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Acctg 33 Prelim Exam Page 1 of 5 a. Stating in the auditors engagement letter that the examination was made in accordance with generally accepted auditing standards. b. Maintaining a clear-cut distinction between managements representations and the auditors representation. c. Attaching an auditors opinion to the clients financial statements. d. Testifying under oath about client financial information. 7. Which of the following criteria is unique to the auditors attest function? a. General competence. b. Familiarity with the particular industry of which his client is a part. c. Due professional care. d. Independence.

1. Which of the following best describes the reasons why an independent auditor reports on financial statements? a. A management fraud may exist and it is made likely to be reported by independent auditors. b. Different interests may exist between the company preparing the statements and the persons using the statements. c. A misstatement of account balances was corrected as the result of the independent auditors work. d. An excellent internal control system was in existence. 2. The independent audit is important to users of financial statements inasmuch as it a. Reports on the validity of all accounting data in the financial statements. b. Involves the objective examination of and reporting of financial statements prepared by management. c. Determines the management capability of the client whose financial statements are under review. d. Evaluates and communicate financial data included in financial statements. 3. When an auditor expresses an opinion on financial statements, his responsibilities extend to a. The underlying wisdom of his clients management decisions. b. Whether the results of his clients operating decisions are fairly presented in the financial statements. c. Active participation in the implementation of the adverse given to his client. d. An ongoing responsibility for his clients solvency. 4. Independent auditing can best be described as a. A branch of accounting. b. A discipline which attests to the results of accounting and other functional operations and data. c. A professional activity that measures and communicates financial and business data. d. A regulatory function that assures the issuance of accurate financial forecasts. 5. The essence of the attest function is to a. Discover fraud if it exists. b. Determine whether the clients financial statements are fairly presented. c. Examine most of the transactions to ascertain their accuracy. d. Assure the consistent applications of proper accounting procedures. 6. The independent auditor lends credibility to client financial statements by

8. An independent audit aids in the communication of economic data because the audit a. Confirms the accuracy of managements financial representations. b. Lends credibility to the financial statements. c. Guarantees that financial data are fairly presented. d. assures the readers of financial statements that the irregularities occurred. 9. Mr. Flores has been retained as auditor of Black Company. The function of his opinion on financial statements of Black Company is to a. Improve financial decisions of company management. b. Lend credibility to managements representation. c. Detect fraud and abuse in management operations. d. Serve requirements of BIR, SEC or Central Bank. 10. The independent audit is important to readers of financial statements because it a. Determines the future stewardship of the management of the company whose financial statements are audited. b. Measures and communicates financial and business data included in financial statements. c. Involves the objective examination of and reporting on management prepared statements. d. Reports on the accuracy of all information in the financial statements. 11. The CPA states in his auditor's report that he has examined the a. Financial statements of the client. b. Financial condition and operating results of the client.

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Acctg 33 Prelim Exam Page 2 of 5 d. Minutes of the board meeting. 17. Due professional care requires a. A critical review of the work done at every level of supervision. b. The examination of all corroborating evidence available. c. The exercise of error-free judgment. d. A study and review of internal accounting control that includes compliance tests. 18. The first general standard requires that the examination of financial statements is to be performed by a person or persons having adequate technical training a. Independence with respect to the financial statements and supplementary disclosures. b. Exercising professional care as judged by peer review. c. Proficiency as an auditor which likely has been acquired from previous experience. d. Objectivity as an auditor as verified by proper supervision. 19. A CPA, while performing an audit, strives to achieve independence in appearance in order to a. Reduce risk and liability. b. Maintain public confidence in the profession. c. Become independent in fact. d. Comply with the generally accepted auditing standards of fieldwork. 20. The first general standard requires that a person or persons should have adequate technical training and proficiency as an auditor. This standard is met by a. An understanding of the field of business and finance. b. Education and experience in the field of auditing. c. Continuing professional education. d. A thorough knowledge of the Statements of Auditing Standards. 21. When a CPA is associated with the preparation of forecasts, all of the following should be disclosed except the a. Source of information. b. Character of the work performed by the CPA. c. Major assumptions in the preparation of the forecasts. d. Probability of achieving estimates. 22. Below are the names of four CPA firms and pertinent facts relative to each firm. Unless otherwise indicated, the individuals named are CPAs and partners, there are no other partners. Which firm name and related facts indicates a violation of the Board of Accountancys Code of Professional Ethics?

c. Books and other records of the client. d. Clients transactions, adjustments and summarizing thereof for the audit period. 12. Which of the following best describes what is meant by generally accepted auditing standards? a. Audit objectives generally determined on audit engagements. b. Acts to be performed by the auditor. c. Measure of the quality of the auditors performance. d. Procedures to be used to gather evidence to support financial statements. 13. The first general standard recognizes that regardless of how capable an individual may be in other fields, the individual can not meet the requirements of the auditing standards without proper a. Business and finance courses. b. Quality control and peer review. c. Education and experience in auditing. d. Supervision and review skills. 14. The third general standards states that due care is to be exercised in the performance of the examination. This standard means that a CPA who undertakes an engagement assumes a duty to perform each audit a. As a professional possessing the degree of skill commonly possessed by others in the field. b. In conformity with generally accepted accounting principles. c. With reasonable diligence and without fault or error. d. To the satisfaction of governmental agencies and investors who rely upon the audit. 15. Which of the following best describes the reference to the expression taken as a whole in the fourth generally accepted auditing standard of reporting? a. It applies equally to a complete set of financial statements and to each individual financial statement. b. It applies only to a complete set of financial statements. c. It applies equally to each item in each financial statements. d. It applies equally to each material items in each financial statements. 16. In connection with the third generally accepted auditing standard of fieldwork, an auditor examine corroborating evidential matter which includes all of the following, except a. Client accounting manuals. b. Written client representations. c. Vendor invoices.

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Acctg 33 Prelim Exam Page 3 of 5 27. An auditor, in accepting an audit engagement wherein he does not possess the industry expertise of the business entity, should a. Engage financial experts familiar with the nature of the business entity. b. Obtain a knowledge of matters that relate to the nature of the entitys business. c. Refer substantial portion of the audit to another CPA who will act as the principal auditor. d. First inform management that an unqualified opinion can not be issued. 28. During the course of an audit engagement, The CPA needed additional studies and consultation with experts. This additional study and consultation is deemed to be a. An unusual practice which should have voided the audit engagement. b. Lack of competence on the part of the CPA. c. An appropriate part of the professional conduct of the audit engagement. d. Undertaken as a responsibility of management. 29. J. Dela Pea, CPA, accepted the audit engagement of ABC Corporation. During the audit, J. Dela Pea became aware of the fact that he did not have the competence required for the engagement. He must a. Disclaim an opinion. b. Issue a subject to opinion. c. Suggest that ABC Corporation engage another CPA to perform the audit. d. Rely on the competence of client personnel. 30. The essence of s CPAs independence is a. Avoiding significant financial interest in the clients business. b. Performing the examination from the viewpoint of the stockholders. c. Maintaining a mental attitude of impartiality. d. Making sure no relatives or personal friends are employed by the client. 31. In determining independence with respect to any audit engagement, the ultimate decision as to whether the auditor is independent must be made by the a. Auditor b. Client c. Audit Committee d. Public 32. A CPA in an audit engagement, where he lacks independence, should a. Disclaim an opinion on the financial statements. b. Issue a piecemeal opinion.

a. Aku, Ciya and Kamy (Kamy died about five years ago; Aku and Ciya are continuing the firm) b. Dong and Estong, CPAs (the name of Godo, a third active partner, is omitted from the firm name) c. Hugo and Ingkol, CPAs (Hugo died three years ago; Ingkol is continuing the firm as a sole proprietorship) d. None of the above 23. BCG and Co., CPAs is the principal auditor of the consolidated financial statements of Banaba, Inc., and its subsidiaries. Banaba accounts for approximately 98% of consolidated assets and consolidated net income. The two subsidiaries are audited by Armel and Co., CPAs, a firm with an excellent professional reputation. BCG insists on auditing the two subsidiaries because it deems this necessary to warrant the expression of an opinion. a. The principal auditor of consolidated statements may never insist on auditing the subsidiaries. b. BCG may insist on auditing the subsidiaries only if it shares the fee with Armel. c. BCG may insist on auditing the subsidiaries only if it can show that total fees will be reduced. d. BCG maybe considered in violation of the Code of Professional Ethics. 24. Dante, a CPA in public practice, contracts Pedro, an employee of Dalmacio & Co., and makes him an offer of employment without first notifying Dalmacio. According to the Code of Professional Ethics such practice a. Is a violation only if Pedro is a CPA. b. Is a violation regardless of whether Pedro is a CPA or Dalmacio is a CPA frim. c. Is a violation if Dalmacio is a CPA firm. d. Is not a violation if Dalmacio is a CPA firm. 25. Mr. CPA commits himself to audit and report on the financial operations of a business as who possess the desired competence and requisite skills when in fact he does not have them. This Involves a. The general standards. b. The standards of fieldwork. c. The standards of reporting. d. Due professional care. 26. Which of the following is mandatory if the auditor is to comply with generally accepted auditing standards? a. Use of analytical review on audit work. b. Confirmation of material accounts receivable balances. c. Use of statistical sampling, to the extent practicable, on audit engagements. d. Possession of adequate technical training.

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Acctg 33 Prelim Exam Page 4 of 5 c. The extent to which change in the companys organization will influence the scope of the examination. d. Details of potential problems which the auditor believes might cause a qualified opinion. 37. An auditor is most likely to refer to one or more of the three general auditing standards in determining a. Scope of the CPAs auditing procedures. b. Nature of the CPAs report qualification. c. Extent of review of accounting controls. d. Whether the CPA should accept the audit engagement. 38. Standards of fieldwork in auditing refer to which of the following? a. Planning of work and supervision of assistant. b. Proper study and evaluation of existing internal control. c. Obtaining sufficient competent evidential matter. d. All of the above. 39. Ropper and Co., CPAs have policies requiring that all members of the audit staff submit weekly time reports to the audit manager, who then prepares a weekly summary work report regarding variance from budget for Roppers review. This provides written evidence of Ropper & Co.s professional concern regarding compliance with which generally accepted auditing standards? a. Quality control. b. Due professional care. c. Adequate review. d. Adequate planning. 40. A requirement of the application of generally accepted auditing standards for the auditor a. Not to obtain clients by solicitation. b. To undertake a proper study and evaluation of the existing internal control. c. To charge fees fairly and in relation to time and cost of engagement. d. To inspect all fixed assets acquired during the year.

c. List, in the auditors report, all the generally accepted auditing procedures actually performed by him. d. State the reason for his lack of independence in his auditors report. 33. To emphasize auditor independence from management, many corporations follow the practice of a. Appointing a partner of the CPA firm conducting the examination of the corporations audit committee. b. Establishing a policy of discouraging social contact between employees of the corporation and the staff of the independent auditor. c. Requesting that a representative of the independent auditor be on hand at the annual stockholders meeting. d. Having the independent auditor report to an audit committee of outside members of the board of directors. 34. As generally conceived, the audit committee of a publicly held company should be made up of a. Representatives from the clients management, investors, suppliers, and customers. b. The audit partner, the chief financial officer, the legal counsel, and at least one outsider. c. Representatives of the major equity interests (bonds, preferred stock, common stock) d. Members of the board of directors who are not officers or employees of the company. 35. Which of the following best describes why publicly traded corporations follow the practice of having the outside auditor appointed by the board of directors or elected by the stockholders? a. To comply with the regulations of Accounting Standards Council (ASC). b. To emphasize auditor independence from the management of the corporation. c. To encourage a policy of rotation of the independent auditors. d. To provide the corporate owners with an opportunity to voice their opinion concerning the quality of the auditing firm selected by the directors. 36. It would not be appropriate for the auditor to initiate discussion with the audit committee concerning a. The extent to which the work of internal auditors will influence the scope of the examination. b. Details of the procedures which the auditor intends to apply.

It is easier to be wise for others than for ourselves. Francois De La Rochefoucauld The art of being wise is knowing what to overlook. William James The first step in the acquisition of wisdom is silence, the second listening, the third memory,

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the fourth practice, the fifth teaching others. Solomon Ibn Gabriol

Commitment leads to action. Action brings your dream closer. Marcia Wieder --END--