supernova 300

1. Theoretically, it is possible to provide an infinite range of assurance from a very low level of assurance to an absolute level of assurance in practice, the professional accountants cannot provide absolute assurance because of the following, except:

A. The professional accountants employ testing process.
B. The internal control has its inherent limitations.
C. The use of judgments in gathering evidence and drawing conclusions based on that evidence.
D. The lack of expertise of the professional accountants in doing a systematic engagement process.

D. The lack of expertise of the professional accountants in doing a systematic engagement process.

2. The practitioner's report on an assurance engagement should always include the following, except:

A. A description of the engagement and identification of the subject matter.
B. Identification of the standards under which the engagement was conducted.
C. Reference to the work of an expert.
D. Identification of the criteria.

C. Reference to the work of an expert.

3. Assurance services involve all the following except:

A. Improving the quality of information for decision purposes. B. Improving the quality of the decision model used.
C. Improving the relevance of information.
D. Implementing a system that improves the processing of information.

D. Implementing a system that improves the processing of information.

4. Competence as a certified public accountants includes all of the following except

A. Having the technical qualifications to perform an engagement.
B. Possessing the ability to supervise and evaluate the quality of staff work.
C. Warranting the infallibility of the work performed.
D. Consulting others if additional technical information is needed.

C. Warranting the infallibility of the work performed.

5. Close family includes the following except:

A. Parent
B. Sibling
C. Non-dependent child
D. Spouse

D. Spouse

6. Firm includes the following except

A. A sole practicing professional accountant.
B. An entity that controls a partnership of professional accountants.
C. An entity controlled by a partnership of professional accountants.
D. A sole practitioner, partnership or corporation of professional accountants.

D. A sole practitioner, partnership or corporation of professional accountants.

7. The term professional accountant in public practice includes the following except:

A. A sole proprietor providing professional services to a client.
B. Each partner or person occupying a position similar to that of a partner staff in a practice providing professional services to a client.
C. Professional accountants employed in the public sector having managerial responsibilities.
D. A firm of professional accountants in public practice.

C. Professional accountants employed in the public sector having managerial responsibilities.

8. The term receiving accountant includes the following except:

A. A professional accountant in public practice to whom the existing has referred tax engagement.
B. A professional accountant in public practice to whom the client of the existing accountant has referred audit engagement.
C. A professional accountant in public practice who is consulted in order to meet the needs of the client.
D. A professional accountant in public practice currently holding an audit appointment or carrying out accounting, taxation, consulting or similar professional services for a client.

D. A professional accountant in public practice currently holding an audit appointment or carrying out accounting, taxation, consulting or similar professional services for a client.

9. Related entity is an entity that has any of the following relationships with the client, except:

A. An entity that has direct or indirect control over the client provided that the client is material to such entity.
B. An entity with a direct financial interest in the client even though such entity has no significant influence over the client provided the interest in the client is material to such entity.
C. An entity over which the client has direct or indirect control.
D. An entity which is under common control with the client (referred to as a "sister entity") provided the sister entity and the client are both material to the entity that controls both the client and sister entity.

B. An entity with a direct financial interest in the client even though such entity has no significant influence over the client provided the interest in the client is material to such entity.

10. Safeguards created by the profession, legislation or regulation, include the following, except:

A. Educational, training and experience requirements for entry into the profession.
B. Continuing education requirements.
C. Legislation governing the independence requirements of the firm.
D. Policies and procedures that emphasize the assurance client's commitment to fair financial reporting.

D. Policies and procedures that emphasize the assurance client's commitment to fair financial reporting.

11. Professional accountants may encounter problem in identifying unethical behavior or in resolving an ethical conflict. When faced with significant ethical issues, professional accountants should do the following except
    A. Follow the established policies of the employing organization to seek a resolution of such conflict.
    B. Review the conflict problem with the immediate superior if the organization's policies do not resolve the ethical conflict.
    C. If the problem is not resolved with the immediate superior and the professional accountant determines to go to the next higher managerial level, the immediate superior need not be notified of the decision.
    D. Seek counseling and advice on a confidential basis with an independent advisor or the applicable professional accountancy body or regulatory body to obtain an understanding of possible courses of action.

C. If the problem is not resolved with the immediate superior and the professional accountant determines to go to the next higher managerial level, the immediate superior need not be notified of the decision.

12. As a resolution of the conflict in the application of fundamental principles, the auditor, after considering the ethical issues and relevant facts may do any of the following except:

A. Must immediately resign from the engagement or the employing entity.
B. Should weigh the consequences of each possible course of action.
C. Should consult with other appropriate persons within the firm or employing organization foe help to finally resolve the matter.
D. The professional accountant may wish to obtain professional advice from the relevant professional body without breaching confidentiality if significant conflict cannot be resolved.

A. Must immediately resign from the engagement or the employing entity.

13. The professional accountant has a professional duty or right to disclose confidential information in each of the following, except

A. To comply with technical standards and ethics and requirements.
B. To disclose to BIR fraudulent scheme committed by the client on payment of income tax.
C. To comply with the quality of review of a member body or professional body.
D. To respond to an inquiry or investigation by a member body or regulatory body.

B. To disclose to BIR fraudulent scheme committed by the client on payment of income tax.

14. Safeguards within the firm's own systems and procedures, include the following, except:

A. Firm leadership that stresses the importance of independence and the expectation that members of assurance teams will act in the public interest.
B. External review of a firm's quality control system.
C. Policies and procedures to implement and monitor quality control of assurance engagements.
D. Policies and procedures that will enable the identification of interests or relationships between the firm or members of the assurance team and assurance clients.

B. External review of a firm's quality control system.

15. Safeguards within the assurance client, include the following, except

A. Professional standards and monitoring and disciplinary processes.
B. The assurance client has competent employees to make managerial decisions.
C. Internal procedures that ensure objective choices in commissioning non-assurance engagements.
D. A corporate governance structure, such as an audit committee, that provides appropriate oversight and communications regarding a firm's services.

A. Professional standards and monitoring and disciplinary processes.

16. In determining estimates of fees, an auditor may take into account each of the following, except the:

A. Value of the service to the client.
B. Degree of responsibility assumed by undertaking the engagement.
C. Skills required in performing the service.
D. Attainment of specific findings.

D. Attainment of specific findings.

17. Which of the following is incorrect regarding engagement period?

A. The period of the engagement starts when the assurance team begins to perform assurance services and ends when the assurance report is issued, except when the assurance engagement is of a recurring nature.
B. If the assurance engagement is expected to recur, the period of the assurance engagement ends with the notification by either party that the professional relationship has terminated or the issuance of the final assurance report, whichever is earlier.
C. In the case of an audit engagement, the engagement period includes the period covered by the financial statements reported on by the firm.
D. When an entity becomes an audit client during or after the period covered by the financial statements that the firm will report on, the firm should consider whether any threats to independence may be created by previous services provided to the audit

B. If the assurance engagement is expected to recur, the period of the assurance engagement ends with the notification by either party that the professional relationship has terminated or the issuance of the final assurance report, whichever is earlier.

18. The following self-interest threat created would be so significant no safeguard could reduce the threat to an acceptable level, except

A. If a firm, or a network firm, has a direct financial interest in an audit client of the firm.
B. If a fir, or a network firm, has a material indirect financial interest in an audit client of the firm.
C. If a firm, or a network firm, has a material financial interest in an entity that has a controlling interest in an audit client.
D. If the retirement benefit plan of a firm, or network firm, has a financial interest in an audit client

D. If the retirement benefit plan of a firm, or network firm, has a financial interest in an audit client

19. The following loans and guarantees would not create a threat to independence, except:

A. A loan from, or a guarantee thereof by, an assurance client that is a bank or a similar institution, to the firm, provided the loan is made under normal lending procedures, terms and requirements and the loan is immaterial to both the firm and the assurance client.
B. A loan from, or a guarantee thereof by, an assurance client that is a bank or a similar institution, to a member of the assurance team or their immediate family, provided the loan is made under normal lending procedures, terms and requirements.
C. Deposits made 1* or brokerage accounts of, a firm or a member of the assurance team with an assurance client that is a bank, broker or similar institution, provided the deposit or account is held under normal commercial terms.
D. If the firm, or a member of the assurance team, makes a loan to an assurance client that

D. If the firm, or a member of the assurance team, makes a loan to an assurance client that is not a bank or similar institution, or guarantees such an assurance clients' borrowings

20. When a firm or a member of the assurance team and the audit client or one of its officers hold interest in a closely-held entity, a threat to independence is not created, except:

A. The relationship is clearly insignificant to the member of the assurance team and the audit client.
B. The relationship is other than insignificant acceptable for indirect financial interest.
C. The interest held is immaterial to the investors or group of investors.
D. The interest does not give the investor, or group the ability to control the closely-held entity.

B. The relationship is other than insignificant acceptable for indirect financial interest.

21. The following activities would generally create self-interest or self-review threats that are so significant and that only avoidance of the activity or refusal to perform the assurance engagement would reduce the threats to an acceptable level, except

A. Authorizing, executing or consummating a transaction, or otherwise exercising authority on behalf of the assurance client, or having the authority to do so.
B. Determining which recommendation of the firm should be implemented.
C. Reporting, in a management role, to those charged with governance.
D. Providing technical assistance and advice on accounting principles for audit clients.

D. Providing technical assistance and advice on accounting principles for audit clients.

22. If firm, or network firm, personnel providing such assistance make management decisions, the self-review threat created could not be reduced to an acceptable level by any safeguards. Examples of such managerial decisions include the following, except

A. Determining or changing journal entries, or the classifications for accounts or transactions or other accounting records without obtaining the approval of the audit clients
B. Authorizing or approving transactions.
C. Preparing source documents or originating data (including decisions on evaluation assumptions), or making changes to such documents or data.
D. Assisting an audit client in resolving account reconciliation problems.

D. Assisting an audit client in resolving account reconciliation problems.

23. The following services are considered to be a normal part of the audit process and do not, under circumstances, threaten independence, except.

A. Analyzing and accumulating information for regulatory reporting. B. Assisting in the preparation of consolidated financial statements.
C. Drafting disclosures items.
D. Having custody of an assurance client's assets.

D. Having custody of an assurance client's assets.

24. The safeguards necessary to reduce the threat created by providing accounting and bookkeeping services to an audit client that is not a listed entity to an acceptable level might include the following, except:

A. Making arrangements so that such services are not performed by a member of the assurance team.
B. Implementing policies and procedures to prohibit the individual providing such services from making any managerial decisions on behalf of the audit client.
C. Requiring the source data for the accounting entries to be originated by the assurance team
D. Obtaining audit client approval for any proposed journal entries or other changes affecting the financial statements.

C. Requiring the source data for the accounting entries to be originated by the assurance team

25. The provision of accounting and bookkeeping services of a routine or mechanical nature to divisions or subsidiaries of listed audit clients would not be seen as impairing independence with respect to the audit client provided that the following conditions are met, except:

A. The services do not involve the exercise of judgment.
B. The divisions or subsidiaries for which the service is provided are collectively immaterial to the audit client.
C. The services provided are collectively immaterial to the division or subsidiary.
D. The fees to the firm, or network firm, from such services are collectively significant.

D. The fees to the firm, or network firm, from such services are collectively significant.

26. The following would generally create a significant threat to independence, except:

A. When a firm, or a network firm, performs a valuation service for an audit client for the purpose of making a filing or return to a tax authority
B. The firm provides formal taxation opinions and assistance in the resolution of tax disputes to an audit client.
C. The firm renders internal services involving an extension of the procedures required to conduct an audit in accordance with Philippine Standards on Auditing to an audit client.
D. When a firm, or a network firm, provides assistance in the performance of a client's internal audit activities or undertakes the outsourcing of some of the activities.

D. When a firm, or a network firm, provides assistance in the performance of a client's internal audit activities or undertakes the outsourcing of some of the activities.

27. The lending of staff by a firm to a financial statement audit client may be made only on the understanding that the firm's personnel will not be involved in the following, except:

A. Assembling the annual financial statements based recorded transactions.
B. Making management decisions.
C. Approving or signing agreements or other similar documents.
D. Exercising discretionary authority to commit the client.

A. Assembling the annual financial statements based recorded transactions.

28. When independence is threatened by litigation between the member of the assurance team and the client management, the following safeguards that can reduce the effect to an acceptable level may be applied, except:

A. Involve an additional professional accountant in the firm who is not a member of the assurance team to review the work done.
B. Disclose to the audit committee, or others charged with governance, the extent and the nature of the litigation.
C. Remove the particular member of the assurance team who is involved in litigation hum cite engagement.
D. Submit a new engagement letter.

D. Submit a new engagement letter.

29. The objectives of the Philippine Accountancy Act of 2004 are the following except:

A. The standardization and regulation of accounting education.
B. Examination for registration of certified public accountants.
C. Supervision, control, and regulation of the practice of accountancy.
D. Integration of accountancy profession.

D. Integration of accountancy profession.

30. The following is deemed a practice of accountancy, except:

A. Appointment to a position in the government that requires a CPA license as a prerequisite.
B. Employment as budget officer in a local government unit regardless of the officer being a holder of a CPA license or not.
C. Teaching professional subjects in a collegiate program leading to the degree of Bachelor of Science in Accountancy.
D. Representing his clients before government agencies on tax and other matters related to accounting.

B. Employment as budget officer in a local government unit regardless of the officer being a holder of a CPA license or not.

31. The following are represented both to the Financial Reporting Standards Council (FRSC) and Auditing and Assurance Standards Council (AASC), except:

A. Bangko Sentral ng Pilipinas
B. Securities and Exchange Commission
C. Bureau of Internal Revenue
D. Board of Accountancy

C. Bureau of Internal Revenue

32. All of the following are represented to the Financial Reporting Standards Council, except:

A. Commission on Higher Education
B. Board of Accountancy
C. Securities and Exchange Commission
D. Bureau of Internal Revenue

A. Commission on Higher Education

33. The Philippine Accountancy Act of 2004 provides that all working papers made during an audit shall be the property of the auditor. These working papers shall include the following, except:

A. Working papers prepared by the CPA and his staff.
B. Analysis and schedule prepared and submitted to the auditor by his client's staff.
C. Excerpts or copies of documents furnished to the auditor.
D. Any report submitted by the auditor to his client.

D. Any report submitted by the auditor to his client.

34. A professional accountant has a professional duty or right to disclose confidential information in each of the following, except:

A. To comply with technical standards and ethics requirements.
B. To disclose to the Bureau of Internal Revenue any fraudulent scheme committed by the client on payment of income tax.
C. To comply with the quality review of a member body or professional body.
D. To respond to an inquiry or investigation by a member body or regulatory body.

B. To disclose to the Bureau of Internal Revenue any fraudulent scheme committed by the client on payment of income tax.

35. The CPA must not subordinate his or her professional judgment to that of others in every

A. engagement.
B. audit engagement.
C. engagement except tax services.
D. engagement except management advisory services.

A. engagement.

36. A CPA firm issues an unqualified opinion on financial statements that were not prepared in accordance with GAAP. The CPA firm would have acted with fraud or its equivalent in all the following circumstances except where the firm

A. intentionally disregards the truth.
B. has actual knowledge of fraud.
C. negligently performs auditing procedures.
D. intends to gain monetarily by concealing the fraud.

C. negligently performs auditing procedures.

37. The auditor's report may be addressed to any of the following, except the client's

A. Stockholders
B. Chief executive officer
C. Board of directors
D. Partners

B. Chief executive officer

38. The standard audit report explains that a financial audit includes all of the following except

A. Examining support for the amounts and disclosure in the financial statements
B. Assessing the level of control risk
C. Assessing the accounting principles used and significant estimates made by the management
D. Evaluating the overall financial statement presentation

B. Assessing the level of control risk

39. Which of the following is ordinarily true of a modification of the audit report by adding an emphasis of matter paragraph?

A. The modification by adding an emphasis of matter paragraph is an "except for" qualification of opinion
B. The emphasis of matter paragraph is a "subject to qualification of opinion
C. The emphasis of matter paragraph would ordinarily refer to the fact that the auditor's opinion is not qualified
D. The emphasis of matter paragraph is presented before the opinion paragraph.

C. The emphasis of matter paragraph would ordinarily refer to the fact that the auditor's opinion is not qualified

40. An explanatory paragraph may be added to the audit report while at the same time issuing an unqualified opinion in all cases except when:

A. the client has changed an accounting principle with the agreement of the auditor
B. there is an immaterial departure from GAAP to ensure fair presentation with the agreement of the auditor
C. the audit opinion is partly based on the work of another auditor
D. the audit work has been significantly limited by management.

D. the audit work has been significantly limited by management.

41. An explanatory paragraph or modified wordings may be added to the audit report while at the same time issuing an unqualified opinion in all cases except when:

A. the client has changed an accounting principle with the agreement of the auditor
B. there is an immaterial departure from PFRS to ensure fair presentation with the agreement of the auditor
C. the audit opinion is partly based on the work of another auditor
D. the audit work has been materially limited by management.

D. the audit work has been materially limited by management.

42. When there is a limitation in the scope of the audit that results to a disclaimer of opinion, the following paragraphs are modified, except:

A. Introductory paragraph
B. Management's responsibility for the financial statements
C. Auditor's responsibility
D. Auditor's opinion.

B. Management's responsibility for the financial statements

43. If an amendment is necessary in the other information and the entity refuses to make the amendment, the auditor, depending on particular circumstance, may do any of the following, except:

A. Describe the material inconsistency as an emphasis of matter in a paragraph following the opinion paragraph
B. The auditor may not issue the auditor's report.
C. The auditor may withdraw from the engagement
D. The auditor to issue either a qualified or adverse opinion.

D. The auditor to issue either a qualified or adverse opinion.

44. If a principal auditor decides to assume responsibility for another auditor's work, the principal auditor should consider performing all of the following procedures except:

A. Performing a peer review of the other auditor.
B. Reviewing the audit program of the other auditor.
C. Reviewing the working papers of the other auditor
D. Discussing the audit procedures and the results of the audit with other auditor.

A. Performing a peer review of the other auditor.

45. .Management's integrity affects all of the following risks except:

a. Enterprise risk
b. Financial reporting risk
c. Engagement risk
d. All of the above risks are affected

d. All of the above risks are affected

46. To obtain an understanding of the relevant policies and procedures of internal control, the auditor performs all of the following except:

a. Make inquiries
b. Make observations
c. Inspect documents and records
d. Design substantive tests

d. Design substantive tests

47. The understanding of internal control that relates to a financial statement assertion should be used to do all of the following except:

a. Determine inherent risk for that assertion.
b. identify types of potential misstatements for that assertion.
c. Consider factors that affect the risk of material misstatement for that assertion and assess control risk.
d. Design substantive tests that correspond with the assessment of control risk.

a. Determine inherent risk for that assertion.

48. Tests of controls are concerned primarily with each of the following questions except:

a. How were the controls applied?
b. Why were the controls applied?
c. Were the necessary controls consistently performed? d. By whom were the controls applied?

b. Why were the controls applied?

49. In considering the evidence needed to assess control risk during the period from interim to year-end, all of the following should be considered except the:

a. Significance of the assertion being tested.
b. Specific internal control policies and procedures tested during the interim period.
c. Degree to which the policies and procedures were tested and the test results.
d. Control risk on other assertions.

d. Control risk on other assertions.

50. The assessment of control risk can be made at any of the following times except:

a. Immediately after obtaining an understanding of internal control.
b. After some tests of controls are performed concurrently with obtaining an understanding.
c. After the performance of additional tests of controls designed to further lower the assessment of control risk.
d. After performing all the necessary substantive tests.

d. After performing all the necessary substantive tests.

51. To be competent, evidence must be all of the following except:

A. Sufficient
B. Reliable
C. Relevant
D. Unbiased

A. Sufficient

52. Although the validity of evidential matter is dependent on the circumstances under which it is obtained, there are three general presumptions that have some usefulness. The situations given below indicate the relative reliability that a CPA has placed on two types of evidence obtained in different situations. Which of these is an exception to one of the general presumptions?

A. The CPA places more reliance on the balance in the scrap sales account at Plant A, where the CPA has made limited tests of transactions because of effective controls, than at Plant B where the CPA has made extensive tests of transactions because of ineffective controls.
B. The CPA places more reliance on the CPAs computation of interest payable on outstanding bonds than on the amount confirmed by the trustee.
C. The CPA places more reliance on the report of an expert on an inventory of precious gems than on the CPAs physical observation o

C. The CPA places more reliance on the report of an expert on an inventory of precious gems than on the CPAs physical observation of

53. Each of the following might, by itself, form a valid basis for an auditor of deciding to omit a test except for the:

A. Difficulty and expense involved in testing a particular item
B. Assessment of control risk at a low level
C. Inherent risk involved
D. Relationship between the cost obtaining evidence and its usefulness

A. Difficulty and expense involved in testing a particular item

54. Financial statement assertions include all of the following except:

A. Occurrence
B. Presentation and disclosure
C. Consistency and comparability
D. Completeness

C. Consistency and comparability

55. In using the work of a specialist, an understanding should exist among the auditor, the client, and the specialist as to the nature of the work to be performed by the specialist. Preferably, the understanding should be documented and would include all of the following except

A. The objectives and scope of the specialist's work
B. The specialist's representations as to his relationship, if any, to the client
C. The specialist's understanding of the auditor's corroborative use of the specialist's findings in relation to the representations in the financial statements
D. A statement that the methods or assumptions to be used are not inconsistent with those used by the client

D. A statement that the methods or assumptions to be used are not inconsistent with those used by the client

56. Determining whether amounts are in conformity with GAAP addresses the proper measurement of assets, liabilities, revenues, and expenses which includes all of the following except:

A. The reasonableness of management's accounting estimates
B. Proper application of valuation principles
C. Proper application of matching principle
D. The reasonableness of management's accounting policies

D. The reasonableness of management's accounting policies

57. Each audit program should have a column for all of the following except:

A. Audit procedures to be performed
B. The initials of the auditor who performs each procedure
C. The date that the performance of the procedure is performed and completed
D. The test of controls related to each procedure

D. The test of controls related to each procedure

58. When evaluating the planned level of substantive tests for each significant assertion, the auditor will consider the evidence obtained from all of the following except:

A. Procedures to understand the business and industry and related analytical procedures that have been completed.
B. Evidence about the effectiveness of internal controls gained while obtaining an understanding of internal control structure.
C. The assessment of detection risk.
D. Evidence of effectiveness of computer control procedures and related follow-up.

C. The assessment of detection risk.

59. Choices about audit evidence are influenced by all of the following except:

A. The auditor's understanding of the business and industry B. Assessment of inherent and control risk
C. Comparisons of the auditor's expectation of the financial statements with the client's books and records
D. Decisions about immaterial risk factors

D. Decisions about immaterial risk factors

60. If the auditor is concerned that a population may contain exceptions, the determination of a sample size sufficient to include at least one such exception is a characteristic of

A. Discovery sampling
B. Variables sampling
C. Random sampling
D. Monetary-unit sampling

A. Discovery sampling

61. In a variable sampling plan, an auditor must generally consider each of the following except

A. variation within the population
B. acceptable risk of incorrect acceptance
C. tolerable error
D. population

D. population

62. When sampling methods are used in a substantive test, all of the following factors must be considered in determining an optimum sample size, except the

A. variation in the population
B. risk levels that the auditor is willing to accept
C. deviation occurrence rate that the auditor expects to exist in the sample
D. tolerable misstatement

C. deviation occurrence rate that the auditor expects to exist in the sample

63. To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except:

A. cutoff bank statement
B. year-end bank statement
C. bank confirmation
D. general ledger

D. general ledger

64. The negative form of accounts receivable confirmation request is particularly useful except when

A. control procedures surrounding accounts receivable are considered to be effective
B. a large number of small balances are involved
C. the auditor has reason to believe the persons receiving the requests are likely to give them consideration
D. individual account balances are relatively large

D. individual account balances are relatively large

65. An auditor confirms a representative number of open accounts receivable as of December 31, 2010, and investigates respondents' exceptions and comments. By this procedure which of the following would the auditor most likely learn of?

A. One of the cashiers has been covering a personal embezzlement by lapping.
B. One of the sales clerks has not been preparing charge slips for credit sales to family and friends.
C. One of the computer department's staff has been removing all sales Invoices applicable to his account from the data file.
D. The credit manager has misappropriated remittances from customers whose accounts have been written off

A. One of the cashiers has been covering a personal embezzlement by lapping.

66. The accounts payable department receives a purchase order form to accomplish all of the following except

A. comparing invoice price to purchase order price
B. ensuring that the purchase had been properly authorized
C. ensuring that the goods had been received by the party requesting the goods
D. comparing quantity ordered to quantity purchased

C. ensuring that the goods had been received by the party requesting the goods

67. Client's inventory instructions should include all the following except

A. names of client personnel responsible for the count.
B. instructions for recording accurate description.
C. instructions for auditors' test counts.
D. plans for controlling movement of goods.

C. instructions for auditors' test counts.

68. In auditing plant assets and accumulated depreciation for proper valuation, the auditor should do all of the following, except:

A. recalculate depreciation expense on a test basis
B. physically inspect major plant assets additions
C. vouch major additions by reference to underlying documentation D. vouch repairs and maintenance expense on a test basis

B. physically inspect major plant assets additions

69. Controls over making estimates include all of the following except.

A. management communication of the need for proper accounting estimates
B. comparison of prior estimates with subsequent results
C. consideration of whether estimates are consistent with the company's operational plans
D. ensuring the effects of the estimate are in line with analysts' forecasts

D. ensuring the effects of the estimate are in line with analysts' forecasts

70. When verifying dividend amounts paid, an auditor will typically do all except which of the following?

A. Determine dates and amounts of dividends paid
B. Send confirmations to shareholders to verify payments
C. Examine arrearages of preferred stock dividends.
D. Examine treatment of unclaimed dividends.

B. Send confirmations to shareholders to verify payments

71. The auditor should normally concentrate on the key factors and assumptions used by management including all of the following except that those that are

A. insignificant to the accounting estimates.
B. sensitive to variations.
C. deviations from historical patterns.
D. susceptible to misstatements and biases

A. insignificant to the accounting estimates.

72. When a fact, that existed before the date of the report is discovered and the management revises the previously issued audited financial statements, the following are appropriate except the:

A. new auditor's report should include an emphasis of a matter paragraph that refers to a note to the financial statements that discusses the reason for the revision of the financial statements and to the earlier report issued by the auditor.
B. new auditor's report should contain the original date.
C. 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. auditor is permitted to restrict the audit procedures regarding the financial statements to the effects of the subsequent event that necessitated the revision.

B. new auditor's report should contain the original date.

73. In evaluating the 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.

A. the independence of the management.

74. Before reaching a final decision on the opinion to be issued, a conference is generally is held with the client. At this meeting, all of the following may be expected, except:

A. an oral report of the auditor's major findings.
B. the auditor's rationale for proposed adjustments or additional disclosures.
C. an agreement between the auditor and the client on the changes to be made in the financial statements
D. the delivery of the management letter.

D. the delivery of the management letter.

75. Analytical procedures enable the auditor to predict the balance or quantity of an item under audit. Information to develop this estimate can be obtained from all of the following except

A. tracing transactions through the system to determine whether procedures are being applied as prescribed.
B. comparison of financial data with data for comparable prior periods, anticipated results (e.g., budgets and forecasts), and similar data for the industry in which the entity operates.
C. study of the relationships of elements of financial data that would be expected to conform to a predictable pattern based upon the entity's experience.
D. study of the relationships of financial data with relevant nonfinancial data.

A. tracing transactions through the system to determine whether procedures are being applied as prescribed.

76. An auditor should obtain evidential matter relevant to each of the following actors concerning third-party litigation against a client except the
    A. period in which the underlying cause for legal action occurred.
    B. probability of an unfavorable outcome.
    C. jurisdiction in which the matter will be resolved.
    D. existence of a situation indicating an uncertainty as to the possible loss.

C. jurisdiction in which the matter will be resolved.

77. When performing an operational audit, the auditor would normally be concerned with all of the following except

A. calculation of earnings per share.
B. investigation of budget variance.
C. follow up on inventory shortages.
D. reasons for idle equipment.

A. calculation of earnings per share.

78. The benefits of an operational audit generally include all of following except

A. increased revenue.
B. increased reliability of the financial statements.
C. increases productivity.
D. decreased costs.

B. increased reliability of the financial statements.

79. In a review of interim financial information of a publicly-held company, the CPA is expected to have an understanding of all of the following except the:

A. industry in which the client operates
B. client's internal control structure
C. nature of the entity's organization
D. entity's accounting practices

B. client's internal control structure

80. Matters to be agreed in an agreed-upon procedures engagement include the following, except:

A. stated purpose of the engagement
B. limitations on distribution of the report of factual findings
C. anticipated form of the report and the level of assurance to be provided
D. nature, timing and extent of the specific procedures to be applied

C. anticipated form of the report and the level of assurance to be provided

81. Reports on compilation engagements should contain the following, except:

A. a statement that the engagement was performed in accordance with the PSAs applicable to compilation engagements
B. identification of the financial information indicating that it is based on information provided by the management
C. a statement that the management is responsible for the financial information compiled by the accountant
D. a statement that the accountant does not express an opinion but expresses only a limited assurance on the financial statements

D. a statement that the accountant does not express an opinion but expresses only a limited assurance on the financial statements

82. A compilation report should include all of the following except:

A. a statement that the compilation has been performed in accordance with the Philippine Standards on Related Services applicable to compilation
B. a statement that the financial statements are the representation of the management
C. a statement that adequate disclosure has been made concerning accounting policy and practice
D. a statement that the financial statement have not been audited or reviewed

C. a statement that adequate disclosure has been made concerning accounting policy and practice

83. A comprehensive basis of accounting comprises a set of criteria used in preparing financial statements which applies to all material items and which has substantial support. Other comprehensive financial reporting frameworks may include the following, except

A. a conglomeration of accounting conventions devised to suit individual preference
B. that one used by an entity to prepare its income tax return
C. the cash receipts and disbursements basis of accounting
D. the financial reporting provisions of a government regulatory agency

A. a conglomeration of accounting conventions devised to suit individual preference

84. Assurance services involve allot the following except:

A. Improving the quality of information for decision purposes.
B. Improving the quality of the decision model used
C. Improving the relevance of information.
D. Implementing a system that improves the processing of information.

D. Implementing a system that improves the processing of information.

85. The following are factors that a professional accountant should use the basis of his acceptance of an assurance engagement, except:

A. The auditor believes that a conclusion based on suitable criteria can be expressed.
B. The subject matter is identifiable.
C. The conclusion can be meaningful to the intended user of the report of the practitioner.
D. The likelihood that the conclusion to be expressed always support, the assertion of the responsible party.

D. The likelihood that the conclusion to be expressed always support, the assertion of the responsible party.

86. Auditors test management's estimates of an asset's impaired value through reference to all of the following except:

A. inquiry of fixed asset personnel
B. evidence of fair market value
C. estimated cash flow
D. financial plans

A. inquiry of fixed asset personnel

87. The application of due professional care means that the auditor work conforms with all of the following except:

A. Current auditing standards as promulgated by Auditing and Assurance Standards Council.
B. The work that a reasonably prudent auditor would have performed in the same situation.
C. The work that would have been performed by a reasonable person who was not necessarily trained in auditing.
D. The work is at least equal to that which had been performed on the audit engagement during the preceding year.

C. The work that would have been performed by a reasonable person who was not necessarily trained in auditing.

88. The second standard of fieldwork requires the auditor to do all of the following except

A. Understand the business and its environment.
B. Understand the risks related to financial reporting
C. Perform analytical procedures to identify potential misstatements in the financial statements
D. Obtain an understanding of internal control and potential 'weaknesses in controls.

C. Perform analytical procedures to identify potential misstatements in the financial statements

89. Financial statement assertions include ail of the following except:

A. occurrence.
B. presentation and disclosure.
C. consistency and comparability.
D. completeness.

C. consistency and comparability.

90. In a financial statement audit, management is responsible for the following except:

A. the financial statements.
B. for establishing and maintaining internal control.
C. for meeting budget projections.
D. for assuring compliance with laws and regulations.

C. for meeting budget projections.

91. Engagement risk is, influenced by the risks associated with the following, except:

A. The sufficiency and appropriateness of the evidence likely to be available.
B. The nature and extent of the process used to collect and evaluate evidence.
C. The identified user of the assurance engagement report.
D. The nature and form of the subject matter.

C. The identified user of the assurance engagement report.

92. Fraudulent companies will prepare financial statements that materially misleading by doing all of the following except

A. understate revenues and assets:
B. understate expenses and liabilities.
C. show financial performance better than industry average.
D. have performance exactly meet announced targets.

A. understate revenues and assets:

93. Before the practitioners rely on the work of the expert, he should obtain sufficient appropriate evidence that the work of the expert is adequate by considering the following, except:

A. the reasonableness and significance of the expert's findings in relation to the objective of the engagement and the conclusion on the subject matter
B. the professional competence, experience and objectivity of the expert
C. the findings of the expert support the assertion issued by the party responsible to the subject matter
D. the reasonableness of the assumptions, methods and source data used by the expert

C. the findings of the expert support the assertion issued by the party responsible to the subject matter

94. The auditor should perform the following risk assessment procedures to obtain an understanding of the entity and its environment, including its internal control, except:

A. inquiries of management and others within the entity
B. inquiries of the entity's external legal counsel or of valuation experts that the entity has used
C. analytical procedures
D. observation arid inspection

B. inquiries of the entity's external legal counsel or of valuation experts that the entity has used

95. When the auditor considers that the service organization activities are significantly relevant to the audit and he concludes that it would be efficient to obtain evidence from tests of controls, such evidence may be obtained by, except:

A. visiting the service organization
B. performing tests of the client's control over activities of the service organization
C. reviewing the service contract between the client and the service organization
D. obtaining a service organization auditor's report that expresses an opinion as to the operating effectiveness of the service organization's accounting and internal control systems for the processing applications and internal control systems for the processing applications relevant to the audit

C. reviewing the service contract between the client and the service organization

96. An audit program should be sufficiently detailed to provide all of the following except:

A. Evidential support for the audit opinion.
B. An outline of the work to be done.
C. A record of the work performed.
D. A basis for controlling the audit

A. Evidential support for the audit opinion.

97. Each of the following might, by itself, form a valid basis for an auditor to decide to omit a test except for the

A. Difficulty and expense involved in testing a particular item
B. Assessed level of control risk.
C. Relative risk involved.
D. Relationship between the cost of obtaining evidence and its usefulness.

A. Difficulty and expense involved in testing a particular item

98. The objectives of the Philippine Accountancy Act of 2004 are the following, except:

a. Standardization and regulation of accounting education
b. Integration of accountancy profession
c. Examination for registration of certified public accountants.
d. Supervision, control and regulation of the practice of accountancy.

b. Integration of accountancy profession

99. If the auditor is concerned that a population may contain exceptions, the determination of a sample size sufficient to include at least one such critical exception is a characteristic of:

a. Random sampling
b. Variable sampling
c. Discovery sampling
d. Probability-proportional-size sampling

c. Discovery sampling

100. The following statements relate to audit evidence, except:

A. The competence of audit is likely improved by selecting a larger sample size or different population items.
B. The evidence obtained from a source outside the client entity is more persuasive than that one obtained from within.
C. When a client's accounting and internal controls are effective, the internal evidence obtained is more reliable.
D. The evidence obtained directly by the auditor through physical examination, computation, observation, or confirmation is more competent than the information that is obtained indirectly.

A. The competence of audit is likely improved by selecting a larger sample size or different population items.