Beruflich Dokumente
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Instructions: Write the letter that best corresponds to your answer. Do not write on the
test questions and return it after use. Thank you and GOD BLESS!
1. The statement that best expresses the auditor's responsibility with respect to events
occurring between the balance sheet date and the end of his audit is that:
A. The auditor has no responsibility for events occurring in the subsequent period
unless these events affect transactions recorded on or before the balance sheet date.
B. The auditor's responsibility is to determine that a proper cutoff has been made
and that transactions recorded on or before the balance sheet date actually occurred.
C. The auditor is fully responsible for events occurring in the subsequent period and
should extend all detailed procedures through the last day of field work.
D. The auditor is responsible for determining that a proper cutoff has been made and
performing a general review of events occurring in the subsequent period.
2. In auditing the balance sheet, most revenue and expense accounts are also audited.
Which accounts are most likely to be audited when auditing Accounts Receivable?
A. Sales and Cost of Goods Sold.
B. Interest and Bad Debt Expense.
C. Sales and Bad Debt Expense.
D. Interest and Cost of Goods Sold.
3. Auditors often request that the audit client send a letter of inquiry to those
attorneys who have been consulted with respect to litigation, claims, or assessments.
The primary reason for this request is to provide the auditors with:
A. An estimate of the dollar amount of the probable loss.
B. An expert opinion as to whether a loss is possible, probable or remote.
C. Information concerning the progress of cases to date.
D. Corroborative audit evidence.
4. The auditors' primary means of obtaining corroboration of management's information
concerning litigation is a:
A. Letter of audit inquiry to the client's lawyer.
B. Letter of corroboration from the auditor's lawyer upon review of the legal
documentation.
C. Confirmation of claims and assessments from the other parties to the litigation.
D. Confirmation of claims and assessments from an officer of the court presiding over
the litigation.
5. Which of the following auditing procedures is ordinarily performed last?
A. Reading of the minutes of the directors' meetings.
B. Confirming accounts payable.
C. Obtaining a management representation letter.
D. Testing of the purchasing function.
6. An auditor will ordinarily examine invoices from lawyers primarily in order to:
A. Substantiate accruals.
B. Assess the legal ramifications of litigation in progress.
C. Estimate the dollar amount of contingent liabilities.
D. Identify possible unasserted litigation, claims and assessments.
7. The primary objective of analytical procedures used in the final review stage of an
audit is to
a. Obtain evidence from details tested to corroborate particular assertions.
b. Identify areas that represent specific risks relevant to the audit.
c. Assist the auditor in assessing the validity of the conclusions reached.
d. Satisfy doubts when questions arise about a client's ability to continue in
existence.
8. An auditor is concerned with completing various phases of the examination after the
balance sheet date. This "subsequent period" extends to the date of the
a. Auditor's report.
b. Final review of the audit working papers.
c. Public issuance of the financial statements
d. Delivery of the auditor's report to the client.
9. Which of the following procedures would most likely be performed in connection with a
review of subsequent events?
a. Test of shipping cut-offs.
b. Review of cut-of bank statements.
c. Vouching of subsequent payments of accounts payable
d. Reading of minutes of meetings of stockholders and board of directors up to the
date of the audit report.
10.Which of the following material events occurring subsequent to the balance sheet date
would require an adjustment to the financial statements before they are issued?
a. Sale of long-term debt or capital stock.
b. Loss of a plant as a result of a flood.
c. Major purchase of a business which is expected to double sales volume.
d. Settlement of litigation, in excess of the recorded liability.
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11.The auditor's primary means of obtaining corroboration of management's information
concerning litigation is a
a. Letter of audit inquiry to the client's lawyer.
b. Letter of corroboration from the auditor's lawyer upon review of the legal
documentation.
c. Confirmation of claims and assessments from the other parties to the litigation.
d. Confirmation of claims and assessments from an officer of the court presiding over
the litigation.
12.Which of the following conditions or events most likely would cause an auditor to
have substantial doubt about an entity’s ability to continue as a going concern?
a. Cash flows from operating activities are negative.
b. Research and development projects are postponed.
c. Significant related party transactions are pervasive.
d. Stock dividends replace annual cash dividends.
13.Cooper, CPA, believes there is substantial doubt about the ability of Zero Corp. to
continue as a going concern for a reasonable period of time. In evaluating Zero’s
plans for dealing with the adverse effects of future conditions and events, Cooper
most likely would consider, as a mitigating factor, Zero’s plans to
a. Discuss with lenders the terms of all debt and loan agreements.
b. Strengthen internal controls over cash disbursements.
c. Purchase production facilities currently being leased from a related party.
d. Postpone expenditures for research and development projects.
14.When an auditor concludes there is a substantial doubt a continuing audit client’s
ability to continue as a going concern for a reasonable period of time, the auditor’s
responsibility is to
a. Issue a qualified or adverse opinion, depending upon materiality, due to the
possible effects on the financial statements.
b. Consider the adequacy of disclosure about the client’s possible inability to
continue as a going concern.
c. Report to the client’s audit committee that management’s accounting estimates may
need to be adjusted.
d. Reissue the prior year’s auditor’s report and add an explanatory paragraph that
specifically refers to “substantial doubt” and “going concern”.
15.It is an accepted practice for external auditors to request letter of representation
from their clients. A principal purpose of a letter of representation form the client
is to
a. Discharge the auditor from legal liability of his examination.
b. Confirm in writing management’s approval of limitations on the scope of audit.
c. Serve as an introduction to company’s personnel and authorization to examine the
records.
d. Remind management for its primary responsibility for financial statements.
16.Items for inclusion in management representation letter are normally:
a. Determined by management.
b. Covering all the accounts in the financial statements
c. Determined by auditors based on the circumstances of the engagement.
d. Based on ASPC’s standard list.
17.The auditor considers the status of legal matters up to
a. The date of the audit report.
b. The issuance of financial statements.
c. The balance sheet date.
d. Up to the date of receipt of letter from lawyers.
18.The auditor needs to be aware of the existence of related parties and transactions
between such parties. Which of the following is the least likely reason?
1. GAAP in the Philippines require disclosure in the financial
statements of certain related party relationships and
transactions.
b. Related parties and transactions between such parties are considered unusual
features of business.
c. The source of audit evidence affects the auditor's assessment of its reliability.
d. A related party transaction may be motivated by other than ordinary business
considerations.
19.Which of the following is most likely a procedure that would be performed by the
auditor regarding subsequent events?
a. Reading the minutes of the meetings of shareholders, the board of directors and
audit executive committees held throughout the audit year.
b. Reading the entity’s latest available interim financial statements.
c. Send second requests to the client’s customer who failed to respond to initial
accounts receivable confirmation requests.
d. Review the cutoff bank statements for several months after the year-end.
20.Which statement is incorrect regarding the auditor’s use of the work of an expert?
a. Determination of amounts using specialized techniques or methods, for example, an
actuarial valuation will likely require the services of an expert.
b. The auditor's education and experience enable the auditor to be knowledgeable
about business matters in general.
c. The auditor need not assess the objectivity of the expert since latter may be
related to the entity.
d. When planning to use the work of an expert, the auditor should assess the
professional competence of the expert.
21.Analytical procedures used in the overall review stage of an audit generally include
a. Considering unusual or unexpected account balances that were not previously
identified
b) Performing test of transactions to corroborate management's financial statement
assertions
c) Gathering evidence concerning account balances that have not changed from the
prior year
d) Re-testing control procedures that appeared to be ineffective during the
assessment of control risk
22.Which of the following procedures would an auditor most likely perform to obtain
evidence about the occurrence of subsequent events?
a) Confirming a sample of material accounts receivable established after year-end
b) Comparing the financial statements being reported on with those of the prior
period
c) Investigating personnel changes in the accounting department occurring after year-
end
d) Inquiring as to whether any unusual adjustments were made after year-end
23.The audit inquiry letter to the client's legal counsel should be mailed only by the
a. Client after the auditor has reviewed it for appropriate content.
b. Auditor after preparation by the client and review by the auditor.
c. Auditor's attorney after preparation by the client and review by the auditor.
d. Client after review by the auditor's attorney.
24.A written representation letter from a client's management that, among other matters,
acknowledges responsibility for the fair presentation of financial statements, should
normally be signed by the
a. Chief executive officer and the chief financial officer.
b. Chief financial officer and the chairman of the board of directors.
c. Chairman of the audit committee of the board of directors.
d. Chief executive officer, the chairman of the board of directors, and the client's
lawyer.
25.If a lawyer refuses to furnish corroborating information regarding litigation,
claims, and assessments, the auditor should
a. Honor the confidentiality of the client–lawyer relationship.
b. Consider the refusal to be tantamount to a scope limitation.
c. Seek to obtain the corroborating information from management.
d. Disclose the fact in a footnote to the financial statements.
26.An auditor should obtain written representations from management concerning
litigation claims and assessments. These representations may be limited to matters
that are considered either individually or collectively material, provided an
understanding on the limits of materiality for this purpose has been reached by