HARAMBEE UNIVERSITY
FACULTY OF BUSINESS AND ECONOMICS
FULL NAME: _______________________________________________ COURSE NAME: Auditing principle and practice I
ID NO.: ___________________________ COURSE INSTRUCTOR: Beneberu .k.
DATE OF EXAM: ________________ TIME ALLOWED: 1:00_
Department: _ Maximum Value:__ 50%_____
Part I say true if the statement is correct and say false if incorrect ( 2 pts)
1 professionals, auditors must not act negligently/carelessly or in bad faith, but they are not expected to
be infallible (fail safe).
2 Auditing standards are general guidelines to aid auditors in fulfilling their professional responsibilities
in the audit of historical FSs.
3 The auditor must maintain dependence in mental attitude in all matters relating to the audit.
PART II Choose the best answer from the given alternatives ( 2 pts each)
1 a review of an organization’s procedures to determine whether the organization is following specific
procedures, rules or regulations set out by some higher authority.
A Financial statement audit B Compliance audits
C Operational audit D All
2___________is determining whether recorded information properly reflects the economic events that
occurred during the accounting period.
A Accounting B finance C economics D Auditing F none
3 The purpose of compliance audit is;
A Dependent upon the existence of verifiable data
B It recognized criteria or standards, such as established laws and regulations
C It follows an organization's policies and procedures D All
4 Independent Auditing can be best be described as:
A. A branch of accounting
B. A discipline
discipline which attests to the result of accounting and other functi functional operat
operations and data.
data.
C. A profes
professional
sional activit
activity that measures and comm communicates
unicates fina
financial
ncial and busi
business dat
data.
D. A regulatory
regulatory functi
function
on thatthat prev
prevents the
the issuance
issuance of Improper financ inancial
ial informati
information.
5 “why do organizations request an audit?
A To resolve conflict of inter interest betw
between manage
management and thethe owners
ers
B Control mechanism
C To reduce damaging Conse Consequences
D To simplify
mplify comple
complexity
xity E All
6 . a managerial contcontrol
rol activi
tivity performed with an orga organiza
nization as service to manageme
management by an
employee
employee of the organi
organizati
zation
on..
A external Auditing B Interna
Internal audi
uditing
C governmental Auditing D All
7.which one of the following is incorrect about professional ethics of auditing
A An accountant should be straight forward, honest and sincere in his approach to his professional
work.
B An accountant should be fair and should not allow bias to override his objectivity.
C An accountant should carry out his professional work in accordance with the technical and
professional standards relevant to that work.
D A professional accountant should not respect the confidentiality of information acquired in the
course of his work and should not disclose any such information
E none
8.what is the Responsibilities of Auditor
A Expression of an opinion
B Reasonable assurance (word/ declaration) that material misstatements are absent like errors
(faults/mistakes), fraud/fake and other irregularities
C Plan and perform the audit in accordance with IFRS or GAAS
D All
9. a systematic review of an organization's activities, or a part of them, in relation to the efficient and
effective use of resources .this type of audit is referred to
A a performance audit B management audit:
C Operational Audits D . Financial statement audit E All except D
10. which one of the following is true about the Objective of auditing
A Find out reliability and accuracy of financial position of profit and loss statement
B Ensure true and fair view of business and its transaction
C Independent judgment and opinion about the reliability of account
D detection and prevent of fraud E All
11 An auditor discovers that the company's bookkeeper unintentionally made an mistake in
calculating the amount of the quarterly sales. This is an example of:
A employee fraud. B an error.
C misappropriation of assets. D a defalcation.
12 "Independence" in auditing means:
A maintaining an indirect financial interest. B being an advocate for a client.
C not being financially dependent on a client. D taking an unbiased viewpoint.
13 Which of the following attributes is likely to be unique to the audit work of CPAs as compared
to the work performed by practitioner of other professions?
A Competence B Independence
C Due professional care D Complex body of knowledge
14. The objective of an audit of the financial statements is an expression of an opinion on:
A the fairness of the financial statements in all material respects.
B the accuracy of the financial statements.
C the accuracy of the annual report.
D the accuracy of the balance sheet and income statement.
15 When an auditor knows that an illegal act has occurred, he or she must:
A report it to the proper governmental authorities.
B consider the effects on the financial statements, including the adequacy of disclosure.
C withdraw from the engagement.
D issue an adverse opinion.
16 . The auditor's responsibility section of the standard unqualified audit report states that the audit is
designed to:
A) discover all errors and/or irregularities.
B) discover material errors and/or irregularities.
C) conform to generally accepted accounting principles.
D) obtain reasonable assurance whether the statements are free of material misstatement.
17. An adverse opinion is issued when the auditor believes:
A) some parts of the financial statements are materially misstated or misleading.
B) the financial statements would be found to be materially misstated if an investigation
were performed.
C) the auditor is not independent.
D) the overall financial statements are so materially misstated.
18. When the auditor determines that the financial statements are fairly stated, but there is a non
independent relationship between the auditor and the client, the auditor should issue:
A) an adverse opinion.
B) a disclaimer of opinion.
C) either a qualified opinion or an adverse opinion.
D) either a qualified opinion or an unqualified opinion with modified wording.
19. when the auditor encountered one of the two types of situations which do not comply with
generally accepted accounting principles, however, the rest of the financial statements are fairly
presented.
A) unqualified opinion. B) qualified opinion
C) adverse opinion. D) disclaimer opinion.
20. The auditor's responsibility section of the standard unqualified audit report states that the audit is
designed to:
A) discover all errors and/or irregularities.
B) discover material errors and/or irregularities.
C) conform to generally accepted accounting principles.
D) obtain reasonable assurance whether the statements are free of material misstatement.
Part III short answer ( 5 point )
1 Write ten generally accepted auditing standards that available to auditors ?
