Professional Skepticism in Audit

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What is one of the principal objectives in auditing accounts receivable?

To determine if compliance audit reduces costs

To provide negative assurance on financial statements

To determine if accounts are collected by the balance sheet date (correct)

To assess the risk that information is misstated

What are management assertions in financial statements?

Negative assurances provided by accountants

Assertions about the risk of misstatement

Implied representations about classes of transactions

Expressed representations by management (correct)

What is the hallmark of auditing according to the text?

Certainty that financial statements are free from misstatement

The type of assurance in a compliance audit

Professional due care (correct)

Risk assessment in compilation services

What is the type of assurance expected in an audit of financial statements?

Absolute assurance with certainty of no misstatement Signup and view all the answers

Which statement correctly describes the auditor's consideration during audit procedure development?

Audit objectives guide the development of specific audit procedures Signup and view all the answers

What is the risk referred to as in auditing when information may be misstated?

Audit risk Signup and view all the answers

Why is maintaining professional skepticism important throughout the audit process?

To enhance the evaluation of audit results Signup and view all the answers

What is a common misconception about the role of professional skepticism?

It involves trusting management and governance Signup and view all the answers

Why do users of financial statements demand independent audits?

To ensure that fraud does not exist Signup and view all the answers

In what areas does the practice of accountancy extend according to the text?

Commerce and industry, government, education/academe Signup and view all the answers

What type of assurance is now required on the financial statements by the bank?

Negative assurance Signup and view all the answers

If audit procedures reveal that land is materially overstated, what might be discovered?

Land is materially overstated Signup and view all the answers

Which statement best describes why professional skepticism is necessary in auditing?

To critically assess audit evidence Signup and view all the answers

In an assurance engagement, what is the responsibility of a professional accountant?

To evaluate the subject matter against unidentified suitable criteria Signup and view all the answers

What role does an independent audit play in relation to management's errors?

Correcting management errors Signup and view all the answers

What is one objective of an operational audit?

To assess management's operations oversight by the audit committee Signup and view all the answers

In terms of independence, what happens if a CPA holds an immaterial indirect financial interest in the client?

Independence is maintained Signup and view all the answers

What does an assurance engagement aim to provide the intended user with?

Level of assurance about the subject matter Signup and view all the answers

What is the reason behind the client's failure to record purchase returns?

Ignorance of individually immaterial accounts Signup and view all the answers

Why should confirmation requests be mailed to respondents by the management?

To support management's financial statement assertion of occurrence Signup and view all the answers

What is the purpose of the auditor reviewing a client's periodic accounting for numerical sequence?

To support management's financial statement assertion of occurrence Signup and view all the answers

When is it required to document all auditor test counts in the working papers?

Not all auditor test counts are always required to be documented Signup and view all the answers

Why must auditors not ignore individually immaterial accounts when confirming accounts receivable?

To support management's financial statement assertion of occurrence Signup and view all the answers

What is the CPA firm's duty concerning the acceptance of new clients?

Anticipate before performing any fieldwork whether an unqualified opinion can be expressed Signup and view all the answers

According to RA No. 9288, which service is NOT considered a CPA service in public practice?

Professional assistance on accounting procedures Signup and view all the answers

Regarding the auditor's use of professional competence, which statement is TRUE?

The auditor uses professional competence to determine specific auditing procedures Signup and view all the answers

Which assertion is Allocation related to?

Assertions about account balances Signup and view all the answers

In conducting an audit engagement, what categories do the assertions fall into according to PSA 500?

All of the above Signup and view all the answers

Which statement about representing clients before governmental agencies is TRUE?

It is related to accounting procedures Signup and view all the answers

Professional Skepticism in Audit

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Questions and Answers

What is one of the principal objectives in auditing accounts receivable?

What are management assertions in financial statements?

What is the hallmark of auditing according to the text?

What is the type of assurance expected in an audit of financial statements?

Which statement correctly describes the auditor's consideration during audit procedure development?

What is the risk referred to as in auditing when information may be misstated?

Why is maintaining professional skepticism important throughout the audit process?

What is a common misconception about the role of professional skepticism?

Why do users of financial statements demand independent audits?

In what areas does the practice of accountancy extend according to the text?

What type of assurance is now required on the financial statements by the bank?

If audit procedures reveal that land is materially overstated, what might be discovered?

Which statement best describes why professional skepticism is necessary in auditing?

In an assurance engagement, what is the responsibility of a professional accountant?

What role does an independent audit play in relation to management's errors?

What is one objective of an operational audit?

In terms of independence, what happens if a CPA holds an immaterial indirect financial interest in the client?

What does an assurance engagement aim to provide the intended user with?

What is the reason behind the client's failure to record purchase returns?

Why should confirmation requests be mailed to respondents by the management?

What is the purpose of the auditor reviewing a client's periodic accounting for numerical sequence?

When is it required to document all auditor test counts in the working papers?

Why must auditors not ignore individually immaterial accounts when confirming accounts receivable?

What is the CPA firm's duty concerning the acceptance of new clients?

According to RA No. 9288, which service is NOT considered a CPA service in public practice?

Regarding the auditor's use of professional competence, which statement is TRUE?

Which assertion is Allocation related to?

In conducting an audit engagement, what categories do the assertions fall into according to PSA 500?

Which statement about representing clients before governmental agencies is TRUE?

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