased degrees of responsibility.
This is evidence of the firm's adherence to prescribed standards
ofSupervision and reviewContinuing professional
educationProfessional developmentQuality controlAuditing Theory -
CPA Profession (Average)Question 60Accounting firms should
establish quality control procedures for professional development
in order to provide reasonable assurance thatPersons promoted
possess the appropriate characteristics to perform
competentlyPersonnel will have the knowledge required to fulfill
responsibilities assignedThe extent of supervision and review in a
given instance will be appropriateAssociation with a client whose
management lacks integrity will be minimizedAuditing Theory - CPA
Profession (Average)Question 61As part of audit planning, CPAs
should design audit programs for each individual audit and should
include audit steps and procedures toDetect and eliminate
fraudIncrease the amount of management information availableProvide
assurances that the objectives of the audit are metEnsure that only
material items are auditedAuditing Theory - Evidence
(Average)Question 62In evaluating the reasonableness of advertising
expense, which of the following would be the best evidence?Oral
evidence obtained through discussions with company marketing
executives and representatives of the advertising agency
retainedDocumentary evidence obtained by vouching charges to the
account and by retracing charges from source documents to the
accountAnalytical evidence developed by comparing the ratio of
advertising expenses to sales with historical data for the company
and industryArithmetical evidence developed by re-computing charges
submitted by the advertising agency and paid by the companyAuditing
Theory - Evidence (Average)Question 63Which of the following is not
a typical analytical procedure?Study of relationships of financial
information with relevant nonfinancial informationComparison of
financial information with similar information regarding the
industry in which the entity operatesComparison of recorded amounts
of major disbursements with appropriate invoicesComparison of
recorded amounts of major disbursements with budgeted
amountsAuditing Theory - Evidence (Average)Question 64Having
evaluated inherent risk and control risk, the auditor determines
detection riskAs the complement of overall audit riskBy performing
substantive audit testsAs a product of further study of the
business and industry and application of analytical proceduresAt a
level that equates the joint probability of inherent risk, control
risk, and detection risk with overall audit riskAuditing Theory -
Risk Assessment (Average)Question 65The understanding between the
client and the auditor as to the degree of responsibilities to be
assumed by each are normally set forth in a(an)Representation
letterEngagement letterManagement letterComfort letterAuditing
Theory - Risk Assessment (Average)Question 66It would be
appropriate for the payroll accounting department to be responsible
for which of the following functions?Approval of employee time
recordsMaintenance of records of employment, discharges, and pay
increasesPreparation of periodic governmental reports as to
employees' earnings and withholding taxesTemporary retention of
unclaimed employee paychecksAuditing Theory - Internal Control
(Average)Question 67Which of the following would lessen internal
control in a CBIS?The computer librarian maintains custody of
computer program instructions and detailed listingsComputer
operators have access to operator instructions and detailed program
listingsThe control group is solely responsible for the
distribution of all computer outputComputer programmers write and
debug programs which perform routines designed by the systems
analystAuditing Theory - Computerized Auditing (Average)Question
68Based on a random sample, it is estimated that four percent, plus
or minus two percent, of a firm's invoices contain errors. The plus
or minus two percent is known as the
estimate'sPrecisionAccuracyConfidence levelStandard errorAuditing
Theory - Audit Sampling (Average)Question 69The accuracy of
perpetual inventory records may be established in part by comparing
perpetual inventory records withPurchase requisitionsReceiving
reportsPurchase ordersVendor paymentsAuditing Theory - Audit of
Inventory (Average)Question 70Which of the following is a "Type I"
subsequent event?The client's Long Island warehouse was destroyed
by fire two weeks following the balance sheet date. The warehouse
and its contents were uninsured and represented 15% of the client's
total assetsAs the result of an uninsured flood loss, one of the
client's major customers declared bankruptcy. The client doesn't
expect to recover more than 5% of the outstanding receivable which
accounts for 30% of total accounts receivable. The flood and
bankruptcy declaration both occurred after the balance date but
before the release of the audit report. No additional provision for
loss had been made as of year endThree weeks after the balance
sheet date, a major strike was called by the labor union
representing 80% of the client's work forceAfter the balance sheet
date, but prior to release of the audit report, a product liability
judgment against the client was rendered by a judge. The judgment
assessed damages and fines totaling 30% of audited net income. The
events giving rise to the judgment occurred prior to the balance
sheet date. The client does not plan to appeal the decisionAuditing
Theory - Evidence (Difficult)Question 71An auditor who wishes to
substantiate the gross balance of the account "Trade Notes
Receivable" is considering the advisability of performing the four
procedures listed below. Which pair of procedures is best suited to
this objective?IAge the receivables
IIConfirm the notes with the makers
IIIInspect the notes
IVTrace a sample of postings from the sales journal to the notes
receivable ledger
I and IIII and IVII and IIIII and IVAuditing Theory - Audit of
Accounts Receivable (Average)Question 72In a highly automated
information processing system tests of controlMust be performed in
all circumstancesMay be required in some circumstancesAre never
requiredAre required in first year auditsAuditing Theory -
Computerized Auditing (Average)Question 73An auditor most least
likely use computer software toAccess client data filesPrepare
spreadsheetsAssess computer control riskConstruct parallel
simulationsAuditing Theory - Computerized Auditing
(Average)Question 74System characteristics that may result from the
nature of CIS processing include, exceptAbsence of input
documents.Lack of visible transaction trail.Lack of visible
output.Difficulty of access to data and computer programs.Auditing
Theory - Computerized Auditing (Average)Question 75A computer falls
into the supercomputer category if it is, at the time of
construction, one of the ____ computers in the
world.biggestfastestboth a. and b.neither a. nor b.Auditing Theory
- Computerized Auditing (Average)Question 76Managers need
information from the management accounting system because? (Tick
the one untrue answer)They cannot get this from the financial
accountsThe financial accounts are not detailed enoughThe financial
accounts are prepared too lateThe financial accounts are prepared
for each part of the organization and the management accounts are
prepared for the whole organizationAuditing Theory - Cost Concepts
(Easy)Question 77Which of the following procedures concerning
accounts receivable is an auditor most likely to perform to obtain
evidential matter in support of an assessed level of control risk
below the maximum level?Sending confirmation requests to an entitys
principal customers to verify the existence of accounts
receivable.Inspecting an entitys analysis of accounts receivable
for unusual balances.Comparing an entitys uncollectible accounts
expense to actual uncollectible accounts receivable.Observing an
entitys employee prepare the schedule of past due accounts
receivable.Auditing Theory - Evidence (Average)Question 78Proper
segregation of functional responsibilities calls for separation of
the functions ofAuthorization, execution, and
recording.Authorization, execution, and payment.Custody, execution,
and reporting.Authorization, payment, and recording.Auditing Theory
- Internal Control (Average)Question 79The evaluation of deviations
that were observed upon completing tests of controlsMay require the
need for doing more extensive understanding of control.May require
more extensive tests of controls.Always requires documentation of
the basis of assessment of control risk.May require modification of
the nature, timing, and extent of planned substantive
procedures.Auditing Theory - Internal Control (Average)Question
80An auditor decides to increase the assessed level of control risk
from that originally planned on the basis of audit evidence
gathered and evaluated. To achieve an overall audit risk level that
is substantially the same as the planned audit risk level, the
auditor wouldDecrease substantive testing.Increase inherent
risk.Increase materiality levels.Decrease detection risk.Auditing
Theory - Risk Assessment (Average)Question 81The professions
ethical standards most likely would be considered to have been
violated when a CPA represents that specific consulting services
will be performed for a stated fee and it is apparent at the time
of the representation that theActual fee would be substantially
higherActual fee would be substantially lower than the fees charged
by other CPAs for comparable services.CPA would notbe
independentFee was a competitive bidAuditing Theory - Audit
Planning (Average)Question 82The responsibility for the preparation
of the financial statements and the accompanying footnotes belongs
to:The auditorManagementBoth management and the auditor
equallyManagement for the statements and the auditor for the
notesAuditing Theory - Audit Reporting (Average)Question 83Which of
the following statements about the existence and completeness
assertions is not true?The existence and completeness assertions
emphasize different audit concernsExistence deals with
overstatements and completeness deals with understatementsExistence
deals with understatements and completeness deals with
overstatementsThe completeness assertion deals with unrecorded
transactionsAuditing Theory - Evidence (Average)Question 84Which of
the following management assertions is not associated with
transaction-related audit objectives?OccurrenceClassification and
understandabilityAccuracyCompletenessAuditing Theory - Evidence
(Average)Question 85The detail tie-in is part of the_______
assertion for account balancesClassificationValuation and
allocationRights and obligationsCompletenessAuditing Theory -
Evidence (Average)Question 86After general audit objectives are
understood, specific audit objectives for each account balance on
the financial statements can be developed. Which of the following
statements is true?There should be at least one specific objective
for each relevant general objectiveThere will be only one specific
objective for each relevant general objectiveThere will be many
specific objectives developed for each relevant general
objectiveThere must be one specific objective for each general
objectiveAuditing Theory - Audit Planning (Difficult)Question 87A
measure of how willing the auditor is to accept that the financial
statements may be materially misstated after the audit is completed
and an unqualified opinion has been issued is the:Inherent
riskAcceptable audit riskStatistical riskFinancial riskAuditing
Theory - Risk Assessment (Average)Question 88An auditor searching
for related party transactions should obtain an understanding of
each subsidiarys relationship to the total entity because:The
business structure may be deliberately designed to obscure related
party transactionsThis may reveal whether transactions would have
taken place if the parties had been unrelatedTransactions may have
been consummated on terms equivalent to arms-length
transactionsThis may permit the audit of intercompany account
balances to be performed as of concurrent datesAuditing Theory -
Evidence (Average)Question 89A CPA who is not independent and is
associated with financial statements should disclaim an opinion
with respect to those financial statements. The disclaimer
should:Clearly state the specific reasons for lack of
independenceNot mention any reason for the disclaimer other than
that the CPA was unable to conduct the examination in accordance
with generally accepted auditing standardsNot describe the reason
for lack of independence but should state specifically that the CPA
is not independentInclude a middle paragraph clearly describing the
CPAs association with the client and explaining why the CPA was
unable to gather sufficient competent evidential matter to warrant
the expression of an opinionAuditing Theory - Audit Reporting
(Difficult)Question 90The auditor is responsible for communicating
significant internal control deficiencies to the audit committee,
or those charged with governance. This communication:May be oral or
writtenMust be oralMust be writtenMust be oral via direct
communicationAuditing Theory - Audit Reporting (Average)Question
91The auditors responsibility for reviewing the subsequent events
of a public company that is about to issue new securities is
normally limited to the period of time:Beginning with the balance
sheet date and ending with the date of the auditors reportBeginning
with the start of the fiscal year under audit and ending with the
balance sheet dateBeginning with the start of the fiscal year under
audit and ending with the date of the auditors reportBeginning with
the balance sheet date and ending with the date the registration
statement becomes effectiveAuditing Theory - Audit Reporting
(Difficult)Question 92Tests of controls are directed toward the
controls:EfficiencyEfficiency and effectivenessEffectivenessCost
benefit ratioAuditing Theory - Evidence (Easy)Question 93Many
auditors perform extensive analytical procedures on audits
because:They are required by Philippine Auditing StandardsThey
pinpoint errors in accountsThey indicate areas of potential risk
and misstatementThey are required for tests of controlsAuditing
Theory - Evidence (Easy)Question 94Documentation is used in every
type of test except ________.Tests of controlsAnalytical
proceduresTests of transactionsTests of detailsAuditing Theory -
Evidence (Easy)Question 95Cutoff misstatements occur:Either by
error or fraudBy error onlyBy fraud onlyRandomly without causes
related to errors or fraudAuditing Theory - Evidence (Easy)Question
96If the clients internal control for recording sales returns and
allowances is evaluated as ineffective:A larger sample is needed to
verify cutoffSampling is not appropriateAll sales returns must be
traced to supporting documentationAll sales returns must be
confirmed with the customerAuditing Theory - Evidence
(Easy)Question 97An auditor should perform alternative procedures
to substantiate the existence of accounts receivable when:No reply
to a positive confirmation request is receivedNo reply to a
negative confirmation request is receivedCollectibility of the
receivables is in doubtPledging of the receivables is
probableAuditing Theory - Evidence (Easy)Question 98During the
audit of prepaid insurance, the auditor should keep in mind that
the amount in insurance expense is based on:The beginning balance
in prepaid insuranceThe payment of premiums during the yearThe
ending balance in prepaid insuranceAll three of the aboveAuditing
Theory - Evidence (Easy)Question 99In connection with a review of
the prepaid insurance account, auditors would typically not perform
which of the following procedures?Recompute the portion of the
premium that expired during the yearPrepare excerpts of insurance
policies for audit working papersConfirm premium rates with an
independent insurance brokerExamine support for premium
payments.Auditing Theory - Evidence (Average)Question 100In an IT
system, automated equipment controls or hardware controls are
designed to:Correct errors in the computer programsMonitor and
detect errors in source documentsDetect and control errors arising
from the use of equipmentArrange data in a logical sequential
manner for processing purposesAuditing Theory - Computerized
Auditing (Average)