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At-Auditin-Theory-Final-Preboard-Examination-Cebu-Cpar-Center- (1).pdf
At-Auditin-Theory-Final-Preboard-Examination-Cebu-Cpar-Center- (1).pdf
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Page 1 of 24CEBU CPAR CENTER
Mandaue City, Cebu
AUDITING THEORY
FINAL PREBOARD EXAMINATION
INSTRUCTIONS: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING. MARK
THE LETTER OF YOUR CHOICE WITH A VERTICLE LINE ON THE ANSWER SHEET
PROVIDED. STRICTLY NO ERASURES ARE ALLOWED.
1. Which of the following best describes “high level of assurance”?
a. It refers to the professional accountant having obtained evidence based on procedures
agreed upon between the practitioner and the intended users to be satisfied that findings be
reported to the intended users.
b. It refers to the professional accountant having obtained sufficient external and internal
appropriate evidence to be satisfied that the subject matter is plausible in the
circumstances.
c. It refers to the professional accountant having obtained sufficient appropriate evidence to
conclude that the subject matter conforms in all material respects with identified suitable
criteria.
d. It refers to the professional accountant having obtained sufficient evidence to conclude that
he has no knowledge of any required modifications to be made in the financial statements
in order for them to conform of prescribed criteria.
2. Which statement is incorrect regarding assurance engagement risk?
a. Engagement risk is the risk that the practitioner will express an inappropriate conclusion
that the subject matter conforms in all material respects with suitable criteria.
b. All components of the engagement risk model will be significant for all assurance
engagements.
c. The extent to which the practitioner considers the relevant components of engagement risk
will be affected by the engagement circumstances.
d. Business risk is not part of engagement risk and does not affect the application of Philippine
Standard on Assurance Engagements.
3. Which statement is incorrect regarding an engagement to perform agreed-upon procedures?
a. An auditor is engaged to carry out those procedures of an audit nature to which the auditor
and the entity and any appropriate third parties have agreed and to report on factual
findings.
b. The recipients of the report must form their own conclusions from the report by the auditor.
c. The report is restricted to those parties that have agreed to the procedures to be performed.
d. The report on factual findings is expressed in the form of negative assurance.
4. Which of the following engagements provides third parties the highest level of assurance about
the client’s financial statements?
a. Audit c. Agreed-upon procedures
b. Review d. Compilation
5. In which of the following situations can third parties assume responsibility of the auditor
regarding association with financial information?
a. When the auditor attaches a report to that information.
b. When the auditor consents to the use of the auditor's name in a professional connection.
c. Either a or b.
d. Neither a nor b.
6. A concept relating to the accumulation of the audit evidence necessary for the auditor to
conclude that there are no material misstatements in the financial statements taken as a whole.
a. Reasonable assurance c. Moderate assurance
b. Positive assurance d. Negative assurance
7. Which statement is incorrect regarding the external auditor’s consideration of the work of
internal auditing?
, Page 2 of 24
b. The external auditor should obtain a sufficient understanding of internal audit activities to
assist in planning the audit and developing an effective audit approach.
c. During the course of planning the audit, the external auditor should perform a preliminary
assessment of the internal audit function when it appears that internal auditing is relevant to
the external audit of the financial statements in specific audit areas.
d. When the external auditor intends to use specific work of internal auditing, the external
auditor need not evaluate and test that work to confirm its adequacy for the external
auditor's purposes.
8. The independent auditor lends credibility to client’s financial statements by
a. Maintaining a clear-cut distinction between management’s representations and the auditor’s
representation.
b. Testifying under oath about client’s financial statements.
c. Stating in the auditor’s management letter that the examination was made in accordance
with generally accepted auditing standards.
d. Attaching an auditor’s opinion to the client’s financial statements.
9. Which of the following is responsible for the fairness of representations made in financial
statements?
a. The independent auditor. c. The client's management.
b. The internal auditor. d. The audit committee.
10. The exposure period allowed for each exposure draft of PSA to be considered by the
organizations and persons to whom it is sent for comment is generally
a. Four months c. Two months
b. Three months d. Six months
11. Which statement is incorrect regarding the pronouncements of ASPC?
a. The PSAs and Interpretations may also have application, as appropriate, to other related
activities of 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.
12. The following should be occupied only by a duly registered CPA, except
a. Any position in any business or company in the private sector which requires supervising
the recording of financial transactions.
b. Any position in any business or company in the private sector which requires preparation of
financial statements.
c. Any position in any business or company in the private sector which requires coordinating
with the internal auditors for the audit of financial statements.
d. The position of the dean that supervises the BSA program of an educational institution.
13. Which of the following is not represented in the Auditing and Assurance Standards Council?
a. Board of Accountancy c. Bureau of Internal Revenue
b. Bangko Sentral ng Pilipinas d. Securities and Exchange Commission
14. A study, appraisal, or review by the BOA or its duly authorized representatives, of the quality of
audit of financial statements through a review of the quality control measures instituted by an
Individual CPA, Firm or Partnership of CPAs engaged in the practice of public accountancy.
a. Peer review c. Analytical review
b. Quality review d. Administrative review
15. Emong, CPA is applying for renewal of his professional license. He is exempted from the CPE
requirements
a. If he is at least 65 years old.
b. If he is working abroad and he has been out of the country for at least two years
immediately prior to the date of renewal.
c. Either a or b.
d. Under no circumstances.
, Page 3 of 24
a. The Professional Regulation Commission has the authority to remove any member of the
Board of Accountancy for negligence, incompetence, or any other just cause.
b. Insanity is not a ground for proceeding against a CPA.
c. A person shall be considered to be in the professional practice of accounting if, as an officer
in a private enterprise, he makes decisions requiring professional accounting knowledge.
d. After three years, subject to certain conditions, the Board of Accountancy may order the
reinstatement of a CPA whose certificate of registration has been revoked.
17. There is a need for assurance that all services obtained from a professional accountant are
carried out to the highest standards of performance. This statement relates to
a. Credibility c. Quality of Services
b. Professionalism d. Confidence
18. Indicate the normal pattern of development for a professional accountant.
I. A period of work experience.
II. High standard of general education.
III. Specific education, training and examination in professionally relevant subjects
a. I, II, III b. II, III, I c. III, II, I d. II, I, III
19. A partner or employee of the firm serving as an officer or as a director on the board of an
assurance client will most likely create
a. Intimidation threat c. Advocacy threat
b. Self-review threat d. Familiarity threat
20. Which of the following least likely create a self-review threat?
a. A former officer, director or employee of the assurance client serve as a member of the
assurance team.
b. A director, an officer or an employee of the assurance client in a position to exert direct and
significant influence over the subject matter of the assurance engagement has been a
member of the assurance team or partner of the firm.
c. Assisting an audit client in matters such as preparing accounting records or financial
statements.
d. A firm, or network firm, provides internal audit services to an audit client.
21. This process may include, particularly in the case of large complex audits, requesting
personnel not otherwise involved in the audit to perform certain additional procedures.
a. Direction c. Review
b. Supervision d. All of these
22. Which of the following is least likely a factor that affects the extent of quality control
procedures?
a. The size of the firm. c. The number of practice offices.
b. The type of clients that the firm serves. d. The nature of the practice.
23. Which statement is incorrect regarding the auditor’s responsibility to consider fraud and error in
the audit of financial statements?
a. The auditor is entitled to accept records and documents as genuine.
b. The auditor is may be held responsible for the prevention of fraud and error.
c. The auditor should consider the risk of material misstatements in the financial statements
resulting from fraud or error.
d. The risk of not detecting a material misstatement resulting from error is lower than the risk
of not detecting a material misstatement resulting from fraud.
24. Which statement is incorrect regarding “fraud risk factors”?
a. Using the auditor’s knowledge of the business, the auditor may identify events or conditions
that provide an opportunity, a motive or a means to commit fraud, or indicate that fraud may
already have occurred.
b. A missing document, an out of balance general ledger, or an analytical procedure that does
not make sense may be the result of circumstances other than fraud.
c. Fraud risk factors indicate the existence of fraud because they often have been present in
circumstances where frauds have occurred.
d. The presence of fraud risk factors may affect the auditor’s assessment of inherent risk or
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