Saint Paul School of Business and Law
Palo, 6501, Leyte, Philippines ACCOUNTANCY DEPARTMENT
AT -MC Q001 Q001:: GENERALLY ACCEPTED AUDITING STANDARD Sources: GAAS/Various test banks
Name: _______________________________________________ Schedule: ____________________________________________
Score: _____________
INSTRUCTIONS: Read each items carefully. Choose the best answer among the given choices. Write your answer before the number. Use capital letter in answering. Strictly NO ERASURES ALLOWED
1. As guidance for measuring the quality of the p erformance of an auditor, the auditor au ditor should refer to A. Statements of the Financial Accounting Standard Board B. Generally Accepted Auditing Standards C. Interpretations of the Statement on Auditing Standards D. Statement on Quality Control Standards 2. Which of the following statements best describes the primary purpose of Statements on Auditing Standards? A. They are guides intended to set forth auditing procedures that are applicable to a variety of situations B. They are procedural outlines which are intended to narrow the areas of inconsistency and divergence of auditor opinion C. They are authoritative statements, enforced through the Co de of Professional Conduct, that are intended to limit the degree of auditor judgment D. They are interpretations which are intended to clarify the meaning of “generally “generally accepted auditing standards” 3. Generally Accepted Auditing Standards (GAAS) and Philippine Standards on Auditing (PSA) should be looked upon by practitioners as A. Ideals to work towards, but which are not achievable B. Maximum standards which denote excellent work C. Minimum standards of performance which must be achieved on each audit engagement D. Bench mark to be used on all audit, reviews and compilations 4. An auditor needs not abide by b y a Philippines Standards on Auditing if the auditor believes that A. The amount is insignificant B. The requirement of the PSA is impractical to perform C. The requirement of the PSA is impossible to perform D. Any of the above three is correct 5. Auditing standards are: A. Statutory in nature B. Rules imposed by the Securities and Exchange Commission C. Rules imposed by the PICPA D. General guidelines to help auditors
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6. Which of the following best describes what is meant b y generally accepted auditing standards? A. Pronouncements issued by the auditing Standards and Practices Council B. Procedures to be used to gather evidence to support financial statements C. Rules acknowledged by the accounting profession because of their universal compliance D. Measure of the quality of the auditor’s performance 7. When GAAS do not provide “hard and fast rules”, they provide subjective guidance which allows auditors to: A. Tailor their audit to procedures requested by management B. Only apply those standards that are important to the audit C. Accurately interpret the profession’s Code of Professional Conduct D. Use adequate professional judgment when applying the standards 8. Every independent audit engagement involves both auditing standards and auditing procedures. The relationship between the two may be illustrated by how they apply from engagement to engagement. The best representation of this application is that, from one audit engagement to the next, A. Both auditing standards and auditing procedures are applied uniformly B. Auditing standards are applied uniformly but auditing procedures ma y vary C. Auditing standards may vary but auditing procedu res are applied uniformly D. Auditing standards are applied uniformly but auditing procedures are op tional 9. Generally Accepted Accounting Principles (GAAP) are distinguished from Generally Accepted Auditing Standards (GAAS) in that: A. GAAP are the principles for representation of financial statements and und erlying transactions, while GAAS are the standards that the auditors should follow when conducting an audit B. GAAP are the principles auditors follow when conducting an audit, while GAAS are the standards for presentation of financial statements and underlying transactions C. GAAP are promulgated by the SEC, while GAAS are promulgated by ASC. D. When GAAP are violated, sufficiently strong GAAS may make up for most GAAP deficiencies. 10. The Philippine Standards on Auditing issued b y the Auditing and Assurance Standards Council (AASC) A. Are interpretations of generally accepted auditing standards B. Are the equivalent of laws for audit practitioners C. Must be followed in all situations D. Are optional guidelines which an auditor ma y choose to follow or not follow when conducting an audit 11. The standards which represent guidance in the personal traits an auditor must possess are known as: A. General standards B. Standards of field work C. Standards of reporting D. Standards of operation 12. Which of the following best describes the character of the three generally accepted auditing standards classified as general standards? A. Criteria for competence, independence, and professional care of individual B. Criteria for content of the financial statements and related footnote disclosure C. Criteria for the content of the auditor’s report D. The requirements for planning and supervision
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13. The general standards stress the importance of A. The personal qualities which the auditor should have B. Evidence accumulation C. Communicating the auditor’s findings to the reader D. All of the above 14. An auditor is most likely to refer to one or more o f the three general auditing standards in determining A. The nature of a report qualification B. The scope of auditing procedures C. Requirements for the consideration of internal control D. Whether the auditor should undertake an audit engagement 15. The first general standard of generally accepted aud iting standards states that A. An independence in mental attitude is to be maintained B. Due professional care is to exercised C. The audit is to be performed by a person or persons having the adequate technical training and proficiency as an auditor D. The work is to be adequately planned 16. Which of the following is mandatory if the auditor is to comply with the general standards of the generally accepted auditing standards? A. Adequate technical training B. Use of analytical procedures C. Use of statistical sampling when feasible on an audit engagement D. Confirmation of material account receivable balances 17. The first general standard requires that a person or persons have adequate technical training and proficiency as an auditor. This standard is met by A. Understanding business and finance B. Education and experience in auditing C. Continuing professional education D. Knowledge if statement on auditing standards 18. Competence as a certified public account includes all of the following except A. Having the technical qualifications to perform an engagement B. Possessing the ability to supervise and evaluate the q uality of staff work C. Warranting the infallibility of the work performed D. Consulting others if additional technical information is needed 19. The general standards of GAAS require an aud itor to: A. Maintain adequate technical training B. Express an opinion on the financial statements C. Supervise the engagement and the audit staff D. Gather proper audit evidence for the engagement 20. The first general standard requires that the audit of financial statements be performed by a person having adequate technical training and A. Independence with respect to the financial statements and supplementary disclosures B. Exercising professional care as judged by peer reviews C. Proficiency as an auditor which likely has been acquired from previous experience D. Objectivity as an auditor, as verified by proper supervision 21. In any case in which the incoming accountant is not qualified to perform the work, a professional obligation exists to A. Acquire the requisite knowledge and skills B. Suggest someone else who is qualified to perform the work C. Decline the engagement 1sr Semester AY 2015 – 2016
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D. Any of the above 22. Ultimately, the decision about whether or not an auditor is independent must be made by the A. Auditor B. Audit committee C. Client D. Public 23. Which one of the following attributes is required of an auditor in relation to audit clients? A. Rationalization B. Bias C. Loyalty D. Independence 24. To be independent, the auditor: A. Cannot place any reliance on the client’s verbal and written assertions B. Is responsible only to third-party users of the financial statements C. Cannot perform any consulting services for an aud it client D. Must be impartial when dealing with the client 25. What is the meaning of the generally accepted auditing standard that requires that the auditor be independent? A. The auditor must be without bias with respect to the client entity B. The auditor must adopt a critical attitude during the audit C. The auditor’s sole obligation is to third parties D. The auditor may have a direct ownership interest in the client’s business if it is not material 26. A CPA, while performing an audit, strives to achieve independence in appearance in order to A. Reduce risk and liability B. Comply with the generally accepted standards of field work C. Become independent in fact D. Maintain public confidence in the profession 27. Which of the following best describes why publicly-traded corporation follow the practice of having the outside auditors appointed by the board of directors or elected by the stockholders? A. To comply with the regulations of the Financial Accounting Standards Board. B. To emphasize auditor independence from the management of the corporation C. To encourage a policy of rotation of the independent auditor D. To provide the corporate owners with an opportunity to voice their opinion concerning the quality of the auditing firm selected by the directors 28. Practitioner’s independence A. Minimize risk B. Help achieve public confidence C. Defends against liability D. Achieves compliance with the standards of fieldwork 29. The auditor’s responsibility for illegal acts is: A. Greater than for errors or fraud B. Less than it is for errors or fraud C. Restricted to information that comes to his attention D. The same as it is for errors and fraud
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30. An audit committee must be comprised of outside directors. Which of the following is considered an outside director? A. A member of company management B. A retired executive from another company C. The company’s independent auditor D. A consultant to the company 31. If the client refuses to accept and audit repo rt that is qualified due to the known existence of an illegal act, the auditor should: A. Issue an adverse opinion if management agrees to fully disclose the matter. B. Withdraw from the engagement and indicate the reasons to the audit committee in writing. C. Withdraw from the engagement and indicate the reasons to the Securities and Exchange Commission or other regulatory body in writing. D. Issue an unqualified opinion if management agrees to fully disclose the matter. 32. Reasonable assurance means: A. Gathering of all available corroborating evidence for the auditor to conclude that there are no material misstatements in the financial statements, taken as a whole B. Gathering of the audit evidence necessary for the auditor to conclude that the financial statements, taken as a whole are free from any misstatements. C. Gathering of the audit evidence necessary for the auditor to conclude that the financial statements are free of material unintentional misstatements. D. Gathering of the audit evidence necessary for the auditor to conclude that there are no material misstatements in the financial statements, taken as a whole. 33. Which of the following is not a general auditing standard? A. Examination is to be performed by a person having adequate technical training and proficiency. B. The work is to be adequately planned. C. Auditor is to maintain independence of material attitude. D. Auditor is to exercise due professional care in performance of ex amination. 34. The exercise of due professional care requires that an auditor A. Uses error-free judgment B. Considers internal control, including tests of controls C. Be responsible for fulfilling his or her duties diligently and carefully. D. Examines all corroborating evidence available. 35. Which of the following is not required by the Generally Accepted Auditing Standards that states that due professional care is to be ex ercised in the performance if the audit? A. Observation of the standards of field work and reporting B. Critical review of the audit work performed at every lev el of supervision C. Degree of skill commonly possessed by others in the profession. D. Responsibility for losses because of errors of judgment. 36. The standard of due audit care requires the auditor to A. Apply judgment in a conscientious manner, carefully weighing the relevant factors before reaching a decision. B. Ensure that the financial statements are free from error. C. Make perfect judgment decisions in all cases. D. Possess skills clearly above the average for the profession. 37. Required auditor communication to the audit committee con cerning illegal acts detected includes: A. All material items B. All that are not adequately addressed by management C. Only those that constitute management fraud. D. Any such acts. 1sr Semester AY 2015 – 2016
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38. Due professional care requires A. An auditor to exercise reasonable prudence in his work B. The examination of all corroborating evidence available C. The exercise of error-free judgment D. A consideration of internal control structure that includes tests of controls. 39. Which of the following mostly describes the function of AASC (ASPC)? A. To promulgate auditing standards, practice and procedures th at shall be generally accepted by the accounting profession in the Philippines. B. To monitor full compliance by auditors to PSAs. C. To assist the Board of Accountancy in conducting administrative proceedings on erring CPAs in audit practice. D. To undertake continuing research on both auditing and financial accounting in order to make them responsive to the needs of the public. 40. The exercise of due professional care requires that an auditor A. Examine all available corroborating evidence. B. Critically review the judgment exercised at every level o f supervision. C. Reduce control risk below the maximum D. Attain the proper balance of professional experience and formal education. 41. Which of the following best describes the reference to the expression “taken as a whole” in the fourth generally accepted auditing standard of reporting? A. It applies only to a complete set of financial statements B. It applies equally to each item in each financial statement. C. It applies equally to each material item in each financial statement. D. It applies equally to a complete set of financial statements and to each individual financial statement. 42. The Philippine Standards on Auditing issued by ASPC A. Apply to independent examination of financial statements of any entity when such an examination is conducted for the purpose of expressing an opinion. B. Must not apply to other related activities of auditors. C. Need to be applied on all audit related. D. Require that in no circumstances would an auditor may judge it necessary to depart from a PSA, even though such a departure may result to more effective achievement of the objective of an audit. 43. Which of the following is not one of the three generally accepted auditing standards for fieldwork? A. Adequate planning and supervision B. The need to express an opinion C. Sufficient competent evidence D. Understanding of the entity, including its internal control 44. Which of the following is a general standard? A. Proper planning and supervision B. Due professional care C. Study the internal control structure D. Gathering sufficient competent evidence 45. The third general standard states that due care is t o be exercised in the performance of the examination. This standard should be interpreted to mean that a CPA who undertakes an engagement assumes a duty to perform A. With reasonable diligence and without fault or error B. As a professional who will assume responsibility for losses consequent upon in error of judgment C. To the satisfaction of the client and third parties who may rely upon it. D. As a professional possessing the degree of skill commonly possessed by other in the field. 1sr Semester AY 2015 – 2016
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46. The exercise of due professional care requires that an auditor A. Use error-free judgment B. Consider internal controls, including tests of controls C. Critically review the work done at every level of supervision D. Examine all corroborating evidence available 47. Which of the following is not required by the Generally Accepted Auditing Standard that states that due professional care is to be exercised in performance of the audit? A. Observance of the standards of fieldwork and reporting B. Critical review of the audit work performed at every lev el of supervision C. Degree of skill commonly possessed others in the profession. D. Responsibility for losses because of errors of judgment 48. The third general standard states that due care is t o be exercised in the performance of an audit. This standard is generally interpreted to require A. Objective review of the adequacy of the technical training and proficiency of firm personnel. B. Critical review of work done at every level of supervision C. Thorough review of the existing internal control structure D. Periodic review of CPA firm’s quality control procedures 49. A CPA who has been retained by a client that operates in an industry totally new to him A. May not accept such an engagement B. May accept the engagement only if the accounting firm specializes in the audit of commercial banks. C. May accept the engagement after attaining a suitable level of understanding of the transactions and accounting practices unique to commercial banking. D. May accept the engagement because training as a CPA transcends unique industry characteristics. 50. The generally accepted standards of field work rel ate to A. The competence, independence and professional care of persons performing the audit B. Criteria for the content of the auditor’s report on financial statements C. Audit planning and evidence gathering D. The need to maintain independence in mental attitude
It is hard work, perseverance, learning, studying, sacrifice and most of all, love of what you are doing -Pele
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