Which of the following is the least desirable basis of preliminary materiality?

Pre-tax income

Revenues

Total assets

Net loss

Which of the audit risk components is a dependent variable during the planning stage?

Inherent risk

Control risk

Risk of material misstatement

Detection risk

Which is more important?

Independence in mind

Independence in appearance

Independence in mind and independence in appearance are equally important

Independence in fact

The following are reasons in applying professional skepticism except,

Overlooking usual circumstances

Over-generalizing

Using inappropriate assumptions

None of the above

Assuming that the acceptable range for setting the preliminary materiality is 5% to 10%, which of the following entity is more likely geared towards the upper range (i.e., 10%)?

Listed client in the Philippines Stock Exchange

Client holding a secondary license from the Philippine Securities and Exchange Commission

Family-owned retail client with no debt financing scheme

Client in a highly regulated industry such as banks and insurance companies

Which of the following items pertain to control risk?

The susceptibility of risky assets to defalcation

Auditor's (external) testing procedures

Auditor's (internal) testing procedures and responsibilities

Complex accounting treatment of a loan with an embedded prepayment option

A BOA member can be a non-resident Filipino citizen;S2: BOA's chairman is elected among the members appointed by the President of the Republic

True, False

False, True

True, True

False, False

Complete the analogy: _______, Management, _______, Auditor

Financial Statements, Financial Statements

Management Report, Audi Report

Financial Statements, Audit Report

Audit Report, Audit Report

Which of the following items pertain to decreased control risk?

Control procedures have not been updated for almost 10 years.

The client has a functioning independent audit committee and internal audit department

The client is start-up company operating at breakeven

The client's only customer is the Philippine Government, hence the risk of default is lower as compared to other private corporations.