AUDITING THEORY CPA Review School of the Philippines Preweek Quizzer

1. How did the framework of Philippines Standards on Auditing 5. A draft of statement, studies or standards should be discussed by
conceptually describe an assurance? the Council en banc. How many members are required to approve
A. It refers to the auditor’s satisfaction as to the reliability of an the draft to consider it for exposure?
assertion being made by one party for use by another party. A. Majority C. Ten
B. The level of assurance which may be provided is determined by B. Eight D. Twelve
the reporting objective.
C. An assurance is expressed positively in the report.
D. Because of the inherent limitation in an audit, the assurance is
of limited one.

2. Which of the following are authoritative sources for auditing

standards for members of the Accountancy profession in the
Philippines?
I. Pronouncements on GAAS, issued by ASPC.
II. Pronouncements on GAAS issued by PICPA which are not
superseded or amended by statements issued by ASPC.
III. Pronouncements issued by AICPA.
A. I only. C. I and III only
B. I and II only. D. I, II and III

3. In the absence of pronouncements issued by ASPC and the PICPA,

published statements and guidelines by other authoritative bodies,
like AICPA, IAPC and AFA are the basis of determining generally
accepted auditing standards. What effect do these pronouncements
provide in determining the generally accepted auditing standards?
A. Authoritative C. Alternative
B. Persuasive D. Parallel

4. Specifically, the Board of Accountancy is officially represented in

the ASPC by
A. Secretary of the BOA
B. Chair, PRC
C. Chair, BOA
D. BOA member who handles Auditing Theory subject

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AUDITING THEORY CPA Review School of the Philippines
6. How many members of ASPC are needed to approve the exposed
draft of Philippine Standards in Auditing as Philippine Standards on
Auditing?
A. Majority of the regular members C. At least eight.
B. At least ten. D. At least twelve.
7. Which of the following is a correct statement?
A. ASPC should normally expose a proposed interpretation of
statements.
B. ASPC should normally expose its opinion on specific queries from
a practicing CPA.
C. To make the statements on Philippine Standards on Auditing
operative, the final statements shall be submitted to the Board
of Accountancy for approval.
D. When it is deemed necessary to expose for a comment on
proposed interpretations of statements, the exposure period is
understandably shorter than those of the regular drafts of
standards.
8. Which of the following is not represented by the signatories to the
Joint Memorandum of Support to the creation and operation of the
Auditing Standards and Practices Council?
A. Board of Accountancy
B. Philippine Institute of Certified Public Accountants (PICPA)
C. Association of Certified Public Accountants in Public Practice
(ACPAPP)
D. Philippine Institute of Certified Public Accountants Foundation,
INC.
9. Ethically, how many years can a partner who survived the death or
withdrawal of other partner(s) an continue to practice under the
partnership name though he becomes a sole practitioner?
A. 1 year C. 2 years
B. 3 years D. No prescribed rule
10.This exists because business people, investors and the general
public perceive the duties and responsibilities of auditors differently
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from the way in which auditors themselves perceive those duties
and responsibilities.
A. Assurance C. Expectation gap
B. Audit standards D. Ethics
11.Which of the following public perceptions least likely manifests an
expectation gap?
A. The general public expects that the auditors are independent of
the financial statements that they audit.
B. The general public believes that an unqualified audit opinion
guarantees the accuracy of financial statements.
C. The general public believes that detection of fraud is the primary
objective of financial audit.
D. The general public believes that an unqualified opinion is an
assurance as to the viability of an entity’s future operations.
12.Conflict between financial statement users and auditors often arises
because of the
A. high cost of performing an audit.
B. extremely technical vocabulary which the auditor uses in the
report.
C. placement of the auditor’s report in the back of the client’s
annual report where it is hard to locate.
D. expectation gap.
13.The subsequent discovery of material misstatements of the
financial statements resulting from fraud or error existing during
the period covered by the auditor’s report
A. Indicates that the auditor has failed to the basic principles and
essential procedures of an audit.
B. Always results to litigation due to the auditor’s negligence.
C. Does not, in itself, indicate that the auditor has failed to adhere
to the basic principles and essential procedures of an audit.
D. Does not make the auditor liable because he just provides a
reasonable and not an absolute assurance.
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AUDITING THEORY CPA Review School of the Philippines Preweek Quizzer

14.Most accounting and auditing professionals agree that when an

audit has failed to uncover material misstatements, and the wrong 18.In “auditing” accounting data, the concern is with
type of audit opinion is issued, the audit firm A. determining whether recorded information properly reflects the
A. has failed to follow generally accepted auditing standards economic events that occurred during the accounting period.
(GAAS). B. determining if fraud has occurred.
B. deserves to lose the lawsuit. C. determining if taxable income has been calculated correctly.
C. should be asked to defend the quality of the audit. D. analyzing the financial information to be sure that it complies
D. should not be held responsible for the financial loss suffered loss with government requirements.
suffered by others.
19.The responsibility for adopting sound accounting policies,
15.The understanding between the client and the auditor as to the maintaining an adequate internal control structure, and making fair
degree of responsibility to be assumed by each is normally set forth representations in the financial statements rests
in a(n) A. with management. C. equally with management and
A. Representation letter C. Engagement letter. the auditor..
B. Management letter D. Letter of reportable B. with the independent auditor. D. with the internal audit
conditions. department.

16.In a financial statement audit, audit risk represents the probability
that
A. Internal control fails and the failure is not detected by the
auditor’s procedures.
B. The auditor unknowingly fails to modify an opinion on materially
misstated financial statements.
C. Inherent and control risk cause errors that could be material to
the financial statements.
D. The auditor is not retained to conduct a financial statement
audit in the succeeding year.
17.The auditor’s judgment concerning the overall fairness of the
presentation of financial positions, results of operations, and cash
flows is applied within the framework of
A. Quality control.
B. Generally accepted auditing standards that include the concept
of materiality.
C. The auditor’s evaluation of the audited company’s internal
controls.
D. Generally accepted accounting principles.
20.The auditor’s best defense when material misstatements in the
financial statements are not uncovered in the audit is that
A. the audit was conducted in accordance with generally accepted
accounting principles.
B. client is guilty of contributory negligence.
C. the audit was conducted in accordance with generally accepted
auditing
D. the financial statements are client’s responsibility.
21.Which of the following circumstances would ordinarily not impair
the auditor’s independence?
A. Litigation by client against auditor related to tax services.
B. Litigation by client against auditor claiming a deficiency in the
previous audit.
C. Litigation by CPA firm against client claiming management fraud
or deceit.
D. Intent to start a lawsuit at some future date, after the current
audit is completed, claiming a deficiency in the previous audit.

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AUDITING THEORY CPA Review School of the Philippines Preweek Quizzer

22.The members of a client’s “audit committee” must all be 26.In rare cases auditor’s have been held liable for criminal acts. A
A. members of management. criminal conviction against an auditor can result only when it is
B. directors who are not a part of company management. demonstrated that the auditor
C. non-directors and non-managers. A. was negligent.
D. directors and managers. B. was grossly negligent.
C. intended to deceive or harm others.
23.When a CPA firm is requested to provide a written or oral opinion on D. caused financial loss to an innocent third party.
the application of accounting principles or the type of audit opinion
that would be issued for a specific or hypothetical transaction
relating to an audit client of another CPA firm, primarily among the
requirements set forth is that
A. client is entitled to confidentiality, so the consulting CPA firm is
forbidden from communicating with the CPA firm which does the
audit.
B. the consulted CPA firm should communicate with the entity’s
existing auditors to ascertain all the available facts relevant to
forming a professional judgment on the matters that the firm
has been requested to report on.
C. client is entitled to confidentiality, so the CPA firm which does
the audit should refuse to share any information with the
consulting CPA firm under any circumstances.
D. client is not entitled to confidentiality under these
circumstances, so the existing auditors should share all
information with the consulting CPA firm.

24.“Absence of reasonable care that can be expected of a person in a

set of circumstances” is the definition of
A. ordinary negligence. C. constructive fraud.
B. gross negligence. D. fraud.

25.When CPA’s are able to maintain an independent attitude in

fulfilling their responsibility, it is referred to as independence
A. in fact C. in conduct
B. in appearance D. in total

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AUDITING THEORY CPA Review School of the Philippines Preweek Quizzer

27.The auditor’s responsibility for failure to detect fraud arises C. Ultramares Corporation v. Touche.
A. when such failure clearly results from failure to comply with D. United States v. Simon.
generally accepted auditing standards.
B. whenever the amounts involved are material.
C. only when the examination was specifically designed to detect
fraud.
D. only when such failure clearly results from negligence so gross
as to sustain an inference of fraud on the part of the auditor.

28.There is agreement within the auditing profession and the courts

that the auditor
A. is not a guarantor or insurer of financial statements.
B. is a guarantor but not an insurer of the statements.
C. is an insurer but not a guarantor of the statements.
D. is both a guarantor and an insurer of the financial statements.

29.The auditor is not liable to his client for

A. negligence. C. dishonesty
B. bad faith. D. errors of judgment

30.An individual who is not party to the contract between CPA and
client, but who is known by both and is intended to receive certain
benefits from the contract, is a
A. common law inheritor. C. third party beneficiary.
B. third party. D. tort.

31.The prudent person concept establishes in law that

A. the CPA firm is not expected to be infallible.
B. an audit in accordance GAAS
C. the courts do not require that the auditor become the insurer or
guarantor of the accuracy of the statements.
D. all three of the above are true.

32.The leading precedent-setting auditing case in the third party

liability is
A. Escott et al. v. Bar Chris Construction Corp.
B. Hochfelder v. Ernst & Ernst.

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AUDITING THEORY CPA Review School of the Philippines Preweek Quizzer

33.The leading case of criminal action against CPAs is the C. indirectly related to generally accepted auditing standards.
A. 1136 Tenants case. D. indirectly related to generally accepted accounting principles.
B. United States v. Simon case, aka Continental Vending
C. Escott et al. v. Bar Chris case, aka Bar Chris 40.The following are some of the quality control policies that CPAs
D. Ultramares Corporation v. Touche case. should have:
1. Skills and competence 4. Acceptance and retention of
34.A CPA is subject to criminal liability if the CPA clients
A. refuses to turn over the working papers to the client. 2. Delegation 5. Direction
B. performs an audit in a negligent manner. 3. Consultation 6. Review
C. willfully omits a material fact required to be stated in a financial Which of the foregoing are classified as control policies at the level
statement. of the firm?
D. willfully breaches the contract with the client. A. 1, 3, 5, 6 C. 1, 2, 5, 6
B. 1, 2, 3, 4 D. 3, 4, 6
35.Fraudulent financial reporting is often called:
A. management fraud C. defalcation 41.Which of the following least satisfies skills and competence as an
B. theft of assets D. employee fraud objective of quality control policies?
A. Advancement C. Hiring
36.Management assertions are B. Professional development D. Consultation
A. directly related to generally accepted auditing standards.
B. directly related to generally accepted accounting principles. 42.The following are quality control procedures that are observed by a
C. indirectly related to generally accepted auditing standards. firm:
D. indirectly related to generally accepted accounting principles. I. Identifies on a timely basis the staffing requirements of specific
audits
37.A CPA is subject to criminal liability if the CPA II. Periodically counsels personnel as to their progress and career
A. refuses to turn over the working papers to the client. opportunities
B. performs an audit in a negligent manner. III. Prepares time budget for audit to determine manpower
C. willfully omits a material fact required to be stated in a financial requirements and to schedule audit work.
statement. IV. Evaluates partners periodically by means of senior partner or
D. willfully breaches the contract with the client. fellow partner evaluation and counseling as to whether they
continue to have the qualifications to fulfill their responsibilities.
38.Fraudulent financial reporting is often called: Which of the foregoing procedures is (are) necessary to achieve the
A. management fraud C. defalcation objectives of assignment of personnel?
B. theft of assets D. employee fraud A. I C. I, III
B. II, IV D. I, II, III, IV
39.Management assertions are
A. directly related to generally accepted auditing standards. 43.The objectives of the quality control policies to be adopted by an
B. directly related to generally accepted accounting principles. audit firm will ordinarily include the following?

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A. Professional requirements, skills and competence, assignment, 44.Which of the following is the least factor to consider for a firm to
inspection, due professional care, consultation have quality control?
B. Professional requirements, skills and competence, Assignment, A. The form of organization. C. Geographical dispersion of the
consultation, inspection, monitoring firm.
C. Professional requirements, skills and competence, assignment, B. Size and nature of the firm’s practice. D. Appropriate
delegation, monitoring, consultation cost/benefit considerations.
D. Skills and competence, due professional care, consultation,
assignment, monitoring, delegation 45.Which of the following constitutes “directing an audit assistant”
A. Identifying in advance the audit personnel requirements of a
particular audit engagement.
B. Informing assistants of their responsibilities and the objectives of
the procedures they are to perform.
C. Resolving any differences in professional judgment between
audit personnel.
D. Providing audit staff the necessary on-the-job training.

46.The work of each assistant needs to be reviewed by personnel of at

least equal competence. Which of the following is not one of the
objectives of this requirement?
A. The work performed and the results obtained have been
adequately documented.
B. The objectives of the audit procedures have been achieved.
C. All available evidences have been obtained, evaluate and
documented.
D. The conclusion expressed are consistent with the result of the
work performed and support the opinion.

47.It involves informing assistants of their responsibilities and the

objectives of the procedures they have to perform:
A. Supervision. C. Delegation.
B. Direction D. Review

48.A practice of providing sufficient direction, supervision and review

of the work at all levels to provide reasonable assurance that the
work performed meets appropriate standards of quality is a control
policy of
A. Assignment. C. Monitoring

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B. Delegation D. Consultation A. Make inquiries of the proposed client’s legal counsel.

B. Review financial statements of the proposed client.
49.Quality control policies and procedures should be implemented at C. Make inquiries of previous auditors.
both the level of the audit firm and on individual audits. Classify the D. Review the personnel practices of the proposed client.
following control policies as to audit firm level or individual audit:
I. Consultation II. Assignment III. Direction 53.Any deviation from the independence rule is considered
Which of these control policies are individual audit level? A. immaterial. C. material.
A. I only. C. III only. B. slightly material D. highly material
B. I and II D. All of these
54.Internal control procedures are not designed to provide reasonable
50.Which one of the following policy statements relates to delegation? assurance that
A. Personnel in the firm are to adhere to principles of A. Transactions are executed in accordance with management’s
independence, integrity, objectivity, confidentiality, and authorization.
professional behavior. B. Irregularities will be eliminated.
B. There is to be a sufficient direction, supervision, and review of C. Access to assets is permitted only in accordance with
work at all levels to provide reasonable assurance that the work management’s authorization.
performed meets appropriate standards of quality. D. The recorded accountability for assets is compared with the
C. Audit work is to be assigned to personnel who have the degree existing assets at reasonable intervals.
of technical training and proficiency required in the
circumstances. 55.After consideration of a client’s internal control, an auditor might
D. Whenever necessary, consultation within or outside the firm is to decide to
occur with those who have appropriate expertise. A. Increase the extent of substantive testing in areas where the
control structure is strong.
51.What is the responsibility of a successor auditor to communicate B. Reduce the extent of tests of controls in areas where the
with the predecessor auditor in connection with a prospective new controls are strong.
client? C. Reduce the extent of both substantive tests and tests of controls
A. The successor auditor has no responsibility to contact the in areas where the controls are strong.
predecessor auditor. D. Increase the extent of substantive testing in areas where the
B. The successor auditor should obtain permission from the controls are weak.
prospective client to contact the predecessor auditor.
C. The successor auditor should contact the predecessor auditor if 56.In an auditor’s consideration of internal control, the completion of a
the client authorizes contact. questionnaire is most closely associated with which of the
D. The successor auditor need not contact the predecessor if the following?
successor is aware of all available relevant facts. A. Separation of duties C. Understanding the system.
B. Flowchart accuracy D. Tests of controls.
52.In pursuing its quality control objectives with respect to acceptance
of a client, a CPA firm is not likely to 57.Tests of controls may include the following, except:

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AUDITING THEORY CPA Review School of the Philippines
A. Reperformance of internal control procedures
B. Inquiries about, and observation of, internal control which leave
no audit trail.
C. Analytical procedures involving comparison of operating
expenses with budgeted amount.
D. Inspection of documentary support for transactions evidencing
authorization
58.In considering internal control within the revenue/receipt cycle,
what is the purpose of a transaction walk-through?
A. To assure that employees are performing assigned functions
accurately.
B. To confirm the auditor’s understanding of the internal control
structure.
C. To select documents for detailed tests of controls.
D. To verify the results of the auditor’s sampling plan.
59.Following are four steps an auditor undertakes in assessing control
risk:
A. Determine what control procedures are used by the entity.
B. Identify the system’s control objectives.
C. Design tests of controls.
D. Consider the potential errors or irregularities that could result.
In what order would an auditor perform these steps?
A. DBAC C. BDAC
B. BCDA D. DCAB
60.The purpose of tests of controls over shipping is to
A. Determine whether billed goods have been shipped.
B. Determine whether shipments are billed.
C. Determine whether shipping department personnel are
competent.
D. Determine whether credit is approved before goods are shipped.
61.The purpose of tests of controls over billing is to
A. Determine whether billed goods have been shipped.
B. Determine whether shipments are billed.
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C. Determine whether shipping department personnel are
competent.
D. Determine whether credit is approved before goods are shipped.
62.After finishing the review phase of the study and evaluation of
internal control in an audit engagement, the auditor should perform
tests of controls on
A. those controls that the auditor plans to rely upon.
B. those controls in which material weaknesses were identified.
C. those controls that have a material effect upon the financial
statement balances.
D. a random sample of the controls that were reviewed.
63.The primary emphasis by auditors is on controls over
A. classes of transactions.
B. account balances.
C. both a and b, because they are equally weighted.
D. both a and b, because they vary from client to client.
64.The three key concepts that underlie the study of an internal
control structure and the assessment of control risk would not
include a criteria that
A. the control risk may range from zero to 100%.
B. management, not the auditor, must establish and maintain the
entity’s controls.
C. the internal control structure provides reasonable, but not
absolute assurance that the financial statements are fairly
stated.
D. the internal control structure can never be regarded as
completely effective.
65.When the auditor attempts to determine the operation of the
accounting system by tracing one or few transactions through the
accounting system, this is referred to as
A. tracing. C. tests of controls.
B. vouching. D. a walk-through.
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66.The procedures to test effectiveness of control policies and 67.Understanding components of internal control and assessing the
procedures in support of a reduced assessed control risk are called level of control risk are primarily used by the auditor to
A. tests of transactions. C. analytical tests. A. determine whether procedures and records concerning the
B. tests of controls. D. a walk-through. safeguarding of assets are reliable.
B. ascertain whether the opportunities to allow any person to both
perspective and conceal irregularities are minimized.
C. modify the initial assessments of inherent risk and preliminary
judgments about materiality levels.
D. determine the nature, timing, and extent of substantive tests for
financial statement assertions.

68.Tests of controls are directed toward the control’s

A. efficiency C. efficiency and effectiveness
B. effectiveness D. cost benefit ratio

69.The final step in the evaluation of the audit results is the decision to
A. accept the population as fairly stated or to require further
action.
B. determine sampling error and calculate the estimated total
population error.
C. project the point estimate.
D. determine the error in each sample.

70.The primary factor from the audit risk model which affects the
auditor’s decision about acceptable risk of incorrect acceptance is
A. control risk C. detection risk
B. audit risk D. inherent risk

71.In comparison of detecting material fraud and material error, which

of the following is least likely a reason why the auditor may
discover material error but less of fraud’s?
A. Collusion between or among employees.
B. Intentional misrepresentations by the client personnel.
C. Sampling of transactions.
D. Forgery.

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72.Ordinarily, the likelihood of detecting errors is higher than that of
detecting fraud because
A. The auditor is responsible to detect errors but not fraud.
B. The effect of fraudulent act is likely omitted in the accounting
records.
C. Fraud is ordinarily accompanied by acts specifically designed to
conceal its existence.
D. Fraud is always a result of connivance between or among
employees.
73.Which of the following least likely affect the judgment of the auditor
in determining the extent of modified or additional procedures
when he believes that fraud or error possibly exists?
A. The types of fraud and error indicated.
B. The reason why fraud or error has been committed.
C. The likelihood that a particular type of fraud or error could have
a material effect on the financial statements.
D. The likelihood of their occurrence.
74.When the auditor discovers fraud or error, the effect of which is
material to the financial statements, he should most likely consider
the following, except
A. The implications of fraud and significant error in relation to the
reliability of management representations.
B. The auditor should assume that the instance of fraud or error is
an isolated occurrence.
C. The auditor may necessarily adjust the nature, timing and extent
of substantive procedures.
D. The auditor may reconsider risk assessment.

75.Which of the following is the most compelling reason for the auditor
to resign from an audit engagement when he discovers material
irregularity?
A. The top management is the perpetrator of fraud.
B. The irregularity is committed through connivance of rank and
file employees.
C. The extent of effect of fraud on the financial statements cannot
immediately be estimated.
D. The management takes remedial action regarding fraud.

76.Which of the following statements is true?

A. It is usually easier for the auditor to uncover irregularities than
errors.
B. It is usually easier for the auditor to uncover errors than
irregularities.
C. It is usually equally difficult for the auditor to uncover errors or
irregularities.

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77.Should the auditor uncover circumstances during the audit that
may cause suspicions of management fraud, the auditor must
A. issue an adverse opinion.
B. issue a disclaimer.
C. evaluate their implications and consider the need to modify
audit evidence.
D. withdraw from engagement.
78.An auditor should recognize that the application of auditing
procedures may produce evidential matter indicating the possibility
of errors or irregularities and therefore should a design audit tests
to detect unrecorded transactions.
A. design audit tests to detect unrecorded transactions.
B. extend the work to audit most recorded transactions and
records of an entity.
C. plan and perform the engagement with an attitude of
professional skepticism.
D. not depend on internal accounting control features that are
designed to prevent or detect errors or irregularities.
79.What is expected of auditor in determining noncompliance by an
entity to existing laws and regulations?
A. Whether an act constitutes noncompliance is a legal
determination that is ordinarily within the auditor’s professional
competence.
B. The auditor’s training, experience and understanding of the
entity and its industry cannot provide a basis for recognition that
some acts coming to the auditor’s attention may constitute
noncompliance with laws and regulations.
C. The determination as to whether a particular act constitutes or is
likely to constitute noncompliance is generally based on the
understanding of the auditor but ultimately can only be
determined by an expert who is qualified to practice law.
D. In order to plan the audit, the auditor should obtain a general
understanding of the legal and regulatory framework applicable
to the entity and the industry and how the entity is complying
with the framework.
80.A type of fraud in which an employee takes assets from an
organization for personal gain:
A. Fraudulent financial reporting C. Defalcation.
B. Window dressing D. Secret reserve.
81.When the auditor becomes aware of information concerning a
possible noncompliance to laws or regulations, the auditor should
appropriately:
A. Obtain an understanding of the nature of the act and the
circumstances in which it has occurred, and evaluate the
possible effect on the financial statements.
B. Discuss his suspicion with the management.
C. Ask management to determine whether a violation is readily
committed.
D. Consult with the entity’s legal counsel as to what appropriate
action the auditor should do.
82.If the auditor suspects that members of senior management,
including members of the board of directors, are involved in
noncompliance to laws as regulations, and he believes his report
may not be acted upon, he would.
A. Do nothing.
B. Issue a disclaimer of opinion.
C. Consider seeking legal advice.
D. Make special investigation in order to fully determine the extent
of client’s noncompliance.
83.The auditor is examining copies of sales invoices only for the initials
of the person responsible for checking the extensions. This is an
example of a
A. Test of controls C. Substantive test.
B. Dual-purpose test D. Test of balances.

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84.After the auditor has prepared a flowchart of internal control for 88.Which of the following is an element of sampling risk?
sales and cash receipts transactions and evaluated the design of A. Choosing an audit procedure that is inconsistent with the audit
the system, the auditor would perform tests of controls on all objective.
control procedures B. Choosing a sample size that is too small to achieve the sampling
A. Documented in the flowchart. objective.
B. Considered to be deficiencies that might allow errors to enter C. Failing to detect an error on a document that has been
the accounting system. inspected by the auditor.
C. Considered to be strengths that the auditor plans to rely on in D. Failing to perform audit procedure that are required by the
assessing control risk. sampling plan.
D. That would aid in preventing irregularities.
89.If the auditor is concerned that a population may contain
85.To determine whether internal control effectively minimized errors exceptions, the determination of a sample size sufficient to include
of failure to bill a customer for a shipment, the auditor would select at least one such exception is a characteristic of
a sample of transactions from the population represented by the A. Discovery sampling C. Variables sampling.
A. Customer order file C. Shipping records file B. Random sampling D. Probability-proportional-to-size
B. Subsidiary customer accounts ledger D. Sales invoice sampling.

86.Which of the following sampling methods is most useful to auditors 90.Which of the following best illustrates the concept of sampling risk?
when performing tests of controls? A. A randomly chosen sample may not be representative of the
A. Discovery sampling. population as a whole on the characteristic of interest.
B. Attribute estimation. B. An auditor may select audit procedures that are not appropriate
C. Variable sampling. to achieve the specific objective.
D. Unrestricted random sampling with replacement. C. An auditor may fail to recognize errors in the documents
examined for the chosen sample.
87.At times, a sample may indicate that the auditor’s assessed level of D. The documents related to the chosen sample may not be
control risk for a given control is reasonable when, in fact, the true available for inspection.
compliance rate does not justify the assessed level. This situation
illustrates the risk of 91.Discovery sampling should be used to estimate whether a
A. Assessing control risk too low C. Assessing control risk too population contains
high. A. Errors of any kind C. Noncritical errors.
B. Incorrect precision D. Incorrect rejection. B. Critical deviations D. No errors.

92.In assessing sampling risk, the risk of incorrect rejection and the
risk of assessing control risk too high relate to the
A. Efficiency of the audit C. Effectiveness of the audit.
B. Selection of the sample D. Audit quality controls.

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93.An advantage of using statistical sampling is that such techniques 99.Which of the following is not a primary purpose of audit working
A. Mathematically measure risk. papers?
B. Eliminate the need for judgmental decision. A. To coordinate the examination.
C. Define the value of reliability necessary to provide audit B. To assist in preparation of the audit report.
assurance. C. To support the financial statements.
D. Have been established in the courts to be superior to D. To provide evidence of the audit work performed.
nonstatistical sampling.
100. The reliability of internal evidence varies according to the
94.Management assertions are following, except
A. stated in the footnotes to the financial statements. A. The effectiveness of the client’s internal control structure.
B. implied or expressed representations about the financial B. The potential motivation management to misstate financial
statements. statements.
C. explicitly expresses representations about the financial C. The formality of the documentation.
statements. D. The quantity of audit evidence.
D. provided to the auditor in the assertions letter, but are not
disclosed on the financial statements. 101. The following statements were made in a discussion of audit
evidence between two CPAs. Which statement is not valid
96.The reason an independent auditor gathers evidence is to concerning evidential matter?
A. Form an opinion on the financial statements. A. I am seldom convinced beyond all doubt with respect to all
B. Detect fraud. aspects of the statements being examined.
C. Evaluate management B. I would not undertake that procedure because at best the results
D. Evaluate internal controls. would only be persuasive and I’m looking for convincing
evidence.
97.It refers to the auditor’s ability to perform audit procedures deemed C. I evaluate the degree of risk involved in declining the kind of
necessary in the circumstances: evidence I will gather.
A. Scope and Audit C. Substantive Procedures D. I evaluate the usefulness of the evidence I can obtain against
B. Objectivity D. Reporting Objective the cost to obtain it.

98.Which of the following factors will least affect the independent
auditor’s judgment as to the quantity, type and content of the
working papers desirable for a particular engagement?
A. Nature of the auditor’s report.
B. Nature of the financial statements, schedules, or other
information upon which the auditor is reporting.
C. Need for supervision and review.
D. Number of personnel assigned to the audit.
102. Evidence is generally considered competent when
A. it has the qualities of being relevant, objective, and free from
known bias.
B. there is enough of it to afford a reasonable basis for an opinion
on financial statements.
C. it has been obtained by random selection.
D. it consists of written statements made by managers of the
enterprise under audit.

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103. The primary emphasis in most tests of details of balances is on 107. The third standard of field work requires the auditor to
the accumulate sufficient competent evidence to support the opinion
A. balance sheet accounts C. cash flow statement account issued. Because of the nature of audit evidence, it is
B. income statement accounts D. three statements given A. unlikely that auditor will be completely convinced that the
opinion is correct.
104. More types of evidence are obtained by using this test than by B. likely that auditor will be completely convinced that the opinion
using any other type of test. is correct.
A. Tests of controls C. Tests of balances C. unlikely that auditor will arrive at a conclusion.
B. Tests of transactions D. Analytical procedures D. likely that the auditor would change his/her mind about the
opinion if he/she took the time to gather additional evidence.
104. In testing for cutoff, the objective is to determine
A. whether all of the current period’s transactions are recorded. 108. Evidence is usually more persuasive for balance sheet accounts
B. that no transactions from the prior period are included in the when it is obtained
current period’s balances. A. from various times throughout the client’s year.
C. that no transactions of the current period have been delayed B. only from transactions occurring on the balance sheet date.
and recorded in a future period. C. as close to the balance sheet date as possible.
D. whether the transactions are recorded in the proper period. D. from the time period when transactions in that account were
most numerous during the fiscal period.
105. In determining the quantity and quality of evidence to gather,
the auditor will be satisfied when the evidence is 109. Which of the following statements is not correct?
A. irrefutable. C. highly persuasive. A. Analytical procedures use comparisons and relationships to
B. conclusive. D. completely convincing. determine which account balances are in error.
B. For certain immaterial accounts, analytical procedures may be
106. “The detailed instructions for the collection of a particular type the only evidence needed.
of audit evidence that is to be obtained at some time during the C. In some instances, other types of evidence may be reduced
audit” is the definition of a(n) when analytical procedures indicate that an account balance
A. sampling plan. C. audit plan. appears reasonable.
B. audit procedure. D. audit program. D. Analytical procedures are used to isolate accounts or
transactions that should be investigated more extensively.

110. The working papers prepared during the engagement are the
property of
A. the auditor, but do not include the working papers prepared by
client for the auditor.
B. the auditor, even including those prepared by client for auditor.
C. the client.
D. the auditor and client jointly.

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112. An auditor should examine minutes of the board of directors’

111. Before applying principal substantive tests to the details of asset
and liability accounts at an interim date, the auditor should
A. assess the difficulty in controlling incremental audit risk.
B. investigate significant fluctuations that have occurred in the
asset and liability accounts since the previous balance-sheet
date.
C. select only those accounts which can effectively be sampled
during year-end audit work.
D. consider the tests of controls that must be applied at the
balance-sheet date to extend the audit conclusions reached at
the interim date.
meetings.
A. through the date of his report.
B. through the date of the financial statements.
C. on a test basis.
D. only at the beginning of the audit.
113. Which of the following is a basic tool used by the auditor to
control the audit work and review the audit progress?
A. Time and expense summary. C. Progress flowchart
B. Engagement letter. D. Audit program.
114. Audit programs are modified to suit the circumstances on
particular engagements. A complete audit program for an
engagement generally should be developed
A. prior to beginning the actual audit work.
B. after the auditor has completed an evaluation of the existing
internal accounting control.
C. after reviewing the client’s accounting records and procedures.
D. when the audit engagement letter is prepared.

115. The current file of the auditor’s working papers generally should
include
A. a flowchart of the internal controls C. a copy of the
financial statements
B. organization charts D. copies of bond and note
indentures

116. Which of the following eliminates voluminous details from the

auditor’s working trial balance by classifying and summarizing
similar or related items?
A. Account analyses. C. Control accounts.
B. Supporting schedules D. Lead schedules

117. The estimate for sampling error results because the auditor has
sampled only a portion of the population. Sampling error represents
the

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A. maximum misstatements in the audited accounts. the assistant treasurer. What is the major flaw in this audit
B. minimum misstatements in the audited accounts. procedure?
C. maximum misstatements in accounts not audited. A. The confirmation request was signed by the treasurer.
D. minimum misstatements in accounts not audited. B. Sending the request was meaningless because the account was
closed before the year-end.
118. Tracing copies of sales invoices to shipping documents will C. The request was mailed by the assistant treasurer.
provide evidence that all D. The CPA did not sign the confirmation request before it was
A. Shipments to customers were recorded as receivables. mailed.
B. Billed sales were shipped.
C. Debits to the subsidiary accounts receivable ledger are for sales 123. Customers with substantial due balances have failed to reply
shipped. after second requests had been mailed to them directly. Which of
D. Shipments to customers were billed. the following audit procedures is most appropriate?
A. Examine shipping documents.
119. To gather audit evidence about the proper credit approval of B. Review cash collections during the year being audited.
sales, the auditor would select a sample of documents from the C. Intensify the study of internal controls for receivables.
population represented by the D. Increase the balance in the accounts receivable allowance
A. Customer order file C. Bill of lading file. account.
B. Subsidiary customers’ accounts ledger D. Sales invoice file.

120. A sales cutoff test of billings complements tests of

A. Sales returns C. Cash.
B. Accounts receivable D. Sales allowances.

121. Which of the following is the best argument against the use of
negative accounts receivable confirmations?
A. The cost-per-response is excessively high.
B. There is no way of knowing if the intended recipients received
them.
C. Recipients are likely to feel that in reality the confirmation is a
subtle request for payment.
D. The inference drawn from receiving no reply may not be correct.

122. As one of the year-end audit procedures, the auditor instructed

the client’s personnel to prepare a standard bank confirmation
request for a bank account that had been closed during the year.
After the client’s treasurer had signed the request, it was mailed by

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124. Which of the following procedures relating to the audit of
accounts payable could the auditor delegate entirely to the client’s
employees?
A. Test footings in the accounts payable ledger.
B. Reconcile unpaid invoices to vendors’ statements.
C. Prepare a schedule of accounts payable.
D. Mail confirmations for selected account balances.
125. Negative confirmation of accounts receivable is less effective
than positive confirmation of accounts receivable because
A. A majority of recipients are usually unwilling to respond
objectively.
B. Some recipients may report incorrect balances that require
extensive follow-up.
C. The auditor cannot infer that all nonrespondents have verified
the account information.
D. Negative confirmations do not produce evidence that is
statistically quantifiable.
126. In order to efficiently establish the correctness of the accounts
payable cutoff, the auditor will be most likely to
A. Coordinate cutoff tests with physical inventory observation.
B. Compare cutoff reports with purchase orders.
C. Compare vendors’ invoices with vendors’ statements.
D. Coordinate mailing of confirmations with cutoff tests.
127. Which of the following is incorrect about the management’s
responsibility to make an assessment of an entity’s ability to
continue as a going concern?
A. In assessing whether the going concern assumption is
appropriate, the management takes into account all available
information for the foreseeable future, which should be at least
twelve months from the balance sheet date.
B. Though there is a history of profitable operations and a ready
access to financial resources, management must make its
assessment with detailed analysis.
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C. Management’s assessment of the going concern assumption
involves making a judgment, at a particular point of time, about
the future outcomes of events or conditions which are inherently
uncertain.
D. Management should make explicit assessment of its ability to
continue as a going-concern entity.
128. Which of the following least likely is an action that may mitigate
an entity’s difficulty to continue as a going concern?
A. Increased cash dividends.
B. Retirement of outstanding capital stock in order to improve
earnings per share.
C. Retirement of long-term debt in order to improve profitability.
D. Disposal of property in a sale-leaseback arrangement.
129. Which of the following least likely indicate a potential going-
concern problem of an entity?
A. Historical negative operating cash flows.
B. Failure to comply with loan covenants.
C. Refinancing of large short-term obligation with a medium-term
loan.
D. Pending regulatory proceedings against the entity.
130. Which of the following is correct about the auditor’s
responsibility with respect to the entity’s ability to continue as a
going concern?
A. The auditor is responsible to make an assessment of the entity’s
ability to continue as a going concern
B. The auditor’s responsibility is to consider the appropriateness of
the management’s use of the going concern assumption in the
preparation of the financial statements.
C. The auditor can predict future events or conditions that may
cause an entity to cease to continue as a going concern.
D. The auditor may allow the management to make an assessment
of its ability to continue as a going concern if the management is
believed to be objective in doing such an assessment.
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131. In evaluating management’s assessment of the entity’s ability to
continue as a going concern, he should consider the following,
except:
A. The independence of the management.
B. The process that the management has followed to make its
assessment.
C. The assumptions on which the assessment is based and
management’s plan for future action.
D. Whether the assessment has taken into account all relevant
information of which the auditor is aware of as a result of the
audit procedures.
132. Which of the following is an appropriate procedure to test for an
indication of events or conditions that cast significant doubt on the
entity’s ability to continue as a going concern beyond the period
assessed by management?
A. Inspection. C. Inquiry
B. Observing D. Analysis
133. The management’s assessment of those events that may cast
significant doubt about the entity’s ability to continue as a going
concern should be at least
A. Two years from the balance sheet date.
B. Two years from the date of the audit report.
C. One year from the balance sheet date.
D. One year from the date of the audit report.
134. When events or conditions have been identified to cast
significant doubt on the entity’s ability to continue as a going
concern, the auditor should
A. Consider reassessing control risk at the maximum.
B. Consider the issuance of disclaimer of opinion due to scope
limitation.
C. Review management plans for future actions based on its going-
concern assessments.
D. Report the matter to the board of directors and stockholders.
135. Which of the following statements that relate to subsequent
events is inappropriately described?
A. The auditor is expected to conduct a continuing review of all
matters to which previously applied procedures have provided
satisfactory conclusions.
B. The auditor should consider the effect of subsequent events on
the financial statements and on the auditor’s report.
C. The procedures to identify events that may require adjustment
of, or disclosure in the financial statements would be performed
as near as practicable to the date of the auditor’s report.
D. The procedures that are designed to obtain sufficiently
appropriate audit evidence that all events up to the date of the
audit report that may require adjustment of, or disclosure in, the
financial statements are in addition to routine procedures which
may be applied to specific transactions.

136. When, after the financial statements have been issued, the
auditor becomes aware of a fact that existed at the date of the
auditor’s report, the auditor should do the following, except:

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A. Consider whether the financial statements need revisions. 137. Which of the following is a correct response of the auditor when
B. Discuss the matter with management. he lowers the acceptable level of detection risk?
C. Take the action appropriate in the circumstance. Substantive Testing Procedures
D. Inform those users who are currently relying on the financial Nature Timing Amount
statements. A. Less effective Year-end More extensive
B. Less effective Interim Less effective
C. More extensive Year-end More extensive
D. More extensive Year-end Less effective

138. Which of the following auditing procedures is ordinarily

performed last?
A. Reading of the minutes of the director’s meetings.
B. Confirming accounts payable.
C. Obtaining a management representation letter.
D. Testing of the purchasing function.

139. If no material differences are found using analytical procedures

and the auditor concludes that differences should not have
occurred.
A. it will be necessary to increase the tests of balances.
B. other tests may be reduced.
C. it will be necessary to increase the tests of transactions.
D. it will not be necessary to perform tests of balances.

140. A representation letter issued by a client

A. Is essential for the preparation of the audit program.
B. Is a substitute for testing.
C. Does not reduce the auditor’s responsibility.
D. Reduces the auditor’s responsibility only to the extent it is relied
upon.

141. After an auditor has issued an audit report on a nonpublic entity,

there is no obligation to make any further audit tests or inquiries
with respect to the audited financial statements covered by that
report unless

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A. New information comes to the auditor’s attention concerning an
event that occurred prior to the date of the auditor’s report that
may have affected the auditor’s report.
B. Material adverse events occur after the date of the report.
C. Final determination or resolution was made on matters that had
resulted in a qualification in the auditor’s report.
D. Final determination or resolution was made of a contingency
that had been disclosed.
142. The auditor’s report may be appropriately addressed to the
client’s:
A. Board of directors and stockholders
B. Board of directors and audit committee
C. Audit committee and stockholders
D. Board of directors, audit committee and stockholders
D. whether it can materially affect some future period.
146. When the client fails to make adequate disclosure in the body of
the statements or in the related footnotes, it is the responsibility of
the auditor to
A. inform the reader that disclosure is not adequate, and to issue a
qualified or an adverse opinion.
B. inform the reader that disclosure is not adequate, and to issue
an unqualified or qualified opinion.
C. present the information in the audit report and to issue a
qualified or an adverse opinion.
D. present the information in the audit report and issue an
unqualified or qualified opinion.

143. Which of the following is explicitly included in the scope

paragraph of the auditor’s report?
A. Financial reporting framework
B. Generally accepted accounting principles
C. Generally accepted auditing standards
D. Auditing procedures

144.When the auditor concludes that the financial statements are

presented fairly in all material respects, in accordance with the
identified financial reporting framework, he should issue:
A. Standard unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Unqualified opinion with explanatory paragraph

145. The primary concern in measuring materiality when a client has

failed to follow GAAP is usually
A. the total peso error in the accounts involved, compared with
some base.
B. measurability of the peso error.
C. the nature of the item in error.

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147. When an auditor expresses an opinion other than unqualified D. The need to observe physical inventory count
opinion, a clear description of all substantive reasons for the
modification of the opinion should be included in the report. This 151. When
explanation should be presented: the client does not disclose restrictions of future cash dividends and
A. As a separate paragraph that precedes the opinion paragraph of the CPA discloses the omitted information in the separate
the audit report. paragraph of the audit report, the opinion should be:
B. As a separate paragraph, preferably after the opinion paragraph, A. Unqualified C. Adverse
of the audit report. B. Qualified D. Disclaimer of opinion
C. In the opinion paragraph
D. As a separate paragraph in the notes to financial statements.

148. Where a limitation on the scope of the auditor’s work requires

modification of an unqualified opinion, the auditor’s report should
describe the limitation and:
A. Indicate that the auditor is no longer responsible to his opinion.
B. Indicate the possible adjustments to the financial statements
that might have been determined to be necessary had the
limitation not existed.
C. Refer the users to the particular note to financial statements
that adequately discusses the limitation
D. Indicate that the auditor is not satisfied of the results of the
alternative procedures that he had performed.

149. Which of the following is least considered a scope limitation in

an audit engagement?
A. The timing of auditor’s appointment is too late which results to
inability of the auditor to perform prescribed procedures.
B. The entity’s accounting records are inadequate.
C. The auditor is unable to carry out an audit procedure believed to
be desirable.
D. The audit engagement requires an audit of balance sheet only.

150. Which of the following disagreements with management is not a

possible reason for an auditor to issue an adverse opinion?
A. Acceptability of accounting policies.
B. Method of application of accounting policies.
C. Adequacy of disclosures in the financial statements.

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152. The audit report of the incoming auditor least likely include an
indication
A. That the financial statements of the prior period were audited by
another CPA.
B. The type of report issued by the predecessor auditor.
C. The reason why there was a change of auditor.
D. The date of the predecessor auditor’s report.
153. If the auditor believes that required disclosures are omitted from
the financial statements, the auditor should decide between issuing
A. A qualified opinion or an adverse opinion.
B. A disclaimer of opinion or a qualified opinion.
C. An adverse opinion or a disclaimer of opinion.
D. An unqualified opinion or a qualified opinion.
154. When a CPA has concluded that action should be taken to
prevent future reliance on his report, he should
A. advise his client to make appropriate disclosure of the newly
discovered facts and their impact on the financial statements to
persons who are known to be currently relying or who are likely
to rely on the financial statements and the related auditor’s
report.
B. recall the financial statements and issue revised statements and
include an appropriate opinion.
C. advise the client and others not to rely on the financial
statements and make appropriate disclosure of the correction in
the statements of a subsequent period.
D. recall the financial statements and issue a disclaimer of opinion
which should generally be followed by revised statements and a
qualified opinion.
155. When a fact, that existed before the date of the report is
discovered and the management revises previously issued audited
financial statements, the following are appropriate except:
A. A new auditor’s report should include an emphasis of a matter
paragraph that refers to a note to financial statements that
May 2004
Preweek Quizzer
discusses the reason for the revision of the financial statements
and to the earlier report issued by the auditor.
B. The new auditor’s report should contain the original date.
C. The performance of the procedures that are designed to obtain
sufficient evidence as to subsequent events would ordinarily be
extended to the date the revised financial statements are
approved by the entity’s management.
D. The auditor is permitted to restrict the audit procedures
regarding the financial statements to the effects of the
subsequent event that necessitated the revision.
156. A measure of how willing the auditor is to accept that the
financial statements may be materially misstated after the audit is
completed and an unqualified opinion has been issued is the
A. inherent risk C. statistical risk.
B. acceptable risk D. financial risk.
157. Which of the following procedures is not included in a review
engagement on a nonpublic entity?
A. Inquiries of management.
B. Inquiries regarding events subsequent to the balance sheet
date.
C. Any procedures designed to identify relationships among data
that appear to be unusual.
D. A study and evaluation of internal control structure.
158. An accountant who reviews the financial statements of a
nonpublic entity should issue a report stating that a review
A. is substantially less in scope than an audit
B. provides negative assurance that the internal control structure is
functioning as designed.
C. provides only limited assurance that the financial statements are
fairly presented.
D. is substantially more in scope than a compilation.
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159. When a change in the type of engagement from higher to lower
level of assurance is reasonably justified, the report based on the
revised engagement
A. Should contain a separate paragraph that refers to the original
engagement
B. Should always refer to any procedures that may have been
performed in the original engagement
C. Should qualify the opinion due to scope limitation
D. Omits reference to the original engagement
160. When an accountant performs more than one level of service
concerning the financial statements of a nonpublic entity, the
accountant generally should issue the report that is appropriate for
A. the lowest level of service rendered. C. a compilation
engagement.
B. the highest level of service rendered. D. a review
engagement.
161. An accountant may accept an engagement to apply agreed-
upon procedures to prospective financial statements provided that
A. distribution of the report is to be restricted to the specified users
involved.
B. the prospective financial statements are also examined.
C. responsibility for the adequacy of the procedures performed is
taken by the accountant.
D. negative assurance is expressed on the prospective financial
statements taken as a whole.
162. Which of the following is least considered if the auditor has to
determine whether specialized CIS skills are needed in an audit?
A. The auditor needs to obtain a sufficient understanding of the
accounting and internal control system affected by the CIS
environment.
B. The auditor needs to determine the effect of the CIS
environment on the assessment of overall risk and of risk at the
account balance and class of transactions level.
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C. The need of the auditor to make analytical procedures during
the completion stage of audit.
D. Design and perform appropriate tests of controls and
substantive procedures.
163. The nature of the risks and the internal characteristics in CIS
environment that the auditors are mostly concerned include the
following except:
A. Lack of segregation of functions
B. Cost-benefit ratio
C. Lack of transaction trails
D. Dependence of other control over computer processing
164. Which of the following significance and complexity of the CIS
activities should an auditor least understand?
A. The organizational structure of the client’s CIS activities.
B. Lack of transaction trails
C. The significance and complexity of computer processing in each
significant accounting application.
D. The use of software packages instead of customized software.
165. Which of the following least likely indicates a complexity of
computer processing?
A. The system generates a daily exception report.
B. Transactions are exchanged electronically with other
organizations without manual review of their propriety.
C. The volume of the transactions is such that users would find it
difficulty to identify and correct errors in processing.
D. The computer automatically generates material transactions or
entries directly to another applications.
166. Which of the following is an inherent characteristic of software
package?
A. They are typically used without modifications of the programs.
B. The programs are tailored-made according to the specific needs
of the user.
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C. They are developed by software manufacturer according to a B. The control over source documents.
particular user’s specifications. C. The documentation maintained for accounting applications.
D. It takes a longer time of implementation. D. The cost-benefit ratio of data processing operations.

167. The disadvantages of using personal computers include: 172. In considering a client’s internal control structure in a computer
A. They are relatively expensive environment, the auditor will encounter general controls and
B. They are easily transportable application controls. Which of the following is an application
C. They are easy to operate control?
D. The operating system is less comprehensive A. Organization charts C. Hash total.
B. Systems flowcharts D. Control over program changes
168. Which of the following best protects critical and sensitive
information from unauthorized access in a personal computer 173. Hitech, Inc., has changed from a conventional to a computerized
environment? payroll clock card system. Factory employees now record time in
A. The use of secret file names and hiding the files. and out with magnetic cards, and the computer system
B. Using anti-virus software programs. automatically updates all payroll records. Because of this change,
C. Segregating data into files organized under separate file A. The auditor must audit through the computer.
directories. B. Internal control has improved.
D. Keeping of back up copies offsite. C. Part of the audit trail has been lost.
D. The potential for payroll-related fraud has been diminished.
169. The test-data method is used by auditors to test the
A. Accuracy of input data. 174. Controls which are designed to assure that the information
B. Validity of the output. processed by the computer is valid, complete, and accurate are
C. Procedures contained within the program. called
D. Normalcy of distribution of test data. A. input controls. C. output controls.
B. Processing controls D. General controls
170. Which of the following is true of generalized audit software?
A. They can be used only in auditing on-line computer systems. 175. The auditor’s objective to determine whether the client’s
B. They can be used on any computer without modification. computer program can correctly handle valid and invalid
C. They each have their own characteristics, which the auditor transactions as they arise is accomplished through the
must carefully consider before using in a given audit situation A. test data approach C. microcomputer-aided auditing
D. They enable the auditor to perform all manual compliance test approach
procedures less expensively. B. generalized audit software approach D. generally accepted
auditing standards
171. Which of the following is likely to be of least importance to an
auditor when assessing control risk in a company that processes 176. The audit approach in which the auditor runs his or her own
data by computer? program on a controlled basis in order to verify the client’s data
A. The segregation of duties within the computer department. recorded in a machine language is

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A. the test data approach. Answer Key

B. the generalized audit software approach. 1. 31. 61. 91. 121. 151.
C. the microcomputer-aided auditing approach. 2. 32. 62. 92. 122. 152.
D. called auditing around the computer. 3. 33. 63. 93. 123. 153.
4. 34. 64. 94. 124. 154.
177. Internal control is ineffective when computer personnel 5. 35. 65. 95. 125. 155.
A. participate in computer software acquisition decisions. 6. 36. 66. 96. 126. 156.
B. design documentation for computerized systems. 7. 37. 67. 97. 127. 157.
C. originate changes in master files. 8. 38. 68. 98. 128. 158.
D. provide physical security for program files. 9. 39. 69. 99. 129. 159.
10. 40. 70. 100. 130. 160.
178. An auditor’s investigation of a company’s electronic data 11. 41. 71. 101. 131. 161.
processing control procedures has disclosed the following four
12. 42. 72. 102. 132. 162.
circumstances. Indicate which circumstance constitutes a weakness
13. 43. 73. 103. 133. 163.
in internal control.
14. 44. 74. 104. 134. 164.
A. Machine operators do not have access to the complete run
manual. 15. 45. 75. 105. 135. 165.
B. Machine operators are closely supervised by programmers. 16. 46. 76. 106. 136. 166.
C. Programmers do not have the authorization to operate 17. 47. 77. 107. 137. 167.
equipment. 18. 48. 78. 108. 138. 168.
D. Only one generation of back-up files is stored in an off-premises 19. 49. 79. 109. 139. 169.
location. 20. 50. 80. 110. 140. 170.
21. 51. 81. 111. 141. 171.
179. A collection of files that is shared and used by a number of 22. 52. 82. 112. 142. 172.
different users: 23. 53. 83. 113. 143. 173.
A. Database C. Permanent file 24. 54. 84. 114. 144. 174.
B. Archive file D. Flat file 25. 55. 85. 115. 145. 175.
26. 56. 86. 116. 146. 176.
180. They are control procedures that provide reasonable assurance 27. 57. 87. 117. 147. 177.
that all transactions are authorized and recorded, and are 28. 58. 88. 118. 148. 178.
processed completely, accurately and on a timely basis. 29. 59. 89. 119. 149. 179.
A. General controls C. Hardware controls 30. 60. 90. 120. 150. 180.
B. Application controls D. Software controls

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