1. Which of the following procedures the auditor will least likely perform in order to obtain sufficient appropriate audit evidence that opening balances do not contain material misstatement that could potentially affect the current period financial statements?

a. Read the most recent financial statements and the auditor's report thereon of the client's competitors.

b. Determine whether the prior period's closing balances have been correctly brought forward to the current period.

c. Determine whether the opening balances reflect the application of appropriate accounting policies.

d. Review of the predecessor auditor's working papers to obtain evidence regarding the opening balances.

The Entity's Use of a Service Organization

2. If the user auditor plans to use a type 1 or type 2 report as audit evidence to support the user auditor's understanding about the design and implementation of controls at the service organization, the user auditor shall: (Choose the incorrect one)

a. Evaluate whether the description and design of controls at the service organization is at a date or for a period that is appropriate for the user auditor's purposes.

b. Evaluate the sufficiency and appropriateness of the evidence provided by the report for the understanding of the user entity's internal control relevant to the audit.

c. In determining the sufficiency and appropriateness of the audit evidence provided by a type 1 or type 2 report, the user auditor shall be satisfied as to the service auditor's professional competence, but not the independence from the service organization; and the adequacy of the standards under which the type 1 or type 2 report was issued.

d. Determine whether complementary user entity controls identified by the service organization are relevant to the user entity and, if so, obtain an understanding of whether the user entity has designed and implemented such controls.

3. When the auditor considers that the service organization activities are significantly relevant to the audit and he concludes that it would be efficient to obtain evidence from tests of controls, such evidence may be obtained by, except

a. Visiting the service organization

b. Performing tests of client's control activities of the service organization

c. Review the service contract between the client and the service organization

d. Obtaining a service organization auditor's report that expresses an opinion as to the operating effectiveness of the service organization's accounting and internal control systems for the processing applications relevant to the audit

Using the Work of Internal Auditors

4. When obtaining an understanding and performing a preliminary assessment of the internal audit function, the auditor should consider the internal auditors'

Organizational status

(Objectivity) Scope of functions Technical competence and due care

a. Yes Yes Yes

b. Yes No Yes

c. Yes No No

d. No Yes No

5. In connection with the examination of financial statements by an independent auditor, the client suggests that members of the internal audit staff be utilized to minimize audit costs. Which of the following tasks could most appropriately be delegated to the internal audit staff

a. Selection of accounts receivable for confirmation, based upon the internal auditor's judgment as to how many accounts and which accounts will provide sufficient coverage.

b. Preparation of schedules for negative accounts receivable responses.

c. Evaluation of the internal control for accounts receivable and sales.

d. Determination of the adequacy of the allowance for doubtful accounts.

Using the Work of an Auditor's Expert

6. Which of the following is most likely to require special planning considerations related to asset valuation?

a. Inventory is comprised of diamond rings.

b. The client has recently purchased an expensive copy machine.

c. Assets costing less than P250 are expensed even when the expected life exceeds one year.

d. Accelerated depreciation methods are used for amortizing the costs of factory equipment.

7. Which of the following statements is correct about the auditor's use of the work of a specialist?

a. The specialist should not have an understanding of the auditor's corroborative use of the specialist's findings.

b. The auditor is required to perform substantive procedures to verify the specialist's assumptions and findings.

c. The client should not have an understanding of the nature of the work to be performed by the specialist.

d. The auditor should obtain an understanding of the methods and assumptions used by the specialist.

Audits of Group FSsComponent Auditors

8. In the auditor's report, the group engagement partner decides not to make reference to a component auditor who audited a client's subsidiary. The group engagement partner could justify this decision if, among other requirements, he or she

a. Issues an unmodified opinion on the consolidated financial statements.

b. Learns that the component auditor issued an unmodified opinion on the subsidiary's financial statements.

c. Is unable to review the audit plan (programs) and working papers of the component auditor.

d. Is satisfied as to the independence and professional reputation of the other CPA.