1.

Recording, Classifying, and summarizing economic events in a longing 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 trueC. All of the above statements are true
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 C. Absolute assurance

 B. Moderate 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
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 understand
B. Completeness relates to whether balance exist
C. Existence relates to whether the balances are valid
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
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

29. Which of the following best describes “related services”?

A. Audit and Review of financial statements
B. Assurance and Audit engagements
C. Compilation and agreed – upon procedures engagements
D. Review, compilation and agreed – upon procedures engagements

30. The auditor’s satisfaction as to the reliability of an assertion being made by one party’s called?
A. Assurance C. Precision
B. Audit risk D. Materiality

31. The concept of limited assurance is provided for in which of the following engagements?
A. Audit C. Compilation
B. Review D. Agreed – upon procedures

32. The code of professional ethics for CPAs promulgated by the Board of Accountancy applies to
A. All CPAs in public practice
B. All CPAs in government
C. All CPAs in public practice and employed in private business
D. All CPAs in public practice, employed in private business and industry, in the government,
and in education.