Theory.pdf

CPA REVXEW SCHOOL OF THE PHILIPPINES

Manila

JULY

AUDITING THEORY FIRST PREBOARD EXAMINATIOII SET

SATURDAY, 3:30PM

27,20L3

- 5:00PM

A

CHOOSE THE BESI"ANSWER FOR EACH OF THE FOLLOWING. FULLY SHADE ONLY ONE BOX FOR EACH ilEM, STRITI-LY NO ERASURES ALLOWED.

INSTRUCTIONS:

1.

The primary reason for an audit by ar, lndeperrdent, external audit firm is to A. Relieve management of responsii:ili*y for ihe financial staternents B. Guarantee thlt there are no missurternents the financial statements and ensure that any fraud will be discovered. C. Satisff government regulatory requlrernents. D. providelncreased assurance to users as to the fairness of the financial statements'

2.

An independent auditor must have whicir of the following? A. A pie-existing and well-informed point of view with respect to the audit. B. A background in many different disciplines. C. Fxperience in taxatiorr that is sufficiei"rt to comply with Philippine Standards on Auditing. D. Technical qualifications to peform an engagement.

3.

Which of the following statemenLs applies to consultation services engagements? A. A practitioner should obtain an understaniJing of the internal control to assess control risk. B. A practitioner is not permitted to compile a financial forecast. C. A practitioner is to maintain an appearance of independence. D. A practitioner should obtain sufficient relevant data to complete the engagement'

4.

Upon discovering material misstaterienLs in a client's financial statements that the client would not revise, a predecessor auditor withdretv from the engagement' If asked by the auditor about the termination of the engagement, the predecessor auditor should A. Indicate that a misunderstanding occurred' B. State that he/she found material misstatements that the client would not revise. C. Suggest that the auditor obtain the ellentk permission to discuss the reasons. D. Suggct that the auditor ask the client. unfamiliar to the aud'rtor. Which G tne least useful sotrrce of information for the auditor during the preliminary planning stage when the aui";!:or is trying to obtain an understanding of the entity and its environment? A. Inquiries of intemal auditing personnel. B. Observation of the entity's activities. C. Inspections of documented buslness plans. D. Results of performing substantive proredttrer.

5. An auditor is planning an audit engagrment for a new client in a business

6.

According to professional standards, analyl-ical procedures are least likely to be applied to A. Plan an audit and assist in the finai revit'u,;. B" Test disclosures about rcportable operatinc segments. C. Compile financial statements. D. Review financial statements or int-erin: fiirancial informatlon.

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cPA REVIEV\I SCHOOL OF THE PFITUPPINES (CPAR)

*

MANitA

AUDMI{G THEORY

7.

8.

FTRST PR"EBOARD EHMIT{ATIOI{ / SATURDAY I 3:30PM - 5:00PM

JULY 27. 2013

Three conditions are generally present in the clientt organizaUon when fraud occurs. Those conditions include each of the following except a/an A. Incentive or pressure to commit fraud" B. Professional skepticism about the likelihood of fraud. C. Attitude or rationalization about the act of ftaud. D. Opportunity to commit fraud.

Internal auditing can affect the scope

of the

external auditor's audit

of financial

statements by

A. Decreasing the external auditor's need to perforrn detailed tests. B. Eliminating the need to be on hand during the physical count of inventory. C. Limiting direct testing the external ar:ditor tested by by pwedeng to assertions directly Hindi ka magrely TOTALLY dun sa mganot natest na ng Internal internal audiUng. pero pwedeng LESS DETAILED na lang yung gawin mo. D. Allowing the external auditor to limit hislher audit to substantive testing.

9.

Which of the following is an unusual procedure that may be deemed necessary to discover the effect of a related-parlry transactir.,n? A. Inspect or confirrr the trcnsferabriify and value of collateral. B. Confirm or discuss significant information with intermediaries, such as banks, guarantors, or agents. C. Examine invoices and other pertinent docrrments such a receiving or shipping reports. D. Determine whether the transaction has bten approved by the board of directors or other appropriate officials.

10. In evaluating the reasonableness of an aecriunting estimate, an auditor is rnost likely to concentrate on key factors and assumptions that are

A. Consistent with prior periods. B. Deviations from historical pattems.

C. Similar to industry guidelines. D. Objective and not susceptible to bias.

11.

Directors, management, external auditors, and interrral auditors all play important roles in creating proper control processes. Senior rnanagement is primarily responsible for A. Establishing risk management and conftol processes. B. Implementing and monitoring controls clesigned by the board of directors. C. Ensuring that external and internal auditors oversee the administration of risk management and control processes. D. Reviewing the reliability and integrity of financial and operational information.

L2.

Why do auditors generally use a sampline appr