Chapter 1 AUDIT – An Overview
Audit in General
1. When auditing financial statements, the primary concern is with
a. Determining whether recorded information properly reflects the economic events that occurred during the
accounting period.
b. Determining if fraud has occurred.
c. Determining if taxable income has been calculated correctly.
d. Analyzing the financial information to be sure that it complies with government requirements.
2. Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing
financial information for decision making is commonly called
a. Finance
b. Auditing
c. Accounting
d. Economics
3. The trait that distinguishes auditors from accountants is the
a. Auditor’s ability to interpret accounting standards
b. Auditor’s education beyond the Bachelor’s degree
c. Auditor’s continuing professional development
d. Auditor’s accumulation and interpretation of evidence related to the company’s financial statements.
4. The subject matter of any audit consists of
a. Assertions about economic actions and events
b. Economic data
c. Financial statements
d. Operating data
5. An audit involves ascertaining the degree of correspondence between assertions and established criteria. In the
case of a financial statement audit, which of the following is not a valid criterion?
a. Philippine Standards on Auditing
b. Philippine Financial Reporting Standards
c. PFRS for Small and Medium-sized Entities
d. PFRS for Small Entities
6. The criteria for evaluating quantitative information vary. For example, in the case of an independent audit of
financial statements by CPA firms, the criteria are usually the
a. Philippine Standards on Auditing
b. Philippine Financial Reporting Standards
c. National Internal Revenue Code
d. Regulations of the Securities and Exchange Commission
7. Most of the independent auditor’s work in formulating an opinion on the financial statements consists of
a. Obtaining and examining evidence
b. Examining cash transactions
c. Comparing recorded accountability with assets
d. Studying and evaluating internal control