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The objective objective of the ordinary ordinary audit audit of nancial statements is is the expression expression of an opinion on: a. the fairn fairness ess of the the nancia nanciall statements statements in in all materia materiall respect respects. s. b. the accu accura racy cy of the the nanc nancial ial stat statem ement ents. s. c. the accura accuracy cy of the the annua annuall repo report. rt. d. the accur accuracy acy of of the balanc balance e sheet sheet and income income stateme statement. nt. The responsibi responsibility lity for the the preparation preparation of the nancial nancial statements and the accompanying accompanying footnotes footnotes belong belong to: a. the au auditor. b. management management.. c. both manageme management nt and and the the auditor auditor equally equally. d. manageme management nt for the statem statements ents and the the auditor auditor for the the notes. notes. udit uditor ors s accum accumula ulate te evid evidenc ence e to: to: a. defend defend them themselve selves s in the event event of of a la!suit. la!suit. b. justify justify the the conclus conclusion ions s they have have other other!ise !ise reached reached.. c. satisfy satisfy the requi requirem rements ents of the the "ecuriti "ecurities es and #xchan #xchange ge $ommiss $ommission. ion. d. enable them to reach conclusi conclusions ons about about the fairness of the nancial statements. &anag &anageme ement nt assert assertio ions ns are: are: a. directly related to the nanci nancial al reporting reporting frame!o frame!or' r' used used by the the company company.. b. stated stated in the footn footnotes otes to the the nanci nancial al statem statements ents.. c. explici explicitly tly expresse expressed d represen representati tation on about the company company(( nancial nancial conditio condition. n. d. provided provided to the auditor in the assertions assertions letter) but are not not disclosed disclosed on the nancial nancial statements. statements. This assertion assertion addresses addresses !hether !hether all transactions transactions that that should be be included included in the nancial nancial statements statements are in fact include. a. occurrence b. comp mpllete tene ness ss c. righ rights ts and and obli obliga gati tion ons s d. existence ,hich ,hich of the the follo! follo!ing ing state statement ments s is not not corr correctecta. t !ould be a violation violation of the completenes completeness s assertion assertion if management management !ould record record a sale that did not ta'e place. b. The completenes completeness s assertion assertion deals deals !ith matters opposite opposite from those of of the existence assertion. c. The completenes completeness s assertion assertion is concern concern !ith the possibility possibility of omitting omitting items from the nancial nancial statements that should behave been included. d. The existence existence assertion assertion is is concerned concerned !ith inclusion of amount amount that should should not have been. been. ,hich ,hich of the follo!i follo!ing ng assertio assertions ns does does not relate relate to balance balance at at period period enda. #xistence b. 0ccurrence c. alua aluati tion on or or allo alloca cati tion on d. igh ights ts and and obl oblig igat atio ion n ,hich ,hich of the follo follo!ing !ing statement statements s is corre correctcta. #xistenc #xistence e relates relates to !hethe !hetherr the amounts amounts in accou accounts nts are are understat understated. ed. b. $omplet $ompletenes eness s relat relates es to !hether !hether balances balances exist. exist. c. #xis #xistenc tence e relate relates s to !heth !hether er the the balanc balances es are are valid. valid. d. 0ccurrence 0ccurrence relates relates to !hether the the amounts amounts in accounts accounts occurred occurred in proper proper year. year. ,hich of of the follo!ing follo!ing managemen managementt assertions assertions is not not associated associated !ith transaction5rela transaction5related ted audit objectivesa. 0ccurrence b. $l $lass assi icat cation ion and and underst understan anda dabil bility ity c. ccuracy d. $omple pletene teness ss n assertion that transactions transactions are recorde recorded d in proper accounting accounting period is: a. classi ssicati cation on b. accuracy c. occurrence d. cut5o7 The auditor is determining determining that the record record sales are for the amount of goods goods shipped are correctly correctly billed billed and recorded. The auditor is gathering evidence about !hich transaction related audit objectivea. existence b. compl mpletene teness ss c. accuracy d. cut5o7 n testing the cut5o7 ) the objective objective is to determine: determine: a. !hether !hether all all of the curren currentt period(s period(s transac transaction tions s are reco recorde rded. d. b. !he !hether ther transac transaction tions s are recor recorded ded in the correc correctt accountin accounting g period. period. c. the prope properr cut5o7 cut5o7 bet!een bet!een capital capitali8ing i8ing and and expens expensing ing expend expenditur iture. e. d. the proper proper cut5o7 bet!een bet!een disclosing disclosing items in in footnotes footnotes or in account account balances. balances. ,hich of of the follo!ing follo!ing statements statements are are not corre correctcta. There are many many !ays an auditor auditor can accumulate accumulate evidence evidence to meet meet the overall overall audit audit objectives. objectives. b. "u9cient appropr appropriate iate evidence evidence must be accumulate accumulated d to meet the auditor( auditor(s s professional professional responsibility responsibility. c. The cost of accum accumulat ulating ing evidence evidence should should be minimi8e minimi8ed. d.
d. 1%.
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athering evidence and minimi8ing costs are equally important considerations that a7ect the approach the auditor selects. ,hen the auditors develops supporting evidence for amounts posted to account balances !ith documentary evidence) that process is called: a. inquiry b. conrmation c. vouching d. physical examination ,hen the auditor uses tracing as an audit procedure for test of transactions) the auditor is primarily concerned !ith !hich audit objectivea. 0ccurrence b. $ompleteness c. $ut5o7 d. $lassication ,hen auditor use documentation to support recorded transactions and amounts) the process is usually called: a. tracing b. conformations c. vouching d. reperformance ,hen the auditor used the audit procedure vouching) the auditor is primarily concerned !ith !hich of the follo!ing audit objectives !hen testing classes of transactionsa. 0ccurrence b. $ompleteness c. uthori8ation d. $lassication n performing your audit for a privately5held rm your inquiries have yielded that one of the company(s o!ner(s primary motivations is to pay the least amount of income tax that is possible. ;ased on this observation !hich audit objective for ending inventory !ould the auditor be most concerned about ascertaininga. $ompleteness b. ccuracy c. ights and obligations d. #xistence fter the auditor has completed all audit procedures) it is necessary to combine the information obtained to reach an overall conclusion as to !hether the nancial statements are fairly presented. This is a highly subjective process that relies heavily on: a. generally accepted auditing standards. b. the $ode of
2%. #ven !ith the most e7ectively designed internal control) the auditor must obtain audit evidence) beyond testing the controls) for every: a. transaction b. nancial statements account c. material nancial statements account d. nancial statement account that !ill be relied upon by third parties. 2*. The sequence of steps in gathering evidence as the basis of the auditor(s opinion is a. "ubstantive tests) documentation of control structure) and tests of controls b. >ocumentation of control structure) tests of controls) and substantive tests c. >ocumentation of control structure) substantive tests ) and tests of controls d. Tests of controls) documentation of control structure) and substantive tests 2+. ,hich of the follo!ing is the correct order of steps in the audit process.
evelop an overall strategy for the expected conduct and scope of the audit $. 0btain client(s !ritten representation >. ) ) ;) #) $ b. >) ;) ) #) $ c. >) ;) $) ) # d. >) ;) #) ) $ 2/. ,hich of the follo!ing !ould an auditor least li'ely perform as part of the auditor(s preliminary engagement activitiesa. eciding !hether to accept or reject an audit engagement. b. nquiring from predecessor auditor. c. etermine the degree of 'no!ledge and expertise required by the engagement. b. >etermine the integrity of management. c. >etermine !hether the rm is independent !ith the client. d. ather evidence about the fairness of the nancial statements. 33. $< rm(s quality control procedures pertaining to the acceptance of a prospective audit client !ould most li'ely include a. nquiry of management as to !hether disagreements bet!een the predecessor auditor and the prospective client !ere resolved satisfactorily. b. $onsideration of !hether su9cient competent evidential matter may be obtained to a7ord a reasonable basis for an opinion. c. nquiry of third parties) such as the prospective client(s ban'ers and attorneys) about information regarding the prospective client and its management.
d. 3%.
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$onsideration of !hether the internal control structure is su9ciently e7ective to permit a reduction in the required substantive tests. isagreements the predecessor had !ith the client concerning auditing procedures and accounting principles b. The predecessor(s evaluation of matters of continuing accounting signicance. c. The degree of cooperation the predecessor received concerning the inquiry of the client(s la!yer. d. The predecessor(s assessments of inherent ris' and judgments about materiality ;efore accepting an audit engagement) a successor auditor should ma'e specic inquiries of the predecessor auditor regarding the predecessor(s a. 0pinion of any subsequent events occurring since the predecessor(s audit report !as issued b. Bnderstanding as to the reasons for the change of auditors c. !areness of the consistency in the application of <=" bet!een periods d. #valuation of all matters of continuing accounting signicance n incoming auditor most li'ely !ould ma'e specic inquiries of the predecessor auditor regarding
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a. "peciali8ed accounting principles of the client(s industry b. The competency of the client(s internal audit sta7. c. The uncertainty inherent in applying sampling procedures. d. >isagreements !ith management as to auditing procedures. ,hich of the follo!ing should an incoming auditor obtain from the predecessors auditor prior to accepting an audit engagement a. nalysis of balance sheet accounts b. nalysis of income statements accounts c. ll matters of continuing accounting signicance d. =acts that bear on the integrity of management ,hat information should an incoming auditor obtain during the inquiry of the predecessor auditor prior to acceptance of the audit. =acts that bear in the integrity of the management . ,hether statistical or non5statistical sampling !as used to gather evidence . >isagreement !ith management concerning auditing procedures . The e7ect of the client(s internal audit function on the scope of the independent auditor(s examination a. and b. and c. and d. and n incoming auditor should request the ne! client to authori8e the predecessor auditor to allo! a revie! of the predecessor(s #ngagement letter ,or'ing
c. notify the audit sta7 of an upcoming engagement so that personnel scheduling can be facilitated d. emphasi8e management(s responsibility for approving the audit program **. ;efore performing any audit procedures. The auditor and the client should agree on the Type of opinion to be expressed Terms of the engagement a. ?es ?es b. @o ?es c. @o ?es d. ?es ?es *+. #ngagement letters a. may be either oral or !ritten b. must be !ritten c. must be !ritten and notari8ed d. must be !ritten if the client is regulated by the "ecurities and #xchange $ommission */. ccording to <" 216) the auditor and the client should agree on the terms of engagement. The agreed terms !ould need to be recorded in aGnH a. memorandum to be placed in the permanent section of the auditing !or'ing papers b. engage letter c. client representation d. comfort letter *. The auditor should document the understanding established !ith a client through aGnH a. 0ral communication !ith the client b. ,ritten communication !ith the client c. ,ritten or oral communication !ith the client d. $ompletely detailed audit plan *4. ,hich of the follo!ing is GareH valid reasons !hy an auditor sends to his client an engagement lettera. b. c. d. To avoid misunderstanding with respect to engagement ?es ?es @o ?es To confrm the auditor’s acceptance o the appointment ?es ?es ?es @o To document the objective and scope o the audit ?es ?es ?es ?es To ensure CPA’s compliance to PSA ?es @o @o ?es +6. ,ritten communication that the auditor !ill provide reasonable assurance for the detection of fraud is found in: a. engagement letter b. representation letter c. responsibility letter d. client letter +1. ,hich of the follo!ing normally signs the engagement letter for an audit of a private companya. &anagement. b. ;oard of directors representative c. udit committee representative d. $orporate treasurer +2. f an auditor believes that an understanding !ith the client has not been established) he or she should ordinarily a. ecline to accept or perform the audit c. ssess the control ris' at the maximum level and perform a primarily substantive audit d. &odify the scope of the audit to reDect an increased ris' of material misstatement due to fraud +3. #ngagement letter that documents and conrms the auditor(s acceptance of the engagement !ould normally be sent to the client. a. before the audit report issued b. after the audit report is issued c. at the end of the eld !or' d. before the commencement of the engagement +%. an engagement letter should ordinarily include information on the objectives of the engagement and CPA’s responsibility Clients responsibility Limitation o engagement a. ?es ?es ?es b. ?es @o ?es c. ?es @o @o d. @o @o @o +*. ,hich of the follo!ing matters is generally included in an auditor(s engagement lettera. &anagement(s responsibility for the entity(s compliance !ith la!s and regulations b. The factors to be considered in setting preliminary judgments about materiality c. &anagement(s explicit liability for illegal acts committed by its employees d. The auditor(s responsibility to search for signicant internal control deciencies ++. ,hich of the follo!ing !ould be least li'ely to be included in the auditor(s engagement lettera. =orms of the report
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b. #xtent of his responsibilities to his client c. 0bjectives and scope of the audit d. Type of opinion to be issued ,hich of the follo!ing is not one of the principal contents of an engagement lettera. objective of the nancial statements b. unrestricted access to records and documents c. limitation of the engagement d. management(s responsibility for the nancial statements n engagement letter !ould not normally include a. billing arrangement b. arrangement concerning client(s assistance c. details of the procedure that !ill be performed d. expectation of receiving a representation letter from management The audit engagement letter should generally include a reference to each of the follo!ing except a. The expectation of receiving a !ritten management representation letter b. request for the client to conrm the terms of the engagement c. description of the auditor(s method of sample selection d. The ris' that material misstatements may remain undiscovered fter preliminary audit) arrangements have been made) an engagement conrmation letter should be sent to the client. The letter usually !ould not conclude a. reference to the auditor(s responsibility for the detection of errors or irregularities b. n estimate of the time to be spent on the audit !or' by audit sta7 and management c. statement that management advisory services !ould be made available upon request d. statement that a management letter !ill be issued outlining comments and suggestions as to any procedures requiring the client(s attention rrangements concerning !hich of the follo!ing are least li'ely to be included in engagement lettersa. auditor(s responsibilities b. =ees and billing c. $< investment in client securities d. 0ther forms of reports to be issued in addition to the audit report The use of an engagement is the best method of documenting . The required communication of signicant deciencies in internal control structure . "ignicantly lo!er materiality levels than those used in the prior audit . The description of any letters or reports that the auditor expects to issue . @otication of any changes in the original arrangements of the audit a. and b. and c. and d. and n !hich of the follo!ing situations !ould be the auditor be unli'ely to send a ne! engagement letter to a continuing clienta. a change in terms of the engagements b. a signicant change in the nature or si8e of the client(s business c. a recent change of client management d. a recent change in the partner andIor sta7 in the audit engagement n continuing engagement) the continuing auditor !ould most li'ely send a ne! engagement letter !hen a. there is a change in the partner assigned to the engagement b. there is a recent change in client(s management c. there are ne! accounting pronouncements a7ecting the client(s nancial statements d. there are expected minor changes in the nature or si8e of the client(s business ,hen the auditor of a parent entity is also the auditor of its subsidiary) branch or division GcomponentHJ !hich of the follo!ing factors !ould least li'ely inDuence the auditor(s decision to send separate letter to a component of a parent entitya. eographical location of the component. b. Eegal requirements c. >egree of o!nership by parent d. >egree of independence of component(s management.
