1 As used in PSA 560, the term subsequent events refers to a Events occurring the date of the financial statement b Events occurring after the date of the auditor's report c Events occurring between the date of the financial statements and the date of the auditor's report d Both events occurring between the date of the Financial Statements and the date of the auditor's report, and facts discovered after the date of the auditor's report 2 Which of the following statements best describes a positive request for confirmation of an Accounts Receivable balance a The customer will be asked to indicate to the auditor the current balance in the account b The customer will be asked to respond to the confirmation request only if the balance indicated in the request is incorrect c The customer will be asked to inform the auditor whether the balance indicated in the request is correct and to respond regardless of whether such stated balance is correct d The customer will be asked to indicate to the auditor the balance in his her account only if it is positive (i e , greater than zero) 3 The auditor is required to obtain reasonable assurance about whether the financial statements are free of materials misstatement, whether due to fraud or error In all cases when reasonable assurance cannot be obtained, the auditor's report shall contain a an a Unmodified opinion b Qualified or adverse opinion c Qualified or disclaimer of opinion d Disclaimer of opinion 4 Accepting an engagement to examine an entity's financial protection most likely would be appropriate if the projection were to be distributed to a All employees who work for the entity b Potential stockholders who request a prospectus or a registration statement c A bank with which the entity is negotiating for a loan d All stockholders of record as of the report date 5 On January 2, 2020, the TANYA CO received a notice from its primary suppliers that effective immediately all wholesale prices would be increased 10 On the basis of the notice, TANYA revalued its December 31, 2019 inventory to reflect the higher costs As a result, the statement of the financial position reflects inventory stated at an amount is higher that its net realizable value The inventory constituted a material proportion of total assets however, the effect of the revaluation was material to current assets but not to total assets or net income In reporting on the company's financial statements for the year ended December 31, 2019 in which inventory is valued at the adjusted amount, the auditor would most likely a Express an unmodified opinion provided the nature of the adjustments and the amounts involve are disclosed in notes to the financial statements b Express a qualified opinion c Disclaim an opinion d Express an adverse opinion 6 The date of the end of the latest period covered by the financial statements, which is normally the date of the most present balance sheet in the financial statement subject to audit is the a Date the financial statements are issued b Date of the auditor's report c Date of the financial statements d Date of approval of the financial statements 7 Which one of the following statements concerning sampling risk and non sampling risk is correct a Neither sampling risk nor non sampling risk can be reduced by the auditor b Sampling risk but not non sampling risk, can be reduced by the auditor c Non sampling rick but not sampling risk d Both sampling risk and non sampling risk can be reduced 8 Professional judgment a Should be exercised in planning and performing an audit of financial statements but need not to be documented b Can be used as the justification for the decisions made by the auditor that are not supported by the facts and circumstances of the engagement c Is necessary in the evaluation of management's judgment in applying the entity's applicable financial reporting framework d Is not used in making decisions about materiality and audit risk 9 An entity's management is responsible for the preparation and fair presentation of the financial statements Its responsibility includes the following, except a Designing, implementing, and maintaining internal control relevant to the preparation and presentation of financial statements b Making accounting estimates that are responsible in the circumstances c Selecting and applying appropriate accounting policies d Assessing the risks of material misstatement of the financial statements 10 PSA 620 (using the work of an auditor's expert) considers the following individuals as experts except a An individual with expertise in applying methods of accounting for deferred and income tax b An expert in taxation law c An individual with expertise in complex modeling for the purpose of valuing financial instruments d An individual with expertise in the valuation of assets acquired and liabilities assumed in business combinations 11 Which of the following statements concerning the auditor's responsibility regarding subsequent events is incorrect a The auditor's should perform audit procedures designed to obtain sufficient appropriate audit evidence that all events up to the date of the auditor's report that may require adjustment of, or disclosure in the financial statements have been identified b The audit procedures to identify events that may require adjustments of, or disclosure in the financial statements shall be performed as near as practicable to the date of issuance of the audited financial statements c When the auditor becomes aware of events which materially affect the financial statement, the auditor should consider whether such events are properly accounted for and adequately disclosed in the financial statements d The auditor does not have any responsibility to perform audit procedures or make inquiry regarding the financial statements after the date of the auditor's report 12 The upper precision limit in statistical sampling is a A statistical measure, at a specified reliability level, of the maximum rate of occurrence of an attribute b The percentage of items in a sample that posses that possess a particular attribute c The percentage of items in a population that possess a particular attribute d The maximum rate of exemption that the auditor would be willing to accept in the population without altering the planned reliance on the attribute 14 Which of the following statements concerning related party transactions is correct a In the absence of evidence to the contrary, related party transactions should be assumed to be outside the ordinary course of business b The audit procedures directed toward identifying related party transactions should include considering whether transactions are occurring but are not given proper accounting recognition c An auditor should determine whether a particular transaction would have occurred if the parties had not been related d An auditor should substantiate that related party transactions were consummated on terms equivalent to those that prevail in arm's length transactions 15 Which of the following constitutes the most significant risk within the purchasing cycle a Receiving department personal sign receiving documents without inspecting or counting the goods b Large quantities of relatively inexpensive parts are stored in open areas near work stations to reduce production slow downs c Poor records of transfer between warehouses often result in unnecessary purchases and excess inventories d Warehouse personnel do not compare quantities received to quantities shown on transfer tickets 16 Which of the following statements best describes an auditor's responsibility regarding misstatements a An auditor should plan and perform an audit to provide reasonable assurance of detecting misstatement that are material to the financial statements b An auditor is responsible to detect material errors but has no responsibility to detect material fraud that is concealed through employee collusion or management override of internal control c An auditor has no responsibility to detect material misstatements unless analytical procedures or tests of transactions identify conditions causing a reasonably prudent auditor to suspect the financial statements were materially misstated d An auditor has no responsibility to detect material misstatements because an auditor is not an insurer and an audit does not constitute a guarantee 17 The effect of a satisfactory audit function upon the work of the independent auditor will most likely be a A substitution of the work of the internal auditor for the work of the independent auditor b A substitution of the internal auditor's opinion of the financial statements in place of the independent auditor's opinion c A reduction in the scope of audit procedures by the independent auditor d An acceptance of the financial statements as a fair representation of financial position and results of operations 18 Which of the following circumstances may create self interest threats for a professional accountant in public practice a Performing a service for a client that directly affects the subject matter of the assurance engagement b Being threatened with litigation c A financial interest in a client or jointly holding a financial interest with a client d Acting as an advocate in behalf of assurance client in litigation or disputes with third parties 19 Which of the following procedures should an auditor ordinarily perform regarding subsequent events a Review the cutoff bank statements for several months after the year end b Send second requests to the client's customers who failed to respond to initial accounts receivable confirmation requests c Communicable material weaknesses in internal control to the client's audit committee d Compare the latest available interim financial statements with the financial statements being audited 20 Which statement is correct regarding personal computers a Programs and data are stores only on non removable storage media b Personal computers cannot be used to process accounting transactions and produce reports that are essential to the preparation of financial statements c Generally, CIS environments in which personal computers are used are the same with other CIS environments d Personal computers or PCs are economically yet powerful self contained general purpose computers consisting typically of a central processing unit (CPU), memory, monitor, disk drives, printer cables and modems 21 An accountant may perform an agreed upon procedures engagement regarding prospective financial statements provided that a Use of the report is to be restricted to the specified users b The prospective financial statements are also examined c Responsibility of the sufficiency of the procedures performed is taken by the accountant d Negative assurance is expressed on the prospective financial statements taken as a whole 22 The primary purpose of the representation letter is the a Acceptance of the auditor's engagement letter b Evaluation by the management of the auditor's performance c Acknowledgment of management's responsibility for the financial statements d Agreement by the management to engage the auditor for the next annual audit 23 Which of the following is not a contingent fee a A fee that is dependent upon the approval of the assurance client's loan application b An audit fee that is based on 5 of the client's adjusted net income for the current year c A fee that is fixed by a court or other public authority d An arrangement whereby no fee will be charged unless a specified finding or result is attained 24 The standard states that the auditor may decide to select specific items from a population based on such factors as the auditor's understanding of the entity, the assesses risk of material misstatements, and the characteristics of the population being tested Specific items that may be selected for testing usually include the following, except a Items that re of high value b Items that are suspicious, unusual, risk prone, or have a history of error c All items whose values do not exceed a certain amount so as to verify only a small proportion of the total amount of class transactions or account balance d Items that provide information about the matters such as the nature of the entity, the nature of transactions, and the internal control 25 Which statement is correct regarding the evaluation of general CIS controls and the CIS application control a The general CIS controls may have a pervasive effect on the processing of transactions in application systems b If general CIS controls are not effective, there may be a risk that misstatements might occur and go undetected in the application systems c Manual procedures exercised by users may provide effective control at the application level d Weaknesses in general CIS controls cannot preclude testing certain CIS application controls 26 A service organization's internal control may interact with that of the client The user auditor a Is not required to evaluate the service organization's controls b Should obtain absolute assurance of the service organization's internal control will prevent or detect errors or fraud c Should not consider weaknesses in the service organization's internal control to be weaknesses in the client's system d Need not to be concerned with the service organization's internal control if the client has effective controls related to service organization processing 27 The most reliable forms of documentary evidence are those documents that are a Pre numbered b Internally generated c Issued sequentially d Authorized by a responsible official 28 An entity's accounting records generally include the records of initial entries and supporting records including a Confirmation from third parties b Information obtained by the auditor from such audit procedures as inquiry, observation, and inspection c Worksheets and spreadsheets supporting cost allocations d Other information developed by, or available to, the auditor to permit him her to reach conclusions through valid reasoning 29 Auditors have learned that increased computerization has created more opportunities for computer fraud but has also led to the development of computer audit techniques to detect frauds A type of fraud that has occurred in the banking industry is a programming fraud in which the programmer designs a program to calculate daily interest on savings accounts to four decimal points The programmer then truncates the last two digits and adds it to his account balance Which of the following CAATs would be most effective in detecting this type of fraud a Generalized audit software that selects account balances for confirmation with the depositor b Snapshot c Parallel simulation d SCARF (System Control and Audit Review File) 30 Which statement is incorrect regarding external confirmation a External confirmation is the process of obtaining and evaluating audit evidence through a direct communication from a third party in response to a request for information about a particular item affecting assertions made by managements in the financial statements b External confirmation of an account receivable provides strong evidence regarding the valuation of the account as at a certain date c The auditor should tailor external confirmation requests to the specific audit objective d The auditor mat use positive or negative external confirmation requests or a combination of both 31 A continuing accountant is one who has been engaged to audit, review, or compile and report on the financial statements of the current period and one or more consecutive periods immediately prior to the current period A continuing account who performs the same or a higher level of service with the respect to the financial statements of the current period should a Update his her report on the financial statements of a prior period b Disclaim any assurance on the prior period's statements c Reissue the reports on the financial statements of a prior period d Express an adverse opinion with respect to the prior period's financial statements 32 Attribute sampling in the statistical sampling is a A method of sampling that divides the population into strata and then selects random samples from the strata b A procedure used to determine an estimated occurrence rate of a particular characteristic in a population c A method of sampling in which individual items are drawn at random from a population so that each sample of a given size has an equal chance of being selected d A procedure in which characteristic selected permits a specified probability of locating an occurrence in a population 33 Which of the following statements concerning audit evidence is correct a Appropriateness is the measure of the quantity of audit evidence b Sufficiency is the measure of the quantity of audit evidence, that is, its relevance and the reliability c The quantity of audit evidence needed is affected by its quality and the risk of misstatement d The sufficiency and the appropriateness of audit evidence are not interrelated 34 Online computer systems use workstations or terminals that are located either locally or at remote sites There are two types of workstations general purpose terminals and special purpose terminals General purpose terminals include the following, except a Basic keyboard and monitor b Point of the sale devices c Intelligent terminal d Personal computers 35 Analytical procedures enable the auditor to predict the balance or quantity of an item under audit Information to develop this estimate can be obtained from all the following, except a Comparison of financial data with the data for comparable prior periods, anticipated results (e g , budgets and forecasts), and similar data for the industry in which the entity operates b Study of the relationships of elements of financial data that would be expected to conform to a predictable pattern based upon the entity's experience c Study of the relationships of elements of financial data with relevant nonfinancial data d Tracing transactions through the system to determine whether procedures are being applied as prescribed 36 Auditors are often requested to report on interim financial statements A review of interim financial information consists primarily of a Vouching and tracing b Reconciliation and re performance c Inquiries and analytical procedures d Confirmation and observation 37 When the author performs substantive test of balances, the primary concern is a Assessing control rick too high b Assessing control risk too low c Incorrect rejection of an account balance d Incorrect acceptance of an account balance 38 PSA 500 requires the auditor to use assertions for classes of transactions, account balances, and presentation and the disclosures in sufficient detail to form a basis for the assessment of risks of material misstatement and the design and performance for further audit performance of further audit procedures Assertions about classes of transactions include occurrence, completeness, accuracy, cutoff, and a Valuation and allocation b Rights and obligations c Existence d Classification 39 Which of the following is the greatest advantage of a database system a Data redundancy can be reduced b Backup and recovery procedures are minimized c Multiple occurrences of data items are useful for consistency checking d Conversion to a database system is inexpensive and can be accomplished quickly 40 In evaluating the assumptions on which the estimate is based, the auditor would need to pay particular attention to assumptions which are a Reasonable in light of actual results in prior periods b Consistent with those used for other accounting estimates c Consistent with the management's plans which appear appropriate d Subjective or susceptible to material misstatement 41 Comparative financial statements include the prior year's statements that were audited by a predecessor auditor whose report is not presented If the predecessor's report was unmodified, the successor auditor should a Express an opinion to the current year's statements alone and make no reference to the prior year's statements b Indicate in the auditor's report that the predecessor auditor expresses an unmodified opinion c Obtain a letter of representations from the predecessor concerning any matters that might affect the successor's opinion d Request the predecessor auditor to reissue the prior year's report 42 In performing audit tests, the auditor may use either non statistical or statistical sampling The critical difference between the two types of sampling is that a The sampling plan for non statistical sampling eliminates procedures required for statistical sampling b Statistical sampling enables quantification and control of sampling risk c Non sampling risk is lower in statistical sampling d Statistical sampling eliminates both sampling and non sampling risk 43 The auditor is required by the standard to consider the IT environment in designing audit procedures to reduce risk to an acceptable low level Which of the following statements is incorrect a The auditor' specific audit objectives do not change whether financial information is processed manually or by computer b The methods of applying audit procedures to gather audit evidence are not influenced by the methods of computer processing c The auditor may use either manual audit procedures, computer assisted audit techniques (CAATs), or a combination of both to obtain sufficient appropriate audit evidence d In some IT environments, it may be difficult or impossible for the auditor to obtain certain data for inspection, inquiry, or confirmation without the aid of a computer 44 The auditor is required to complete the administrative process of assembling final audit file on a timely basis after the date of the auditor's report a Not more than 30 days after the date of the auditor's report b Not more than 60 days after the date of the auditor's report c Not more than 90 days after the end of the entity's reporting period d Not more than 60 days after the date the entity's financial statements are authorized for issue 45 Which of the following statements best expresses the auditor's responsibility with respect to events occurring in the subsequent events periods a The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the end of the reporting period b The auditor is responsible for determining that a proper cutoff has been made and for performing a general review of events occurring in the subsequent period c The auditor is fully responsible for the events occurring in the subsequent period and should extend all detailed procedures through the date of the auditor's report d The auditor's responsibility is to determine that transactions recorded on or before the end of the reporting period actually occurred 46 The size of a sample designed for dual purpose testing should be a The larger of the samples that would otherwise have been designed for the two separate purposes b The smaller of the samples that would otherwise have been designed for two separate purposes c The combined total of the sample that would otherwise have been designed for the two separate purposes d More than the larger of the samples that would otherwise have been designed for the two separate purposes, but less than the combined total of the samples that would otherwise have been designed for the two separate purposes 47 During an audit engagement, pertinent data are combined in the audit working papers The working papers primarily are considered to be a A client owned record of conclusions reached by the auditors who performed the engagement b Evidence supporting financial statements c Support for the auditor's representations as to compliance with the PSAs d A record to be used as a basis for the following year's engagement 48 Control activities one of the five components of internal control Which of the following is not included in the internal control component a Segregation of duties b Performance reviews c An internal audit function d Authorization 49 If the fee quoted for a professional service is so low, it may be difficult for the CPS to perform the engagement in accordance with applicable technical and professional standards for that price This situation may create a self interest threat to a Professional competence due care b Objectivity c Integrity d Professional behavior 50 Which statement is incorrect about sampling risk a Sampling risk arises from the possibility that the auditor's conclusion based on a sample may be different from the conclusion reached if the entire population were subjected to the same audit procedure b The risk of assessing control risk too low and the risk of incorrect acceptance affect the audit effectiveness as it would usually lead to additional work to establish that initial conclusions were incorrect c The mathematical complements of sampling risks are termed confidence levels d The risk of assessing control risk too high is the risk that the auditor will conclude, in the case of a test of controls, that control risk is higher than it actually is 51 Assistants to whom work is delegated need appropriate direction Direction involves a Informing assistants of their responsibilities and the objectives of the procedures they are to perform b Informing assistants of matters, such as the nature of the entity's business and the possible accounting or auditing problems that may affect the nature, timing, and extent of audit procedures with which they are involved c Both A and B d Neither A and B 52 What is the independent auditor's principle purpose for obtaining an understanding of internal control and assessing control risk a To comply with PSAs b To obtain a measure of assurance of management's efficiency c To maintain a state of independence in mental attitude during the audit d To determine the nature, timing, and extent of subsequent audit work 53 Which of the following components of an entity's internal control includes development and use of training policies that communicate prospective rules and responsibilities to employees a Monitoring of controls b Control activities c Control environment d Information and communication 54 The auditor's risk assessment procedures should always include the following, except a Inquiries of management and of others within the entity b Analytical procedures c Observation and inspection d Substantive test procedures and test controls 55 Which of the following statements is correct a The expected population deviation rate has little or no effect on sample size b For a given tolerable rate, a larger sample size should be selected as the expected population deviation rate decreases c The population size has little or no effect on sample size except for very small populations d The population size double, the sample size should also double 56 The preliminary assessment of control risk is the process of evaluating the efficiency of an entity's accounting and internal control systems in preventing or detecting and correcting material misstatements The auditor should document in the audit working papers the understanding obtained of the entity's accounting and internal control systems and the assessment of control risk There will always be some control risk because of the inherent limitations of any accounting and internal control systems a False True True c False False True b True True False D True False True 57 A CPA is auditing the financial statements of a small telephone company and wishes to test whether customers are being billed One procedure that he she might use is to a Check a sample of listings in the telephone directory to the billing control b Trace a sample of postings from the billing control to the subsidiary accounts receivable records c Balance the accounts receivable master files to the general ledger control account d Confirm a representative number of accounts receivables 58 Which of the following statements concerning audit planning is correct a Planning is a discrete phase of an audit b Planning is a continual and iterative process c In a recurring audit, planning often begins shortly after (or in connection with) the completion of the previous audit and continues until the completion of the current audit engagement d In planning an audit, the auditor considers the timing of certain planning activities and audit procedures that are to be completed prior to the performance of further audit procedures 59 Application controls are a Manual of automated procedures that typically operate at a business process level and apply to the processing of transactions by individual applications b Policies and procedures that relate to many applications c Controls that maintain the integrity of information and security of data such as controls over system software acquisition, change and maintenance d Controls that relate to many applications and support the effective functioning of general controls 60 Which of the following is least likely considered by the auditor in determining the significance of service organization activities to the client and the relevance to the audit a Terms of contract and relationship between the client and the service organization b The material financial statement assertions that are affected by the use of the service organization c Client's internal controls that are applied to the transactions processed by the service organization d The control policies and procedures of the client of requiring that all payments for goods and services be supported by receiving reports 61 An entity installed antivirus software on all its personal computers The software was designed to prevent initial infections, stop replication attempts, detect infections after their occurrence, mark affected system components, and remove viruses from infected components The major risk in relying on antivirus software is that it may a Consume too many system resources b Interfere with system operations c Not detect certain viruses d Make software installation too complex 62 The negative form of accounts receivable confirmation request is useful except when a Internal control surrounding accounts receivable is considered to be effective b A large number of small balances are involved c The auditor has reasons to believe the persons receiving the requests are likely to give them consideration d Individual account balances are relatively large 63 Before accepting an audit engagement, a proposed (successor) auditor should make inquiries of the previous (predecessor) auditor regarding the previous auditor's a Evaluation of all matters of continuing accounting significance b Understanding as to the reasons for the change of auditors c Awareness of the consistency in the application of PFRS between periods d Opinion of any subsequent events occurring since the previous auditor's report was issued 64 The accounts payable department generally should a Cancel supporting documents after a cash payment is made b Approve the price and quantity of each purchase requisition c Assured that the quantity ordered is omitted from the receiving department's copy of the purchase order d Agree the vendor's invoice with the receiving reports and purchase order 65 Which of the following statement concerning detection risk is incorrect a Detection risk is a function of the effectiveness of an auditing procedure and its application b Detection risk arises partly from uncertainties that exist when the auditor does not examine 100 percent of the population c Detection risk arises partly because of other uncertainties that exist even if the auditor were to examine 100 percent of the population d Detection risk exists independently of the audit of the financial statements 66 Which of the following questions would not appear in an internal control questionnaire relating to cash disbursements a Are all disbursements except for petty cash made by check b Are imprinted and pre numbered checks used and is a check protection device used in printing the check amount c Is each check supported by an approved voucher d Are pre listings made of all cash receipts 67 Which of the following is true of generalized audit software programs a They can be used only in auditing on line computer systems b They can be used on any computer without modification c They each have their own characteristics that the auditor must carefully consider before using the given audit situation d They enable auditor to perform all manual tests of controls procedures less expensively 68 This government agency is responsible for the registration of corporations and partnerships, as well as monitoring of compliance with the Corporation Code, Civil Code provisions on partnerships, Foreign Investments Act, and other related laws a Banko Sentral ng Pilipinas (BSP) b Securities and Exchange Commission (SEC) c Bureau of Internal Revenue (BIR) d Philippines Stock Exchange 69 The two broad groupings of information systems control activities and general controls and application controls General controls include controls a Relating to the correction and resubmission of faulty data b For developing modifying, and maintaining computer programs c Designed to assure that only authorized users receive output from processing d Designed to ensure that all data submitted for processing have been properly authorized 70 Examples of situations where the auditor may find it impossible to design effective substantive procedures that by themselves provide sufficient appropriate audit evidence that certain assertions are not materially misstated include the following An entity that conducts its business using IT to initiate orders for the purchase and delivery of goods based on pre determined rules of what to order and in what quantities and to pay the related accounts payable based on system generated decisions initiated upon the confirmed receipt of goods and terms of payment No other documentation of other placed or goods received is produced or maintained other than through the IT system An entity that provides services to customer via electronic media (for example, an Internet service provider or a telecommunication company) and it uses IT to create a log of the services provided to its customers, initiate and process its billings for the services and automatically record for such amounts in electronic accounting records that are part of the system used to produce the entity's financial statements a Both I and II b I only c II only d Neither I nor II

Question

1 As used in PSA 560, the term  subsequent events  refers to a Events occurring the date of the financial statement  b Events occurring after the date of the auditor's report c Events occurring between the date of the financial statements and the date of the auditor's report d Both events occurring between the date of the Financial Statements and the date of the auditor's report, and facts discovered after the date of the auditor's report  2 Which of the following statements best describes a positive request for confirmation of an Accounts Receivable balance  a The customer will be asked to indicate to the auditor the current balance in the account  b The customer will be asked to respond to the confirmation request only if the balance indicated in the request is incorrect  c The customer will be asked to inform the auditor whether the balance indicated in the request is correct and to respond regardless of whether such stated balance is correct  d The customer will be asked to indicate to the auditor the balance in his her account only if it is positive (i e , greater than zero)  3 The auditor is required to obtain reasonable assurance about whether the financial statements are free of materials misstatement, whether due to fraud or error  In all cases when reasonable assurance cannot be obtained, the auditor's report shall contain a an a Unmodified opinion b Qualified or adverse opinion c Qualified or disclaimer of opinion d Disclaimer of opinion 4 Accepting an engagement to examine an entity's financial protection most likely would be appropriate if the projection were to be distributed to a All employees who work for the entity  b Potential stockholders who request a prospectus or a registration statement  c A bank with which the entity is negotiating for a loan  d All stockholders of record as of the report date  5 On January 2, 2020, the TANYA CO  received a notice from its primary suppliers that effective immediately all wholesale prices would be increased 10   On the basis of the notice, TANYA revalued its December 31, 2019 inventory to reflect the higher costs  As a result, the statement of the financial position reflects inventory stated at an amount is higher that its net realizable value  The inventory constituted a material proportion of total assets  however, the effect of the revaluation was material to current assets but not to total assets or net income  In reporting on the company's financial statements for the year ended December 31, 2019 in which inventory is valued at the adjusted amount, the auditor would most likely a Express an unmodified opinion provided the nature of the adjustments and the amounts involve are disclosed in notes to the financial statements  b Express a qualified opinion  c Disclaim an opinion  d Express an adverse opinion  6 The date of the end of the latest period covered by the financial statements, which is normally the date of the most present balance sheet in the financial statement subject to audit is the a Date the financial statements are issued  b Date of the auditor's report  c Date of the financial statements  d Date of approval of the financial statements  7 Which one of the following statements concerning sampling risk and non sampling risk is correct  a Neither sampling risk nor non sampling risk can be reduced by the auditor  b Sampling risk but not non sampling risk, can be reduced by the auditor  c Non sampling rick but not sampling risk  d Both sampling risk and non sampling risk can be reduced  8 Professional judgment a Should be exercised in planning and performing an audit of financial statements but need not to be documented  b Can be used as the justification for the decisions made by the auditor that are not supported by the facts and circumstances of the engagement  c Is necessary in the evaluation of management's judgment in applying the entity's applicable financial reporting framework  d Is not used in making decisions about materiality and audit risk  9 An entity's management is responsible for the preparation and fair presentation of the financial statements  Its responsibility includes the following, except a Designing, implementing, and maintaining internal control relevant to the preparation and presentation of financial statements  b Making accounting estimates that are responsible in the circumstances  c Selecting and applying appropriate accounting policies  d Assessing the risks of material misstatement of the financial statements  10 PSA 620 (using the work of an auditor's expert) considers the following individuals as  experts  except a An individual with expertise in applying methods of accounting for deferred and income tax  b An expert in taxation law  c An individual with expertise in complex modeling for the purpose of valuing financial instruments  d An individual with expertise in the valuation of assets acquired and liabilities assumed in business combinations  11 Which of the following statements concerning the auditor's responsibility regarding subsequent events is incorrect  a The auditor's should perform audit procedures designed to obtain sufficient appropriate audit evidence that all events up to the date of the auditor's report that may require adjustment of, or disclosure in the financial statements have been identified  b The audit procedures to identify events that may require adjustments of, or disclosure in the financial statements shall be performed as near as practicable to the date of issuance of the audited financial statements  c When the auditor becomes aware of events which materially affect the financial statement, the auditor should consider whether such events are properly accounted for and adequately disclosed in the financial statements  d The auditor does not have any responsibility to perform audit procedures or make inquiry regarding the financial statements after the date of the auditor's report  12 The upper precision limit in statistical sampling is a A statistical measure, at a specified reliability level, of the maximum rate of occurrence of an attribute  b The percentage of items in a sample that posses that possess a particular attribute  c The percentage of items in a population that possess a particular attribute  d The maximum rate of exemption that the auditor would be willing to accept in the population without altering the planned reliance on the attribute  14 Which of the following statements concerning related party transactions is correct  a In the absence of evidence to the contrary, related party transactions should be assumed to be outside the ordinary course of business  b The audit procedures directed toward identifying related party transactions should include considering whether transactions are occurring but are not given proper accounting recognition  c An auditor should determine whether a particular transaction would have occurred if the parties had not been related  d An auditor should substantiate that related party transactions were consummated on terms equivalent to those that prevail in arm's length transactions  15 Which of the following constitutes the most significant risk within the purchasing cycle  a Receiving department personal sign receiving documents without inspecting or counting the goods  b Large quantities of relatively inexpensive parts are stored in open areas near work stations to reduce production slow downs  c Poor records of transfer between warehouses often result in unnecessary purchases and excess inventories  d Warehouse personnel do not compare quantities received to quantities shown on transfer tickets  16 Which of the following statements best describes an auditor's responsibility regarding misstatements  a An auditor should plan and perform an audit to provide reasonable assurance of detecting misstatement that are material to the financial statements  b An auditor is responsible to detect material errors but has no responsibility to detect material fraud that is concealed through employee collusion or management override of internal control  c An auditor has no responsibility to detect material misstatements unless analytical procedures or tests of transactions identify conditions causing a reasonably prudent auditor to suspect the financial statements were materially misstated  d An auditor has no responsibility to detect material misstatements because an auditor is not an insurer and an audit does not constitute a guarantee  17 The effect of a satisfactory audit function upon the work of the independent auditor will most likely be a A substitution of the work of the internal auditor for the work of the independent auditor  b A substitution of the internal auditor's opinion of the financial statements in place of the independent auditor's opinion  c A reduction in the scope of audit procedures by the independent auditor  d An acceptance of the financial statements as a fair representation of financial position and results of operations  18 Which of the following circumstances may create self interest threats for a professional accountant in public practice  a Performing a service for a client that directly affects the subject matter of the assurance engagement  b Being threatened with litigation  c A financial interest in a client or jointly holding a financial interest with a client  d Acting as an advocate in behalf of assurance client in litigation or disputes with third parties  19 Which of the following procedures should an auditor ordinarily perform regarding subsequent events  a Review the cutoff bank statements for several months after the year end  b Send second requests to the client's customers who failed to respond to initial accounts receivable confirmation requests  c Communicable material weaknesses in internal control to the client's audit committee  d Compare the latest available interim financial statements with the financial statements being audited  20 Which statement is correct regarding personal computers  a Programs and data are stores only on non removable storage media  b Personal computers cannot be used to process accounting transactions and produce reports that are essential to the preparation of financial statements  c Generally, CIS environments in which personal computers are used are the same with other CIS environments  d Personal computers or PCs are economically yet powerful self contained general purpose computers consisting typically of a central processing unit (CPU), memory, monitor, disk drives, printer cables and modems  21 An accountant may perform an agreed upon procedures engagement regarding prospective financial statements provided that a Use of the report is to be restricted to the specified users  b The prospective financial statements are also examined  c Responsibility of the sufficiency of the procedures performed is taken by the accountant  d Negative assurance is expressed on the prospective financial statements taken as a whole  22 The primary purpose of the representation letter is the a Acceptance of the auditor's engagement letter  b Evaluation by the management of the auditor's performance  c Acknowledgment of management's responsibility for the financial statements  d Agreement by the management to engage the auditor for the next annual audit  23 Which of the following is not a contingent fee  a A fee that is dependent upon the approval of the assurance client's loan application  b An audit fee that is based on 5  of the client's adjusted net income for the current year  c A fee that is fixed by a court or other public authority  d An arrangement whereby no fee will be charged unless a specified finding or result is attained  24 The standard states that the auditor may decide to select specific items from a population based on such factors as the auditor's understanding of the entity, the assesses risk of material misstatements, and the characteristics of the population being tested  Specific items that may be selected for testing usually include the following, except a Items that re of high value  b Items that are suspicious, unusual, risk prone, or have a history of error  c All items whose values do not exceed a certain amount so as to verify only a small proportion of the total amount of class transactions or account balance  d Items that provide information about the matters such as the nature of the entity, the nature of transactions, and the internal control  25 Which statement is correct regarding the evaluation of general CIS controls and the CIS application control  a The general CIS controls may have a pervasive effect on the processing of transactions in application systems  b If general CIS controls are not effective, there may be a risk that misstatements might occur and go undetected in the application systems  c Manual procedures exercised by users may provide effective control at the application level  d Weaknesses in general CIS controls cannot preclude testing certain CIS application controls  26 A service organization's internal control may interact with that of the client  The user auditor a Is not required to evaluate the service organization's controls  b Should obtain absolute assurance of the service organization's internal control will prevent or detect errors or fraud  c Should not consider weaknesses in the service organization's internal control to be weaknesses in the client's system  d Need not to be concerned with the service organization's internal control if the client has effective controls related to service organization processing  27 The most reliable forms of documentary evidence are those documents that are a Pre numbered  b Internally generated  c Issued sequentially  d Authorized by a responsible official  28 An entity's accounting records generally include the records of initial entries and supporting records including a Confirmation from third parties  b Information obtained by the auditor from such audit procedures as inquiry, observation, and inspection  c Worksheets and spreadsheets supporting cost allocations  d Other information developed by, or available to, the auditor to permit him her to reach conclusions through valid reasoning  29 Auditors have learned that increased computerization has created more opportunities for computer fraud but has also led to the development of computer audit techniques to detect frauds  A type of fraud that has occurred in the banking industry is a programming fraud in which the programmer designs a program to calculate daily interest on savings accounts to four decimal points  The programmer then truncates the last two digits and adds it to his account balance  Which of the following CAATs would be most effective in detecting this type of fraud  a Generalized audit software that selects account balances for confirmation with the depositor  b Snapshot  c Parallel simulation  d SCARF (System Control and Audit Review File)  30 Which statement is incorrect regarding external confirmation  a External confirmation is the process of obtaining and evaluating audit evidence through a direct communication from a third party in response to a request for information about a particular item affecting assertions made by managements in the financial statements  b External confirmation of an account receivable provides strong evidence regarding the valuation of the account as at a certain date  c The auditor should tailor external confirmation requests to the specific audit objective  d The auditor mat use positive or negative external confirmation requests or a combination of both  31 A continuing accountant is one who has been engaged to audit, review, or compile and report on the financial statements of the current period and one or more consecutive periods immediately prior to the current period  A continuing account who performs the same or a higher level of service with the respect to the financial statements of the current period should a Update his her report on the financial statements of a prior period  b Disclaim any assurance on the prior period's statements  c Reissue the reports on the financial statements of a prior period  d Express an adverse opinion with respect to the prior period's financial statements  32 Attribute sampling in the statistical sampling is a A method of sampling that divides the population into strata and then selects random samples from the strata  b A procedure used to determine an estimated occurrence rate of a particular characteristic in a population  c A method of sampling in which individual items are drawn at random from a population so that each sample of a given size has an equal chance of being selected  d A procedure in which characteristic selected permits a specified probability of locating an occurrence in a population  33 Which of the following statements concerning audit evidence is correct  a Appropriateness is the measure of the quantity of audit evidence  b Sufficiency is the measure of the quantity of audit evidence, that is, its relevance and the reliability  c The quantity of audit evidence needed is affected by its quality and the risk of misstatement  d The sufficiency and the appropriateness of audit evidence are not interrelated  34 Online computer systems use workstations or terminals that are located either locally or at remote sites  There are two types of workstations  general purpose terminals and special purpose terminals  General purpose terminals include the following, except a Basic keyboard and monitor b Point of the sale devices c Intelligent terminal d Personal computers 35 Analytical procedures enable the auditor to predict the balance or quantity of an item under audit  Information to develop this estimate can be obtained from all the following, except a Comparison of financial data with the data for comparable prior periods, anticipated results (e g , budgets and forecasts), and similar data for the industry in which the entity operates  b Study of the relationships of elements of financial data that would be expected to conform to a predictable pattern based upon the entity's experience  c Study of the relationships of elements of financial data with relevant nonfinancial data  d Tracing transactions through the system to determine whether procedures are being applied as prescribed  36 Auditors are often requested to report on interim financial statements  A review of interim financial information consists primarily of a Vouching and tracing  b Reconciliation and re performance  c Inquiries and analytical procedures  d Confirmation and observation  37 When the author performs substantive test of balances, the primary concern is a Assessing control rick too high  b Assessing control risk too low  c Incorrect rejection of an account balance  d  Incorrect acceptance of an account balance  38 PSA 500 requires the auditor to use assertions for classes of transactions, account balances, and presentation and the disclosures in sufficient detail to form a basis for the assessment of risks of material misstatement and the design and performance for further audit performance of further audit procedures  Assertions about classes of transactions include occurrence, completeness, accuracy, cutoff, and a Valuation and allocation b Rights and obligations c Existence d Classification 39 Which of the following is the greatest advantage of a database system  a Data redundancy can be reduced  b Backup and recovery procedures are minimized  c Multiple occurrences of data items are useful for consistency checking  d Conversion to a database system is inexpensive and can be accomplished quickly  40 In evaluating the assumptions on which the estimate is based, the auditor would need to pay particular attention to assumptions which are a Reasonable in light of actual results in prior periods  b Consistent with those used for other accounting estimates  c Consistent with the management's plans which appear appropriate  d Subjective or susceptible to material misstatement  41 Comparative financial statements include the prior year's statements that were audited by a predecessor auditor whose report is not presented  If the predecessor's report was unmodified, the successor auditor should a Express an opinion to the current year's statements alone and make no reference to the prior year's statements  b Indicate in the auditor's report that the predecessor auditor expresses an unmodified opinion  c Obtain a letter of representations from the predecessor concerning any matters that might affect the successor's opinion  d Request the predecessor auditor to reissue the prior year's report  42 In performing audit tests, the auditor may use either non statistical or statistical sampling  The critical difference between the two types of sampling is that a The sampling plan for non statistical sampling eliminates procedures required for statistical sampling  b Statistical sampling enables quantification and control of sampling risk  c Non sampling risk is lower in statistical sampling  d Statistical sampling eliminates both sampling and non sampling risk  43 The auditor is required by the standard to consider the IT environment in designing audit procedures to reduce risk to an acceptable low level  Which of the following statements is incorrect  a The auditor' specific audit objectives do not change whether financial information is processed manually or by computer  b The methods of applying audit procedures to gather audit evidence are not influenced by the methods of computer processing  c The auditor may use either manual audit procedures, computer assisted audit techniques (CAATs), or a combination of both to obtain sufficient appropriate audit evidence  d In some IT environments, it may be difficult or impossible for the auditor to obtain certain data for inspection, inquiry, or confirmation without the aid of a computer  44 The auditor is required to complete the administrative process of assembling final audit file on a timely basis after the date of the auditor's report  a Not more than 30 days after the date of the auditor's report  b Not more than 60 days after the date of the auditor's report  c Not more than 90 days after the end of the entity's reporting period  d Not more than 60 days after the date the entity's financial statements are authorized for issue  45 Which of the following statements best expresses the auditor's responsibility with respect to events occurring in the subsequent events periods  a The auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the end of the reporting period  b The auditor is responsible for determining that a proper cutoff has been made and for performing a general review of events occurring in the subsequent period  c The auditor is fully responsible for the events occurring in the subsequent period and should extend all detailed procedures through the date of the auditor's report  d The auditor's responsibility is to determine that transactions recorded on or before the end of the reporting period actually occurred  46 The size of a sample designed for dual purpose testing should be a The larger of the samples that would otherwise have been designed for the two separate purposes  b The smaller of the samples that would otherwise have been designed for two separate purposes  c The combined total of the sample that would otherwise have been designed for the two separate purposes  d More than the larger of the samples that would otherwise have been designed for the two separate purposes, but less than the combined total of the samples that would otherwise have been designed for the two separate purposes  47 During an audit engagement, pertinent data are combined in the audit working papers  The working papers primarily are considered to be a A client owned record of conclusions reached by the auditors who performed the engagement  b Evidence supporting financial statements  c Support for the auditor's representations as to compliance with the PSAs  d A record to be used as a basis for the following year's engagement  48 Control activities one of the five components of internal control  Which of the following is not included in the internal control component  a Segregation of duties b Performance reviews c An internal audit function d Authorization 49 If the fee quoted for a professional service is so low, it may be difficult for the CPS to perform the engagement in accordance with applicable technical and professional standards for that price  This situation may create a self interest threat to a Professional competence due care b Objectivity c Integrity d Professional behavior 50 Which statement is incorrect about sampling risk  a Sampling risk arises from the possibility that the auditor's conclusion based on a sample may be different from the conclusion reached if the entire population were subjected to the same audit procedure  b The risk of assessing control risk too low and the risk of incorrect acceptance affect the audit effectiveness as it would usually lead to additional work to establish that initial conclusions were incorrect  c The mathematical complements of sampling risks are termed confidence levels  d The risk of assessing control risk too high is the risk that the auditor will conclude, in the case of a test of controls, that control risk is higher than it actually is  51 Assistants to whom work is delegated need appropriate direction  Direction involves a Informing assistants of their responsibilities and the objectives of the procedures they are to perform  b Informing assistants of matters, such as the nature of the entity's business and the possible accounting or auditing problems that may affect the nature, timing, and extent of audit procedures with which they are involved  c Both A and B  d Neither A and B  52 What is the independent auditor's principle purpose for obtaining an understanding of internal control and assessing control risk  a To comply with PSAs  b To obtain a measure of assurance of management's efficiency  c To maintain a state of independence in mental attitude during the audit  d To determine the nature, timing, and extent of subsequent audit work  53 Which of the following components of an entity's internal control includes development and use of training policies that communicate prospective rules and responsibilities to employees  a Monitoring of controls  b Control activities  c Control environment  d Information and communication  54 The auditor's risk assessment procedures should always include the following, except a Inquiries of management and of others within the entity  b Analytical procedures  c Observation and inspection  d Substantive test procedures and test controls  55 Which of the following statements is correct  a The expected population deviation rate has little or no effect on sample size  b For a given tolerable rate, a larger sample size should be selected as the expected population deviation rate decreases  c The population size has little or no effect on sample size except for very small populations  d The population size double, the sample size should also double  56 The preliminary assessment of control risk is the process of evaluating the efficiency of an entity's accounting and internal control systems in preventing or detecting and correcting material misstatements  The auditor should document in the audit working papers the understanding obtained of the entity's accounting and internal control systems and the assessment of control risk  There will always be some control risk because of the inherent limitations of any accounting and internal control systems  a False  True  True  c  False  False  True  b True  True  False  D  True  False  True  57 A CPA is auditing the financial statements of a small telephone company and wishes to test whether customers are being billed  One procedure that he she might use is to a Check a sample of listings in the telephone directory to the billing control  b Trace a sample of postings from the billing control to the subsidiary accounts receivable records  c Balance the accounts receivable master files to the general ledger control account  d Confirm a representative number of accounts receivables  58 Which of the following statements concerning audit planning is correct  a Planning is a discrete phase of an audit  b Planning is a continual and iterative process  c In a recurring audit, planning often begins shortly after (or in connection with) the completion of the previous audit and continues until the completion of the current audit engagement  d In planning an audit, the auditor considers the timing of certain planning activities and audit procedures that are to be completed prior to the performance of further audit procedures  59 Application controls are a Manual of automated procedures that typically operate at a business process level and apply to the processing of transactions by individual applications  b Policies and procedures that relate to many applications  c Controls that maintain the integrity of information and security of data such as controls over system software acquisition, change and maintenance  d Controls that relate to many applications and support the effective functioning of general controls  60 Which of the following is least likely considered by the auditor in determining the significance of service organization activities to the client and the relevance to the audit  a Terms of contract and relationship between the client and the service organization  b The material financial statement assertions that are affected by the use of the service organization  c Client's internal controls that are applied to the transactions processed by the service organization  d The control policies and procedures of the client of requiring that all payments for goods and services be supported by receiving reports  61 An entity installed antivirus software on all its personal computers  The software was designed to prevent initial infections, stop replication attempts, detect infections after their occurrence, mark affected system components, and remove viruses from infected components  The major risk in relying on antivirus software is that it may a Consume too many system resources  b Interfere with system operations  c Not detect certain viruses  d Make software installation too complex  62 The negative form of accounts receivable confirmation request is useful except when a Internal control surrounding accounts receivable is considered to be effective  b A large number of small balances are involved  c The auditor has reasons to believe the persons receiving the requests are likely to give them consideration  d Individual account balances are relatively large  63 Before accepting an audit engagement, a proposed (successor) auditor should make inquiries of the previous (predecessor) auditor regarding the previous auditor's a Evaluation of all matters of continuing accounting significance  b Understanding as to the reasons for the change of auditors  c Awareness of the consistency in the application of PFRS between periods  d Opinion of any subsequent events occurring since the previous auditor's report was issued  64 The accounts payable department generally should a Cancel supporting documents after a cash payment is made  b Approve the price and quantity of each purchase requisition  c Assured that the quantity ordered is omitted from the receiving department's copy of the purchase order  d Agree the vendor's invoice with the receiving reports and purchase order  65 Which of the following statement concerning detection risk is incorrect  a Detection risk is a function of the effectiveness of an auditing procedure and its application  b Detection risk arises partly from uncertainties that exist when the auditor does not examine 100 percent of the population  c Detection risk arises partly because of other uncertainties that exist even if the auditor were to examine 100 percent of the population  d Detection risk exists independently of the audit of the financial statements  66 Which of the following questions would not appear in an internal control questionnaire relating to cash disbursements  a Are all disbursements except for petty cash made by check  b Are imprinted and pre numbered checks used and is a check protection device used in printing the check amount  c Is each check supported by an approved voucher  d Are pre listings made of all cash receipts  67 Which of the following is true of generalized audit software programs  a They can be used only in auditing on line computer systems  b They can be used on any computer without modification  c They each have their own characteristics that the auditor must carefully consider before using the given audit situation  d They enable auditor to perform all manual tests of controls procedures less expensively  68 This government agency is responsible for the registration of corporations and partnerships, as well as monitoring of compliance with the Corporation Code, Civil Code provisions on partnerships, Foreign Investments Act, and other related laws  a Banko Sentral ng Pilipinas (BSP) b Securities and Exchange Commission (SEC) c Bureau of Internal Revenue (BIR) d Philippines Stock Exchange 69 The two broad groupings of information systems control activities and general controls and application controls  General controls include controls a Relating to the correction and resubmission of faulty data  b For developing modifying, and maintaining computer programs  c Designed to assure that only authorized users receive output from processing  d Designed to ensure that all data submitted for processing have been properly authorized  70 Examples of situations where the auditor may find it impossible to design effective substantive procedures that by themselves provide sufficient appropriate audit evidence that certain assertions are not materially misstated include the following  An entity that conducts its business using IT to initiate orders for the purchase and delivery of goods based on pre determined rules of what to order and in what quantities and to pay the related accounts payable based on system generated decisions initiated upon the confirmed receipt of goods and terms of payment  No other documentation of other placed or goods received is produced or maintained other than through the IT system  An entity that provides services to customer via electronic media (for example, an Internet service provider or a telecommunication company) and it uses IT to create a log of the services provided to its customers, initiate and process its billings for the services and automatically record for such amounts in electronic accounting records that are part of the system used to produce the entity's financial statements  a Both I and II  b I only  c  II only  d  Neither I nor II

Accepted Answer

The Answer is in the image, click to view ...

1.As used in PSA 560, the term subsequent events refers to a.Events occurring the date of the...

Question:

Principles Of Operations Management Sustainability And Supply Chain Management

1.As used in PSA 560, the term subsequent events refers to a.Events occurring the date of the...

Question:

Expert Answer:

The Answer is in the image, click to view ... View the full answer

Principles Of Operations Management Sustainability And Supply Chain Management

Students also viewed these Accounting questions