Auditing Theory Review Questions For Revisit by Dario Oyam JR

AUDITING THEORY REVIEW QUESTIONS FOR REVISIT
BY DARIO OYAM JR.
19. Which of the following is mandatory if the auditor is to comply with the general standards of
the AICPA’s generally accepted auditing standards?
a. Adequate technical training

b. Use analytical procedures.
c. Use statistical sampling when feasible on an audit engagement.
d. Confirmation of material accounts receivable balances.
23. The fourth generally accepted auditing standard of reporting requires an auditor to render a
report whenever an auditor's name is associated with financial statements. The overall purpose
of the fourth standard of reporting is to require that reports
a. Assure that the auditor is independent with respect to the financial statements audited.
b. State that the audit has been conducted in accordance with generally accepted auditing
standards.
c. Indicate the character of the engagement and the degree of responsibility assumed by the
auditor.
d. Express whether the accounting principles used in preparing the financial statements have
been applied consistently in the period audited.
ANS: C
24. Which of the following underlies the application of generally accepted auditing standards,
particularly the standards of fieldwork and reporting?
a. The elements of materiality and risk.

b. The element of internal control.
c. The element of corroborating evidence.
d. The element of reasonable assurance.
ANS: A
31. In connection with the third generally accepted auditing standard of fieldwork, an auditor
examines corroborating evidential matter that includes all of the following except
a. Client accounting manuals.

b. Vendor invoices.
c. Written client representations.
d. Minutes of board meetings.
ANS: C
33. Which of the following underlies the application of generally accepted auditing standards,
particularly the standards of fieldwork and reporting?
a. The elements of materiality and risk.

b. The element of internal control.
c. The element of corroborating evidence.
d. The element of reasonable assurance.
ANS: A
39. Which of the following has historically had the least influence on the practice of public
accounting?
a. The Governmental Accounting Standards Board.

b. The Institute of Internal Auditors.
c. The Securities and Exchange Commission.
d. The PH Congress.
48. Which of the following engagements is most likely to consider availability, security, integrity,
and maintainability of a company's computer systems?
a. Internal control over financial reporting.

b. Trust Services.
c. Website Asssociate
d. Financial statement audit.
49. Which of the following is the least likely to be considered subject matter of an attestation
engagement?
a. Assertion
b. Behavior
c. Historical event
d. Systems and processes.
50. Arel, CPA, was engaged by a group of royalty recipients to apply agreed-upon procedures to
financial data supplied by Modit Co. regarding Modit's written assertion about its compliance with
contractual requirements to pay royalties. Arel's report on these agreed-upon procedures should contain
a (an).
a. Disclaimer of opinion about the fair presentation of Modit's financial statements.

b. List of the procedures performed (or reference thereto) and Arel's findings.
c. Opinion about the effectiveness of Modit's internal control activities concerning royalty
payments.
d. Acknowledgment that the sufficiency of the procedures is solely Arel's responsibility.
ANS: B
51. Which of the following is not necessarily an attest engagement?
a. An elder care engagement.

b. A WebTrust engagement.
c. An examination of internal control over financial reporting for a nonpublic company.
d. A review of management's discussion and analysis.
ANS: A
52. Which of the following is notcurrently an acceptable form of association with prospective financial
statements?
a. Compilation.
b. Review.
c. Agreed-upon procedures.
d. Examination.
ANS: B
54. When reporting upon a review engagements on an entity's management discussion and analysis, the
report is ordinarily:
a. A general use report.

b. A restricted use report.
c. Required to include a disclaimer of opinion.
d. Included with the entity's report on internal control over financial reporting.
ANS: B
55. When management presents a written assertion on internal control effectiveness, it evaluates the
company's internal control using reasonable criteria for internal control, referred to as.
a. Control environment criteria.

b. Tone criteria.
c. Control criteria
d. Integrated criteria.
ANS: C
56. Providing assurance using a series of reports provided simultaneously or shortly after the related
information is released is referred to as:
a. Continuous auditing.
b. Serial auditing.
c. Systems reliability auditing.
d. Simultaneity auditing.
ANS: A
59. When a CPA is associated with a forecast, all of the following should be disclosed except the:
a. Sources of information.
b. Character of the work performed by the CPA.
c. Major assumptions in the preparation of the forecast.
d. Probability of achieving estimates
ANS: D
It is the end of his client's first quarter and Bill Smith, CPA is performing a compilation of his client's
interim financial statements. He has discovered that the client does not wish to present notes to the
financial statements. The appropriate CPA report includes:
a. Qualified opinion ("subject to" the omission of the notes).

b. Compilation report with an adverse opinion due to inadequate disclosure.
c. standard compilation report.
d. Compilation report with an indication that all required disclosures under GAAP may not be
presented with the statements
Ans ; d
71. To present fairly in conformity with generally accepted accounting principles the financial statements
must:
a. Be consistently applied.
b. Inform users of all matters that could materially affect a decision.
c. Reflect transactions and events within a range of reasonable limits.
d. Be considered preferable to the users of those financial statements.
ANS: C
5. A peer review in which the peer reviewers study and appraise a CPA firm's system of quality control to
perform accounting and auditing work is referred to as a(n):
a. Engagement review.
b. Inspection review.
c. Supervision review.
d. System review.
ANS: D
28. When the professional accountant has obtained sufficient appropriate evidence to be satisfied
that the subject matter is plausible in the circumstances, he or she can provide what level of
assurance?
c. Moderate
d. Absolute
29. Which of the following is least likely considered a part of the financial reporting framework?
a. Generally accepted auditing standards (GAAS).
b. Generally accepted accounting principles (GAAP).
c. International Accounting Standards/International Financial Reporting Standards
(IAS/IFRS).
e. Another authoritative and comprehensive basis of reporting
57. This refers to the audit procedures that, in the auditor’s judgment and based on the PSAs are
deemed appropriate in the circumstances to achieve the objective of an audit.
a. Analytical procedures.
b. Scope of an audit.
c. Audit sampling.
d. Documentation.
69. What is the overall objective of internal auditing?

a. To attest to the efficiency with which resources are used.
b. Ascertain that the cost of internal controls is justified.
c. To ascertain that the financial statements present accurately the financial position,
operating results and changes in cash and stockholders’ equity.
d. To help members of the organization to effectively discharge their responsibilities.
86. Which is incorrect regarding the pronouncement of AASC?
a. The PSAs and Interpretations may also have application, as appropriate, to other
related activities of the auditors.
b. PSAs contain basic principles and essential procedures (identified in bold type
black lettering) together with related guidance in the form of explanatory and other
material.
c. PSAs need only be applied to material matters.
d. The Interpretations have the same authority as the PAPSs.
87. First Statement – Interpretations to PSAs will have the same authority as the PSAs.
Second Statement – PAPS should also have the same authority as the PSAs.
a. Both statements are False

b. Both statements are True
c. First statement is True; Second Statement is False
d. First statement is False; Second Statement is True
90. Which of the following usually need not be exposed for comments?
a. PSAs.
b. PAPSs.
c. Interpretations.
f. d. All should usually be exposed.
Independent auditors of financial statements perform audits that reduce and control a.
The business risks faced by investors.
b. The information risk faced by investors.
c. The complexity of financial statements.
d. Quality reviews performed by other CPA firms.
97. Because an external auditor is paid a fee by a client company, he
a. Is absolutely independent and may conduct an audit.
b. May be sufficiently independent to conduct an audit.
c. Is never considered to be independent.
d. Must receive approval of the Securities and Exchange Commission before conducting
an audit.
98. Which event that occured after the end of the fiscal year under auddit but prior to the auditors report
would not require disclosure in the fs?
a. Sale of a bond or capital stock issue
b. Loss of plant or inventories as a result of fire or flood.
c. A significant decline in the market price of the corporate shares
d. Settlement of litigation when the event giving rise to the claim took place after the balance sheet date.
99. An auditors decision concerning whether or not to “dual date” the audit report is based upon thr
auditor’s willingness to :
A. Extend auditing procedures and assume responsibility for a greater period of time.
B. Accept responsibility for subsequent events
C. Permit inclusion of a footnote captioned : event (unaudited ) subsequent to the date of the auditor’s
report
D. Assume responsibility for event subsequent to the issuance of the auditors report.

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AUDITING THEORY REVIEW QUESTIONS FOR REVISIT

BY DARIO OYAM JR.

a. Adequate technical training

a. The elements of materiality and risk.

a. Client accounting manuals.

a. The elements of materiality and risk.

a. The Governmental Accounting Standards Board.

a. Internal control over financial reporting.

a. Disclaimer of opinion about the fair presentation of Modit's financial statements.

51. Which of the following is not necessarily an attest engagement?

a. An elder care engagement.

a. A general use report.

a. Control environment criteria.

a. Qualified opinion ("subject to" the omission of the notes).

e. Another authoritative and comprehensive basis of reporting

69. What is the overall objective of internal auditing?

a. Both statements are False

a. Sale of a bond or capital stock issue

b. Loss of plant or inventories as a result of fire or flood.

c. A significant decline in the market price of the corporate shares

B. Accept responsibility for subsequent events

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