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AUDITING THEORY QUIZ
1
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1
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Compute-based controls
b
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Control environment
d
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During audit planning, the auditor uses analytical procedures primarily to
a
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b
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c
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d
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3
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Verify the mathematical accuracy of the amounts charged to income as a result of
depreciation expense
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Determine the method for computing depreciation expense and ascertain that it is in
accordance with generally accepted accounting principles
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Reconcile the amount of depreciation expense to those amounts credited in accumulated
depreciation accounts
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Establish the bass for depreciable assets and verfy the deprecaton expense
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An entity’s management is responsible for the preparation and fair presentation of the financial
statements
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Designing, implementing and maintaining internal control relevant to the preparation and
presentation of financial statements
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Making accounting estimates that are reasonable on the circumstances
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Selecting and applying appropriate accounting policies
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Assessing the risk of material misstatement of the financial statements
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Which of the following is false? Philippine Framework for Assurance Engagements
a
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b
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c
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d
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Representative sample selection and non mathematical consideration of the results
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Carefully biased sample selection and statistical calculation of the report
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Representative sample selection and statistical calculation of the results
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Carefully biased sample selection and non mathematical consideration of the results
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Whenever an auditor issues a qualified report, he or she,
a
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b
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c
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d
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8
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Journalize entries and prepare financial statements
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Record cash receipts and record cash disbursements
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Establish internal control and authorize transactions
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Perpetrate errors and irregularities and conceal them
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Bea became the new auditor for Notting Hill Corporation, succeeding Abe, who audited the
financial statements last year
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Only if Abe’s opinion last year was qualified
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Describing the prior audit and the opinion but for not naming Abe as the predecessor
auditor
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Describing the audit but not revealing the type of opinion Abe gave
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Describing the audit and the opinion and naming Abe as the predecessor
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In connection with the element of professional development, a CPA firm’s system of quality
control should ordinarily provide that all personnel
a
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b
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c
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d
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11
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Reconciliation of cash accounts by a competent individual otherwise independent of the cash
function might make the likelihood of a significant misstatement due to the control deficiency
remote
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Compensating
b
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Adjustive
d
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A common audit procedure in the audit of payroll transactions involves tracing selected items
from the payroll journal to employee time cards that have been approved by supervisory
personnel
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Only proper employees worked and their pay was properly computed
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Jobs on which employees worked were charged with the appropriate labor cost
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Internal controls over payroll disbursements are operating effectively
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All employees worked the number of hour for which their pay was computed
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When an auditor believes that an understanding with the client has not been established, he or
she should ordinarily
a
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b
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c
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d
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14
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Inquiries of management and of others within the entity
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Analytical procedures
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Observation and inspection
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Substantive test procedures and test of controls
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The auditor’s understanding of the entity and its environment consist of an understanding of the
following aspects, except
a
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b
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c
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d
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16
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Verify footings and cross-footings of purchases and disbursement records
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Compare approved purchase orders to receiving reports
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Verify the receipts of items ordered and invoiced
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Compare purchase invoice items with disbursement records and checks
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Prospective financial statements are for general use or for limited use
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Which of the following statements is not correct?
a
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b
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c
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d
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18
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Expected error
b
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Sampling error
d
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Which of the following need not be documented in the working papers as required by PSA 230?
a
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b
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c
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d
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20
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Independent auditors will always detect management fraud
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The company’s management preparing the statements may have a vested interest in
reporting certain results
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Independent auditors guarantee the accuracy of the financial statements
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An independent audit is designed to search for deficiencies in the company’s internal
controls
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4
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6
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8
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10
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12
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14
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16
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18
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20

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