1.

Which of the following reports may be issued only by an accountant who is independent of a
client?
a. Standard report on an examination of a financial forecast.
b. Report on consulting services.
c. Compilation report on historical financial statements.
d. Compilation report on a financial projection.

2. An auditor concludes that there is a material inconsistency in the other information in an annual
report to shareholders containing audited financial statements. If the auditor concludes that the
financial statements do not require revision, but the client refuses to revise or eliminate the
material inconsistency, the auditor may
a. Revise the auditor’s report to include a separate emphasis-of-matter paragraph
describing the material inconsistency.
b. Issue an “except for” qualified opinion after discussing the matter with the client’s board
of directors.
c. Consider the matter closed since the other information is not in the audited financial
statements.
d. Disclaim an opinion on the financial statements after explaining the material
inconsistency in a separate basis for disclaimer paragraph.

3. Which of the following types of audit evidence is the most persuasive?

a. Pre-numbered client purchase order forms.
b. Client work sheets supporting cost allocations.
c. Bank statements obtained from the client.
d. Client representation letter.

4. A client maintains perpetual inventory records in both quantities and dollars. If the assessed level
of control risk is high, an auditor would probably
a. Increase the extent of tests of controls of the inventory cycle.
b. Request the client to schedule the physical inventory count at the end of the year.
c. Insist that the client perform physical counts of inventory items several times during the
year.
d. Apply gross profit tests to ascertain the reasonableness of the physical counts

5. Which of the following procedures would most likely assist an auditor in identifying related party
transactions?
a. Evaluate the reasonableness of management’s accounting estimates that are subject to
bias.
b. Retest ineffective internal control activities for evidence of management override.
c. Review the minutes of the meetings of the board of directors and its committees.
d. Send second requests for unanswered positive confirmations of accounts receivable.

6. The test of details of balance procedure which requires the auditor to account for unused
inventory tag numbers to make sure none have been deleted is associated with the audit
objective of:
a. Accuracy.
b. Existence.
c. Detail tie-in.
d. Completeness.

7. An auditor anticipates assessing control risk at a low level in a computerized environment. Under
these circumstances, on which of the following activities would the auditor initially focus?
a. Programmed control activities.
b. Application control activities.
c. Output control activities.
d. General control activities.
8. When audited financial statements are presented in a document (e.g., annual report) containing
other information, the auditor
a. Should read the other information to consider whether it is inconsistent with the
audited financial statements.
b. Has no responsibility for the other information because it is not part of the basic financial
statements.
c. Has an obligation to perform auditing procedures to corroborate the other information.
d. Is required to express a qualified opinion if the other information has a material
misstatement of fact.

9. In which of the following situations would an auditor of an entity’s financial statements ordinarily
choose between expressing a qualified opinion or an adverse opinion?
a. The auditor wishes to emphasize an unusually important subsequent event.
b. The financial statements fail to disclose information that is required by Philippine
Financial Reporting Standards.
c. Events disclosed in the financial statements cause the auditor to have substantial doubt
about the entity’s ability to continue as a going concern.
d. The auditor did not observe the entity’s physical inventory and is unable to become
satisfied as to its balance by other auditing procedures.

10. Which of the following has the title “Going Concern”?

a. PSA 600
b. PSA 570
c. PSA 402
d. PSA 320

11. Mahal Mo Ba Talaga Ako Company bought a piece of machinery from Who You Corp.
Information is as follows:
Cost of Machine 30,000
Cost of Installation 10,000
Cost of initial test 5,000
How much is the capitalized cost?
a. 30,000
b. 35,000
c. 40,000
d. 45,000

12. The existence and significance of financial interest that will create a self-interest threat depends
on the following except:
a. Role of the person holding the interest
b. If it is direct or indirect
c. The materiality of the financial interest
d. Whenever the financial interest is an equity or debt instrument

13. The 2018 Code of Ethics is divided into 4 parts, which of the following is the title of part 2?
a. Complying with the Code, Fundamental Principles and Conceptual Framework
b. Professional Accountants in Business
c. Professional Accountants in Public Practice
d. International Independence Standards

14. The following areas are ordinarily covered during the wrap-up of an engagement except
a. Review planned audit procedures for proper and complete execution.
b. Determine that all matters have been appropriately considered.
c. Revisit open review notes, ‘to-do’ items and any audit procedures not yet completed.
 d. Remove all documents from the working papers that aren’t necessary to support the
auditor’s conclusions.

15. It includes copies of invoices and statements sent to customers, & purchase orders.
a. Internally Generated Evidence
b. Externally Generated Evidence
c. Auditor’s Gathers Evidence
d. Audit Evidence

16. The quality of ___________ affects management’s ability to make appropriate decisions in
controlling the organisation’s activities
a. Internal Control
b. Reports
c. Information and Communication
d. Enterprise Resource Planning System

17. It is based on the premise that a computer will continue to perform any given procedure in exactly
the same way until such time as the program (or application) is changed. If the auditor can verify
that a given program that executes a process or control has not changed since last tested, they
may decide not to repeat certain audit procedures in a subsequent period.
a. Benchmarking
b. Consistency
c. White Box Approach
d. Black Box Approach

18. In testing for completeness of cost and expenses, it can be best described as
a. All costs and expenses in the income statement are properly supported as charges
against the entity in the period. Costs and expenses applicable to future periods are
carried forward as inventory, pre-paid expenses, deferred charges or property, plant and
equipment.
b. All costs related to the current period’s revenues and all expenses of the current
period are included in the income statement.
c. Costs and expenses are stated in income statement at the appropriate amounts.
d. Costs and expenses are properly classified, described and disclosed in the financial
report, including the notes.

19. Delivery documentation for the sale of goods:

a. is important because it provides evidence supporting the date of sale.
b. is not important to audit because the invoice date is always the correct date of sale.
c. is important because it shows how hard the personnel in the warehouse are working.
d. is not important because the only thing that matters is whether the debtor pays the
account.

20. A debtor’s positive confirmation: LO3

a. is not as useful as a negative confirmation.
b. provides evidence that the debt will be collected.
c. provides evidence about the existence of the debt.
d. provides evidence about the classification assertion.