1. The criteria for evaluating quantitative information vary.
For example, in the audit of
historical financial statements by CPA firms, the criteria are usually *
Generally accepted auditing standards.
Generally accepted accounting principles.
Regulations of the Internal Revenue Service.
Regulations of the Securities and Exchange Commission.
2. Inspection cycle is normally done over how many year(s) for each partner of the
firm on one completed audit engagement? *
one year
three years
two years
four years
3. A firm of CPAs may use policies and procedures such as notifying professional
personnel as to the names of audit clients having publicly held securities and
confirming periodically with such personnel that prohibited relations do not exist. This
is done to achieve effective quality control in which of the following areas? *
Acceptance and continuance of clients.
Human resources
Relevant ethical requirements.
Leadership responsibilities for quality within the firm.
4. A review of any part of an organization’s procedures and methods for the purpose
of the evaluating efficiency and effectiveness is classified as a(n) *
Audit of financial statements.
Compliance audit.
Operational audit.
Production audit.
5. To operate effectively, an internal auditor must be independent of *
The line functions of the organization.
The entity.
The employer-employee relationship which exists for other employees in the organization.
All of the above.
6. A governmental audit may extend beyond an examination leading to the expression
of an opinion on the fairness of financial presentation to include – program-results;
compliance; economy and efficiency. *
Yes, no, yes
Yes, yes, yes
No, yes, yes
No, no, yes
7. Which of the following statements is not a distinction between independent auditing
and internal auditing? *
Independent auditors represent third party users external to the auditee entity, whereas internal
auditors report directly to management.
Although independent auditors strive for both validity and relevance of evidence, internal auditors
are concerned almost exclusively with validity.
Internal auditors are employees of the auditee, whereas external auditors are independent
contractors.
The internal auditor’s span of coverage goes beyond financial auditing to encompass operational
and performance auditing.
8. The primary responsibility for the adequacy of disclosure in the financial statements
of a publicly held company rests with the *
Partner assigned to the audit engagement
Management of the company.
Auditor in charge of the field work.
Securities and Exchange Commission.
9. Which of the following engagement is covered by the Framework for Assurance
Engagements? *
Consulting engagements.
Preparation of tax returns
Independent financial statements audit
Internal financial statements audit
10. The scope and objectives of internal auditing vary widely and depend on the size
and structure of the entity and the requirements of its management. Ordinarily, internal
auditing activities include one or more of the following: Review of the accounting and
internal control systems Examinations of financial and operating information
Review of the economy, efficiency, and effectiveness of operations Review of
compliance with laws, regulations, and other external requirements *
yes, yes, yes,yes
yes, yes, yes,no
yes, yes, no, no
yes, no, no, no
11. Which of the following is true of the report based on agreed-upon-procedures? *
The report is restricted to those parties who have agreed to the procedures to be performed.
The CPA provides the recipients of the report limited assurance as to reasonableness of the
assertion(s) presented in the financial information.
The report states that the auditor has not recognized any basis that requires revision of financial
statements
The report should state that the procedures performed are limited to analytical procedures and
inquiry.
12. In all cases, audit reports must *
1 point
Be signed by the individual who performed the audit procedures.
Certify the accuracy of the quantitative information which was audited.
Communicate the auditor’s findings to the general public.
Inform the readers of the degree of correspondence between the quantifiable information and the
established criteria.
13. Which of the following is an appraisal activity established within an entity as a
service to the entity? *
1 point
External auditing.
Internal auditing.
Financial auditing.
Compliance auditing.
14. The best statement of the responsibility of the auditor with respect to an audited
financial statement is: *
1 point
The audit of the financial statements relieves management of its responsibilities
The auditor’s responsibility is confined to his expression of opinion about the audited financial
statements.
The responsibility over the financial statements rests with the management and the auditor
assumes responsibility with respect to the notes of financial statements.
The auditor is responsible only to his unqualified opinion but not for any other type of opinion.
15. Indicate the level of assurance provided by audit and review services:
1 point
high, moderate
moderate, high
reasonable, none
absolute, high
16. A typical objective of an operational audit is for the auditor to: *
1 point
Determine whether the financial statements fairly present the entity’s operation.
Evaluate the feasibility of attaining the entity’s operational objectives.
Make recommendations for improving performance.
Report on the entity’s relative success in attaining profit maximization.
17. The primary goal of the CPA in performing the attest function is to Detect fraud. *
1 point
Examine individual transactions so that the auditor may certify as to their validity.
Determine whether the client’s assertions are fairly stated.
Assure that the consistent application of correct accounting procedures.
Detect fraud.
18. An audit independence issue might be raised by the auditor’s participation in
management advisory services engagements. Which of the following statement is
most consistent with the profession’s attitude toward this issue? *
1 point
Information obtained as a result of a management advisory services engagement is confidential
to that performance of the attest function.
The decision as to loss of independence must be made by the client based upon the facts of the
particular case.
The auditor should not make management decisions for an audit client.
The auditor who is asked to review management decisions is also competent to make these
decisions and can do so without loss independence.
19. It refers to the level of the auditor’s satisfaction as to the reliability of an assertion
being made by one party for use by another party. *
1 point
Confidence level .
Reasonableness level.
Assurance level.
Tolerable level.
20. An audit designed to determine the extent to which the desired results of an
activity established by the legislative or other authorizing body are being achieved is a
(an) *
1 point
Economy audit.
Efficiency audit.
Program audit.
Financial related audit.
21. Which of the following is not an assurance engagement? *
1 point
Management consultancy
Financial statement audit
Information reliability services
Reviews of prospective financial statements
22. The Framework, provides that financial statements needed to be prepared in
accordance with one, or a combination of the following except: *
1 point
Accounting standards generally accepted in the Philippines.
International Accounting Standards
Another authoritative and comprehensive financial reporting framework designed for use in
financial reporting and is identified in the financial statements.
Accounting standards developed by accountant of the business enterprise herself/himself.
23. The framework for auditing and related services as addressed by PSA excludes *
1 point
Review.
Tax Services.
Compilation.
Agreed-upon procedure.
24. According to Philippine Standard on Auditing, the procedures employed in doing
compilations are: *
1 point
Designed to enable the accountant to express a limited assurance.
Designed to enable the accountant to express a negative assurance.
Not designed to enable the accountant to express any form of assurance.
Less extensive than review procedures but more extensive than agreed-upon procedures.
25. The BEST way to reduce information risk is to have *
1 point
The users verify the information.
The users share the information risk with management.
Audited financial statements provided.
All of the above.
26. The auditor communicates the results of his or her work through the medium of
the *
1 point
Engagement letter.
Audit report.
Management letter.
Financial statements.
27. _____ states that audit firm should implement policies and procedures designed to
ensure that all audits are conducted in accordance with PSAs. *
1 point
PSA 120
PSA 220
PSA 200
Answer not given
28. Auditing is based on the assumption that financial data and statement are *
1 point
in conformity with GAAP
verifiable
presented fairly
consistently applied
29. Quality control policies and procedures should provide the firm reasonable
assurance that the policies and procedures relating to the other elements are being
effectively applied. *
1 point
Assignment
Monitoring
Engagement performance
Leadership responsibilities
