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Audit- Theory-Assignment
Accountancy (STI College)
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AUDIT THEORY: Review Questions (Assignment)
1. Certain fundamental beliefs called
"postulates" underlie
auditing theory. Which of the following is not a
postulate of auditing?
a. No long-term conflict exists between the
auditor and
the management of the enterprise under audit.
b. Economic assertions can be verified.
c. The auditor acts exclusively as an auditor.
d. An audit has a benefit only to the owners.
2. In all cases, audit reports must
a. Be signed by the individual who performed the
audit
procedures.
b. Certify the accuracy of the quantitative
information
which was audited.
c. Communicate the auditor’s finding to the
general
public.
d. Inform readers of the degree of
correspondence
between the quantifiable information and the
established criteria.
3. As used in auditing, which of the following
statements best describes "assertions"?
a. Assertions are the representations of
management as to
the reliability of the information system.
b. Assertions are the auditor's findings to be
communicated
in the audit report.
c. Assertions are the representations of
management as to
the fairness of the financial statements.
d. Assertions are found only in the footnotes to
the financial
statements.
4. The expertise that distinguishes auditors from
accountants is in the
a. Ability to interpret generally accepted
accounting principles.
b. Requirement to possess education beyond the
Bachelor’s
degree.
c. Accumulation and interpretation of
evidence.
d. Ability to interpret ASC Statements.
5. Which of the following is true of the report
based on
agreed-upon-procedures?
a. The report is restricted to those parties who
have agreed to the procedures to be
performed.
b. The CPA provides the recipients of the report
limited assurance as to reasonableness of the
assertion(s) presented in the financial
information.
c. The report states that the auditor has not
recognized any basis that requires
revision of financial statements.
d. The report should state that the procedures
performed are limited to analytical procedures
and inquiry.
6. According to Philippine Standard on Auditing,
the procedures employed in doing compilation
are:
a. Designed to enable the accountant to express a
limited assurance.
b. Designed to enable the accountant to express a
negative assurance.
c. Not designed to enable the accountant to
express any form of assurance.
d. Less extensive than review procedures but
more extensive than agreed-upon procedures.
7. The three types of attestation services are:
a. Audits, review, and compilations
b. Audits, compilations, and other attestation
services
c. Reviews, compilations, and other attestation
services
d. Audits, reviews, and other attestation
services
8. Which of the following is not primary category
of attestation report?
a. Compilation report
b. Review report
c. Audit report
d. Special audit report based on a basis of
accounting other than generally accepted
accounting principles.
9. The primary goal of the CPA in performing the
attest function is to
a. Detect fraud
b. Examine individual transactions so that the
auditor may certify as to their validity
c. Determine whether the client's assertions
are fairly stated
d. Assure the consistent application of correct
accounting
procedures
10. The criteria for evaluating quantitative
information vary. For example, in the audit of
historical financial statements by CPA firms, the
criteria are usually
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a. Generally accepted auditing standards.
b. Generally accepted accounting principles.
c. Regulations of the Internal Revenue Service.
d. Regulations of the Securities and Exchange
Commission.
11. Because an external auditor is paid a fee by a
client
company, he or she
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
12. Adequate planning of the audit work helps
the auditor
of accomplishing the following objectives,
except:
a. Gathering of all corroborating audit
evidence.
b. Ensuring that appropriate attention is devoted
to
important areas of the audit.
c. Identifying the areas that need a service of an
expert.
d. The audit work is completed efficiently.
13. The extent of planning will vary according to
any of the
following, except:
a. Size of the audit client.
b. Auditor’s experience with the entity and
knowledge
of the business.
c. The nature and complexity of the audit
engagement
d. The assessed level of control risk.
14. Which of the following is least likely
considered by the
auditor in developing the overall audit plan?
a. Understanding of the accounting and internal
control
systems.
b. Relevant risk and materiality.
c. The involvement of other auditors in the audit
of
major component of financial statements
d. The general level of competence of audit
assistants.
15. The audit program should contain the
following,
except:
a. Audit objective
b. Time budget for the various audit areas
c. Set of planned audit procedures
d. The combined assessed level of inherent and
control
risk
16. Which of the following will most likely help
the auditor
to identify and understand the events,
transactions and practices of his audit client?
a. Obtaining a sufficient knowledge of the
business of
his client.
b. Understanding of accounting and internal
control.
c. Testing control policies and procedures.
d. Obtaining a representation letter from the
client
management.
17. Understanding the business and using this
information appropriately assists the auditor in,
except:
a. Deciding whether to do tests of controls.
b. Evaluating audit evidence.
c. Assessing risks and identifying potential
problems.
d. Planning and performing the audit effectively
and
efficiently.
18. Which of the following is the ultimate
concern of the
knowledge about the business?
a. Consideration of how it affects the financial
statements taken as a whole.
b. Assists the auditor in enforcing quality control
procedures.
c. To assure that sufficient audit evidence is
obtained.
d. It assists in determining the type of audit
report to be
issued.
19. The development of a general strategy and a
detailed
approach for the expected nature, timing, and
extent of audit refers to :
a. Supervision
b. Audit procedures
c. Directing
d. Planning
20. Which of the following would a successor
auditor
normally perform after acceptance of an audit
client?
a. Inquiry of predecessor auditor regarding the
client.
b. Review the SEC filings of the client.
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c. Inquiry of bankers regarding the client.
d. Review of predecessor auditor working
papers.
21. Analytical procedures used in planning an
audit should
focus on
a. Reducing the scope of tests of controls and
substantive tests.
b. Providing assurance that potential material
misstatements will be identified.
c. Enhancing the auditor’s understanding of the
client’s business.
d. Assessing the adequacy of the available
evidential matter.
22. In evaluating an entity's accounting estimates,
one of
the auditor's objectives is to determine whether
the
estimates are
a. Prepared in a satisfactory control environment.
b. Consistent with industry guidelines.
c. Based on verifiable objective assumptions.
d. Reasonable in the circumstances.
23. Assertions with high inherent risk are least
likely to
involve:
a. Complex calculations.
b. Difficult accounting issues.
c. Routine transactions.
d. Significant judgment by management.
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