AUD-MAS Cup

Multiple Choice

What is the capital of the Philippines?

• Baguio

• Boracay

• Davao

• Manila

Multiple Choice

Which of the following is not a characteristic of MAS?

• In MAS engagements, the nature of the work involved requires a lesser need for junior assistance

• A wider variety of assignments are encountered in MAS than in audit engagements

• MAS engagements are recurring

• In MAS, actions to be taken are identified, the benefits of which will be received in the future

Multiple Choice

A continuous or rolling budget

• works best for a firm that can reliably forecast events a year or more in the future

• presents the budgeted amounts for a range of activities so that the amounts can be adjusted for changes in activity

• drops the current month or quarter and adds a future month or quarter as the current month or quarter is completed

• assumes the continuous improvement of products and processes

Multiple Choice

As guidance for measuring the quality of the performance of an auditor, the auditor should refer to

• Statements of Financial Accounting Standards Board

• Philippine Standards on Auditing

• Interpretation of Rules of Conduct

• Statements on Quality Control Standards

Multiple Choice

Reasonable assurance means

• Gathering of all available corroborating evidence for the auditor to conclude that there are no material misstatements in the financial statements, taken as a whole

• Gathering of the audit evidence necessary for the auditor to conclude that the financial statements, taken as a whole, are free from any misstatements.

• Gathering of the audit evidence necessary for the auditor to conclude that the financial statements are free of material unintentional misstatements

• Gathering of the audit evidence necessary for the auditor to conclude that there are no material misstatements in the financial statements, taken as a whole

Multiple Choice

Which of the following statements regarding absorption and variable costing is correct?

• Absorption costing results in higher income when finished goods inventory increases

• Variable manufacturing costs are lower under absorption costing

• Overhead costs are treated in the same manner under both variable and absorption costing methods

• Profits are always the same under the two costing methods

Multiple Choice

In economics, it refers to a rise in the general level of prices of goods and services in an economy over a period of time.

• Inflation

• Recession

• Deflation

• Depression

Multiple Choice

Which of the following is not included in the seal of a professional accountant?

• Tax Identification Number

• Name of the professional accountant

• Title of the profession

• Registration Number

Multiple Choice

Ian Company has sales of P400,000 with variable costs of P300,000, fixed costs of P120,000, and an operating loss of P20,000. How much increase in sales would Ian need to make in order to achieve a target operating income of 10% of sales?

• P400,000

• P462,000

• P500,000

• P800,000

Multiple Choice

The stage of the business cycle may be described as a point of sustained expansion, increased consumer confidence, and high levels of business activity.

• Recovery

• Recession

• Inflation

• Growth

Multiple Choice

If the auditor sets the preliminary judgment about materiality level at a relatively low peso amount

• more evidence will be required than for a high level

• less evidence will be required than for a high level

• the same amount of evidence will be required as for a high level

• the amount of evidence required will not be affected

Multiple Choice

Which of the following actions may be appropriate if the auditor is unable to agree to a change of the engagement and is not permitted to continue the original engagement? 

I.  Auditor should withdraw from the engagement

II. Consider whether there is any obligation to report to the board of directors or shareholders the circumstances necessitating withdrawal

• I

• II

• Both I and II

• Neither I nor II

Multiple Choice

• Make-P20,000

• Make-P50,000

• Buy-P10,000

• Buy-P40,000

Multiple Choice

Thomas Company  is currently operating at a loss of P15,000. The sales manager has received a special order for 5,000 units of product, which normally sells for P35 per unit. Costs associated with the product are: direct material, P6; direct labor, P10; variable overhead, P3; applied fixed overhead, P4; and variable selling expenses, P2. The special order would allow the use of a slightly lower grade of direct material, thereby lowering the price per unit by P1.50 and selling expenses would be decreased by P1. If Thomas wants this special order to increase the total net income for the firm to P10,000, what sales price must be quoted for each of the 5,000 units?

• P23.50

• P24.50

• P27.50

• P34.00

Multiple Choice

Which one of these is not a type of evidence that would be used for both obtaining an understanding of the control structure and testing the controls?

• Reperformance

• Observation

• Inquiries

• Inspection

Multiple Choice

Which of the following statements are true based from the above data?

• Three (3) of the following examinees passed the licensure examination

• Four (4) of the following examinees failed the licensure examination

• One (1) of the following examinees received a conditional status

• Two (2) of the following examinees passed the licensure examination

Multiple Choice

S1: The auditor should obtain an understanding of all aspects of the client’s internal control.

S2: The auditor uses the understanding of internal control to identify types of potential misstatements, consider factors that affect the risks of material misstatement, and design the nature, timing, and extent of further audit procedures.

S3: The way in which internal control is designed and implemented varies with an entity’s size and complexity.

S4: Internal control can only be expected to provide reasonable assurance, not absolute assurance, that the entity’s business risks are addressed, and its objectives are achieved.

Which of the following statements are false?

• All of the following statements above are true

• Three (3) the following statements above is not false

• Two (2) of the following statements above are true

• None of the following statements above not true

Multiple Choice

On July 1, 2022, Sun Co. issued a five-year note payable with a face amount of ₱2,500,000 with interest rate of 10%. The terms of the note require Sun to make five annual payments of ₱500,000 plus accrued interest, with the first payment due June 30, 2023. With respect to the note, the current liabilities section of Sun's December 31, 2022, balance sheet should include:

• ₱250,000

• ₱500,000

• ₱625,000

• ₱750,000

Multiple Choice

If a capital project has a hurdle rate higher than its internal rate, then its profitability index is

• More than the cost of capital

• More than the net present value

• Less than 0

• Less than 1

Multiple Choice

The materials cost variance is

• 0

• P2,250 unfavorable

• P2,250 favorable

• P12,750

Multiple Choice

Which of the following statements is incorrect?

• The ratio of sales to working capital is a measure of liquidity and activity

• the number of days sales in receivables is a measure of liquidity, as well as of activity

• A high sales-to-working capital ratio would indicate that the firm is not susceptible to liquidity problems

• The earnings per share is a profitability ratio

Multiple Choice

Lavia Industries has significant information that is transmitted, processed, maintained, and accessed electronically. The auditor has concluded that it is not possible to reduce detection risk to an acceptable level by performing only substantive tests for a number of financial statement assertions, the auditor’s alternative strategy is to

• increase the acceptable audit risk

• focus audit tests on other assertions for which substantive tests prove to be effective

• require management to change its information system to provide appropriate evidence

• perform tests of controls to gather evidential matter to be used as the basis of assessing control risk related to those assertions.

Multiple Choice

The use of a decision tree is appropriate for decision-making under conditions of

• Uncertainty and risk

• Uncertainty and subjective likelihoods

• Certainty

• Risk

Multiple Choice

A quantitative technique useful in projecting a firm's sales and profits is

• Probability distribution theory.

• Gantt charting.

• Learning curves.

• Queuing theory.

Multiple Choice

Which of the following reflects the correct order in a value-chain?

• Research and Development, Design, Production

• Distribution, Customer service, Marketing

• Design, Research and Development, Production

• Distribution, Marketing, Research and Development

Multiple Choice

The LAST step in activity-based costing (ABC) is to

• Identify the activities that consume resources and assign them to those activities.

• Identify the cost driver(s) associated with each activity.

• Compute a cost rate per cost driver unit.

• Assign costs to products by multiplying the cost driver rate by the volume of cost drivers consumed by the product.

Multiple Choice

In microeconomics, a decrease in the price of a commodity causes its

• Supply to increase and demand to decrease

• Supply to decrease and demand to increase

• Quantity supplied to increase and quantity demanded to decrease

• Quantity supplied to decrease and quantity demanded to increase

Multiple Choice

Which local commodity whose demand tends to be price-elastic?

• Red Horse beer

• Apple I-Phone 7S

• Absolute distilled drinking water

• Lipitor - branded maintenance medicine for Stroke patients