Activity September 26 2024 Auditing & Assurance PDF

Acctg. 331 -- Auditing & Assurance Principles Class Activity J. Sapariya **Test I. Auditing Theory. Choose the letter of the correct answer. (35 points)** 1. The auditor communicates the results of his or her work through the medium of the: a. Audit engagement letter b. Audit report c....

Acctg. 331 -- Auditing & Assurance Principles Class Activity J. Sapariya **Test I. Auditing Theory. Choose the letter of the correct answer. (35 points)** 1. The auditor communicates the results of his or her work through the medium of the: a. Audit engagement letter b. Audit report c. Management letter d. Notes to the financial statements 2. The purpose of an audit of financial statements is to: a. Enhance understanding of the stakeholders of the company b. Provide government agencies, such as BIR with basis for assessments c. Enhance the degree of confidence of intended users of the financial statements d. Enhance the knowledge and skills of external auditors 3. The overall objectives of the independent auditor in conducting financial statement audits is: a. To provide accuracy and reliability of financial statements b. To prepare and present financial statements in accordance with PFRS c. To obtain reasonable assurance about whether the financial statements are free from material misstatements, due to fraud and error d. To report on the financial statements and communicate as required by PAS 4. Financial statements need to be prepared in accordance with one, or a combination of: a. PFRS b. IFRS c. Other authoritative basis d. All of the answers 5. This type of audit involves a review of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness of operations, identifying areas for improvement, and making recommendations to improve performance. a. Financial statement audit b. Operational audit c. Compliance audit d. Internal audit 6. An engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria a. Assurance engagement b. Attestation engagement c. Audit engagement d. Management consulting engagement 7. Which of the following is NOT an element of an assurance engagement? a. Sufficient appropriate evidence b. Appropriate professional fees c. A subject matter d. A written assurance report 8. The person, persons or class of persons for whom the practitioner prepares the assurance report, a. General public b. Responsible party c. Audit committee d. Intended users 9. The Core Competencies of CPAS include: a. Assurance and information integrity b. Objectivity c. Strategic and critical thinking skills d. Pursuit of life-long learning and excellence 10. The Code of Professional Ethics would most likely be violated if an auditor: a. Owns a building and leases floor space to an assurance client b. Has an insured account with a brokerage firm audit client c. Is engaged by an audit client to identify potential acquisitions d. Screens candidates for an audit client's vacant controllership position 11. The provision of services by a firm or network firm to an audit client that involve the design and implementation of financial information technology systems that are used to generate information forming part of a client's financial statements may most likely create a. Self-interest threat b. Self-review threat c. Intimidation threat d. Familiarity threat 12. One of the major parts of audit planning is pre-planning. Which of the following is NOT involved during the pre-planning phase? a. Deciding whether to accept or continue this client. b. Obtaining information about client's legal obligations c. Selecting staff for the engagement d. Obtaining an engagement letter 13. A CPA, while performing an audit, strives to achieve independence in appearance in order to a. Reduce risk and liability of the auditor b. Comply with requirements of the various regulators c. To achieve independent in fact d. Maintain public confidence in the profession 14. An engagement quality control review is required to be performed: a. Immediately after the re-assessment of control risk b. For all audits of financial statements of listed entities c. For all types of audits, regardless of the subject matter of the engagement d. at engagement completion after the report is issued 15. What aspects are most important in determining the eligibility of engagement quality control reviewers? a. Technical qualification and objectivity. b. Integrity and objectivity c. Competence and independence d. All of these 16. Original paper documentation may be scanned and stored electronically for practical reasons. After scanning, the original paper document: a. Shall be discarded following established principles on waste disposal b. Shall be kept on file for future reference c. Shall be considered for retention or disposal depending on legal or regulatory requirements and other factors d. None of these. 17. In the case of an audit, final engagement files should be completely assembled not more than\_\_\_ days after the date of the audit report. a. 60 b. 30 c. 10 d. 5 18. Who is responsible for forming a conclusion on compliance with independence requirements that apply to the audit engagements? a. Audit staff b. Audit supervisor c. Engagement manager d. Engagement partner 19. The following are considered by a CPA firm in deciding whether to accept a new client, except: a. The client's financial ability b. The client's relations with its previous CPA firm c. The client's standing in the business community d. The client's probability of achieving an unqualified opinion 20. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding: a. Disagreements which the predecessor had with the client concerning auditing procedures and accounting principles. b. The predecessor's evaluation of matters of continuing accounting significance c. The degree of cooperation the predecessor received concerning the inquiry of the client's legal counsel d. The predecessor's assessments of inherent risk and judgments about materiality 21. Which of the following matters is least likely to be discussed in an engagement letter?- not yet confirmed a. The fact that the financial statements are the responsibility of management. b. The fact that an auditor does not plan to detect material irregularities c. Assistance to be provided by client personnel d. Timing of the performance of the examination 22. To obtain an understanding of a continuing client's business in planning and audit, an auditor mostly likely would a. Perform test of details of transactions and balances b. Review prior-year working papers and the permanent file for the client c. Read specialized industry journals d. Reevaluate client's internal control environment 23. The overall attitude and awareness of an entity's board of directors concerning the importance of the internal control structure usually is reflected in its: a. Computer-based controls b. System of segregation of duties c. Control environment d. Safeguard over access to assets 24. Control procedures do not encompass: a. Comparison of assets with recorded accountability b. Design and use of documents c. Proper safeguards over access to assets d. An internal audit function 25. This term means " to analyze identified risks to conclude on their significance": a. Estimate b. Assess c. Measure d. Analyze 26. Philippine Standards on Auditing (PSAs) should be looked upon by the practitioners as: a. Ideals to strive for, but which are not achievable b. Maximum standards which denote excellent work c. Benchmark to be used on all adults, reviews, and compilations d. Minimum standards of performance which must be achieved on each audit engagement. 27. The phrase used to express the auditor's opinion is a. "absence of material and pervasive misstatements in the financial statements" b. "present fairly, in all material respects" c. "provide reasonable assurance, but not absolute assurance" d. all of these choices are acceptable phrases to express the auditor's opinion. 28. According to IAASB's Glossary of Terms, this refers to a high, but not, absolute level of assurance a. Professional judgment b. Conservatism c. Audit risk d. Reasonable assurance 29. An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of evidence. a. Professional skepticism b. Materiality c. Conservative advocacy d. Reasonable assurance 30. This term refers to the possibility of harm or loss or danger. It can also refer to a factor, thing, or element or course involving uncertain danger; or a hazard. a. Materiality b. Jeopardy c. Contingency d. Risk 31. Which of the following best describes audit risk? a. The susceptibility of an account balance or class of transactions to misstatement that could be material, individually or when aggregated with misstatements in other balances of classes, before consideration of any related controls. b. The risk that a misstatement that could occur in an account balance or class of transactions and that could be material individually or in the aggregate, will not be prevented or detected and corrected on a timely basis by the company's internal control. c. The risk that an auditor's substantive procedures will not detect a misstatement that exists in an account balance or class of transactions that could be material, individually or when aggregated with misstatements in other balances or classes. d. The risk that the auditor gives an inappropriate audit opinion when the financial statements are materially misstated 32. Inherent risk and control risk collectively are known as: a. The dual risk team b. The risk of information dissemination c. The risk of material misstatement d. The dependent variable of risk 33. Which of the following best describes detection risk? a. The risk that an auditor's substantive procedures will not detect a misstatement that exists in an account balance or class of transactions that could be material, individually or when aggregated with misstatements in other balances or classes. b. The risk that a misstatement that could occur in an account balance or class of transactions and that could be material individually or in the aggregate, will not be prevented or detected and corrected on a timely basis by the company's internal control. c. The susceptibility of an account balance or class of transactions to misstatement that could be material, individually or when aggregated with misstatements in other balances of classes, before consideration of any related controls. d. The risks that the auditor gives an inappropriate audit opinion when the financial statements are materially misstated. 34. This term refers to the application of relevant training, knowledge and experience, within the context provided by auditing, accounting and ethical standards, in making informed decisions about the courses of actions that are appropriate in the circumstances of the audit engagement. a. Professionalism b. Conservatism c. Professional judgment d. Materiality 35. According to ISA 220, which of the following information is not necessary for the engagement partner to consider in client acceptance and continuance decisions? a. Integrity of minority and non-controlling owners b. Competence of engagement team c. Engagement team's compliance with ethical requirements d. Significant matters with implications to continuing client relationship **end**