Professional Documents
Culture Documents
1. A control which relates to all parts of the EDP system is called a(n)
a. Systems control c. Applications control
b. General control d. Universal control
3. Should the auditor feel, after obtaining an understanding of the EDP internal
control structure, that control risk cannot be reduced, he or she will
a. Issue a disclaimer
b. Issue an adverse opinion
c. Increase the sample size for tests of controls
d. Expand the substantive testing portion of the audit
4. The real-time feature normally would be least useful when applied to accounting
for a firms
a. Bank-account balances
b. Property and depreciation
c. Customer accounts receivable
d. Merchandise inventory
5. A sample in which the characteristics in the sample are the same as those of the
population is a
a. Random sample c. Attributes sample
b. Variables sample d. Representative sample
7. When an auditor goes through a population and selects items for the sample
without regard to their size, source, or other distinguishing characteristics, it is
called
a. Block selection
b. Haphazard selection
c. Systematic selection
d. Statistical selection
8. Which of the following may be used to reduce the risk of non sampling errors?
a. Increasing the size of audit samples
b. Stratifying audit samples
c. Adequately planning audit samples
d. Using statistical sampling techniques
9. A number of factors influences the sample size for a substantive test of details of
an account balance. All other factors being equal, which of the following would
lead to larger sample size?
a. Greater reliance on internal control
b.
c. Smaller reliance o analytical procedures
d. Smaller measures of tolerable misstatement
11. The most important general ledger account included in and affecting several
cycles is the
a. General cash account c. Income tax expense ad liability accounts
b. Inventory accounts d. Retained earnings account
13. The primary difference between an audit of the balance sheet and an audit of the
income statement lies in the fact that the audit of the income statement deals
with the verification of
a. Transactions c. Costs
b. Authorization d. Cutoffs
15. The current file of the auditors working papers generally should include
a. a flowchart of internal controls
b. organization charts
c. a copy of the financial statements
d. copies of bond and note indentures
16. An audit working paper that reflects the major components of an amount reported
in the financial statements is referred to as(an)
a. Lead schedule c. Audit control schedule
b. Supporting schedule d. Working trial balance
18. An auditor most likely would analyze inventory turnover rates to obtain evidence
concerning managements assertions about
a. Existence or occurrence
b. Rights and obligations
c. Presentation and disclosure
d. Valuation and allocation
19. To which type of the following matters would materiality limits not apply when
obtaining client representations?
a. Losses from sales commitments.
b. Unasserted claims and assessments
c. Irregularities involving management
d. Noncompliance with contractual agreements
21. In auditing accounts payable, an auditors procedures most likely would focus
primarily o managements assertion of
a. Existence or occurrence
b. Presentation and disclosure
c. Completeness
d. Valuation or allocation
22. Before goods are shipped on account, a properly authorized person must
a. Prepare the sales invoice
b. Approve the journal entry
c. Approve credit
d. Verify that the unit price is accurate
23. Which of the following is not a auditors concern about a key authorization point
in the sales/collection cycle
a. The receiving room must have authorization before releasing items to
inventory control
b. Credit must be authorized before sale
c. Goods must be shipped after the authorization
d. Prices must be authorized
24. Whenever footing ad comparisons are restricted to journals, master file records,
and ledgers, the process is
a. Valuation c. Cutoff
b. Summarization d. Completeness
25. The most significant effect of the results of the tests of controls substantive tests
of transactions in tha sales and collection cycle is on
a. Allowance for uncollectible accounts
b. Bad debts expense account
c. Confirmation of accounts receivable
d. Income tax payable
26. There is a difference between internal control objectives and audit objectives.
Which of the following is not an audit objective?
a. Validity c. Valuation
b. Completeness d. Authorization
27. For effective internal control, employees maintaining the accounts receivable
subsidiary ledger should not also approve
a. Employee overtime wages
b. Credit granted to customers
c. Write-offs of customer accounts
d. Cash disbursement
28. The general cash account is considered significant in almost all audits
a. Where the ending balance is material
b. Where either the beginning balance is material
c. Even when the ending balance is immaterial
d. Except those of not-for-profit organizations
29. Sales order form and invoice blanks should be controlled in the
a. Sales order section of the sales department
b. Billing clerk in the accounting department
c. Credit manager in the credit department
d. Sales manager in the sales department
31. The information typically needed to prepare a production order would not include
a
a. Sales forecast c. Inventory plan
b. Production plan d. Bill of materials
32. The substantive test which requires the auditor to trace from a file of receiving
reports to the acquisitions journal satisfies the objective of
a. Validity c. Completeness
b. Authorization d. Valuation
34. The inventory and warehousing cycle can be thought of as comprising two
separate but closely related systems, one involving the actual physical flow of
goods, and the other the
a. internal control over those goods
b. related costs
c. storing of the goods
d. prevention of wastes, obsolenscence, and theft
35. In planning an audit engagement, which of the following is a factor that affects
the independent auditors judgement as to the quantity, type, and content of
working papers?
a. The estimated occurrence rate of attributes
b. The preliminary evaluation based upon initial substantive testing
c. The content of the clients representation letter
d. The anticipated nature of the auditors report
36. A listing of all the things which the auditor will use to gather sufficient, competent
evidence is the
a. audit procedure
b. audit plan
c. audit program
d. audit risk model
39. Which of the following is the best audit procedure for the detection of lapping?
a. Comparison of postings of cash receipts to accounts with the details of cash
deposits
b. Confirmation of the cash balance
c. Reconciliation of the cash account balances
d. Preparing a proof of cash
40. To gather evidence regarding the balance per bank in the bank reconciliation, an
auditor could examine all of the following except
a. Cut-off bank statement
b. year-end bank statement
c. bank confirmation
d. general ledger
42. The clients physical count of inventories is lower than the inventory quantities in
the perpetual records. This could be the result of a failure to record
a. purchases
b. purchases discounts
c. sales
d. sales discounts
43. The most likely technique for the current year audit of goodwill which was not
acquired three years ago by a continuing audit client.
a. Confirmation
b. Observation
c. Recomputation
d. Inquiry
44. The auditor will most likely perform extensive tests for possible understatement
of
a. revenues
b. assets
c. liabilities
d. capital
45. If the auditor is determined to lack independence, a disclaimer of opinion must be
issued
a. in all cases
b. only if it is highly material
c. only if it is material
d. if the client requests it
46. The use of negative assurances in audit reports of historical financial statements
is
a. a violation of the standards of reporting
b. encouraged by the Philippine Institute of CPAs
c. a help in clarifying the degree of responsibility by being assumed by the
auditor
d. properly located in the opinion paragraph of the unqualified report
47. Unqualified financial statements for the prior year presented in comparative form
with audited financial statements for the current year should be clearly marked to
indicate their status and
I. The report on the prior period should be reissued to
accompany the current period report
II. The report on the current period should include as a separate
paragraph description of the responsibility assumed for the
prior periods financial statements
a. I only
b. II only
c. Both I and II
d. Either I or II
48. Compilation services are intended to enable a CPA firm to compete with
a. Management advisory service firms
b. Tax preparation businesses
c. Computer service business
d. Bookkeeping firms
49. A modification of the CPAs report on a review of the interim financial statements
of a publicly-held company would be necessitated by which of the following?
a. An uncertainty
b. Lack of consistency
c. Reference to another accountant
d. Inadequate disclosure
1) B 27)D
2) B 28)D
3) D 29)A
4) B 30)C
5) D 31)D
6) D 32)C
7) B 33)A
8) C 34)B
9) D 35)D
10)A 36)D
11) A 37)A
12)D 38)B
13)A 39)A
14)A 40)D
15)C 41)B
16)D 42)D
17)A 43)C
18)D 44)C
19)C 45)A
20)C 46)A
21)C 47)D
22)C 48)D
23)A 49)A
24)B 50)A
25)D 51)
26)D
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