Instructions: Place the letter corresponding to your answers on the box provided below.

1. The audit of financial statement is conducted to determine if the

A. Organization is operating efficiently and effectively
B. Auditee is following specific procedures or rules set down by some higher authority
C. Overall financial statements are stated in accordance with an identified financial reporting
framework.
D. Client’s internal control is functioning as intended.
2. In financial statement audit, the audit process should be in accordance with
A. The audit program
B. Philippine Standards on Auditing (PSA)
C. Philippine Accounting Standards (PAS)
D. Philippine Financial Reporting Standards (PFRS)
3. The criteria for evaluating quantitative information vary. For example, in the case of an independent
audit of financial statements by CPA firms, the criteria are usually the
A. Philippine Standards on Auditing (PSA)
B. Philippine Financial Reporting Standards (PFRS)
C. National Internal Revenue Code (NIRC)
D. Regulations of the Securities and Exchange Commission (SEC)
4. Which of the following has the primary responsibility for the fairness of the representations made in
financial statements?
A. Client’s management
B. Audit committee
C. Independent auditor
D. Board of Accountancy
5. Which of the following is one of the limitations of an audit?
A. Nature of evidence obtained
B. Inadequacy of the accounting records
C. Confidentiality of information
D. Scope limitations imposed by the entity
6. Which of the following is not a similarity between external and internal auditors?
A. Both must be independent of the company
B. Both must be competent
C. Both follow a similar methodology in performing their audits
D. Both consider risk and materiality deciding the extent of their tests and evaluating results
7. What assurance is provided by the auditor in an audit of financial statements?
A. Absolute assurance
B. Moderate assurance
C. Reasonable assurance
D. No assurance
8. Which of the following statements is correct concerning an auditor’s responsibilities
regarding financial statements?
A. An auditor’s responsibilities for audited financial statements are confined to the expression of
the auditor’s opinion
B. The fair presentation of audited financial statements in accordance with an applicable financial
reporting framework is an implicit part of the auditor’s responsibilities.
C. Making suggestions that are adopted about the form and content of an entity’s financial
statements impairs an auditor’s independence.
 D. The auditor’s report should provide assurance as to the future viability of an entity
9. Which of the following statements does not describe a condition that creates a
demand for auditing?
A. Conflict between an information preparer of user can result in biased information
B. Information can have substantial economic consequences for a decision-maker.
C. Expertise is often required for information preparation and verification
D. Users can directly assess the quality of information
10. Which of the following would not represent one of the primary problems that would
lead the users to demand for independent audits of a company’s financial
statements?
A. The downsizing of business and financial markets
B. Management bias in preparing financial statements
C. The complexity of transactions affecting financial statements
D. The remoteness of the user to directly obtain financial information from the company

Answers:

1. C 3. B 5. A 7. C 9. D
2. B 4. A 6. A 8. A 10. A