1.S1 Auditing can have a significant effect on both information risk and business risk.

S2 The market for other forms of assurance services is open to non-CPA competitors.

a. True, true c. False, true b. True, false d. False, false

2.Compilation reports maybe of all except which of the following types>

a.Compilation with limited independence

b.Compilation with full disclosure

c.Compilation without independence

d.Compilation that omits substantially all disclosures

3.The trait that distinguishes auditors from accountants in the

a.Auditor's ability to interpret accounting principles generally accepted in the Philippines.

b.Auditor's continuing professional education requirements

c.Auditor's ability to interpret accounting standards

d.Auditor's expertise in the accumulation and interpretation of audit evidence.

4.What is the term used to identify the risk that the client's financial statements may be materially false and misleading?

a.Business riskc. Client risk

b.Information riskd. Audit risk

5.With respect to the practice of Accountancy profession in the Philippines, which of the following statements is correct?

a.The minimum number of CPD credit units that a registered professional accountant in commerce and industry should accumulate for accreditation within the three-year period starting 2019 is reduced to 15.

b.The following can be a CPD provider: sole proprietor, partnership, corporation, government institutions, and members of PRBOA

c.Members of PRBOA may be invited as a technical resource speaker in CPD-earning forum for accounting teachers.

d.CPAs adhere to the SMOs of IFAC because it is required by the CPD Act of 2016.

6.Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide its personnel with

a.Technical training that assures proficiency as a valuation expert.

b.Professional education that is required in order to perform with due professional care.

c.Knowledge required to fulfill assigned responsibilities.

d.Knowledge required to perform a peer review.

7.Before accepting an engagement to audit a new client, a CPA is required to obtain

a.An assessment of fraud risk factors likely to cause material misstatements.

b.An understanding of the prospective client's industry and business.

c.The prospective client's signature to a written engagement letter.

d.The prospective client's consent to make inquires of the predecessor, if any.

8.Which of the following procedures would an auditor most likely perform in planning a financial statement audit?

a.Inquiring of a client's legal counsel concerning pending litigation

b.Comparing the financial statements to anticipated results

c.Examining computer-generated exception reports to verify the effectiveness of internal controls

d.Searching for unauthorized transactions that may aid in detecting unrecorded liabilities.

9.Hilaga Corp. maintains a large internal audit staff that reports directly to the accounting department. Audit reports prepared by the internal auditors indicate that the system is functioning as it should and that the accounting records are reliable. An independent auditor will probably.

a.Eliminate test of controls.

b.Increase the depth of study and evaluation of administrative controls.

c.avoid duplicating the work performed by the internal audit staff.

d.Place limited reliance on the work performed by the internal audit staff.

10.To obtain an understanding of an entity's control environment, an auditor should concentrate on the substance of management's policies and procedures rather than their form because

a.Management may establish appropriate policies and procedures but not act them.

b.The board of directors may not be aware of management's attitude toward the control environment.

c.The auditor may believe that the policies and procedures are inappropriate for that particular entity.

d.The policies and procedures may be so weak that no reliance is contemplated by the auditor.

11.Which of the following statements best describes "control deficiency"?

a.A control deficiency exists if the design or operation of controls does not permit company personnel to prevent or detect misstatements on a timely basis.

b.A control deficiency exists if one or more deficiencies exist that adversely affect a company's ability to prepare external financial statements reliably.

c.A control deficiency exists if the design or operation of controls results in a more than remote likelihood that controls will not prevent or detect misstatements.

d.A control deficiency exists if the design or operation of controls results in a more than probable likelihood that controls will prevent or detect misstatements.

14.When a client uses a service center for processing transactions,

a.The auditor can assume that the controls are adequate because it is an independent enterprise.

b.Auditing standards require the auditor to test the service center's controls if the service center application involves processing significant financial data.

c.And the user auditor decides to rely on the service auditor's report, the user audit must make reference to the report of the service auditor in the opinion on the user organization's financial statements.

d.Auditing standards do not require the auditor to test the service center's controls if the service center application involves processing significant financial data.

16.Which of the following statements is true? In deciding on substantive tests of transactions

a.Some procedures are commonly employed on every audit regardless of the circumstances.

b.All procedures are dependent on the adequacy of the controls and the results of the tests of controls.

c.Results obtained in the prior year's audit will not affect the procedures used this year.

d.The materiality of the item will not influence the choice of procedures used.

17.________ tests are for omitted transactions, while _________ tests are for non-existent transactions.

a.Tracking; verifyingc. Vouching; tracing

b.Verifying; trackingd. Tracing; vouching

18.Which of the following would the auditor be most concerned about regarding a heightened risk of intentional misstatement?

a.Senior management emphasizes that it is very important to beat analyst estimates of earnings every reporting period.

b.Senior management emphasizes that budgeted amounts for expenses are to be achieves for each reporting period or explained in the variance analysis report.

c.Senior management emphasizes that job rotation is a worthwhile corporate objective.

d.Senior management emphasizes that job evaluations are based on performance.

19.When assessing fraud risk,

a.Fraud risk is assessed only at the overall financial statement level.

b.The auditor's assessment of fraud risk should be ongoing throughout the audit.

c.If the auditor concludes that there is a risk of material misstatements due to fraud, auditing standards require that the risks be treated as pervasive.

d.Auditing standards require that the auditor presume there is a risk of fraud on the inventory account.

20.S1 Encryption is not appropriate in preventing interception by unauthorized users of data in transit.

S2 When auditors do not rely on detailed knowledge of the application's internal logic, they are performing white-box test of program controls.

S3 Variable sampling is the approach used by most IT auditors as it involves testing internal

controls around processes deemed critical during audit planning.

a. False, true, false b. True, true, true

c. False, false, false d. True, false, false

21.The major disadvantage of an empty shell solution (cold site) as a second site backup is

a.The host site may be unwilling to disrupt its processing needs to process the critical applications of the disaster stricken company.

b.Intense competition for shell resources during a widespread disaster.

c.Maintenance of excess hardware capacity.

d.The control of the shell site is an administrative drain of the company.

22.What type of report is intended to meet the range of a broad range of users who need information and assurance about operating effectiveness of controls at a service organization that affect the security, availability, and processing integrity of the systems the service

organization uses to process users' data and the confidentiality and privacy of the information processed by the systems?

a.Type I reportc. Type III report

b.Type II reportd. Type IV report

23.Which of the following statements is most correct with respect to the evaluation on non-probabilistic sample results?

a.It is acceptable to make non-probabilistic evaluations only when probabilistic sample selection is used.

b.It is acceptable to make non-probabilistic evaluations only if the auditor cannot quantify sample risk.

c.It is never acceptable to evaluate a non-probabilistic sample using statistical methods.

d.It is acceptable to evaluate a non-probabilistic sample using statistical method.

24.As the auditor, you are assessing the proper sample size to use in testing control. When using attributes sampling, which of the following is most correct?

a.A 10% change in population size will have the least effect on sample size.

b.A 10% change in tolerable deviation rate will have the least effect on sample size.

c.A 10% change in the expected deviation rate will have the least effect on sample size.

d.A 10% change in the tolerable will have the least effect on sample size.

25.Which of the following is unique to the enhanced auditor's report?

a.Introductory paragraph

b.Key audit matters

c. Signature of the auditor

d. Opinion paragraph

26. S1 In the enhanced auditor's report, the name of the engagement partner should be disclosed. S2 Independence and ethics in the enhanced auditor's report are explicit. a. True, true c. False, true b. True, false d. False, false

27.Which of the following statements is correct?

a.The opinion paragraph is the enhanced auditor's report appears in the second half of the report.

b.The opinion paragraph is the enhanced auditor's report appears in the first half of the report.

c.The placement of the opinion paragraph in the old and enhanced auditor's report did not change.

d.The opinion paragraph in the enhanced auditor's report may appear in either the first or second half of the report.

28.S1 In the enhanced auditor's report, subheading for the unmodified opinion paragraphs requires the word "unqualified".

S2 In the enhanced auditor's report, all subheadings for the modified opinion paragraphs require the word "qualified", "adverse", or "disclaimer".

a. True, true c. False, true b. True, false d. False, false

29. Which of the following statements is true?

I.The auditor is required to issue a disclaimer of opinion in the event of a material uncertainty.

II.The auditor is required to issue a disclaimer of opinion in the event of a going concern

problem.

a.I onlyc. I and II

b.II onlyd. Neither I nor II

30.You are auditing Mabuhay and Company. You are aware of a potential lost due to non-compliance with environmental regulations. Management has assessed that there is a 40% chance that a P10 million payment could result from the non-compliance. The appropriate financial statement treatment is to

a.Accrue a P4 million liability.

b.Disclose a liability and provide a range of outcomes.

c.Since there is less than 50% chance of occurrence, ignore.

d.Since there is greater that remote chance of occurrence, accrue the P10 million.

31.The standard inquiry to the client's attorney should be prepared on

a.Auditor's stationery and signed by a company official.

b.Lawyer's stationery and signed by the auditor.

c.Auditor's stationery and signed by an audit partner.

d.Client's letterhead and signed by a company official.

32.A CPA who has been engaged to audit financial statements that were prepared on a cash basis

a.Must ascertain that there is proper disclosure of the fact that the cash basis has been used.

b.May not be associated with such statements which are not in accordance with generally accepted accounting principles.

c.Must render a qualified report explaining the departure from generally accepted accounting principles in the opinion paragraph.

d.Must restate the financial statements on an accrual basis and then render the standard (short-form) report.

33.Which of the following statements is not correct?

a.Forecasts can be provided for general use.

b.Forecasts can be provided for limited use.

c.Projections can be provided for general use.

d.Projections can be provided for limited use.

34.Due to a shortage of personnel, the client asked a member firm to assist with the authorization of accounting transactions. This is an example of which type of threat to compliance with

fundamental principles under the Code of Ethics?

a. Self-interest threat c. Advocacy threat b. Self-review threat d. Familiarity threat

35.Which of the following instances would impair a CPA's independence when they have retained as the auditor?

I.A charitable organization where the CPA serves as treasurer.

II.A municipality where the CPA owns P250,000 of the P25 million outstanding bonds of the municipality.

III.A company that the CPA's investment club owns a 10% investment interest

a. I and II c. II and III b. I and III d. I, II, and III