Saint Paul School of Business and Law

Campetic Road, Palo, Leyte

Final Examination-Accounting 17ND
(Questionnaire B)

Name: _______________________________Schedule: ___________________________

1.  S1 internal control systems refer to all the policies and procedures adopted by the management
of an entity to assist in achieving management’s objectives.
S2 the internal control system is confined to those matters which relate directly to the functions
of the accounting system.
a.       True, false
b.      False, true
c.       True, true
d.      False, false

2.  An auditor is least likely to test the internal controls that provide for
a.       Approval of the purchase and sale of marketable securities.
b.      Classification of revenue and expense transactions by product line.
c.       Segregation of the functions of recording disbursements and reconciling the bank account.
d.      Comparison of receiving reports and vendors’ invoices with purchase orders.

3.  Which of the following statements best describes the phrase, “evaluating the design of a
control”?
a.       Considering whether the control, individually or in combination with other controls, is
capable of effectively preventing, or detecting and correcting, material misstatements.
b.      Determining whether the control exists and that the entity is using it.
c.       Expressing an opinion as to the effectiveness of a control.
d.      Observing the application of specific controls.

4.  When obtaining an understanding of an entity’s internal control, an auditor should concentrate

on the substance of controls rather than their form because:
a.       Management may establish appropriate controls but not act on them.
b.      The controls may be operating effectively but may not be documented.
c.       The controls may be so inappropriate that no reliance is contemplated by the auditor.
d.      Management may implement controls with costs in excess of benefits.

5.  A part of obtaining an understanding of internal controls, an auditor is not required to:
a.       Consider factors that affect the risk of material misstatement.
b.      Ascertain whether internal control policies and procedures have been placed in operation.
c.       Identify the types of potential misstatements that may occur.
d.      Obtain knowledge about the operating effectiveness of internal control.

6.  Narratives, flowcharts, and internal control questionnaires are three commonly used methods
of
a.       Designing the audit manual and procedures.
b.      Testing the internal control structure.
c.       Documenting the study of internal controls.
d.      Documenting the auditor’s understanding of client’s organizational structure.

7.  The following are components of internal control:

a.       Organizational structure, management philosophy, and planning.
b.      Legal environment of the firm, management philosophy and organizational structure.
c.       Risk assessment process, backup facilities, responsibility accounting and natural laws.
d.      Control environment, risk assessment process, control activities, information system and
communication, and monitoring of controls.

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8.  Which of the following is most correct concerning the understanding of internal control
needed by auditors to plan the audit?
a.       The auditors must understand the control environment, but not the accounting system or
the control procedures of an entity.
b.      The auditors must understand the control environment and the accounting system, but not
the control procedures.
c.       The auditors must understand the control environment, the accounting system, and must
use judgment as to the control procedures which must be considered.
d.      The auditors must understand the control environment, the accounting system and all
control procedures.

9.  Which of the following statements best describes “control environment”?

a.       The entity’s process for identifying business risks relevant to financial reporting objectives
and deciding about actions to address those risks, and the results thereof.
b.      The system for transferring information from transaction processing systems to the general
ledger or the financial reporting system.
c.       Policies and procedures that help ensure that management directives are carried out.
d.      This includes the governance and management concerning the entity’s internal control and
its importance to the entity.

10.  Management’s attitude towards aggressive financial reporting and its emphasis on meeting
projected profit goals most likely would significantly influence an entity’s control environment
when:
a.       Management is dominated by one individual who is also a shareholder.
b.      External policies established by parties outside the entity affect its accounting practices.
c.       The audit committee is active in overseeing the entity’s financial reporting policies.
d.      Internal auditors have direct access to the board of directors and entity management.

11.  An entity’s risk assessment process includes how management:

a.       Identifies risk
b.      Assesses significance and livelihood of occurrence of these identified risks.
c.       Decides upon actions to manage these risks
d.      All of these

12.  Risks can arise or change due to circumstances such as the following, except:
a.       There is a change in the regulatory or operating environment.
b.      No new employees have been hired by the company.
c.       The company switched from manual information systems to a computerized system.
d.      The accounting and financial reporting framework has experienced significant revisions.

13.  The information system consists of the following:

a.       Infrastructure (physical and hardware components) and software
b.      People
c.       Procedures and data
d.      All of these

14.  This means “identifying and capturing the relevant information for transactions or events”.
a.       Recording
b.      Processing
c.       Reporting
d.      None of these

15.  The objective of the recording function of transactions (in the context of internal accounting
control) is to
a.       Limit access to assets and to permit preparation of financial statements in accordance with
GAAP.

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b.      Assure compliance with the rules of all regulatory bodies having jurisdiction over the
reporting entity.
c.       Permit preparation of financial statements in accordance with GAAP and to maintain
accountability of assets.
d.      Encourage operational efficiency and adherence to prescribed managerial policies.

16.  When obtaining an understanding of the accounting and internal control system the auditor
may trace a few transactions through the accounting system. This technique is:
a.       Reperformance
b.      Walk-through
c.       Control test
d.      Validity test

17.  Which of the following descriptions pertain to performance reviews?

a.       Control activities that include reviews and analyses of actual performance versus budgets,
forecasts, and prior period performance.
b.      Controls performed to check accuracy, completeness, and authorization of transactions.
c.       Physical security of assets, including adequate safeguards such as secured facilities over
access to assets and records.
d.      The assignment of incompatible functions to different people.

18.  Which of the following would be preventive controls?

a.       The use of batch totals.
b.      Reconciling the accounts receivable subsidiary file with the control account.
c.       Requirement that two persons open mail.
d.      Preparation of bank reconciliation.

19.  An example of specific transaction authorization is the:

a.       Setting of automatic reorder points.
b.      Establishment of sales prices.
c.       Establishment of a customer’s credit limits.
d.      Approval of a construction budget for a new warehouse.

20.  A proper segregation of duties requires:

a.       That an individual authorizing a transaction should record it also.
b.      That an individual authorizing a transaction maintain custody of the asset that resulted from
the transaction.
c.       That an individual maintaining custody of an asset be entitled to access the accounting
records for the asset.
d.      That different individual should handle custody, authorization and record-keeping.

21.  When the auditor identifies an area of the accounting system with missing controls i.e., a
material weakness, this would lead to a modification of the audit program in that area would be:
A.     Increase the amount of tests of controls.
B.     Increase the reliance on tests of controls
C.     Cause the issuance of a qualified or adverse opinion
 
22.  If the auditors do NOT perform tests of controls of certain assertions:
a.       They have performed a substandard audit
b.      They are not required to communicate reportable conditions relating to those accounts to
management
c.       They must issue a qualified opinion
d.      They must assess control risk at the MAXIMUM level for those assertions

23.  A control that reduces the risk that an existing or potential control weakness will result in a
failure to meet a control objective is referred to a ______ control
a.       Conditional                        b. Limited                    c. Compensating                      d. Offset

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24.  When a compensating control exists, a weakness in the system
a.       Is no longer a concern because the potential for misstatement has been sufficiently reduced
b.      Is reduced but is not removed; therefore, it is still of concern to the auditor
c.       Could cause a material loss, so it must be tested using substantive procedures
d.      Is magnified and must be removed from the sampling process and examined in its entirely

25.  During the review of small business client’s internal control system, the auditor discovered
that the receivable clerk credit memos and has access to cash. Which of the following controls
would be most effective in offsetting this weakness?
a.       The owner review error in billings to customers and postings to the subsidiary ledger
b.      The controller receives the monthly bank statement directly and reconciles the checking
accounts
c.       The owner reviews credit memos after they are recorded
d.      The controller reconciles the total of the subsidiary ledger to the amount shown in the
general ledger

26.  If evidence was obtained in the prior year’s audit that indicates a key control was operating
effectively:
a.       It will be unnecessary to test that control this year
b.      The tests of that control will be reduced this year
c.       The extent of tests of that control may be reduced this year if the auditor determines that it
is still in place
d.      The auditor would not test this area again this year

27.  If no changes have occurred since the controls were last tested, a CPA should
a.       Rely on the prior year audit’s assessment of internal controls and use this assessment in the
current year
b.      Test the operating effectiveness of such controls at least once in the year fourth audit
c.       Rely entirely on the performance of substantive audit procedures
d.      Test the operating effectiveness of such controls at least once in every third audit

28.  The acceptable level of detection risk (ADR) and the combined level of inherent risk (IR)
and control risk (CR) are ______related
a.       Directly                  b. Inversely                  c. Proportionately                    d. Not

29.  Which of the following is a correct response of the auditor when he allows a lower
acceptable level of detection risk?
Nature of substantive tests       Timing of substantive tests      Extent of substantive test
a.       Less effective                                Year-end                              More extensive
b.      Less effective                                Interim                                  Less extensive
c.       More effective                               Year-end                              More extensive
d.      More effective                                Interim                                Less extensive

30.  Reportable conditions are matters that come to an auditor’s attention, which should be
communicated to an entity’s  audit committee because they represent:
a.       Material irregularities or illegal acts perpetrated by high-level management
b.      Significant deficiencies in the design or operation of the internal control structure
c.       Flagrant violations of the entity’s documented conflict-of-interest policies
d.      Intentional attempts by client personnel to limit the scope of the auditor’s field work.

31    If the management fails to provide adequate justification for a change from one generally
accepted accounting principle to another, the auditor should:
A.      Add an explanatory paragraph and express a qualified or an adverse opinion for lack
of  conformity with generally accepted accounting principles.
B.     Disclaim an opinion because of uncertainty.

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C.     Disclose the matter in a separate explanatory paragraph(s) but not modify the opinion
paragraph.
D.     Neither modify the opinion nor disclose the matter because both principles are generally
accepted.

32    In the auditor’s report, the principal auditor decides not to make reference to other CPA
who audited a client’s subsidiary. The principal auditor  could justify this opinion if, among
other requirements, the principal auditor:
A.     Expresses an unqualified  opinion on the consolidated financial statements.
B.     Learns that the other CPA expressed an unqualified opinion on the subsidiary’s financial
statements.
C.     Is unable to review the audit programs and working papers of the other CPA.
D.     Is satisfied as to the independence requirements and professional reputation of the other
CPA.
 
33    An auditor’s report contains the following sentences:
 
We did not audit the financial statements of B Company, a consolidated subsidiary, whose
statements reflect total assets and revenues constituting 20 percent and 22 percent, respectively,
of the related consolidated totals. These statements were audited by the auditors, whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts included for B
Company, is based solely upon the report of the other auditors.

These sentences:
A.        Disclaim an opinion.                          C. Divide responsibility.
B.        Qualify an opinion.                            D. Should not be part of the audit report.

34    An auditor used the services of an expert during the audit of a client’s financial statements.
When issuing an unmodified auditor’s report, the auditor should:
A.     Mention the expert and justify the use of the expert’s services.
B.     Not mention the expert in the opinion and instead disclose the expert in the notes.
C.     Not mention the expert as this might mislead financial statement users.
D.     Mention the expert in both the audit report and the notes to financial statements.

35    Aljon, CPA, has audited Bona Semiconductors, Inc. During the course of the audit, Aljon
enlisted the services of Shirley, an expert on electronics. As a result of Shirley’s services, Aljon
issued a modified report. While drafting the explanation to the modification, Aljon decided that
reference to the expert is required. In these circumstances,
A.     Aljon should obtain the permission of Shirley before making such a reference.
B.     Aljon may refer to Shirley without permission, but Shirley’s identification must be
concealed.
C.     Aljon should seek legal advice on whether to reference to Shirley.
D.      Aljon cannot refer to Shirley  under any circumstance.

36    Which of the following statements is correct with respect to emphasis of a matter

paragraph?
A.     They always precede the opinion paragraph.
B.     They always follow the opinion paragraph.
C.     Sometimes they precede and sometimes they follow the opinion paragraph.
D.     They always precede the scope paragraph.

37    When the auditor expresses an opinion other than unqualified opinion a clear description of
all substantive reasons for the modification of the opinion should be included in the report. This
explanation should be presented:
A.     As a separate paragraph that preceded the opinion paragraph of the audit.
B.     As a separate paragraph. Preferably after the opinion paragraph, of the audit report.
C.     In the opinion paragraph.

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D.     As a separate paragraph in the notes to financial statements.

38    In which of the following circumstances would an auditor most likely add an emphasis of a

matter paragraph to the standard report while expressing an unqualified opinion?
A.     The auditor is asked to report on the balance sheet, but not on the other basic financial
statements.
B.     There is a substantial doubt about the entity’s ability to continue as a going concern.
C.     Management’s estimates of the effects of future events are unreasonable.
D.     Certain transactions cannot be tested because of management’s record retention policy.

39    If adequate disclosure is not made by the entity regarding substantial doubt about its ability
to continue as a going concern the auditor should include in his report specific reference to the
substantial doubt as to ability of the company to continue as a going concern and should express:
A.     Unqualified opinion  with emphasis of a matter paragraph.
B.     A subject to qualified opinion or adverse opinion.
C.     Either an “except for” qualified opinion or an adverse opinion.
D.     A disclaimer of opinion.

40    When the management prepares financial statements on a basis of a going concern and the
auditor believes the company may not continue as a going concern, the auditor should issue a(n):
A.     Qualified opinion                                                        C. Adverse opinion
B.     Unqualified opinion with explanatory paragraph.     D. Disclaimer of opinion

41    If an amendment to other information in a document containing audited financial statements

is necessary and the entity refuses to make amendment, the auditor would consider issuing:
A.     Unqualified opinion with emphasis of a matter paragraph
B.     Adverse or disclaimer of opinion.
C.     Qualified or disclaimer of opinion.
D.     Qualified or adverse opinion.

42    Which statement is incorrect regarding PSA 710, Comparatives?

A.     The auditor is required to determine whether the comparatives comply in all material
respects with GAAP relevant to the financial statements being audited.
B.     There are two broad financial reporting frameworks for comparatives: the corresponding
figures and the comparative financial statements.
C.     Under the comparative financial statements framework, the comparative financial
statements for the prior period(s) are considered separate financial statements.
D.     Under the corresponding figures framework, the corresponding figures for the prior
period(s) are not an integral part of the current period financial statements and may be read
without reference to amounts and other disclosures relating to the current period.

43    Which statement is incorrect regarding corresponding figures?

A.     The corresponding figures are not presented as a complete financial statements capable of
standing alone.
B.     The level of detail presented in the corresponding amounts and disclosures is dictated
primarily by its relevance to the current period figures.
C.     The auditor’s report refers only to the financial statements of the current period.
D.     The auditor’s report refers to each period that financial statements are presented.

44    If comparative financial statements are presented and the present auditor has audited both
years, the auditor should:
A.     Reissue the report.                                            C.  Update the report.
B.     Redate the report.                                              D. Dual date the report.

45    In case the prior period financial statements were audited by another auditor and the
incoming auditor decides to refer to another auditor, the incoming auditor’s report should
indicate:

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                                                                                              A          B           C         D
 
That the financial statements of the prior period were      YES     YES        YES    YES
audited by another auditor.
The type of report issued by the predecessor auditor        YES      NO         NO      YES
and, if the report was modified, the reasons therefore.

46. The auditor should obtain evidence of management’s acknowledgment of responsibility for
I. The fair presentation of the financial statements in accordance to GAAP in the
Philippines
II. Approval of the financial statements
A. I only C. Both I and II
B. II only D. Neither I nor II

47. Management representation letters:

A. Reduce inherent risk and control risk to an aggregate level of misstatement that could
be considered material.
B. Increase an auditor’s responsibility to detect material misstatements only to the extent
that the letter is relied on
C. Clarifies the scope of a professional accountant’s procedures concerning the going
concern assumption and events after balance sheet date.
D. Reduce the possibility of misunderstanding or misinterpretation concerning
management’s responsibility for the financial statements.

48. Written client representation letters are normally signed by the

A. president and the chairperson of the board
B. treasurer and the internal auditor
C. chief executive officer and the chief financial officer
D. corporate counsel and the audit committee chairperson

49. Management representation letters should be dated as of the date of the:

A. Balance sheet C. Auditor’s report
B. Latest interim financial statements D. Latest related party transaction

50. Management’s refusal to furnish a written representation letter on a matter, which the auditor
considers essential, constitutes
A. Prima facie evidence that the financial statements are not presented fairly
B. A violation of the International Corrupt Practices Act.
C. An uncertainty sufficient to preclude an unqualified opinion.
D. A scope limitation sufficient to procedure an unqualified.

51. When initiating either a formal or informal conflict resolution process, a CPA should
consider the following, either individually or together with others, as part of the
resolution process
I. Relevant facts
II. Ethical issues involved
III. Fundamental principles related to the matter in question
IV. Established internal procedures
V. Alternative courses of action
A. I, II, II, and V C. I, II, V

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 B. I, III, IV, and V D. I, II, III, IV, V

52. In ethical conflict resolution, if the matter remains unresolved, the CPA should
A. Consult with other appropriate persons within the firm or employing
organization for help in obtaining resolution.
B. Consider consulting with those charged with governance of the organization,
such as the board of directors or the audit committee.
C. Document the substance of the issue and details of any discussions held or
decisions taken, concerning that issue, as necessary.
D. All of the above.

53. Under the Revised Code, which fundamental principle is explicitly mentioned to be
safeguard even as the CPA consult with relevant professional bodies and legal advisors?
A. Technicality B. Confidentiality C. Integrity D. Objectivity

54. Tisha, CPA, has exhausted all relevant possibilities in an ethical conflict which she is trying
to resolve. The conflict remains unresolved. Accordingly, the revised Code allows which
of the following steps to be taken by Tisha?
I. Refuse to remain associated with the matter creating the conflict.
II. Withdraw from the engagement team or specific assignment.
III. Resign from the engagement
IV. Resign from the firm or the employing organization
A. I and II B. III and IV C. II, III and IV D. I, II,III and IV

55. Madonna Corp. is under audit by Hilorie, CPA. Madonna Corps. Is asking for a change in the
engagement (from audits to review) in order to restrict the scope of the engagement.
Madonna Corp. could not provide justifiable reasons for the change. Under these
circumstances, Hilorie should:
A. Issue a disclaimer of opinion due to grave scope limitation.
B. Refuse management’s request for a change in the engagement, then continue to
perform the audit engagement.
C. Issue an adverse opinion.
D. Withdraw from engagement.

56. A CPA should not be associated with reports, returns, communications or other information
where they believe that the information:
A. Contains a materially false or misleading statement.
B. Contains statement or information furnished recklessly.
C. Omits or obscures information required to be included where such omission or
obscurity would be misleading
D. All of these.

57. Objectivity in the Code refers to a CPAs ability:

A. To maintain an impartial attitude on all matters which come under the CPAs
review
B. To independently distinguish between accounting practices that are acceptable
and those that are not
C. To unyielding in all matters dealing with auditing procedures.
D. To independently choose between alternate accounting principles and auditing
standards.
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58. A CPA should maintain objectivity and free of conflicts of interest when performing:
A. Audits, but not any other professional services.
B. All attestation services, but not other professional services.
C. All attestation and tax services, but not other professional services.
D. All professional services.

59. The principle of professional competence and due care imposes which of the following
obligations on CPAs?
I. To maintain professional knowledge and skill at the level required to ensure that clients
or employers receive competent professional service
II To act diligently in accordance with applicable technical and professional standards
when providing professional services
A. I only B. II only C. I and II D. Neither I nor II

60. Which of these phrases describe attainment of professional competence?

A. A high standard of general education followed by specific education, training
and examination in professionally relevant subjects, and whether prescribed or not, a
period of work experience.
B. A continuing awareness and an understanding of relevant technical
professional and business developments.
C. The responsibility to act in accordance with the requirements of an assignment,
carefully, thoroughly and on a timely basis.
D. Making clients, employers or other users of the professional services aware of
limitations inherent in the services to avoid the misinterpretation of an expression
of opinion as an assertion of fact

61. Competence as a CPA includes all of the following, except:

A. Having the technical qualifications to perform an engagement.
B. Possessing the ability to supervise and evaluate the quality of staff work.
C. Warranting the infallibility of the work performed.
D. Consulting others if additional technical information is needed.

62. After beginning an audit of a new client, Sydney, CPA, discover that the professional
competence necessary for the engagement is lacking. Sydney informs management of the
situation and recommends another CPA, and management engages the other CPA. Under
these circumstances:
A. Sydney’s lack of competence should be considered to be a violation of
generally accepted auditing standards.
B. Sydney may request compensation from the client for any professional services
rendered to it in connection with the audit.
C. Sydney’s request for a commission from the other CPA is permitted because a
more competent audit can now be performed
D. Sydney may be indebted to the other CPA since the other CPA can collect
from the client only the amount the client originally agreed to pay Sydney.

63. Samuel Commercial Inc. engages the services of Rita Ube, CPA, to make a project study on
the expanded food vending operations of the corporation with the corresponding staffing
and compensation package for its executive staff. Rita, however, has primarily auditing
expertise and only in general merchandising operations. Ms. Ube properly:
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 A. Accept the engagement and carry it out consistent with GAAS.
B. Accept the engagement but exercise due professional care.
C. Accept the engagement and acquire the necessary competence or consult with
establishment authorities.
D. Decline the engagement for lack of experience or competence in an entirely
new line of specialization.

64. S1 A CPA should maintain confidentiality even in a social environment.

S2 A CPA should also maintain confidentiality of information disclosed by a prospective
client or employer.
A. True, false B. False, true C. True, true D. False, false

65. A CPA shall not disclose any confidential information obtained in the course of a
professional engagement except with the consent of the client. This rule should be
understood to preclude a CPA from responding from an inquiry made by:
A. The trial board of the Code of Professional Ethics.
B. An investigative body of a CPA society.
C. A CPA-shareholder of the client corporation.
D. A code of Professional Conduct voluntary quality review body.

66. In which of the situations given below would disclosure by a CPA be in violation of the
Code?
A. Disclosing confidential information in order to properly discharge the CPA’s
responsibilities in accordance with his profession’s standards.
B. Disclosing confidential information in compliance with a subpoena issued by a
court
C. Disclosing confidential information to another accountant interested in
purchasing the CPA’s practice.
D. Disclosing confidential information in a review of the CPA’s professional
practice by the PICPA Quality Review Committee

67. In deciding whether to disclose confidential information, professional accountants should

consider the following points:
A. Effect of the disclosure on the interests of the client, the CPA, and third
parties, even if consent of the client was given.
B. Knowledge and substantiation of all relevant information, to the extent
practicable.
C. Type of communication that is expected and to whom it is addressed.
D. All of the above are considered

68. In marketing and promoting themselves and their work, CPAs should NOT
A. Bring the profession into disrepute.
B. Make exaggerated claims for the services they are able to offer, the
qualifications they possess, of experience they have gained.
C. Make disparaging references or unsubstantiated comparisons to the work of
others.
D. All of the above.

69. A CPA in public practice should NOT:

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 A. Engage in any business, occupation or activity aside from his/her public
accounting practice.
B. Engage in any business, occupation or activity that impairs or might impair
integrity, objectivity or the good reputation of the profession.
C. Engage in teaching or provision of accounting instruction while still in public
practice, since this would cause a division of time and effort, resulting to
impairment of the quality of service provided to clients.
D. Engage in non-accounting related activities which also involve members of the
companies that comprise his/her audit clients.

70. The nature and significance of threats may differ depending on whether they arise in relation
to the provision of services to a client. In which of the following types of clients would
the Revised Code provide the strictest set of requirements regarding independence?
A. A financial statement audit client.
B. A non-financial statement audit assurance client.
C. A non-assurance client.
D. A non-client

71. The auditor’s satisfaction as to the reliability of an assertion being made by one party for use
by another is called:
A. Assurance B. Reliance factor C. Precision D. Materiality

72. An engagement in which a practitioner expresses a conclusion designed to enhance the

degree of confidence of the intended users other than the responsible party about the outcome
of the evaluation or measurement of a subject matter against criteria
A. Assurance engagement C. Audit engagement
B. Attestation engagement D. Management consulting engagement

73. For assurance engagements which are neither audits nor reviews of historical financial
information, the following standard applies:
A. PSAs B. PSREs C. PSAEs D. PSRSs

74. Pronouncement of the Auditing and Assurance Standards Council (AASC) do not cover:
A. Review engagements C. Agreed-upon procedures engagements
B. Compilations D. Consultancy services

75. The Philippine Standards on Auditing issued by AASC:

A. Apply to an independent examination of financial statements of any entity when such
an examination is conducted for the purpose of expressing an opinion thereon
B. Must not apply to other related activities of auditors
C. Need to be applied on all audit-related matters
D. Require that in no circumstances would an auditor may judge it necessary to depart from a
PSA, even though such a departure may result to more effective achievement of the objective
of an audit.

75. Which of the following is NOT an element of an assurance engagement?

A. Sufficient appropriate evidence C. A subject matter
B. Appropriate professional fees D. A written assurance report

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76. S1 The responsible party and the intended user will often be from separate organizations and
need to be so.
S2 The intended user is the person or class of persons for whom the practitioners prepares
the report for a specific use or purpose.
A. True, true B. False, false C. True, false D. False, true

77. Which of the following forms may the subject matter of an assurance engagement take?
A. Financial performance or conditions C. Physical characteristics
B. Non-financial performance or conditions D. All of these

78. These are the benchmarks used to evaluate or measure the subject matter including, where
relevant, benchmarks for presentation and disclosure
A. Assertions B. Engagement process C. Criteria D. PFRS

79. The following characteristics are considered necessary if criteria is to be deemed as suitable
for an assurance engagement. Which of the following phrases best describes reliability?
A. Allows suitable criteria to contribute to conclusions that assist decision-making by the
intended user
B. Relevant factors that could affect the conclusions in the context of the engagement
circumstances are not omitted
C. Allows reasonably consistent evaluation or measurement of the subject matter
including, where relevant, presentation and disclosure, when used in similar
circumstances by similarly qualified practitioners
D. Contributes to conclusions that are clear, comprehensive, and not subject to significantly
different interpretations

80. Which of the following is more difficult to evaluate objectively?

A. Efficiency and effectiveness of operations
B. Compliance with government regulations
C. Presentation of financial statements in accordance with GAAP
D. All the three above are equally difficult

81. In an assurance engagement, this refers to the information obtained by the practitioner
arriving at the conclusion on which the conclusion is based.
A. Criteria B. Evidence C. Assertions D. PSAs

82. In performing an assurance engagement, a professional accountant typically:

A. Supplies litigation support services
B. Assesses control risk at a low level
C. Expresses a conclusion about an assertion
D. Provides management consulting advice

84. This concept is described as follows: “the practitioner makes a critical assessment, with a
questioning mind, of the validity of evidence obtained and is alert to evidence that
contradicts or brings into question the reliability of documents or representations by the
responsible party”.
A. Objectivity and integrity C. Sufficient, appropriate evidence
B. Independence in mental attitude D. Attitude of professional skepticism

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85. S1 An assurance engagement rarely involves the authentication of documentation, nor is the
practitioner trained as or expected to be an expert in such authentication
S2 Sufficiently refers to the quality of evidence, while appropriateness refers to the quantity
of evidence
A. True, true B. False, false C. True, false D. False, true

86. Generally, the conclusion expressed in an assurance engagement may provide the following
levels of assurance:
A B C D
 Limited level of assurance Yes No Yes Yes
 Reasonable level of assurance Yes Yes Yes No
 Absolute level of assurance No Yes Yes No

87. Absolute assurance is generally not attainable as a result of such factors as:
A B C D
 The use of selective testing Yes Yes Yes No
 The inherent limitations of internal control Yes Yes Yes Yes
 Much of the evidence available to the practitioner is
persuasive rather than conclusive Yes Yes No Yes
 The use of judgment in gathering and evaluating
evidence and forming conclusions based on that
evidence No Yes No No

88. This is the risk that the practitioner expresses an inappropriate conclusion when the subject
matter information is materially misstated
A. Audit risk C. Detection risk
B. Assurance engagement risk D. Practitioner’s risk

89. When a CPA has obtained sufficient appropriate evidence to conclude that the subject matter
conforms, in all material respects, to identified suitable criteria, he/she can provide a (n):
A. Limited level of assurance C. Reasonable level of assurance
B. Absolute assurance D. No assurance

90. When a CPA has obtained sufficient appropriate evidence to conclude that the subject matter
is plausible in the circumstances, he/she can provide a (n):
A. Limited level of assurance C. Reasonable level of assurance
B. Absolute assurance D. No assurance

91. The word auditing comes from the Latin audine, which means:
A. To see C. To hear
B. To detect D. To strain

92. Which of the following is an incorrect phrase?

A. Auditing is a systematic process.
B. Auditing objectively obtains and evaluates assurance.
C. Auditing evaluates evidence regarding assertions.
D. Auditing communicates results to interested users.

93. Financial statements need to be prepared in accordance with one, or a combination of:

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 A. PFRS C. Other authoritative basis
B. IFRS D. All of the answers

94. The auditor communicates the results of his or her work through the medium of the:
A. Audit engagement letter. C. Management letter.
B. Audit report. D. Notes to the financial statement.

95. Which of the following types of audits is performed most frequently by CPAs on a fee basis
and for more than one client?
A. Internal audits. C. Compliance audits.
B. Government audits. D. Financial statement audits.

96. Which of the following statements best describes operational audits?

A. This type of audit is performed to determine whether an entity’s financial statements
are fairly stated in conformity with generally accepted accounting principles.
B. This types of audit involves a review of an organization’s procedures and
methods for the purpose of evaluating efficiency and effectiveness of operations, and
identifying areas for improvement.
C. This types of audit is performed in order to determine the degree of adherence to
specific procedures and rules set down by some higher authority.
D. All of these statements describe operational audits.

97. Which of the following best describes the operational audit?

A. It requires the constant review by internal auditors of the administrative controls as
they relate to operations of the company.
B. It concentrates on implementing financial and accounting control in a newly organized
company.
C. It attempts and is designed to verify the fair presentation of a company’s results of
operations.
D. It concentrates on seeking out aspect of operations in which waste would be
reduced by the introduction of controls.

98. Which of the following types of audits are most similar?

A. Operational audits and compliance audits.
B. Independent financial statement audits and operational audits.
C. Compliance audits and independent financial statement audits.
D. Internal audits and independent financial statement audits.

---000-------end of examination-------000---
(Jeremiah10:10)10 But Jehovah is in truth God. He is the living God and the King to time indefinite.
Because of his indignation the earth will rock, and no nations will hold up under his denunciation. .  .

(John14:28)28 YOU heard that I said to YOU, I am going away and I am coming [back] to YOU. If YOU
loved me, YOU would rejoice that I am going my way to the Father, because the Father is greater than I
am.  . .

(John20:17)17  Jesus said to her: “Stop clinging to me. For I have not yet ascended to the Father. But
be on your way to my brothers and say to them, ‘I am ascending to my Father and YOUR Father and to my
God and YOUR God.’”

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