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Apr 15, 2012 #1
AccIdPEx
Auditing Theory Test Bank
Harmony–Seeking Idealist
Select the best answer for each of the following questions.
1. Broadly defined, the subject matter of any audit consists of

a) Financial statements
b) Economic data
c) Assertions
d) Operating data
Join Date: Jan 2012 c) Assertions
Location: World Wide Web
2. The third standard of field work states that sufficient competent
evidential matter may in part be obtained through the following
methods except
a) Inspection
b) Observation
c) Confirmation
d) Reconciliation
d) Reconciliation
3. If an auditor believes that material error or fraud exist, the auditor

should
a) Consider the implications and discuss the matter with appropriate
levels of management
b) Make the investigation necessary to determine whether errors or
fraud have in fact occurred
c) Request that management investigate whether errors or fraud
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4. Which of the following is not normally performed in the pre-planning
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d) Increase materiality levels
c) Decrease detection risk
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Apr 15, 2012 #2
https://www.pinoyexchange.com/forums/showthread.php?t=566199 1/15
AccIdPEx 6. An effective internal control

a) Cannot be circumvented by management
Harmony–Seeking Idealist b) Can reduce the cost of an external audit
c) Can prevent collusion among employees
d) Eliminates risks and potential loss to the organization
Show me the spoiler!
7. In auditing through a computer, the test data method is used by

auditors to test the
Join Date: Jan 2012 a) Accuracy of input data
Location: World Wide Web b) Validity of the output
c) Procedures contained within the program
d) Normalcy of distribution of test data
c) Procedures contained within the program
8. An auditor's working papers will generally be least likely to include

documentation showing how the
a) Client's schedules were prepared
b) Engagement had been planned
c) Client's system of internal control had been reviewed and
evaluated
d) Unusual matters were resolved
a) Client's schedules were prepared
9. Which of the following sampling methods would be most

appropriate in performing tests of controls over authorization of cash
disbursements
a) Attributes
b) Variables
c) Ratio
d) Stratified
a) Attributes
10. Analytical procedures used in the overall review stage of an audit

generally include
a) Considering unusual or unexpected account balances that were not
previously identified
b) Performing test of transactions to corroborate management's
financial statement assertions
c) Gathering evidence concerning account balances that have not
changed from the prior year
d) Re-testing control procedures that appeared to be ineffective
during the assessment of control risk
a) Considering unusual or unexpected account balances that were

not previously identified
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Apr 15, 2012 #3
AccIdPEx 11. Results of the financial statement audit are communicated to

users through
Harmony–Seeking Idealist a) Financial statement
b) Written management assertion
c) Audit report
d) None of the above
c) Audit report
12. What is the primary difference between financial reporting risk and
audit risk?
Join Date: Jan 2012
a) The application of accounting principles
Location: World Wide Web b) Responsibilities of the respective parties involved
c) Demands of users of financial statements
d) Risks of being sued by third parties
b) Responsibilities of the respective parties involved
13. Relationship between control risk and detection risk is ordinarily

a) Parallel
b) Inverse
c) Direct
d) Equal
b) Inverse
14. A representation letter issued by a client

a) Is essential for the preparation of the audit program
b) Is a substitute for testing
c) Does not reduce the auditor's responsibility
d) Reduces the auditor's responsibility only to the extent that it is
relied upon
c) Does not reduce the auditor's responsibility
15. The recruitment of senior management for an assurance client,

such as those in a position to affect the subject of the assurance
engagement may least likely create
a) Self-interest threat
b) Advocacy threat
c) Intimidation threat
d) Familiarity threat
b) Advocacy threat
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Apr 15, 2012 #4
AccIdPEx 16. In reviewing the audit work performed, the engagement partner
a) Must review all audit documentation
Harmony–Seeking Idealist b) Need not review all audit documentation, but may do so
c) Need not review all audit documentation
d) Must ask the staff performing the audit work to sign the audit
report
b) Need not review all audit documentation, but may do so
17. The independent auditor lends credibility to client’s financial

Join Date: Jan 2012
statements by
Location: World Wide Web a) Maintaining a clear-cut distinction between management’s
representations and the auditor’s representation
b) Testifying under oath about client’s financial statements
c) Stating in the auditor’s management letter that the examination
was made in accordance with generally accepted auditing standards
d) Attaching an auditor’s opinion to the client’s financial statements
d) Attaching an auditor’s opinion to the client’s financial statements
18. The most difficult type of misstatement to detect is fraud based on

a) The over-recording of transactions
b) The non-recording of transactions
c) Recorded transactions in subsidiaries
d) Related party receivables
b) The non-recording of transactions
19. Assuming a recurring audit, in which of the following situations

would the auditor be unlikely to send a new engagement letter to the
client?
a) A recent change in partner and/or staff involved in the audit
engagement
b) A change in the terms of engagement
c) A recent change of client management
d) A significant change in the nature or size of the client's business
a) A recent change in partner and/or staff involved in the audit

engagement
20. When an auditor expresses an adverse opinion he/sheshould

disclose the substantive reasons for such anopinion in an explanatory
paragraph
a) Within the notes to the financial statements
b) Preceding the opinion paragraph
c) Following the opinion paragraph
d) Preceding the introductory paragraph
b) Preceding the opinion paragraph
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Apr 15, 2012 #5
AccIdPEx 21. Tolerable error means

Harmony–Seeking Idealist a) An error that arises from an isolated event that has not recurred
other than on specifically identifiable occasions and is therefore not
representative of errors in the population
b) An error that the auditor expects to be present in the population
c) The maximum error in a population that the auditor is willing to
accept
d) The possibility that the auditor's conclusion, based on a sample
may be different from the conclusion reached if the entire population
were subjected to the same audit procedure
Join Date: Jan 2012
Location: World Wide Web c) The maximum error in a population that the auditor is willing to
accept
22. Examples of events or conditions, which individually or collectively,

may cast significant doubt about the going concern assumption
include the following except
a) Net liability or net current liability position
b) Change from credit to cash-on-delivery transactions with suppliers
c) Labor difficulties or shortages of important supplies
d) Compliance with capital or other statutory requirements
d) Compliance with capital or other statutory requirements
23. Which of the following procedures is not included in a review

engagement on a nonpublic entity
a) Inquiries of management
b) Inquiries regarding events subsequent to the balance sheet date
c) Any procedures designed to identify relationships among data that
appear to be unusual
d) A study and evaluation of internal control structure
d) A study and evaluation of internal control structure
24. In planning the audit engagement, the auditor should consider

each of the following except
a) The kind of opinion that will likely be given
b) Matters relating to the entity’s business and the industry in which it
operates
c) The entity’s accounting policies and procedures
d) Anticipated levels of control risk and materiality
a) The kind of opinion that will likely be given
25. What assurance is provided by the practitioner in an agreed-upon

procedures engagement?
a) Reasonable
b) Absolute
c) Moderate
d) No assurance
d) No assurance
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Apr 15, 2012 #6
AccIdPEx 26. To test for unsupported entries in the journal, the direction of
audit testing should be from the
Harmony–Seeking Idealist a) Journal entries
b) Ledger entries
c) Original source documents
d) Externally generated documents
a) Journal entries
27. For good internal control, the purchasing department should not
be responsible for
Join Date: Jan 2012
a) Authorizing the acquisition of goods
Location: World Wide Web b) Finding the lowest cost vendor
c) Reviewing the vendors catalog descriptions and prices for
standardized items
d) Designing the purchase order form
a) Authorizing the acquisition of goods
28. Involves tracing a few transactions through the accounting system

a) Test of controls
b) Walk-through test
c) Analytical procedures
d) Substantive procedures
b) Walk-through test
29. This exists, when other information, not related to matters

appearing in the financial statements, is incorrectly stated or
presented
a) Material inconsistency
b) Material misstatement
c) Material misstatement of fact
d) Material error affecting the other information
c) Material misstatement of fact
30. Who appoints the members of the Board of Accountancy

a) The chairman of BOA
b) The president of the Philippines
c) The chairman of the PRC
d) The president of PICPA
b) The president of the Philippines
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Apr 15, 2012 #7
AccIdPEx 31. An auditor is required to obtain an understanding of the entity's

business, including business cycles and reasons for business
Harmony–Seeking Idealist fluctuations. What is the audit purpose most directly served by
obtaining this understanding?
a) To enable the auditor to accurately identify significant deficiencies
in internal control
b) To assist the auditor in accurately interpreting information obtained
during an audit
c) To allow the auditor to more accurately perform tests of controls
d) To decide whether it will be necessary to perform analytical
procedures
b) To assist the auditor in accurately interpreting information

obtained during an audit
Join Date: Jan 2012
Location: World Wide Web 32. Which of the following is not true about the report release date?
a) It is defined as the date after which existing documentation must
not be deleted, and additions to the documentation file must be
documented as such
b) It is often the date on which the report is delivered to the client
c) It is the date on which the auditor grants the client permission to
use the report
d) It is used to define the beginning of the retention period
a) It is defined as the date after which existing documentation

must not be deleted, and additions to the documentation file must
be documented as such
33. An auditor should not issue a report on

a) Quarterly financial information
b) Internal control
c) Management performance
d) The achievability of forecasts
d) The achievability of forecasts
34. Which of the following procedures would an auditor most likely

perform to obtain evidence about the occurrence of subsequent
events?
a) Confirming a sample of material accounts receivable established
after year-end
b) Comparing the financial statements being reported on with those
of the prior period
c) Investigating personnel changes in the accounting department
occurring after year-end
d) Inquiring as to whether any unusual adjustments were made after
year-end
d) Inquiring as to whether any unusual adjustments were made

after year-end
35. To which of the following matters would materiality limits not apply
when obtaining written client representations?
a) Violations of state labor regulations
b) Disclosure of line-of-credit arrangements
c) Information about related party transactions
d) Instances of fraud involving management
d) Instances of fraud involving management
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Apr 15, 2012 #8
AccIdPEx 36. Who ultimately determines the scope of the audit?

a) The auditor
Harmony–Seeking Idealist b) The client
c) Both a and b
d) Neither a nor b
a) The auditor
37. Financial statements prepared in accordance with a financial

reporting framework designed to meet the financial information needs
of specific users are referred to as
Join Date: Jan 2012
a) Special purpose financial statements
Location: World Wide Web b) Special purpose framework
c) General purpose financial statements
d) Specific purpose financial statements
a) Special purpose financial statements
38. An auditor plans to apply substantive tests to the details of asset

and liability accounts as of an interim date rather than as of the
balance sheet date. The auditor should be aware that this practice
a) Eliminates the use of certain statistical sampling methods that
would otherwise be available
b) Presumes that the auditor will reperform the tests of the balance
sheet date
c) Should be especially considered when there are rapidly changing
economic conditions
d) Potentially increases the risk that errors that exist at the balance
sheet date will not be detected
d) Potentially increases the risk that errors that exist at the

balance sheet date will not be detected
39. Close family include the following, except

a) Parent
b) Sibling
c) Non-dependent child
d) Spouse
d) Spouse
40. A computer-assisted audit technique that is most likely to be

effective in a continuous auditing environment is
a) Parallel simulation
b) Controlled reprocessing
c) Embedded audit modules
d) Transaction tripping
c) Embedded audit modules
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Apr 15, 2012 #9
AccIdPEx 41. Which of the following is not prohibited by the Code of

Professional Ethics for CPAs?
Harmony–Seeking Idealist a) Advertising and solicitation of clients
b) Payment of commissions to obtain a client
c) Receiving a contingent fee on a tax case before the Bureau of
Internal Revenue
d) Offering employment to a staff member of another CPA without first
informing the CPA
c) Receiving a contingent fee on a tax case before the Bureau of

Internal Revenue
Join Date: Jan 2012
Location: World Wide Web 42. The management's assessment of the entity's ability to continue
as a going concern covers a period of
a) Not longer than 12 months from balance sheet date
b) At least 12 months from the balance sheet date
c) Not longer than 12 months from the date of audit report
d) At least 12 months from the date of audit report
b) At least 12 months from the balance sheet date
43. To obtain evidential matter about control risk, an auditor selects

tests from a variety of techniques including
a) Inquiry
b) Analytical procedures
c) Calculation
d) Confirmation
a) Inquiry
44. The need for independent audits of financial statements can be

attributed to all of the following conditions except
a) Remoteness
b) Consequence
c) Complexity of subject matter
d) Validity
d) Validity
45. After issuing a report an auditor includes that an auditing

procedure considered necessary at the time of the examination was
omitted from the examination. The auditor should first
a) Undertake to apply the omitted procedure or alternative
procedures that would provide a satisfactory basis for the auditor's
opinion
b) Assess the importance of the omitted procedure to the auditor's
ability to support the opinion expressed on the financial statements
taken as a whole
c) Notify the audit committee or the board of directors that the
auditor's opinion can no longer be relied upon
d) Review the results of other procedures that were applied to
compensate for the one omitted or to make its omission less
important
b) Assess the importance of the omitted procedure to the auditor's

ability to support the opinion expressed on the financial statements
taken as a whole
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Apr 15, 2012 #10
AccIdPEx 46. This quality control element requires a CPA firm to establish
policies and procedures to provide it with reasonable assurance that
Harmony–Seeking Idealist engagements are performed in accordance with professional
standards and regulatory and legal requirements, and that the firm or
the engagement partner issue reports that are appropriate in the
circumstances
a) Ethical requirements
b) Engagement performance
c) Monitoring
d) Human resources
b) Engagement performance
47. Communication with a predecessor auditor is initiated by

Join Date: Jan 2012 a) Management
Location: World Wide Web b) The successor auditor
c) The audit committee of the board of directors
d) The chair of the board of directors
b) The successor auditor
48. In which of the following may confidential information not be

disclosed?
a) To comply with the quality review of a member body or professional
body
b) To submit evidence in the course of legal proceedings
c) Acquiring information in the course performing professional services
and use that information for personal advantages
d) When consent to disclose information is given by the client
c) Acquiring information in the course performing professional

services and use that information for personal advantages
49. The auditor should perform the following risk assessment

procedures to obtain an understanding of the entity and its
environment, including its internal control, except
a) Inquiries of management and others within the entity
b) Reperformance
c) Analytical procedures
d) Observation and inspection
b) Reperformance
50. The auditor should determine overall responses to address the

risks of material misstatement at the financial statement level. Such
responses most likely include
a) Assigning less experienced staff
b) Performing predictable further audit procedures
c) Performing substantive procedures at an interim date instead of at
period end
d) Emphasizing to the audit team the need to maintain professional
skepticism in gathering and evaluating audit evidence
d) Emphasizing to the audit team the need to maintain professional

skepticism in gathering and evaluating audit evidence
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Apr 15, 2012 #11
AccIdPEx 51. The need for assurance services arises for all of the following
reason except
Harmony–Seeking Idealist a) Potential bias in providing information
b) Closeness between a user and the organization
c) Complexity of the processing systems
d) Remoteness between a user and the organization
b) Closeness between a user and the organization
52. Which one of the following is not a key attribute needed to

Join Date: Jan 2012 perform assurance?
a) Subject matter knowledge
Location: World Wide Web b) Independence
c) Established criteria or standards
d) Accounting skills
d) Accounting skills
53. Which one of the following is not part of the attest process?
a) Providing the accuracy of the books and records
b) Gathering evidence about assertions
c) Evaluating evidence against objective criteria
d) Communicating the conclusions reached
a) Providing the accuracy of the books and records
54. Users of the audit report can reasonably expect the audited
financial statements to be
a) Complete and contain many of the important financial disclosures
b) Presented fairly according to the substance of GAAP
c) Free from all errors
d) All of the above
b) Presented fairly according to the substance of GAAP
55. Which of the following services is the broadest and most inclusive
a) Audit
b) Attestation
c) Assurance
d) Compliance
c) Assurance
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Apr 16, 2012 #12
AccIdPEx 56. One reason why an auditor makes an analytical review of the
client’s operations is to identify
Harmony–Seeking Idealist a) Improper separation of accounting and other financial duties
b) Weakness of a material nature in the system of internal accounting
control
c) Unusual transactions
d) Non-compliance with prescribed control procedures
c) Unusual transactions
Join Date: Jan 2012 57. Analytical procedures used in planning an audit should focus on
identifying
Location: World Wide Web a) Material weaknesses in the internal control structure
b) The predictability of financial data from individual transactions
c) The various assertions that are embodied in the financial
statements
d) Areas that may represent specific risk relevant to audit
d) Areas that may represent specific risk relevant to audit
58. An integrated test facility (ITF) would be appropriate when the

auditor needs to
a) Trace a complex logic path through an application system
b) Verify processing accuracy concurrently with processing
c) Monitor transactions in an application system continuously
d) Verify load module integrity for production programs
b) Verify processing accuracy concurrently with processing
59. The rotation of senior accounting personnel can be regarded as a

safeguard
a) Created by the profession
b) Within the client’s systems and procedures
c) In the work environment
d) Created within the business community
c) In the work environment
60. If certain forms are not consecutively numbered

a) Systematic sampling may be appropriate
b) Selection of a random sample probably is not possible
c) Stratified sampling should be used
d) Random number tables cannot be used
a) Systematic sampling may be appropriate
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Apr 16, 2012 #13
AccIdPEx 61. A cash shortage may be concealed by transporting funds from one
location to another or by converting negotiable assets to cash.
Harmony–Seeking Idealist Because of this, which of the following is vital?
a) Simultaneous confirmations
b) Simultaneous bank reconciliations
c) Simultaneous verification
d) Simultaneous surprise cash count
c) Simultaneous verification
Join Date: Jan 2012 62. Which of the following is most likely to indicate a significant
deficiency relating to a client's anti-fraud programs?
Location: World Wide Web a) A broad scope of internal audit activities
b) A "whistle-blower" program that encourages anonymous
submissions
c) Audit committee passivity when conducting oversight functions
d) Lack of performance of criminal background investigations for likely
customers
c) Audit committee passivity when conducting oversight functions
63. Which of the following is not an attestation standard?

a) Sufficient evidence shall be obtained to provide a reasonable basis
for the conclusion that is expressed in the report
b) The report shall identify the subject matter on the assertion being
reported on and state the character of the engagement
c) The work shall be adequately planned and assistants, if any, shall
be properly supervised
d) A sufficient understanding of internal control shall be obtained to
plan the engagement
d) A sufficient understanding of internal control shall be obtained

to plan the engagement
64. Proper segregation of functional responsibilities calls for

separation of the functions of
a) Authorization, execution, and payment
b) Authorization, recording, and custody
c) Custody, execution, and reporting
d) Authorization, payment, and recording
b) Authorization, recording, and custody
65. Control risk should be assessed in terms of

a) Specific controls
b) Types of potential fraud
c) Financial statement assertions
d) Control environment factors
c) Financial statement assertions
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Apr 16, 2012 #14
AccIdPEx 66. Which of the following is not a step in an auditor's assessment of

control risk?
Harmony–Seeking Idealist a) Evaluate the effectiveness of internal control with tests of controls
b) Obtain an understanding of the entity's information system and
control environment
c) Perform tests of details of transactions to detect material
misstatements in the financial statements
d) Consider whether controls can have a pervasive effect on financial
statement assertions
c) Perform tests of details of transactions to detect material

Join Date: Jan 2012
misstatements in the financial statements
67. Which of the following procedures would an auditor ordinarily
perform first in evaluating management's accounting estimates for
reasonableness?
a) Develop independent expectations of management's estimates
b) Consider the appropriateness of the key factors or assumptions
used in preparing the estimates
c) Test the calculations used by management in developing the
estimates
d) Obtain an understanding of how management developed its
estimates
d) Obtain an understanding of how management developed its

estimates
68. An entity's income statements were misstated due to the

recording of journal entries that involved debits and credits to an
unusual combination of expense and revenue accounts. The auditor
most likely could have detected this fraudulent financial reporting by
a) Tracing a sample of journal entries to the general ledger
b) Evaluating the effectiveness of internal control
c) Investigating the reconciliations between controlling accounts and
subsidiary records
d) Performing analytical procedures designed to disclose differences
from expectations
d) Performing analytical procedures designed to disclose

differences from expectations
69. Which of the following is most likely to be unique to the audit work
of CPAs as compared to work performed by practitioners of other
professions?
a) Due professional care
b) Competence
c) Independence
d) Complex body of knowledge
c) Independence
70. Which of the following would an auditor most likely use in

determining the auditor's preliminary judgment about materiality?
a) The anticipated sample size of the planned substantive tests
b) The entity's annualized interim financial statements
c) The results of the internal control questionnaire
d) The contents of the management representation letter
b) The entity's annualized interim financial statements
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Apr 16, 2012 #15
AccIdPEx 71. Which of the following conditions identified during fieldwork of an

audit is most likely to affect the auditor's assessment of the risk of
Harmony–Seeking Idealist misstatement due to fraud?
a) Checks for significant amounts outstanding at year-end
b) Computer generated documents
c) Missing documents
d) Year-end adjusting journal entries.
c) Missing documents
Join Date: Jan 2012 72. An auditor ordinarily uses a working trial balance resembling the
financial statements without footnotes, but containing columns for
Location: World Wide Web a) Cash flow increases and decreases
b) Audit objectives and assertions
c) Reclassifications and adjustments
d) Reconciliations and tick marks
c) Reclassifications and adjustments
73. The risk that an auditor will conclude, based on substantive tests,
that a material misstatement does not exist in an account balance
when in fact such misstatement does exist is referred to as
a) Detection risk
b) Sampling risk
c) Non-sampling risk
d) Inherent risk
a) Detection risk
74. The usefulness of the standard bank confirmation request may be

limited because the bank employee who completes the form may
a) Be unaware of all the financial relationships that the bank has with
the client
b) Not believe that the bank is obligated to verify confidential
information to a third party
c) Sign and return the form without inspecting the accuracy of the
client's bank reconciliation
d) Not have access to the client's cutoff bank statement
a) Be unaware of all the financial relationships that the bank has

with the client
75. A material weakness is a significant deficiency (or combination of

significant deficiencies) that results in a reasonable possibility that a
misstatement of at least 'what amount will not be prevented or
detected?
a) An amount greater than zero
b) An amount greater than zero, but at least inconsequential
c) An amount greater than inconsequential
d) A material amount
d) A material amount
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Apr 17, 2012 #16
AccIdPEx 76. The existence of audit risk is recognized by the statement in the
auditor's standard report that the auditor
Harmony–Seeking Idealist a) Obtains reasonable assurance about whether the financial
statements are free of material misstatement.
b) Assesses the accounting principles used and also evaluates the
overall financial statement presentation.
c) Realizes some matters either individually or in the aggregate, are
important while other matters are not important.
d) Is responsible for expressing an opinion on the financial
statements, which arc the responsibility of management.
Join Date: Jan 2012
a) Obtains reasonable assurance about whether the financial
Location: World Wide Web statements are free of material misstatement.
77. Which of the following services would be most likely to be

structured as an attest engagement?
a) Advocating a client's position in tax matter.
b) A consulting engagement to develop a new database system for
the revenue cycle.
c) An engagement to issue a report addressing an entity's compliance
with requirements of specified laws.
d) The compilation of a client's forecast information.
c) An engagement to issue a report addressing an entity's

compliance with requirements of specified laws.
78. Which of the following is ordinarily considered to be a fraud risk

factor?
a) The company's financial statements include a number of last minute
material adjustments.
b) Management regularly informs investors of forecast information.
c) The company has experienced increasing earnings over the
previous five years.
d) The company's president is included as a member of the board of
directors.
a) The company's financial statements include a number of last

minute material adjustments.
79. Which is least likely to be a question asked of client personnel

during a walk-through in an audit of the internal control of an issuer
(public) company?
a) What do you do when you find an error'?
b) Who is most likely to commit fraud among your coworkers?
c) What kind of errors have you found?
d) Have you ever been asked to override the process or controls?
b) Who is most likely to commit fraud among your coworkers?
80. An auditor who uses the work of a specialist may refer to and
identify the specialist ill the auditor's report if the
a) Specialist is also considered to be a related party.
b) Auditor indicates a division of responsibility related to the work of
the specialist.
c) Specialist's work provides the auditor greater assurance of
reliability.
d) Auditor expresses an "except for" qualified opinion or an adverse
opinion related to the work of the specialist.
d) Auditor expresses an "except for" qualified opinion or an

adverse opinion related to the work of the specialist.
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Apr 17, 2012 #17
AccIdPEx 81. Which of the following statements concerning evidential matter is

correct?
Harmony–Seeking Idealist a) Appropriate evidence supporting management's assertions should
be convincing rather than merely persuasive.
b) Effective internal control contributes little to the reliability of the
evidence created within the entity.
c) The cost of obtaining evidence is not an important consideration to
an auditor in deciding what evidence should be obtained.
d) A client's accounting data cannot be considered sufficient audit
evidence to support the financial statements.
Join Date: Jan 2012
d) A client's accounting data cannot be considered sufficient audit
Location: World Wide Web evidence to support the financial statements.
82. Confirmations of accounts receivable address which assertion

most directly?
a) Completeness
b) Existence
c) Valuation
d) Classification
b) Existence
83. When performing a review of an issuer company, which is least

likely to be included in the CPA's inquires of management members
with responsibility for financial and accounting matters?
a) Subsequent events
b) Significant journal entries and other adjustments
c) Communications with related parties
d) Unusual or complex situations affecting the financial statements
c) Communications with related parties
84. The adverse effects of events causing an auditor to believe there

is substantial doubt about an entity's ability to continue as a going
concern would most likely be mitigated by evidence relating to the
a) Ability to expand operations into new product lines in the future.
b) Feasibility of plans to purchase leased equipment at Jess than
market value.
c) Marketability of assets that management plans to sell.
d) Committed arrangements to convert preferred stock to long-term
debt.
c) Marketability of assets that management plans to sell.
85. One reason that an auditor only obtains reasonable, and not
absolute, assurance that financial statements are free from material
misstatement is
a) Comprehensive basis reporting
b) Employee collusion
c) Material misstatements
d) Professional skepticism
b) Employee collusion
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Apr 17, 2012 #18
AccIdPEx 86. When an auditor concludes there is substantial doubt about a

continuing audit client's ability to continue as a going concern for a
Harmony–Seeking Idealist reasonable period of time, the auditor's responsibility is to
a) Issue a qualified or adverse opinion, depending upon materiality,
due to the possible effects on the financial statements.
b) Consider the adequacy of disclosure about the client's possible
inability to continue as a going concern.
c) Report to the client's audit committee that management's
accounting estimates may need to be adjusted.
d) Reissue the prior year's auditors report and add an explanatory
paragraph that specifically refers to "substantial doubt" and "going
Join Date: Jan 2012
concern."
b) Consider the adequacy of disclosure about the client's possible
inability to continue as a going concern.
87. The accountant who is not independent may perform which of the
following types of engagements?
a) Audit
b) Agreed-upon procedures
c) Compilation
d) Review
c) Compilation
88. Which of the following should an auditor obtain from the

predecessor auditor prior to accepting an audit engagement?
a) Analysis of balance sheet accounts
b) Analysis of income statement accounts
c) All matters of continuing accounting significance
d) Facts that might bear on the integrity of management
d) Facts that might bear on the integrity of management
89. Which is least likely to be a response when an auditor has

obtained evidence indicating a risk of material misstatement in the
area of inventory?
a) Request inventory counts at the end of each month.
b) Discuss questions of inventory valuation with any other auditors
involved with the audit.
c) Make oral inquiries of major suppliers in addition to written
confirmations.
d) Perform inventory observations on an unannounced basis.
a) Request inventory counts at the end of each month.
90. The independent auditor selects several transactions in each

functional area and traces them through the entire system, paying
special attention to evidence about whether or not the controls are in
operation. This is an example of a(n)
a) Application test
b) Test of controls
c) Substantive test
d) Test of a function
b) Test of controls
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Apr 17, 2012 #19
AccIdPEx 91. Accounting control procedures within computer processing may

leave no visible evidence indicating that the procedures were
Harmony–Seeking Idealist performed. In such instances, the auditor should test these controls
by
a) Making corroborative inquiries.
b) Observing the separation of duties of personnel.
c) Reviewing transactions submitted for processing and comparing
them to related output.
d) Reviewing the run manual.
c) Reviewing transactions submitted for processing and comparing

Join Date: Jan 2012
them to related output.
92. If information is for management's use only, which of the following
forms of CPA association with financial information is most likely to
result in no report being issued?
a) An agreed-upon procedures engagement
b) An audit
c) A compilation
d) A review
c) A compilation
93. In obtaining an understanding of a manufacturing entity's internal

control over inventory balances, an auditor most likely would
a) Review the entity's descriptions of inventory policies and
procedures.
b) Perform test counts of inventory during the entity's physical count.
c) Analyze inventory turnover statistics-to identify slow-moving and
obsolete items.
d) Analyze monthly production reports to identify variances and
unusual transactions.
a) Review the entity's descriptions of inventory policies and

procedures.
94. When auditing merchandise inventory at year-end, the auditor

performs a purchase cutoff test to obtain evidence that
a) All goods owned at year-end are included in the inventory balance.
b) All goods purchased before year-end are received before the
physical inventory count.
c) No goods held on consignment for customers are included in the
inventory balance.
d) No goods observed during the physical count are pledged or sold.
a) All goods owned at year-end are included in the inventory

balance.
95. A company has changed its method of inventory valuation from an

unacceptable one toone in conformity with generally accepted
accounting principles. The auditor's report on the financial statements
of the year of the change should include
a) No reference to consistency.
b) A reference to a prior period adjustment in the opinion paragraph.
c) An explanatory paragraph explaining the change.
d) A justification for making the change and the impact of the change
on reported net income.
c) An explanatory paragraph explaining the change.
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Apr 17, 2012 #20
AccIdPEx 96. An abnormal fluctuation in gross profit that might suggest the
need for extended audit procedures for sales and inventories would
Harmony–Seeking Idealist most likely be identified in the planning phase of the audit by the use
of
a) Tests of transactions and balances
b) A preliminary review of internal control
c) Specialized audit programs
d) Analytical procedures
d) Analytical procedures
Join Date: Jan 2012
97. Which of the following statements best describes the ethical
Location: World Wide Web standard of the profession pertaining to advertising and solicitation?
a) All forms of advertising and solicitation are prohibited.
b) There are no prohibitions regarding the manner in which CPAs may
solicit new business.
c) A CPA may advertise in any manner that is not false, misleading, or
deceptive.
d) A CPA may only solicit new clients through mass mailings.
c) A CPA may advertise in any manner that is not false, misleading,

or deceptive.
98. A note to the financial statements of a bank indicates that all of

the records relating to its business operations are stored on magnetic
disks; and that there are no emergency back-up systems or duplicate
disks stored since the bank and their auditors consider the occurrence
of a catastrophe to be remote. Based upon this, one would expect the
auditor's report to express
a) An adverse opinion
b) An "except for" opinion
c) An unqualified opinion
d) A qualified opinion
c) An unqualified opinion
99. Which of the following is not typically performed when accountants

are performing a review of the financial statements of a nonissuer?
a) Analytical procedures applied to financial data
b) Inquiries about significant subsequent events
c) Inquiries of the client's attorney about legal matters
d) Obtaining an understanding of the accounting principles followed
by the client's industry
c) Inquiries of the client's attorney about legal matters.
100. Which of the following is least likely to be a restricted use report?

a) A report on financial statements prepared following a
comprehensive basis of accounting other than generally accepted
accounting principles.
b) A report on internal control significant deficiencies noted in an
audit.
c) A required communication with the audit committee.
d) A report on compliance with aspects of contractual agreements.
a) A report on financial statements prepared following a

comprehensive basis of accounting other than generally accepted
accounting principles.
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Results 1 to 20 of 180 Page 1 of 9 1 2 ... Last

Apr 15, 2012 #1

1. Broadly defined, the subject matter of any audit consists of

3. If an auditor believes that material error or fraud exist, the auditor

c) Decrease detection risk

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Apr 15, 2012 #2

AccIdPEx 6. An effective internal control

Show me the spoiler!

7. In auditing through a computer, the test data method is used by

c) Procedures contained within the program

8. An auditor's working papers will generally be least likely to include

a) Client's schedules were prepared

9. Which of the following sampling methods would be most

10. Analytical procedures used in the overall review stage of an audit

a) Considering unusual or unexpected account balances that were

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Apr 15, 2012 #3

AccIdPEx 11. Results of the financial statement audit are communicated to

b) Responsibilities of the respective parties involved

13. Relationship between control risk and detection risk is ordinarily

14. A representation letter issued by a client

c) Does not reduce the auditor's responsibility

15. The recruitment of senior management for an assurance client,

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Apr 15, 2012 #4

b) Need not review all audit documentation, but may do so

17. The independent auditor lends credibility to client’s financial

d) Attaching an auditor’s opinion to the client’s financial statements

18. The most difficult type of misstatement to detect is fraud based on

b) The non-recording of transactions

19. Assuming a recurring audit, in which of the following situations

a) A recent change in partner and/or staff involved in the audit

20. When an auditor expresses an adverse opinion he/sheshould

b) Preceding the opinion paragraph

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Apr 15, 2012 #5

AccIdPEx 21. Tolerable error means

22. Examples of events or conditions, which individually or collectively,

23. Which of the following procedures is not included in a review

d) A study and evaluation of internal control structure

24. In planning the audit engagement, the auditor should consider

a) The kind of opinion that will likely be given

25. What assurance is provided by the practitioner in an agreed-upon

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Apr 15, 2012 #6

a) Authorizing the acquisition of goods

28. Involves tracing a few transactions through the accounting system

29. This exists, when other information, not related to matters

c) Material misstatement of fact

30. Who appoints the members of the Board of Accountancy

b) The president of the Philippines

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Apr 15, 2012 #7

AccIdPEx 31. An auditor is required to obtain an understanding of the entity's

b) To assist the auditor in accurately interpreting information

a) It is defined as the date after which existing documentation

33. An auditor should not issue a report on

d) The achievability of forecasts

34. Which of the following procedures would an auditor most likely

d) Inquiring as to whether any unusual adjustments were made

d) Instances of fraud involving management