Professional Skepticism in Audit
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Questions and Answers

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?

    <p>Absolute assurance with certainty of no misstatement</p> Signup and view all the answers

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

    <p>Audit objectives guide the development of specific audit procedures</p> Signup and view all the answers

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

    <p>Audit risk</p> Signup and view all the answers

    Why is maintaining professional skepticism important throughout the audit process?

    <p>To enhance the evaluation of audit results</p> Signup and view all the answers

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

    <p>It involves trusting management and governance</p> Signup and view all the answers

    Why do users of financial statements demand independent audits?

    <p>To ensure that fraud does not exist</p> Signup and view all the answers

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

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

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

    <p>Negative assurance</p> Signup and view all the answers

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

    <p>Land is materially overstated</p> Signup and view all the answers

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

    <p>To critically assess audit evidence</p> Signup and view all the answers

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

    <p>To evaluate the subject matter against unidentified suitable criteria</p> Signup and view all the answers

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

    <p>Correcting management errors</p> Signup and view all the answers

    What is one objective of an operational audit?

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

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

    <p>Independence is maintained</p> Signup and view all the answers

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

    <p>Level of assurance about the subject matter</p> Signup and view all the answers

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

    <p>Ignorance of individually immaterial accounts</p> Signup and view all the answers

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

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

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

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

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

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

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

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

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

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

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

    <p>Professional assistance on accounting procedures</p> Signup and view all the answers

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

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

    Which assertion is Allocation related to?

    <p>Assertions about account balances</p> Signup and view all the answers

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

    <p><strong>All of the above</strong></p> Signup and view all the answers

    Which statement about representing clients before governmental agencies is TRUE?

    <p><strong>It is related to accounting procedures</strong></p> Signup and view all the answers

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