WorksheetsSemi-Final Examination - ASUPRIN Refreshers AY 23-24
Total questions: 42
Worksheet time: 41mins
Name
Class
Date
1.
Name
4 lines
2.
Section Code
4 lines
3.
1. The auditor faces a risk that the audit will not detect material misstatements in the financial statements. In regard to minimizing the risk, the auditor primarily relies on:
a)
A. Substantive procedures.
b)
B. Tests of controls.
c)
C. Internal control.
d)
D. Statistical analysis.
4.
2. When planning an audit, an auditor should:
a)
A. Consider whether the extent of substantive procedures may be reduced based on the results of the internal control questionnaire.
b)
B. Make preliminary judgments about materiality levels for audit purposes.
c)
C. Conclude whether changes in compliance with prescribed control procedures justifies reliance on them.
d)
D. Prepare a preliminary draft of the management presentation letter.
5.
3. Which of the following is least likely to be required on an audit?
a)
A. Evaluate the business rationale for significant, unusual transactions.
b)
B. Make a legal determination of whether fraud has occurred.
c)
C. Review accounting estimates for biases.
d)
D. Test appropriateness of journal entries and adjustments.
6.
4. An auditor who accepts an audit engagement and does not possess the industry expertise of the business entity, should:
a)
A. Engage financial experts familiar with the nature of the business entity.
b)
B. Obtain knowledge of matters that relate to the nature of the entity’s business.
c)
C. Refers a substantial portion of the audit to another CPA who will act as the principal author.
d)
D. First inform management that an unqualified opinion cannot be issued.
7.
5. If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:
a)
A. completeness assertion.
b)
B. cutoff assertion.
c)
C. existence assertion.
d)
D. classification and understandability assertion.
8.
6. A proposed auditor makes specific inquiries of the previous auditor, prior to engagement acceptance, to
a)
A. Have knowledge whether PFRS has been consistently applied
b)
B. Inquire or significant subsequent events with respect to the prior period
c)
C. Gain understanding on the reasons for the change of auditor
d)
D. Compare audit fees
9.
7. Communication with a predecessor auditor is initiated by:
a)
A. Management
b)
B. The audit committee of the board of directors
c)
C. The successor auditor
d)
D. The chair of the board of directors
10.
8. Which of the following should an auditor obtain from the previous auditor prior to accepting an audit engagement?
a)
A. Analysis of balance sheet accounts.
b)
B. Analysis of income statement accounts.
c)
C. All matters of continuing accounting significance.
d)
D. Facts that might bear on the integrity of managements.
11.
9. Before accepting an engagement to audit a new client, a CPA is required to obtain
a)
A. An understanding of the prospective client’s industry and business.
b)
B. The prospective client’s signature to the engagement letter.
c)
C. A preliminary understanding of the prospective client’s control environment.
d)
D. The prospective client’s consent to make inquiries of the previous auditor, if any.
12.
10. Which of the following factors most likely would influence an auditor’s determination of the auditability of an entity’s financial statements?
a)
A. The complexity of the accounting system.
b)
B. The adequacy of the accounting records.
c)
C. The existence of related-party transactions.
d)
D. The operating effectiveness of control procedures.
13.
11. Auditors must not only decide whether to accept new clients; they also should periodically review their list of current clients and remove those clients the firm no longer wants to be associated with. Reasons for discontinuing clients might include the following, except:
a)
A. Difficulty in working with client personnel.
b)
B. Inability to negotiate an acceptable increase in the audit fee.
c)
C. Evidence indicating a client’s management has integrity.
d)
D. Client needs specialized services the current firm is unable or unwilling to provide.
14.
12. Which of the following factors most likely would cause a CPA to not accept a new audit engagement?
a)
A. The prospective client has already completed its physical inventory count.
b)
B. The CPA lacks an understanding of the prospective client’s operations and industry.
c)
C. The CPA is unable to review the predecessor auditor’s audit documentation.
d)
D. The prospective client is unwilling to make all financial records available to the CPA.
15.
13. Which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should be rejected?
a)
A. The details of most recorded transactions are not available after a specified period of time.
b)
B. Internal control activities requiring the segregation of duties are subject to management override.
c)
C. It is unlikely that sufficient appropriate evidence is available to support an opinion on the financial statements.
d)
D. Management has a reputation for consulting with several accounting firms about significant accounting issues.
16.
14. If permission from the client to discuss its affairs with the proposed auditor is denied by the client, the predecessor auditor should:
a)
A. Keep silent of the denial
b)
B. Disclose the fact that the permission to disclosure is denied by the client
c)
C. Disclose adequately to proposed auditor all noncompliance made by the client
d)
D. Seek legal advice before responding to the proposed auditor
17.
15. A firm has obtained information that would have caused it to decline an engagement had the information been available earlier. Actions available to the auditor would include the following, except:
a)
A. Reporting the information and its implications to the person/s who appointed the CPA
b)
B. Withdraw from the engagement
c)
C. Withdraw from the client relationship
d)
D. Issue a disclaimer of opinion
18.
16. Which of the following would an auditor most likely use in determining the auditor’s preliminary judgment about materiality?
a)
A. The anticipated sample size of the planned substantive tests.
b)
B. The entity’s annualized interim financial statements.
c)
C. The results of the internal control questionnaire.
d)
D. The contents of the management representation letter.
19.
17. The auditor is required to determine three different levels of materiality: (1) materiality for the financial statements as a whole, (2) performance materiality, and (3)
a)
A. Overall materiality
b)
B. Planning materiality
c)
C. General materiality
d)
D. Specific materiality
20.
18. Which of the following statements concerning materiality is not correct?
a)
A. When establishing the overall audit strategy, the auditor shall determine materiality for the financial statements as a whole.
b)
B. If, in the specific circumstances of the entity, there is one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements, the auditor shall also determine the materiality level or levels to those particular classes of transactions, account balances or disclosures.
c)
C. Determining materiality involves the exercise of professional judgment.
d)
D. The materiality level for the financial statements as a whole determined in the planning stage of the audit should not be affected by changes in the circumstances of the engagement.
21.
19. Analytical procedures used in planning an audit should focus on
a)
A. Reducing the scope of tests of controls and substantive tests.
b)
B. Providing assurance that potential material misstatements will be identified.
c)
C. Enhancing the auditor’s understanding of the client’s business and identifying areas of potential risk.
d)
D. Assessing the adequacy of the available evidential matter.
22.
20. Which of the following would not be considered an analytical procedure?
a)
A. Estimating payroll expense by multiplying the number of employees by the average hourly wage rate and the total hours worked.
b)
B. Projecting an error rate by comparing the results of a statistical sample with the actual population characteristics.
c)
C. Computing accounts receivable turnover by dividing credit sales by the average net receivables.
d)
D. Developing the expected sales based on the sales trend of the prior five years.
23.
21. Which of the following auditing procedures most likely would assist an auditor in identifying related party transactions?
a)
A. Inspecting correspondence with lawyers for evidence of unreported contingent liabilities.
b)
B. Vouching accounting records for recurring transactions recorded just after the balance sheet date.
c)
C. Reviewing confirmations of loans receivable and payable for indications of guarantees.
d)
D. Performing analytical procedures for indications of possible financial difficulties.
24.
22. Which of the following most likely would indicate the existence of related parties?
a)
A. Writing down obsolete inventory just before year-end.
b)
B. Failing to correct previously identified internal control deficiencies.
c)
C. Depending on a single product for the success of the entity.
d)
D. Borrowing money at an interest rate significantly below the market rate.
25.
23. Which of the following is an incorrect statement concerning the relationship of the internal auditor and the scope of the external audit of an entity’s financial statements?
a)
A. The external auditor is not required to give consideration to the internal audit function beyond obtaining a sufficient understanding to identify and assess the risks of material misstatement of the financial statements and to design and perform further audit procedures.
b)
B. The internal auditors may determine the extent to which audit procedures should be employed by the external auditor.
c)
C. Under certain circumstances, the internal auditors may assist the external auditor in performing substantive tests and tests of controls.
d)
D. The nature, timing, and extent of the external auditor’s substantive tests may be affected by the work of internal auditors.
26.
24. If the results of the auditor’s expert’s work do not provide sufficient appropriate audit evidence or are not consistent with other audit evidence, the auditor should
a)
A. Report the matter to the appropriate regulatory agency of the government.
b)
B. Resolve the matter.
c)
C. Withdraw from the engagement.
d)
D. Express an unqualified opinion with reference to the work of the expert.
27.
25. Which of the following matters should be considered by the auditor in developing the overall audit strategy?
a)
A. Important characteristics of the entity, its business, its financial performance and its reporting requirements including changes since the date of the prior audit.
b)
B. Conditions requiring special attention, such as the existence of related parties.
c)
C. The setting of materiality levels for audit purposes.
d)
D. All of the above.
28.
26. Auditing standards make ____ distinction(s) between the auditor’s responsibilities for searching for errors and fraud.
a)
A. Little
b)
B. A significant
c)
C. no
d)
D. various
29.
27. Which of the following statements is accurate about “fraud risk factors” considered when conducting an audit?
a)
A. Factors whose presence indicates that fraud exists.
b)
B. Factors whose presence often has been observed in circumstances when frauds have occurred.
c)
C. Factors whose presence will require modification to planned audit procedures.
d)
D. Factors obtained during the audit that led to required communications with the audit committee.
30.
28. Which of the following factors most likely would heighten an auditor’s concern about the risk of fraudulent financial reporting?
a)
A. Large amounts of liquid assets that are easily convertible into cash.
b)
B. Low growth and profitability as compared to other entity’s in the same industry.
c)
C. Financial management’s participation in the initial selection of accounting principles.
d)
D. An overly complex organizational structure involving unusual lines of authority.
31.
29. With respect to fraudulent financial reporting, most frauds involve:
I. Inventory or liquid asset theft
II. Intentional misstatements of amounts
a)
A. I only
b)
B. II only
c)
C. Both I and II
d)
D. Neither I nor II
32.
30. Fraudulent financial reporting may be accomplished through the manipulation of:
I. assets.
II. revenues.
III. liabilities.
a)
A. I and II
b)
B. II and III
c)
C. I and III
d)
D. I, II and III
33.
31. A process, effected by an entity’s board, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance.
a)
A. Quality Control
b)
B. Quality Management
c)
C. Internal Control
d)
D. Risk Management
34.
32. Which of the following is not one of the essential concepts of internal controls?
a)
A. It is a process.
b)
B. It is implemented by those charged with governance, management, and other personnel in an entity.
c)
C. It is a means or tool used by management to achieve the entity’s objectives.
d)
D. It can be expected to provide absolute assurance regarding that the achievement of the entity’s objectives.
35.
33. Internal control is not primarily designed to achieve objectives with regard to
a)
A. Reliability of financial reporting
b)
B. Compliance with laws and regulations
c)
C. Effectiveness and efficiency of operations
d)
D. Quality of audits
36.
34. Key concepts that underlie management’s design and implementation of internal control are:
a)
A. Costs and materiality.
b)
B. Inherent limitation and reasonable assurance.
c)
C. Absolute assurance and costs.
d)
D. Collusion and materiality.
37.
35. Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entity’s internal control?
a)
A. Incompatible duties.
b)
B. Management override.
c)
C. Mistakes in judgment.
d)
D. Collusion among employees.
38.
36. Which of the following statements does not properly describe the reason why control risk cannot be reduced to zero?
a)
A. Management may override controls however effective the controls are implemented at the lower level.
b)
B. The cost of designing and implementing controls should not exceed their benefits.
c)
C. People and personnel subject of the controls are prone to errors and mistakes in judgment.
d)
D. Some accounts and transactions are more susceptible to misstatement (whether due to fraud or error) than other accounts and balances.
39.
37. The basic concept of internal control which recognizes that the cost of internal control should not exceed the benefit as expected to be derived is known as
a)
A. Management by exception
b)
B. Management responsibility
c)
C. Reasonable assurance
d)
D. Limited liability
40.
38. An internal control system that is working effectively
a)
A. Eliminates risk and potential loss of to the entity.
b)
B. Cannot be circumvented by management.
c)
C. Reduces the need for management the review exception reports on a day-to-day basis.
d)
D. Is unaffected by changing circumstances and conditions encountered by the entity.
41.
39. Internal controls can never be considered as absolutely effective because:
a)
A. Their effectiveness is limited by the competency and dependability of employees.
b)
B. Not all organizations have initial audit departments.
c)
C. Controls are designed to prevent and detect only material misstatements.
d)
D. Internal controls prevent separation of duties.
42.
40. A secondary objective of the auditor’s study and evaluation of internal control is that the study and evaluation provide.
a)
A. A basis for constructive suggestions concerning improvements in internal control.
b)
B. A basis for reducing the auditor’s assessed level of control risk below the maximum level.
c)
C. An assurance that the records and documents have been maintained in accordance with existing company policies and procedures.
d)
D. A basis for determination of the resultant extent of the tests to which auditing procedures are to be restricted.
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