Assignment: Audit Documentation

Due Apr 22 at 1pm Points 10 Questions 10 Available until Apr 22 at 1pm

Time Limit 30 Minutes

Instructions
Dear students,

Kindly read Chapter18 - Audit Documentation and PSA 230, then, answer this activity.

Attached is a copy of PSA 230 for your reference.

PSA-230-Audit [Link] ([Link]

Always do your best and be honest. God bless.

This quiz was locked Apr 22 at 1pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 3 minutes 9 out of 10

Score for this quiz: 9 out of 10

Submitted Apr 21 at 8:26pm
This attempt took 3 minutes.

Question 1 1 / 1 pts

Which of the following workpapers would one normally expect to find in the permanent
file?

Correct!
A copy of a long-term bond indenture.

The working trial balance.

An analysis of additions and disposals relating to marketable securities.

A workpaper analyzing customer replies to confirmation requests.

Question 2 1 / 1 pts
 When reviewing audit working papers, the primary responsibility of an audit supervisor is
to determine that:

Correct!
Working papers adequately support the audit findings, conclusions, and report.

Standard departmental procedures are adhered to with regard to work paper preparation and
technique.

Working papers are properly referenced and kept in logical groupings.

Each worksheet is properly identified with a descriptive heading.

Question 3 1 / 1 pts

If working papers are to have the characteristics that will ensure that they achieve their
primary purposes, which of the following is the most important?

Correct!
Working papers must provide sufficient, competent, and useful information to support the
audit report.

Working papers must be properly indexed and cross-referenced to the draft audit report.

Working papers must be of standard format and standard content.

Working papers must be arranged in logical order following the audit program sequence.

Question 4 0 / 1 pts

Which of the following statements is/are correct?

Statement I: The primary reason auditors cross-index their working papers is to provide a
trail for the auditor and the reviewer.

Statement II: The working paper that reflects the major components of an amount
reported in the financial statements is the supporting schedule.

Correct Answer I only

 II only

Both I & II

You Answered Neither I nor II

Question 5 1 / 1 pts

Working papers which contain information relating primarily to the audit of a single period.

Correct!
Current audit files

Financial reporting files

Correspondence files

Permanent audit files

Question 6 1 / 1 pts

Which of the following statements is/are correct?

Statement I: Oral explanations by the auditor, on their own, do not represent adequate
support for the work the auditor performed or conclusions the auditor reached.

Statement II: Oral explanations may be used to explain or clarify information contained in
the audit documentation.

Correct!
Both I & II

II only

Neither I nor II

I only
 Question 7 1 / 1 pts

Which of the following statements is/are correct?

Statement I: An appropriate time limit within which to complete the assembly of the final
audit file is ordinarily not more than 30 days after the date of the auditor’s report.

Statement II: The retention period for audit engagements ordinarily is no shorter than
three years from the date of the auditor’s report, or, if later, the date of the group auditor’s
report.

Correct!
Neither I nor II

II only

Both I & II

I only

Question 8 1 / 1 pts

This is a record of audit procedures performed, relevant audit evidence obtained, and
conclusions the auditor reached.

Correct!
Audit Documentation

Audit Archives

Audit Record

Audit File

Question 9 1 / 1 pts

Which of the following statements is/are correct?

Statement I: Working papers may be a substitute for the entity’s accounting records.
 Statement II: The auditor is required to include in audit documentation superseded drafts
of working papers and financial statements, notes that reflect incomplete or preliminary
thinking, previous copies of documents corrected for typographical or other errors, and
duplicates of documents.

Correct! Neither I nor II

II only

Both I & II

I only

Question 10 1 / 1 pts

The permanent file section of the working papers that is kept for each audit client most
likely contains

Correct! Narrative descriptions of the client's internal control policies and procedures.

Correspondence with the client's legal counsel concerning pending litigation.

A schedule of time spent on the engagement by each individual auditor.

Review notes pertaining to questions and comments regarding the audit work performed.

Quiz Score: 9 out of 10

Assignment: Audit Sampling (PSA 530)
Due Mar 18 at 11am Points 15 Questions 15 Available until Mar 18 at 11am
Time Limit None

Instructions
Dear students,

Kindly read Chapter 15-17 and PSA 530-Audit Sampling, then, answer this activity.

Attached is a copy of PSA 530 for your reference.

PSA-530-Audit [Link] ([Link]

Always do your best and be honest. God bless.

Believing in you,

Your Instructor

This quiz was locked Mar 18 at 11am.

Attempt History
Attempt Time Score
LATEST Attempt 1 6 minutes 14 out of 15

Score for this quiz: 14 out of 15

Submitted Mar 18 at 1:28am
This attempt took 6 minutes.

Question 1 0 / 1 pts

Which of the following statements is/are correct?

Statement I. As provided in PSA 530, examples of sampling risk include use of inappropriate
audit procedures, or misinterpretation of audit evidence and failure to recognize a misstatement
or deviation.

Statement II. Non-sampling risk is the risk that the auditor reaches an erroneous conclusion for
any reasons which are somehow related to sampling.

I only

Both I & II

You Answered II only

Correct Answer
Neither I nor II

Question 2 1 / 1 pts

Which of the following sampling plans would be designed to estimate a numerical

measurement of a population, such as a peso value?

Sequential sampling

Discovery sampling

Correct!
Variables sampling

Attributes sampling

Question 3 1 / 1 pts

Which of the following is/ are correct?

Statement I. Based on PAS 530, the sampling units might be monetary units but not physical
units.

Statement II. A sample in which the characteristics of the sample are the same as those of the
population is a representative sample.

I only

Both I & II

Correct!
II only

Neither I nor II

Question 4 1 / 1 pts

Which of the following statements is/are correct?

Statement I. Based on PSA 530, if the auditor is unable to apply the designed audit procedures,
or an alternative procedure, to a selected item, the auditor shall treat that item as a deviation from
prescribed control in case of tests of control or a misstatement, in the case of tests of details.
 Statement II. Based on PSA 530, if an audit procedure is not applicable in a selected item, the
auditor may not replace the item but will consider it as a deviation.

Both I & II

Neither I nor II

Correct!
I only

II only

Question 5 1 / 1 pts

A number of factors influences the sample size for a substantive test of details of an account
balance. All other factors being equal, which of the following would lead to a larger sample size?

Smaller expected frequency of errors

Lowering of assessed inherent risk through use of analytical review procedures

Lowering of assessed level of control risk

Correct!
Smaller measure of tolerable error

Question 6 1 / 1 pts

As defined in PSA 530, this term means a misstatement or deviate on that is demonstrably not
representative of misstatements or deviations in a population.

None of the choices.

Correct!
Anomaly

Error

Tolerable error

Deviation rate

Question 7 1 / 1 pts
 Which of the following statements is/are correct?

Statement I. For the purpose of audit sampling in test of controls, “error” refers to misstatements.

Statement II. For the purpose of audit sampling in substantive tests, “error” refers to deviations.

II only

I only

Correct!
Neither I nor II

Both I & II

Question 8 1 / 1 pts

Which of the following statements is correct concerning statistical sampling in tests of controls?

Correct!
There is an inverse relationship between the sample size and the tolerable rate.

Deviations from control procedures at a given rate usually result in misstatements at a higher rate.

As the population size doubles, the sample size should also double.

The qualitative aspects of deviations are not considered by the auditor.

Question 9 1 / 1 pts

An auditor desired to test credit approval on 10,000 sales invoices processed during the year. The
auditor designed a statistical sample that would provide a 1% risk of assessing control risk too
low (99% confidence) that not more than 7% of the sales invoices lacked approval. The auditor
estimated from previous experience that about 2.5% of the sales invoices lacked approval. A
sample of 200 invoices was examined and 7 of them were lacking approval. The auditor then
determined the upper occurrence limit to be 8%. In the evaluation of this sample, the auditor
decided to increase the level of the preliminary assessment of control risk because the

Correct!
Tolerable rate was less than the achieved upper occurrence limit.

Expected occurrence rate was less than the tolerable rate.

Achieved upper occurrence limit was more than the percentage of errors in the sample.
 Expected occurrence rate was more than the percentage of errors in the sample.

Question 10 1 / 1 pts

In a probability-proportional-to-size sample with a sampling interval of P10,000, an auditor

discovered that a selected account receivable with a recorded amount of P5,000 had an audit
amount of P2,000. The projected error of this sample was

P3,000

Correct!
P6,000

P2,000

P8,000

Question 11 1 / 1 pts

Which of the following best describes haphazard sampling?

Correct!
It involves going through a population and selecting items for the sample without regard to their size,
source, or other distinguishing characteristics.

It is a sampling method in which all items in the population are divided into two or more sub-
populations.

All of these describe haphazard sampling.

This is the least desirable sampling technique to be used by an auditor.

Question 12 1 / 1 pts

Sampling risk refers to the possibility that

 The auditor may use a less than optimal statistical method for the circumstances, e.g. difference
estimation instead of ratio estimation.

The auditor may fail to recognize an error that is included in the sample.

Correct! Even though a sample is properly chosen, it may not be representative of the population.

The confidence level and/or precision established by the auditor are not appropriate.

Question 13 1 / 1 pts

One of the causes of non-sampling error is

Failure to draw a random sample.

Correct! The use of inappropriate or ineffective audit procedures.

Failure to draw a representative sample.

The use of attributes sampling instead of variables sampling.

Question 14 1 / 1 pts

This is the process of dividing a population into sub-populations, each of which is a group of
sampling units which have similar characteristics.

Bifurcation

Systematic Selection

Correct! Stratification

Random Selection

Question 15 1 / 1 pts

Which of the following is/ are correct?

 Statement I. Audit Sampling pertains to applying audit procedures to less than 100% of the items
in a population.

Statement II. Audit Sampling is the only valid means in selecting items for testing.

Neither I nor II

II only

Correct! I only

Both I & II

Quiz Score: 14 out of 15

Assignment: Auditing in an Information Technology (IT) System
Environment
Due Mar 30 at 11:59pm Points 10 Questions 10
Available Mar 29 at 1pm - Mar 30 at 11:59pm 1 day Time Limit 20 Minutes

Instructions
Dear students,

Kindly read Auditing in Computerized Information System (CIS) and Chapter 23 to 24, then, answer this activity.

You have 20 minutes to answer 10 questions.

Always do your best and be honest. God bless.

Believing in you,

Your Instructor

This quiz was locked Mar 30 at 11:59pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 20 minutes 8 out of 10

Score for this quiz: 8 out of 10

Submitted Mar 29 at 2:54pm
This attempt took 20 minutes.

Question 1 1 / 1 pts

When an auditor tests a computerized accounting system, which of the following is true of the test
data approach?

Several transactions of each type must be tested

Test data must consist of all possible valid and invalid conditions.

Correct! Test data are processed by the client’s computer programs under the auditor’s control.

The program tested is different from the program used throughout the year by the client.
 Question 2 1 / 1 pts

Which of the following is a computer test made to ascertain whether a given characteristic
belongs to the group?

Correct!
Validity check

Parity check

Echo check

Limit check

Question 3 1 / 1 pts

Which of the following characteristics distinguishes computer processing from manual

processing?

Most computer systems are designed so that transaction trails useful for audit do not exist.

The potential for systematic error is ordinarily greater in manual processing than in computerized
processing.

Correct!
Computer processing virtually eliminates the occurrence of computational error normally associated
with manual processing.

Errors or irregularities in computer processing will be detected soon after their occurrences.

Question 4 1 / 1 pts

Which of the following functions would have the least effect on an audit if it was not properly
segregated?

The computer operator and programmer functions.

The computer operator and the user functions.

The systems analyst and the programmer functions.

Correct!
The applications programmer and the systems programmer.

Question 5 1 / 1 pts

Which of the following computer-assisted auditing techniques allows fictitious and real
transactions to be processed together without client operating personnel being aware of the
testing process?

Input controls matrix

Test Data

Parallel Simulation

Correct!
Integrated test facility

Question 6 1 / 1 pts

In an automated payroll system, all employees in the finishing department were paid the rate of
P75 per hour when the authorized rate was P70 per hour. Which of the following controls would
have been most effective in preventing such an error?

The use of batch control totals by department.

A review of all authorized pay rate changes by the personnel department.

Access controls which would restrict the personnel department’s access to the payroll master file
data.

Correct!
A limit test that compares the pay rates per department with the maximum rate for all employees.

Question 7 1 / 1 pts

The output of a parallel simulation should always be

Correct!
Compared with actual results manually.

Compared with actual results using a comparison program.

 Reconciled to actual processing output.

Printed on a report.

Question 8 1 / 1 pts

An auditor anticipates assessing control risk at a low level in a computerized environment. Under
these circumstances, on which of the following procedures would the auditor initially focus?

Programmed control procedures

Application control procedures

Output control procedures

Correct!
General control procedures

Unanswered
Question 9 0 / 1 pts

Misstatements in a batch computer system caused by incorrect programs or data may not be
detected immediately because

The processing of transactions in a batch system is not uniform.

The identification of errors in input data typically is not part of the program.

Errors in some transactions may cause rejection of other transactions in the batch.

Correct Answer There are time delays in processing transactions in a batch system.

Unanswered
Question 10 0 / 1 pts

In an automated payroll processing environment, a department manager substituted the time card
for a terminated employee with a time card for a fictitious employee. The fictitious employee had
the same pay rate and hours worked as the terminated employee. The best control technique to
detect this action using employee identification numbers would be a

Correct Answer Hash total

Batch total

Record count

Subsequent check

Quiz Score: 8 out of 10

Assignment: Completing the Audit / Post-Audit Responsibilities
Due Apr 30 at 2pm Points 15 Questions 15 Available Apr 28 at 2pm - Apr 30 at 2pm 2 days
Time Limit None

Instructions
Dear students,

Kindly read Chapter 20 - Completing the Audit and the related standards: PSA 520, 550, 560, 570, & 580.

After reading, answer this activity.

Attached are the copies of the standards for your reference.

PSA-520-ANALYTICAL [Link] ([Link]

PSA-550-RELATED [Link] ([Link]

PSA-560-Subsequent [Link] ([Link]

PSA-570-GOING [Link] ([Link]

PSA-580-WRITTEN [Link] ([Link]

Always do your best and be honest. God bless.

This quiz was locked Apr 30 at 2pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 5 minutes 14 out of 15

Score for this quiz: 14 out of 15

Submitted Apr 29 at 11:28pm
This attempt took 5 minutes.

Question 1 1 / 1 pts

Which of the following conditions or events most likely would cause an auditor to have significant
doubt about the entity’s ability to continue as a going concern?

Share dividends replace annual cash dividends

Correct! Cashflow from operating activities are negative

Significant related party transactions are pervasive

Research and development projects are postponed

 Question 2 1 / 1 pts

Which of the following methods is considered least effective in identifying related parties?

Correct!
Review of sales and purchases journals for the period under audit

Examination of shareholders’ listings to identify principal shareholders

Inquiry of management

Review of SEC filings

Question 3 1 / 1 pts

The auditor shall evaluate whether there is a substantial doubt about a client’s ability to continue as
a going concern for at least:

one quarter from the date of the auditor’s report.

one year from the date of the auditor’s report.

one quarter from the date of the financial statements

Correct!
one year from the date of the financial statements

Question 4 1 / 1 pts

Which of the following statements is/are correct?

Statement I: Type I subsequent events are those that provide evidence of conditions that existed at
the date of the financial statements.

Statement II: Type II subsequent events are those that provide evidence of conditions that arose
after the date of the financial statements.

Correct!
Both I & II

II only

Neither I nor II
 I only

Question 5 1 / 1 pts

Which of the following is not a reason why the auditor requests that the client provide a letter of
representation?

Correct!
It provides written documentation, which is a higher quality of evidence than management’s oral
responses to inquiries.

It impresses upon management its responsibility for the accuracy of the information in the financial
statements.

Professional auditing standards require the auditor to obtain a letter of representation.

It provides written documentation of the oral responses already received to inquiries of management.

Question 6 1 / 1 pts

Refusal by a client to prepare and sign the representation letter would require a(n):

qualified or an adverse opinion.

Correct!
qualified opinion or a disclaimer.

unqualified opinion with an explanatory paragraph

adverse opinion or a disclaimer.

Question 7 0 / 1 pts

Which of the following statements is/are correct?

Statement I: Procedures being performed in completing the audit are optional since they have only
an indirect impact on the opinion to be expressed.
 Statement II: If based on the post issuance review, it was found out that an audit procedure was
omitted which impairs the ability to support a previously expressed audit opinion, the auditor shall
apply the omitted procedure or alternative procedure to provide a satisfactory basis for the opinion.

I only

Neither I nor II

Correct Answer II only

You Answered Both I & II

Question 8 1 / 1 pts

Which of the following material events occurring subsequent to the balance sheet date would
require an adjustment to the financial statements before they could be issued?

Sale of long-term debt or capital stock

Correct!
Settlement of litigation, in excess of the previously recorded liability

Major purchase of a business that is expected to double sales volume

Loss of a plant as a result of a flood

Question 9 1 / 1 pts

The auditor's primary means of obtaining corroboration of management's information concerning

litigation is a

Confirmation of claims and assessments from an officer of the court presiding over the litigation

Confirmation of claims and assessments from the other parties to the litigation

Correct!
Audit inquiry letter to the client's lawyer

Letter of corroboration from the auditor's lawyer upon review of the legal documentation

Question 10 1 / 1 pts
 Analytical procedures used in the overall review stage of an audit generally include

Performing test of transactions to corroborate management’s financial statement assertions

Correct! Considering unusual or unexpected account balances that were not previously identified

Gathering evidence concerning account balances that have not changed from the prior year

Retesting control procedures that appeared to be ineffective during the assessment of control risk

Question 11 1 / 1 pts

If a potential loss on a contingent liability is remote, the liability usually is:

accrued and indicated in the body of the financial statements.

disclosed in footnotes, but not accrued.

Correct! neither accrued nor disclosed in footnotes.

disclosed in the auditor’s report but not disclosed on the financial statements.

Question 12 1 / 1 pts

The letter of representation obtained from an audit client should be:

dated as of any date decided upon by the client and auditor.

dated as of the end of the period under audit.

dated as of the issuance of the financial statement.

Correct! dated as of the audit report date.

Question 13 1 / 1 pts

Which of the following is not considered a related party?

Key management personnel

 Affiliated company

Principal owners of the company

Correct! Rank and file employee

Question 14 1 / 1 pts

Analytical procedures performed in the overall review stage of an audit suggest that several
accounts have unexpected relationships. The results of these procedures most likely indicate that

Correct! additional tests of details are required.

internal control activities are not operating effectively.

additional representation will be required to be provided by the management.

unaccounted effects of irregularities exist.

Question 15 1 / 1 pts

Which of the following statements is/are correct?

Statement I: The auditor is required to evaluate management’s assessment of the entity’s ability to
continue as a going concern.

Statement II: If there is substantial doubt about the entity's ability to continue as a going concern,
the auditor should obtain information about management's plans to mitigate the problem and
assess the likelihood that such plans can be implemented.

I only

Correct! Both I & II

Neither I nor II

II only

Quiz Score: 14 out of 15

Assignment: Forming an Opinion and Modifications to Audit
Report
Due May 7 at 2:30pm Points 10 Questions 10
Available May 5 at 2:30pm - May 7 at 2:30pm 2 days Time Limit None

Instructions
Dear students,

Kindly read Chapter 21 & 22 - Forming an Opinion and Modifications to the Independent Auditor's Report, and the related
standards: PSA 700 & 701.

After reading, answer this activity.

Attached is a copy of PSA 700 for your reference.

PSA 700 (Revised) - Revised Auditor's [Link] ([Link]

download_frd=1)

This quiz was locked May 7 at 2:30pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 3 minutes 10 out of 10

Score for this quiz: 10 out of 10

Submitted May 7 at 11:19am
This attempt took 3 minutes.

Question 1 1 / 1 pts

When an auditor of financial statements does not confirm material accounts receivable, but is
satisfied by the application of alternative auditing procedures, she normally should:

Issue a qualified opinion

Issue a disclaimer of opinion

Issue an adverse opinion

Correct!
Issue an unqualified opinion
 Question 2 1 / 1 pts

Which of the following statements is/are correct?

Statement I: It is required that the audit report shall have a title that clearly indicates that it is
the report of an independent auditor which distinguishes it from reports issued by others.

Statement II: The first section of the auditor’s report shall include the auditor’s opinion, and
shall have the heading “Opinion.”

Correct! Both I & II

II only

I only

Neither I nor II

Question 3 1 / 1 pts

The opinion expressed by the auditor when the auditor concludes that the financial statements
are prepared, in all material respects, in accordance with the applicable financial reporting
framework is

Disclaimer of opinion

Adverse opinion

Correct! Unmodified opinion

Qualified opinion

Question 4 1 / 1 pts

The auditor’s report shall include a section, directly following the Opinion section, with the
heading

Responsibilities for the Financial Statements

Correct! Basis for Opinion

 Auditor’s Responsibilities for the Audit of the Financial Statements

Key Audit Matters

Question 5 1 / 1 pts

The auditor’s report shall include a section, directly following the Responsibilities for the
Financial Statements section, with the heading

Responsibilities for the Financial Statements

Correct! Auditor’s Responsibilities for the Audit of the Financial Statements

Key Audit Matters

Other Reporting Responsibilities

Question 6 1 / 1 pts

When an auditor is unable obtained sufficient appropriate audit evidence on which to base the
opinion, and concludes that the possible effects on the financial statements of undetected
misstatements could be both material and pervasive, the auditor shall express a/an

Qualified opinion

Correct! Disclaimer of opinion

Unmodified opinion

Adverse opinion

Question 7 1 / 1 pts

The auditor’s report shall be dated as of the date the:

Fiscal period under audit ends.

Correct! Auditors have accumulated sufficient evidence.

 Review of the working papers is completed.

Report is delivered to the client.

Question 8 1 / 1 pts

The term "except for" in an audit report is:

No longer considered appropriate.

Correct!
Used in a qualified opinion.

Used in an adverse opinion.

for an unqualified opinion when an explanatory paragraph is added.

Question 9 1 / 1 pts

When an auditor has obtained sufficient appropriate audit evidence and concludes that
misstatements, individually or in aggregate, are both material and pervasive to the financial
statements, the auditor shall express a/an

Disclaimer of opinion

Correct!
Adverse opinion

Qualified opinion

Unmodified opinion

Question 10 1 / 1 pts

When an auditor expresses an adverse opinion, the opinion paragraph should include

the principal effects of the departure from financial reporting standards.

the substantive reasons for the financial statements being misleading.

Correct! a direct reference to a separate paragraph disclosing the basis for the opinion.

a description of the uncertainty or scope limitation that prevents an unmodified opinion.

Quiz Score: 10 out of 10

Assignment: Implementing the Designed Risk Response and
Obtaining Audit Evidence
Due Mar 12 at 8am Points 10 Questions 10 Available until Mar 12 at 8am
Time Limit 30 Minutes

Instructions
Dear students,

Kindly read Chapter 14 and PSA 500-Audit Evidence, then, answer this activity.

Always do your best and be honest. God bless.

Believing in you,

Your Instructor

This quiz was locked Mar 12 at 8am.

Attempt History
Attempt Time Score
LATEST Attempt 1 10 minutes 7 out of 10

Score for this quiz: 7 out of 10

Submitted Mar 11 at 11am
This attempt took 10 minutes.

Question 1 0 / 1 pts

The primary reason why auditors usually try to plan the audit to minimize the use of tests of
details of balances is

There are other types of audit tests that are more effective to obtain more reliable audit evidence.

You Answered Tests of details of balances are less costly to perform.

There are other types of audit tests that would require less experienced audit personnel.

Correct Answer There are other types of audit tests are less costly to perform.

Question 2 1 / 1 pts
 Which of the following statements is/are correct?

Statement I. Sufficiency of audit evidence is the measure of the quantity of audit evidence.

Statement II. Sufficiency of audit evidence is not affected by the auditor’s assessment of the risks
of material misstatement or by the quality of such audit evidence.

II only

Neither I nor II

Correct!
I only

Both I & II

Question 3 1 / 1 pts

Which of the following statements is/are correct?

Statement I. Appropriateness of audit evidence is the measure of the quality of audit evidence.

Statement II. Appropriateness of audit evidence is its relevance and its reliability in providing
support for the conclusions on which the auditor’s opinion is based.

I only

Correct!
Both I & II

II only

Neither I nor II

Question 4 1 / 1 pts

The use of prenumbered invoices, then accounting for their numeric sequence, would prove
which of the following assertion?

Accuracy

Correct!
Completeness

Cutoff

Occurrence
 Question 5 1 / 1 pts

When the auditor develops supporting evidence for amounts posted to account balances with
documentary evidence, that process is called:

inquiry

Correct!
vouching

confirmation

tracing

Question 6 1 / 1 pts

Which of the following statements is/are correct?

Statement I. Evidence obtained indirectly or by inference is more reliable than directly obtained by
the auditor.

Statement II. Evidence obtained from independent sources outside the entity is more reliable than
evidence secured solely from within the entity.

Correct!
II only

Neither I nor II

Both I & II

I only

Question 7 0 / 1 pts

Evidence obtained directly by the auditor is more reliable than information obtained indirectly.
Which of the following is not an example of the auditor’s direct knowledge?

Correct Answer
Inquiry

Observation
You Answered Computation

Inspection

Question 8 1 / 1 pts

Which of the following types of procedures will aid the auditor in obtaining evidence regarding the
mathematical accuracy of accounting records and other information?

Correct!
Recalculation

Confirmation

Reperformance

Analytical Procedures

Question 9 0 / 1 pts

Substantive tests aid the auditor in all, but which of the following ways?

Correct Answer Assessing risks of material misstatement

Gather evidence in respect to all material classes of transactions, account balances, and disclosures.

Identifying peso misstatements in an account

You Answered Satisfying planned detection risk

Question 10 1 / 1 pts

Which of the following statements is/are correct?

Statement I. Foot means to multiply.

Statement II. Extend means to add a column.

Both I & II
Correct!
Neither I nor II

II only

I only

Quiz Score: 7 out of 10

Assignment: Performance of Risk Assessment Procedures and
Assessment of Material Misstatement through Understanding the
Entity
Due Feb 4 at 1pm Points 10 Questions 10 Available until Feb 4 at 1pm
Time Limit 20 Minutes

Instructions
Dear students,

Kindly read Chapter 10: Risk Assessment - Part II and PSA 315, then, answer this activity. You have 20 minutes to answer and submit
your answers upon opening the activity.

God bless.

Believing in you,

Your Instructor

This quiz was locked Feb 4 at 1pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 11 minutes 9 out of 10

Score for this quiz: 9 out of 10

Submitted Feb 3 at 6:51pm
This attempt took 11 minutes.

Question 1 1 / 1 pts

Based on PSA 315, in assessing the risk of material misstatement, the auditor shall perform the
following procedures except:

Correct! Reperformance

Inspection

Inquiries of other within the entity

Observation
 Question 2 1 / 1 pts

Which of the following statements is/are correct?

I. At assertion level, a misstatement is material if it exceeds the tolerable misstatement specified

for the assertion.

II. The auditor shall consider factors that affect the risk of material misstatements at the financial
statement level and at the assertion level.

Correct!
Both I & II

I only

Neither I nor II

II only

Question 3 1 / 1 pts

Having evaluated inherent risk and control risk, the auditor determines detection risk

As a product of further study of the business and industry and application of analytical procedures.

By performing substantive audit tests.

As the complement of overall audit risk.

Correct!
At a level that equates the joint probability of inherent risk, control risk, and detection risk with overall
audit risk.

Question 4 1 / 1 pts

Inherent risk is defined as the susceptibility of an account balance or class of transactions to error
that could be material assuming that there were no related internal controls. Of the following
conditions, which one does not increase inherent risk?
 The board of directors approved a substantial bonus for the president and chief executive officer, and
also approved an attractive stock option plan for themselves.

The client has entered into numerous related party transactions during the year under audit.

The client has lost a major customer accounting for approximately 30% of annual revenue.

Correct!
Internal control over shipping, billing, and recording of sales revenue is weak.

Question 5 1 / 1 pts

This audit procedure may be helpful in identifying the existence of unusual transactions or events,
and amounts, ratios and trends that may indicate matters that have financial statement and audit
implications.

Inquiries of management

Correct!
Analytical Procedures

Recalculation

Observation and inspection

Question 6 1 / 1 pts

An auditor is required to obtain understanding of the following matters about the entity’s selection
and application of accounting policies, except

Correct!
Criteria in the selection of company’s Chief Accounting Officer

The effect of significant accounting policies in controversial or emerging areas for which there is a lack
of authoritative guidance or consensus.

The methods the entity uses to account for significant and unusual transactions.

Changes in the entity’s accounting policies.

Question 7 1 / 1 pts
 The auditor’s understanding of the entity and its environment consists of an understanding of the
following, except:

Correct!
Entity’s selection and screening process of marketing and production personnel.

Nature of the entity, including entity’s selection and application of accounting policies.

Industry, regulatory, and other external factors, including the applicable financial reporting framework.

Measurement and review of entity’s financial performance.

Question 8 0 / 1 pts

Which of the following statement is/are correct?

I. Based on PSA 315, significant deficiencies in internal control are to be communicated to those
charged with governance on a timely basis by the auditor

II. The risk of material misstatement of the financial statements is broader than business risk.

Both I & II

Correct Answer I only

You Answered Neither I nor II

II only

Question 9 1 / 1 pts

Which of the following is not an example of matters relating to regulatory environment that the
auditor would usually consider?

Taxation

Accounting principles and industry specific practices.

Correct!
Product technology relating to the entity’s products

Regulatory framework for a regulated industry.

 Question 10 1 / 1 pts

Which of the following statements is/are correct?

I. Criteria are representations by management, explicit or otherwise, that are embodied in the
financial statements, as used by the auditor to consider the different types of potential
misstatements that may occur.

II. A significant risk is an identified and assessed risk of material misstatement that, in the
auditor’s judgment, requires special audit consideration.

I only

Both I & II

Neither I nor II

Correct!
II only

Quiz Score: 9 out of 10

5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

Assignment: Preliminary Engagement Activities &

Audit Planning
Due Jan 27 at 2:30pm Points 15 Questions 15
Available until Jan 27 at 2:31pm Time Limit None

Instructions
Hello dear students,

Kindly read Chapter 9: Risk Assessment - Part I and the related standards. After reading, answer the
following questions.

Believing in you,

Your Instructor

This quiz was locked Jan 27 at 2:31pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 18 minutes 14 out of 15

Score for this quiz: 14 out of 15

Submitted Jan 26 at 11:06pm
This attempt took 18 minutes.

Question 1 1 / 1 pts

Which of the following statement/s is/are correct?

I. Prior to the acceptance of an audit engagement with a client who has

terminated the services of the predecessor auditor, the CPA should not
communicate with the predecessor auditor because this would in effect be

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

asking the auditor to violate the confidential relationship between auditor

and client.

II. Prior to accepting an audit engagement, an auditor shall obtain from

the predecessor auditor facts that might bear on the integrity of
management.

Correct! II only

I only

Both I & II

Neither I nor II

Question 2 1 / 1 pts

Which of the following is not one of the reasons why auditor should
perform preliminary engagement activities?

Correct!
To ensure that sufficient appropriate evidence will be obtained to support
the auditor’s opinion on the financial statements.

To help ensure that there are no issues with management integrity that
may affect the auditor’s willingness to continue the engagement.

To ensure that the auditor maintains the necessary independence and

ability to perform the engagement.

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

To ensure that there is no misunderstanding with the client as to the terms

of the engagement.

Question 3 1 / 1 pts

Which of the following matters would an auditor most likely consider when
establishing the scope of the audit?

The entity’s time table for reporting

The discussion with the entity’s management about the expected

deliverables resulting from the audit.

Correct!
The expected audit coverage, including the number and locations of the
entity’s components to be included.

The expected nature and timing of communications among engagement

team member.

Question 4 1 / 1 pts

Which of the following statements is/are correct?

I. Based on PSA 300, the auditor may no longer change the overall audit
strategy and the audit plan during the course of the audit.

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

II. Based on PSA 300, the auditor may organize meetings with
management and those charged with governance to discuss the nature,
timing and extent of the audit work.

I only

Correct! II only

Neither I nor II

Both I & II

Question 5 0 / 1 pts

The primary purpose of the engagement letter is to:

ou Answered Provide a written record as to the services to be provided to the client.

Provide a starting point for the auditor’s preparation of the preliminary audit
program.

orrect Answer
Remind management that the primary responsibility for the financial
statements rest with the management.

Satisfy the requirements of the CPA’s liability insurance policy.

Question 6 1 / 1 pts

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

Which of the following is least likely to be included in an audit

engagement letter?

Basis on which fees are computed and any billing arrangements.

Correct!
Identification of specific audit procedures that the auditor needs to
undertake.

A reference to the inherent limitations of an audit that there is an

unavoidable risk that some material misstatements may remain
undiscovered.

Description of any letters or reports that the auditor expects to submit to

the client.

Question 7 1 / 1 pts

In which of the following situations would the auditor be unlikely to send a

new engagement letter to a continuing client?

As significant change in the nature/size of the client’s business

Correct! A recent change of the engagement partner

A recent change of client management

A change in the terms of engagement

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

Question 8 1 / 1 pts

Which of the following factors would most likely cause a CPA to decide
not to accept a new audit engagement?

The CPA’s lack of understanding of the prospective client’s internal

auditor’s computer-assisted audit techniques.

Management’s refusal to permit the CPA to perform inventory count before

the year-end.

The CPA’s inability to determine whether related-party transactions were

consummated on terms equivalent to arm’s-length transactions.

Correct!
Management’s disregard of its responsibility to maintain an adequate
internal control environment.

Question 9 1 / 1 pts

Which of the following statements is/are correct?

I. As defined in PSA 320, performance materiality means the amount or

amounts set by the auditor higher than materiality for the financial
statements as a whole to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a
whole.

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

II. Based on PSA 320, when establishing the overall audit strategy, the
auditor shall determine materiality for the financial statements as a whole.

I only

Both I & II

Correct! II only

Neither I nor II

Question 10 1 / 1 pts

Which of the following statements is/are correct?

I. An audit plan is more detailed than an audit strategy.

II. As required in PSA 300, all the members of the engagement team are
required to be involved in planning the audit.

II only

Both I & II

Neither I nor II

Correct! I only

Question 11 1 / 1 pts

Which of the following statements is/are correct?

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

I. During the audit process, the auditor may no longer change the overall
audit strategy since this was already approved during the planning stage
and such changes will make the audit inefficient.

II. Planning often begins shortly after the completion of the previous audit
and continues until the completion of the current audit engagement. Thus,
is a discrete phase of audit.

I only

Both I & II

Correct! Neither I nor II

II only

Question 12 1 / 1 pts

Which of the following statements is/are correct?

I. Materiality shall be determined after assessing risk of material

misstatement.

II. The auditor may begin the execution of further audit procedures for
some classes of transactions before planning all remaining further
procedures.

Both I & II

Correct! II only

I only

Neither I nor II

[Link] 8/10
5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

Question 13 1 / 1 pts

Which of the following statements is/are correct?

I. Audit planning helps in identifying potential problems and resolving

them on a timely basis.

II. In establishing the audit strategy, the auditor shall consider the results
of the preliminary engagement activities.

I only

Neither I nor II

II only

Correct! Both I & II

Question 14 1 / 1 pts

Which of the following statements is/are correct?

I. Based on PSA 320, misstatements, including omissions, are considered

to be material if they, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of users taken on the basis
of the financial statement.

II. Based on PSA 320, the concept of materiality is applied by the auditor
only in planning and not in performing the audit.

II only

Neither I nor II

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5/15/2021 Assignment: Preliminary Engagement Activities & Audit Planning: Auditing and Assurance: Concepts and Applications

Both I & II

Correct! I only

Question 15 1 / 1 pts

Which of the following statements is/are correct?

I. An auditor may not change the materiality for the financial statements
as a whole even if additional information was obtained subsequently since
it was already used in establishing the overall audit strategy.

II. Materiality and audit risk are considered throughout the audit, in
particular, when identifying and assessing the risks of material
misstatement.

Correct! II only

I only

Neither I nor II

Both I & II

Quiz Score: 14 out of 15

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Assignment: Risk Assessment – Part III: Consideration of Internal
Control in a Financial Audit
Due Feb 10 at 2:30pm Points 10 Questions 10 Available until Feb 10 at 2:31pm
Time Limit 20 Minutes

Instructions

Dear students,

Kindly read Chapter 11: Risk Assessment - Part III Consideration of Internal Control and PSA 315, then, answer this activity.

upon opening the activity, you have 20 minutes to answer and submit your answers.

Always do your best. God bless.

Believing in you,

This quiz was locked Feb 10 at 2:31pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 16 minutes 8 out of 10

Score for this quiz: 8 out of 10

Submitted Feb 10 at 9:48am
This attempt took 16 minutes.

Question 1 1 / 1 pts

An entity shall establish internal control to

Ensure the accuracy, reliability, and timeliness of information.

Correct! Provide reasonable assurance that the objectives of the organization are achieved.

Have a basis of planning the audit.

Encourage compliance with organization objectives

Question 2 1 / 1 pts
 Proper segregation of functional responsibilities in an effective system of internal control calls for
separation of the functions of:

Correct!
Authorization, recording, and custody.

Authorization, payment, and recording.

Custody, execution, and reporting.

Authorization, execution, and payment.

Question 3 1 / 1 pts

In an audit of financial statements, an auditor's primary consideration regarding a control is

whether it

Supports management's decision-making processes.

Incorporates management's philosophy and operating style.

Provides adequate safeguards over access to assets.

Correct!
Affects management's financial statement assertions.

Question 4 1 / 1 pts

Based on PSA 315, Internal control is designed and implemented to address identified business
risks that threaten the achievement of some objectives. Which of the following is not one of those
objectives?

Reliability of financial reporting.

Effectiveness and efficiency of operations.

Compliance with applicable laws and regulations.

Correct!
Elimination of misstatements.

Question 5 1 / 1 pts
 The inherent limitations of internal control include the following, except

Inappropriate management override

Misunderstanding of instructions

Human errors

Correct!
Incompatible functions performed by the same employee

Question 6 1 / 1 pts

The control environment component of internal controls includes all of the following except

Organizational structure

Management's operating style

Correct!
Information processing

Human resource policies and practices

Question 7 0 / 1 pts

Which of the following is not one of the specific control procedures that are relevant to FS audit?

You Answered Control activities

Performance reviews

Segregation of duties

Correct Answer Monitoring

Question 8 0 / 1 pts

Which of the following statements is/are correct?

 I. An auditor shall obtain an understanding of the elements of internal control system in planning
an audit to consider the effectiveness of the internal controls.

II. The objective of test of details of transactions performed as tests of controls is to evaluate
whether an internal control procedure operated effectively.

Neither I nor II

You Answered Both I & II

I only

Correct Answer II only

Question 9 1 / 1 pts

Which of the following statements is/are correct?

I. The occurrence assertion means that transactions and events that have been recorded have
occurred and pertain to the entity.

II. The accuracy assertion means that all transactions and events that should have been recorded
have been recorded.

II only

Neither I nor II

Both I & II

Correct!
I only

Question 10 1 / 1 pts

Which of the following statements is/are correct?

I. Assertions about account balances at the period end includes existence which means that
assets, liabilities, and equity interests exist.

II. Assertions about presentation and disclosure include completeness which means that all
disclosures that should have been included in the financial statements have been included.

Neither I nor II
 I only

Correct!
Both I & II

II only

Quiz Score: 8 out of 10

Assignment: Risk-based Audit Process
Due Jan 19 at 1pm Points 10 Questions 10
Available Jan 15 at 12am - Jan 19 at 1pm 5 days Time Limit None

Instructions
Dear student,

Kindly read Chapter 8: Overview of risk-based Audit Process, and answer the questions in this activity.

Believing in you,

Your Instructor

This quiz was locked Jan 19 at 1pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 24 minutes 10 out of 10

Score for this quiz: 10 out of 10

Submitted Jan 18 at 10:41pm
This attempt took 24 minutes.

Question 1 1 / 1 pts

Which of the following statements is/are correct?

I. Risk response is the phase which involves the performance of risk

assessment procedures to identify/assess risk of material misstatement
through understanding the entity.

II. Reporting phase involves evaluating the audit evidence obtained to

determine if additional audit work is required.
 Both I & II

I only

Neither I nor II

Correct! II only

Question 2 1 / 1 pts

Which of the following statements is/are correct?

I. Identified significant related party transactions outside the entity’s

normal course of business are to be treated as giving rise to significant
risks.

II. The risk of not detecting material misstatement resulting from error is
higher than the risk of not detecting material misstatement resulting from
fraud.

II only

Correct! I only

Neither I nor II

Both I & II

Question 3 1 / 1 pts

Which of the following statements is/are correct?

 I. The external auditor shall determine the appropriate audit opinion(s) to
issue.

II. The external auditor is responsible for preparing financial reports and
maintaining internal controls.

Neither I nor II

II only

Correct! I only

Both I & II

Question 4 1 / 1 pts

Which of the following statements is/are correct?

I. Significant fraud risks are only identified during the initial stage in the
audit as part of audit planning.

II. The auditor shall consider the level of the management to override
control procedures in evaluating whether significant risk could result from
the identified fraud risk factors.

Neither I nor II

Both I & II

Correct! II only

I only
 Question 5 1 / 1 pts

Which of the following statements is/are correct?

I. Reasonable assurance means that the auditor guarantees the fair

presentation of the financial statements.

II. Free from material misstatement is intended to inform the users that the
auditor’s responsibility is not limited to material financial information but
includes other matters such as nonfinancial information.

I only

Correct! Neither I nor II

Both I & II

II only

Question 6 1 / 1 pts

Which of the following statements is/are correct?

I. Business risk refers to those risks that affect the operations and
potential outcomes of organizational activities.

II. Audit Risk is the risk that an auditor may give unqualified opinion on
financial statements that are materially misstated.

I only

Correct! Both I & II

II only
 Neither I nor II

Question 7 1 / 1 pts

Which of the following statements is/are correct?

I. Engagement Risk is the risk that a CPA firm is exposed to because of

being associated with a particular client including loss of reputation.

II. The auditor may control audit risk by not accepting certain companies
or individuals as clients which reduced engagement risk to zero.

Neither I nor II

Correct! Both I & II

II only

I only

Question 8 1 / 1 pts

Which of the following statements is/are correct?

I. The audit risk can not be completely eliminated but it can be reduced by
the auditor.

II. Business risk and financial reporting risk may exist even before the
audit.

I only
 II only

Neither I nor II

Correct! Both I & II

Question 9 1 / 1 pts

Which of the following statements is/are correct?

I. Audit may provide absolute assurance to the users of the financial

statements that the reports are free from material misstatement.

II. The auditor shall reduce audit risk to an acceptably low level to give an
appropriate opinion.

Neither I nor II

I only

Correct! II only

Both I & II

Question 10 1 / 1 pts

Which of the following statements is/are correct?

I. If the audit risk is set at 5%, that implies that the auditor is willing to
accept 5% risk of issuing an unqualified opinion on materially misstated
financial statements.
 II. Auditors are required to test all the items comprising an account to give
reasonable assurance that the financial statements are fairly stated.

Both I & II

Neither I nor II

Correct! I only

II only

Quiz Score: 10 out of 10

MIDTERM EXAMINATION
Due Apr 8 at 4pm Points 150 Questions 150
Available Apr 8 at 12:55pm - Apr 8 at 4pm about 3 hours Time Limit 180 Minutes

Instructions
allotted. A guide as to the remaining time is also available in your interface.
9. Technical difficulties, such as unannounced power interruptions and sudden fluctuation of internet connection
shall be documented accordingly and a proper escalation of such concern shall be undertaken as soon as
possible, but must be within the duration of the examination.
10. Please be mindful of the "Submit Button" and prevent to press it at all times while you are still taking the
examination. Once this is pressed, intentionally or by accident, the examination is deemed to have been
completed by the taker.
11. Concerns or questions about the exam shall be directed to your professors.
12. Do your best and God bless you!

This quiz was locked Apr 8 at 4pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 161 minutes 89 out of 150

Score for this quiz: 89 out of 150

Submitted Apr 8 at 3:41pm
This attempt took 161 minutes.

Question 1 1 / 1 pts

An auditor is evaluating the results of a variables sampling plan. Which of the following is
not relevant to the auditor’s judgment about the sample?

Projecting the sample error to the population

Qualitative information that lends insight into errors fraud

Correct!
Management’s explanations for why errors in the sample occurred

Considering the effects of sampling risk

 Question 2 0 / 1 pts

The understanding of the internal control relating to computer information systems

includes matters such as:

I. The significance and complexity of computer processing in each significant accounting

application. Significance relates to the materiality of the financial statement assertions
affected by computer processing.

II. The organizational structure of the client’s computer information systems activities and
the extent of concentration or distribution of computer processing throughout the entity,
particularly as they may affect segregation of duties.

III. The availability of data. Source documents, specific computer files, and other
evidential matter that may be required by the auditor may exist for only a short period or
only in machine-readable form.

You Answered I, II

None of the choices

Correct Answer I, II, III

Question 3 1 / 1 pts

Variables Sampling is

All of the choices

a type of sampling enables the auditor to estimate the peso amount of an account balance.

a type of statistical sampling plan is used in tests of controls when the auditor is interested in
an attribute of a population or when the auditor is concerned with acceptance or rejection of a
hypothesis.

Correct!
None of the choices
 Question 4 1 / 1 pts

If the auditor decides to conduct substantive procedures at interim date, the auditor shall
cover the remaining period by performing:

I. Substantive procedures, combined with tests of controls for the intervening period

II. If the auditor determines that it is sufficient, further substantive procedures only, that
provide a reasonable basis for extending the audit conclusions from the interim date to
the period end

None of the above

II

Correct!
I and II

Question 5 0 / 1 pts

All of the following are included in the audit documentation, except

The auditor’s conclusion as to whether uncorrected misstatements are material, individually,

or in aggregate, and the basis for that conclusion

Correct Answer The amount below which misstatement would be regarded as clearly not trivial

All misstatements accumulated during the audit and whether they have been corrected

You Answered The nature, timing, and extent of the further audit procedures performed.

Question 6 0 / 1 pts

Which of the following statements is/are correct?

 Statement I: Oral representation by the client management is not a valid evidence.

Statement II: Audit evidence obtained directly by the auditor is more reliable than that one
provided by the client management.

You Answered
Neither I nor II

Correct Answer II only

I only

both I and II

Question 7 0 / 1 pts

Monetary-unit sampling is said to eliminate the need to stratify the sample because

The risk of incorrect acceptance is inversely related to sample size

You Answered Tolerable misstatement is considered when determining sample size

Correct Answer Sample items are selected in proportion to their peso amount

The upper limit on misstatements can be computed based on statistical principles

Question 8 0 / 1 pts

The most common method used by auditors is the test data method, in this method the
auditor tests the:

Segregation of duties

Correct Answer Program Processes

End-product reports

You Answered Input data accuracy

 Question 9 1 / 1 pts

Which of the following statements is/are correct?

Statement I. The auditor shall design and implement overall responses to address the
assessed risks of material misstatement at the financial statement level.

Statement II. According to PSA 330, a substantive procedure is an audit procedure

designed to detect material misstatements at the assertion level

II only

Neither I nor II

Correct! both I and II

I only

Question 10 1 / 1 pts

For control purposes, which of the following should be organizationally segregated from
the computer operations function?

Minor maintenance according to a schedule

Correct! Systems development

Data conversion

Surveillance of CRT messages

Question 11 1 / 1 pts

If an auditor concludes that internal controls are likely to be effective, the preliminary
assessment of control risk can be reduced, leading to a(n)_____ the acceptable risk of
incorrect acceptance

reduction in
 elimination of

Correct! increase in

increase of decrease

Question 12 1 / 1 pts

“Analytical procedures” means

evaluations of financial information through analysis of unlikely relationships among both

financial and non-financial data.

evaluations of financial information through analysis of plausible relationships among

financial data only.

Correct!
evaluations of financial information through analysis of plausible relationships among both
financial and non-financial data.

evaluations of financial information through analysis of plausible relationships among non-

financial data only.

Question 13 0 / 1 pts

Georgia, CPA was assigned to perform substantive test of details about the account
balances of accounts receivables. There are total of 1,000 accounts receivable and the
total book value of the accounts receivables is ₱20,025. Georgia has selected and
audited a sample of 65 accounts with total book value of ₱1,235 and found that that the
total audited value of the sample is ₱1,261. Using mean-per-unit sampling, what is the
estimated total audited value?

None of the choices

You Answered ₱20,240

 ₱19,760

Correct Answer ₱19,400

₱12,600

Question 14 0 / 1 pts

Which of the following is an example of general computer control?

Reasonableness Test

Correct Answer Disaster recovery plan

You Answered Control total

Limit Test

Question 15 1 / 1 pts

Which of the following statements is/are correct?

Statement I: Those controls subject to testing by performing inquiry combined with

inspection or reperformance ordinarily provide more assurance than those controls for
which the audit evidence consists solely of inquiry and observation.

Statement II: If the auditor plans to rely on controls that have not changed since they were
last tested, the auditor should test the operating effectiveness of such controls at least
once in every third audit.

Correct! both I and II

Neither I nor II

I only

II only
 Question 16 0 / 1 pts

Caroline, CPA wants to test the control of the company of using passwords and user
identification for access. Which of the following procedures MOST LIKELY achieved
Caroline’s objective?

You Answered Caroline should use password hacking virus to see if it can access the system.

Review samples of transactions that were processed in the computer with a password.

Get written representations from employees that they do not use the password for malicious
access.

Correct Answer Caroline should attempt to access in the computer using invalid password.

Question 17 1 / 1 pts

Examples of Non-Statistical Sampling includes:

I. Haphazard Selection

II. Block Selection

II

Correct! Both

None of the choices

Question 18 1 / 1 pts

. Example of factors influencing sample size for test of controls includes:

 I. Other things being constant, the greater the reliance the auditor places on the operating
effectiveness of internal controls in the risk assessment, the greater is the extent of the
auditor’s test of controls, and therefore, the sample size is increased.

II. The higher the tolerable rate of deviation, the lower the sample size will be. The
tolerable rate of deviation is a rate of deviation from prescribed internal controls
procedures set by the auditor in respect of which the auditor seeks to obtain an
appropriate level of assurance that the rate of deviation set by the auditor is not exceeded
by the actual rate of deviation in the population. Accordingly, the tolerable rate of deviation
is the rate of deviation that an auditor is willing to accept without modifying the initial
assessed level of control risk.

III. An increase in the estimate of the deviation rate in the entire population the larger the
sample size needs to be so that the sample could reasonably reflect the actual rate of
deviation in the population.

IV. An increased in the level of assurance by the auditor that the tolerable rate of deviation
is not exceeded by the actual rate of deviation in the population, the larger the sample
size will be.

V. An increase in the number of sampling units in the population have little to no effect on
sample size.

I, II, III, IV

II, IV, V

Correct!
I, II, III, IV, V

I, III, V

None of the choices

Question 19 1 / 1 pts

Testing the input and output of a computer system instead of the computer program itself
will

Give the auditor with the same type of evidence.

Identify all program errors, regardless of the nature of the output.

Correct!
Unable to discover program errors which are not present in the output sample.

Not give confidence to the auditor in the results of the subsequent audit procedures.
 Question 20 0 / 1 pts

Which is a disadvantage of a business having a CIS environment?

You Answered Computers can quickly process high volume of data.

Computers help lessen human error.

Correct Answer Computers provides an audit trail which can be easily followed.

Computers uniformly handle business transactions.

Question 21 1 / 1 pts

Substantive analytical procedures are generally more applicable to:

Correct!
large volumes of transactions that tend to be predictable over time.

large volumes of transactions.

small volumes of transactions that tend to be predictable over time.

small volumes of transactions.

Question 22 1 / 1 pts

All the following are examples of computer-assisted audit technique, except

Audit modules.

Correct!
Operating systems.

Audit hooks.

Integrated test data.

 Question 23 1 / 1 pts

The most likely concern of an auditor regarding controls in a distributed data processing
system is?

Correct!
Access controls

Control over hardware

Systems documentation controls

Data recovery controls

Question 24 1 / 1 pts

The substantive procedures performed by the auditor relating to the financial statement
closing process shall include:

I. Agreeing or reconciling the financial statements with the underlying accounting records

II. Examining material journal entries and other adjustments made during the course of
preparing the financial statements

II

None of the above

Correct!
I and II

Question 25 1 / 1 pts

Which of the following types of evidence would an auditor most likely explore to determine
whether internal control is operating as designed?
 Correct! Client manuals showing procedures on how to use the computer programs.

Budget to actual expenditure reports

Negative confirmations of payables verifying account balances.

Indexes regarding the client’s industry

Question 26 1 / 1 pts

The process of vouching helps establish that all recorded transactions are

Recorded

Presented properly

Correct! Valid

Complete

Question 27 0 / 1 pts

Ivy, CPA was assigned to perform substantive test of details about the account balances
of accounts receivables. There are total of 40,000 accounts receivable and the total book
value of the accounts receivables is ₱200,000. Ivy has selected and audited a sample of
200 accounts with total book value of ₱1,040 and found that that the total audited value of
the sample is ₱840. Using ratio estimation sampling, what is the estimated total audited
value?

₱168,000

₱160,000

You Answered ₱200,000

Correct Answer ₱161,538

 Question 28 0 / 1 pts

Joy, CPA wants to evaluate whether the results of her mean-per-unit sampling will accept
or reject the clients book value amounting to ₱750,000 of the account balance she’s
examining. She obtained and set-up the following figures:

Tolerable misstatement is ₱40,000

Adjusted Allowance for Sampling Risk is ₱25,240
The Estimated Total Audited Value is ₱710,000

Given the values above, evaluate whether Joy will accept the client’s book value of
₱750,000 as not materially misstated or reject it.

Joy will reject the client’s book value of ₱750,000 since the misstatement is above the
adjusted allowance of ₱25,240.

Correct Answer
Joy will reject the client’s book value of ₱750,000 since the total book value is not within the
acceptable interval of ₱684,750 to ₱735,240.

Joy will accept the client’s book value ₱750,000 since the misstatement of ₱40,000
(₱750,000-₱710,000) is within the tolerable misstatement of ₱40,000.

You Answered
Joy will accept the client’s book value of ₱750,000 since the total book value is within the
interval of the estimated total audited value and tolerable misstatement which is ₱670,000 to
₱750,000.

Question 29 1 / 1 pts

The output of a parallel simulation should always be.

Printed on a report.

Compared with actual results using a comparison program.

Correct! Compared with actual results manually.

Reconciled to actual processing output.

Question 30 1 / 1 pts

External confirmations can be in:

positive request form

None of the choices

Correct! positive and negative request form

negative request form

Question 31 1 / 1 pts

Tests of controls may include the following, except:

Inquiries about, and observation of, internal controls which leave no audit trail.

Inspection of documentary support to transactions evidencing authorization

Reperformance of internal control procedures.

Correct! Analytical procedures involving comparison of operating expenses with budget amount.

Question 32 1 / 1 pts

A number of factors influence the sample size for a substantive test of details of an
account balance. All other factors being equal, which of the following would lead to a
larger sample size?
 Smaller expected frequency of errors

Greater reliance on internal controls

Correct! Smaller measure of tolerable misstatement

Greater reliance on analytical procedures

Question 33 1 / 1 pts

Which of the following is/are correct?

Statement I. The relationship of tolerable deviation rate to sample size is direct.

Statement II. The relationship of acceptable level of risk of assessing control risk too low
to sample size is inverse.

Both

None of the choices

Correct! II

Question 34 1 / 1 pts

To gain assurance that all inventory items in a client’s inventory listing schedule are valid,
an auditor most likely would vouch

Correct!
Items listed in the inventory listing schedule to inventory tags and the auditor’s recorded
count sheets.

Items listed in receiving reports and vendors’ invoices to the inventory listing schedule.

Inventory tags noted during the auditor’s observation to items listed in receiving reports and
vendors’ invoices.
 Inventory tags noted during the auditor’s observation to items listed in the inventory listing
schedule.

Question 35 1 / 1 pts

The auditor notices that a client’s cash-basis financial statements are prepared with
accrual basis financial titles. This situation bears on which financial statement assertion?

Completeness

Correct! Presentation and disclosure

Valuation or allocation

Rights and obligations

Question 36 1 / 1 pts

Substantive procedures is comprising of:

I. Test of details

II. Substantive Analytical Procedures

Correct! I and II

II

None of the above

Question 37 1 / 1 pts

Internal control is ineffective when computer department personnel

 Provide physical security for program files.

Correct! Originate changes in master file.

Design documentation for computerized systems.

Participate in computer software acquisition decisions.

Question 38 1 / 1 pts

Vouching is:

None of the choices

an audit procedure that involves the auditor seeing something or observing an item firsthand.

An audit procedure performed to see if an activity will yield the same results if done similarly
by the auditor.

Correct!
An audit procedure that begins tracking an information from one document like general
ledger or journal back into its underlying source documents.

Question 39 0 / 1 pts

Which of the following statements is/are correct?

Statement I: Substantive procedures are required to gather evidence in respect to all

material classes of transactions, account balances, and disclosures.

Statement II: Substantive procedures are designed to detect material monetary errors or
fraud.

You Answered Neither I nor II

I only
Correct Answer both I and II

II only

Question 40 1 / 1 pts

Types of control operating in computer information system environment includes:

I. General Controls

II. Special Controls

III. Application Control

I, III, III

Correct! I, III

I, II

None of the choices

II, III

Question 41 1 / 1 pts

Attribute Sampling is

a type of statistical sampling plan is applied to a population when a goal is to reach a

conclusion about a population in terms of monetary value in an audit of financial statements.

Correct!
a type of statistical sampling plan is used in tests of controls when the auditor is interested in
an attribute of a population or when the auditor is concerned with acceptance or rejection of a
hypothesis.

a type of sampling enables the auditor to estimate the peso amount of an account balance.
 None of the choices

Question 42 1 / 1 pts

Which of the following most likely represents a significant deficiency in the internal control
structure?

The accounts payable clerk prepares data for computer processing and enters the data into
the computer.

Correct!
The systems programmer designs systems for computerized applications and maintains
output controls.

The control clerk establishes control over data received by the EDP department and
reconciles control totals after processing.

The systems analyst review applications of data processing and maintains systems
documentation.

Question 43 1 / 1 pts

These are controls that apply to all functions of computer information system and affect
many different software applications.

Correct! General Controls

Output Controls

Processing Controls

Input Controls
 Question 44 1 / 1 pts

Which of the following is/are correct?

Statement I. Audit sampling is commonly used for inquiry.

Statement II. Audit sampling is commonly used for analytical procedures.

Both

Correct! None of the choices

II

Question 45 1 / 1 pts

Which of the following does not involve audit sampling?

Test of details of balances

Correct! Substantive analytical procedure

Test of details of transactions applied as a substantive test

Test of details of transactions applied as a test of control

Question 46 1 / 1 pts

Which of the following is/are correct?

Statement I. In designing the further audit procedures to be performed, the auditor shall
obtain more persuasive audit evidence the lower the auditor’s assessment of risk.

Statement II. According to PSA 330, the auditor may decide to test the operating
effectiveness of controls at the same time as evaluating their design and determining that
they have been implemented.
 both I and II

Neither I nor II

Correct! II only

I only

Question 47 1 / 1 pts

The maximum error in a population that the auditor is willing to accept

Sample error

Expected Population Error

Correct! Tolerable error

Anomalous error

Question 48 1 / 1 pts

Audit sampling involves the

Application of audit procedures to all items that comprise a class of transactions or an

account balance

Selection of all items over a certain amount

Application of audit procedures to all items over a certain amount and those that are unusual
or have a history of error

Correct!
Application of audit procedures to less than 100% of items within a class of transactions or
an account balance such that all items have a chance of selection
 Question 49 1 / 1 pts

Honesty, CPA is assigned to perform tests of controls over authorization of cash

disbursements. Which of the following sampling methods would be most appropriate for
Honesty to use?

Correct!
Attributes Sampling

Difference Estimation

Ratio Estimation

Variables Sampling

Question 50 0 / 1 pts

Which of the following is considered a disadvantage when doing an entry in the journal
when the auditee uses a computerized system?

Trans placement errors are difficult to detect.

Transactions are authorized first before they recorded.

You Answered

Random error is more common when similar transactions are processed in different ways.

Correct Answer Access and alteration of files is much easier for unauthorized persons.

Question 51 0 / 1 pts

Halsey, CPA was assigned to perform substantive test of details about the account
balances of accounts receivables. There are total of 1,000 accounts receivable and the
total book value of the accounts receivables is ₱20,000. Halsey has selected and audited
a sample of 50 accounts with total book value of ₱950 and found that that the total
audited value of the sample is ₱980. Using difference estimation sampling, what is the
estimated total audited value?
You Answered None of the choices

₱19,400

₱20,600

₱20,400

Correct Answer
₱19,600

Question 52 1 / 1 pts

When auditing the allowance for uncollectible accounts, the least reliance should be
placed on which of the following?

Ratios that show the past relationship of the allowance to net credit sales.

Collection experience of the client's collection agency.

An aging of past due accounts.

Correct!
The credit manager's opinion.

Question 53 1 / 1 pts

Which of the following is/are correct?

Statement I. Confirmation is relevant to form evidence with regard to assertion about

existence.

Statement II. The use of prenumbered invoices, then accounting for their numeric
sequence, will prove valuation assertion.

Correct!
I only

Neither I nor II

I and II
 II only

Question 54 1 / 1 pts

Which of the following controls ensure that the results of computer processing are
accurate, complete, and properly distributed?

Correct!
Output Controls

General Controls

Processing Controls

Input Controls

Question 55 1 / 1 pts

In which of the following circumstances would the use of the negative form of accounts
receivable confirmation most likely be justified?

A substantial number of accounts may be in dispute and the accounts receivable balance
arises from sales to a few major customers.

A substantial number of accounts may be in dispute and the accounts receivable balance
arises from sales to many customers with small balances.

Correct!
A small number of accounts may be in dispute and the accounts receivable balance arises
from sales to many customers with small balances.

A small number of accounts may be in dispute and the accounts receivable balance arises
from sales to a few major customers.
 Question 56 1 / 1 pts

There are three categories of financial statement assertions: Assertions pertaining to

account balances at period end, assertions pertaining to classes of transactions and
events during the period, and assertions pertaining to presentation and disclosure. Which
of the following is a financial statement assertion that is common to all three categories?

Classifications

Existence

Occurrence

Correct! Completeness

Question 57 0 / 1 pts

Philippine Standards on Auditing requires the auditor to design and perform a substantive
procedure for:

each class of transaction, account balance, and disclosure.

each material class of transaction, account balance, and disclosure.

each trivial class of transaction, account balance, and disclosure.

Both B and C

You Answered Both B and C

Correct Answer each material class of transaction, account balance, and disclosure.

each trivial class of transaction, account balance, and disclosure.

each class of transaction, account balance, and disclosure

Question 58 1 / 1 pts

Unauthorized alteration of on-line records can be prevented by employing:

 Computer matching.

Key verification.

Correct! Data base access controls

Computer sequence checks.

Question 59 1 / 1 pts

A sample in which every possible combination of items in the population has an equal
chance of constituting the sample is a

Statistical sample

Correct! Random sample

Representative sample

Judgment sample

Question 60 0 / 1 pts

Regardless of the assessed risks of material misstatement, the auditor is required to

design and perform substantive procedures for each material class of transactions,
account balance, and disclosure. This reflects the facts that:

I. The auditor’s assessment of risk is judgmental and so may not identify all risks of
material misstatement

II. There are inherent limitations to internal control

Correct Answer I, II

You Answered II

None of the choices

 Question 61 1 / 1 pts

Example of factors influencing sample size for test of details includes:

I. An increase in the auditor’s assessment of the risk of material misstatement, the larger
the sample size needs to be.

II. An increase of the auditor’s reliance on other substantive procedures directed on the
same assertion the smaller the sample size can be. Since the auditor will be using
another substantive procedure for a certain assertion of a particular account or
transaction, the auditor may choose to lower the sample size.

III. An increase of tolerable misstatement, the lower the sample size can be. A tolerable
misstatement is the application of performance materiality to a particular sampling
procedure. Accordingly, it is the maximum estimate of monetary misstatement that may
exist in an account balance or class of transactions, that even when such misstatement is
aggregated with other individual misstatements, the financial statement as whole will still
not be materially misstated.

IV. An increase in the expected amount of misstatements in the entire population the
larger the sample size needs to be so that the sample could reasonably reflect the actual
amount of misstatements in the population.

V. When a population is appropriately stratified, the aggregate of the sample sizes from
the strata will generally be lesser compare when no stratification was done to a
population.

II, IV, V

None of the choices

I, II, III, IV

I, III, V

Correct! I, II, III, IV, V

Question 62 1 / 1 pts

Which of the following is the best explanation of the difference, if any, between audit
objectives and audit procedures?
 Audit procedures establish broad general goals, audit objectives specify the detailed work to
be performed.

Audit procedures and audit objectives are essentially the same.

Correct!
Audit objectives define specific desired accomplishments; audit procedures provide the
means of achieving audit objectives.

Audit objectives are tailor-made for each assignment, audit procedures are generic in
application.

Question 63 0 / 1 pts

This method enables the estimation of the value of a population by using the average
difference between audited amounts and individual recorded.

None of the choices

Ratio Estimation

You Answered Mean-per-unit estimation

Correct Answer Difference estimation

Question 64 0 / 1 pts

Which of the following computer-assisted auditing techniques processes client input data
on a copy of a program that the client uses under the auditor’s control to test controls in
the computer system?

Blackbox approach

You Answered Test data approach

Correct Answer Controlled reprocessing

 Integrated test facility

Question 65 1 / 1 pts

Assertions about account balances at the period-end include valuation and allocation,
which means that

The entity holds or controls the rights to assets, and liabilities are the obligations of the entity.

Assets, liabilities and equity interest exist.

All assets, liabilities and equity interests that should have been recorded have been
recorded.

Correct!
Assets, liabilities and equity interests are included in the financial statements at appropriate
amounts and any resulting valuation or allocation adjustments are appropriately recorded.

Question 66 0 / 1 pts

Faith, CPA wants to determine whether she will use a statistical sampling over non-
statistical sampling. Which of the following is a correct statement that will make Faith
choose statistical sampling over non-statistical sampling?

In using the statistical sampling, Faith will be able to test the operating effectiveness of the
client’s internal control.

In using the statistical sampling, Faith will be able to quantify the appropriateness and
sufficiency of audit evidence.

You Answered
In using the statistical sampling, Faith as will no longer need to project the sample’s
misstatements to the population.
Correct Answer In using the statistical sampling, Faith will be able to quantify sampling risk.

Question 67 0 / 1 pts

Which of the following techniques would an auditor use if he wants to capture the
auditee’s data transactions being processed and continuously test the entity’s
computerized information system?

Correct Answer Implanted audit module

Snapshot

Integrated test facility

You Answered Test data

Question 68 0 / 1 pts

In which of the following situations would the auditor not perform 100% testing?

You Answered
The repetitive nature of a calculation or other process performed automatically by an
information system makes a 100% examination cost effective.

Correct Answer The population constitutes a large number of small volume items.

The population constitutes a small number of large volume items

When both inherent and control risks are high and other means do not provide sufficient
appropriate audit evidence.

Question 69 1 / 1 pts
 Which of the following controls most likely would assure that an entity can reconstruct its
financial records?

System flowcharts provide accurate descriptions of input and output operations.

Hardware controls are built into the computer by the computer manufacturer.

Correct! Backup diskettes or tapes of files are stored away from originals.

Personnel who are independent of data input perform parallel simulations.

Question 70 1 / 1 pts

The computer process whereby data processing is performed concurrently with a

particular activity and the results are available soon enough to influence the course of
action being taken or the decision being made is called:

Correct! On-line, real-time system

Random access sampling

Integrated data processing

Batch processing system

Question 71 1 / 1 pts

Tracing is:

an audit procedure that involves checking the mathematical accuracy of document and
records.

an audit procedure establishing agreement between separate sources of information such

accounting records with bank statements.
 None of the choices

Correct!
an audit procedure that involves tracing an accounting information from source document to
another subsequent documents like journal or general ledger.

Question 72 0 / 1 pts

In sampling plan for test of details, which of the following items have a direct relationship
with sample size?

Correct Answer Variation within the population

You Answered Population size

Tolerable error

Acceptable risk of incorrect acceptance

Question 73 1 / 1 pts

Segregation of incompatible duties is differently defined in a manual system since the

computer programs can do multitasking. To offset the negative effects for the lack of
segregation of duties, how can a computer programs be modified?

Run complete parallel manual and automated accounting systems for a crisscross check on
input and output.

Correct!
Effective built- in controls for both the computer software and hardware to reduce the risk of
unauthorized access and manipulation.

The computer system should be accessible to various competent partners so they can check
on each other’s work.
 The computer system should be under the control of the user department.

Question 74 1 / 1 pts

A negative confirmation request is where:

None of the choices

the confirming party respond directly to the auditor indicating whether the confirming party
agrees or disagrees with information contained in the requests.

All of the choices

Correct!
the confirming party responds only to the auditor if the external party disagrees with the
information provided in the requests.

Question 75 0 / 1 pts

As one of the year-end audit procedures, the auditor instructed the client's personnel to
prepare a standard bank confirmation request for a bank account that had been closed
during the year. After the client's treasurer had signed the request, it was mailed by the
assistant treasurer. What is the major error in this audit procedure?

Sending the request was unnecessary because the account was closed before the year-end.

Correct Answer The confirmation request was signed by the treasurer.

The CPA did not sign the confirmation request before it was mailed.

You Answered The request was mailed by the assistant treasurer.

Question 76 0 / 1 pts
 Which of the following statements about test data is/are correct?

Statement I: The test data must consist of all possible valid and invalid conditions.

Statement II: When using test data method, the program tested is different from the
program used throughout the year by the client.

Correct Answer Neither I nor II

II

Both

You Answered I

Question 77 0 / 1 pts

Statistical sampling cannot

Select a sample draw inference about a population

Correct Answer Assure the sample will be representative of a population

Determine the reliability of samples

You Answered Measure the risk that a sample is not representative of a population

Question 78 0 / 1 pts

Examples of Statistical Sampling includes:

I. Random Sampling

II. Systematic Selection

III. Monetary Unit Sampling

Correct Answer I, II, III

I, II
You Answered I

None of the choices

Question 79 1 / 1 pts

Which of the following statements is/are correct?

As provided in PSA 530, examples of nonsampling risk include use of inappropriate audit
procedures, or misinterpretation of audit evidence and failure to recognize a misstatement
or deviation.

I. Tolerable rate of deviation is the monetary amount set by auditor in respect of which the
auditor seeks to obtain an appropriate level of assurance that such amount is not
exceeded by the actual misstatement in the population.

II. Non-sampling risk is the risk that the auditor reaches an erroneous conclusion for any
reasons which are somehow related to sampling risk.

None of the choices

II

Correct!
I, II

Question 80 1 / 1 pts

When designing and performing substantive analytical procedures, either alone or in

combination with tests of details, as substantive procedures in accordance with PSA 330
(Redrafted), the auditor shall:

I. Determine the suitability of particular substantive analytical procedures for given

assertions, taking account of the assessed risks of material misstatement and tests of
details, if any, for these assertions.

II. Evaluate the reliability of data from which the auditor’s expectation of recorded
amounts or ratios is developed, taking account of source, comparability, and nature and
relevance of information available, and controls over preparation.
 III. Develop an expectation of recorded amounts or ratios and evaluate whether the
expectation is sufficiently precise to identify a misstatement that, individually or when
aggregated with other misstatements, may cause the financial statements to be materially
misstated

IV. Determine the amount of any difference of recorded amounts from expected values
that is acceptable without further investigation.

I, II

I, II

Correct!
I, II, III, IV

I, II, III

Question 81 1 / 1 pts

Substantive Test Sampling Risks includes:

I. Risk of incorrect rejection (alpha risk, type I error)

II. Risk of incorrect acceptance (beta risk, type II error)

None of the choices

II

Correct!
Both

Question 82 0 / 1 pts

There is an inverse relationship that exist between the acceptable level of detection risk
and the
You Answered Risk of falling to discover material misstatement

Correct Answer Assurance provided by substantive tests

Preliminary judgments about materiality levels

Risk of misapplying audit process

Question 83 1 / 1 pts

The likelihood of assessing control risk too high is the risk that the sample selected to test
controls

Does not support the tolerable error for some or all of management’s assertions.

Correct!
Does not support the auditor’s planned assessed level of control risk when the true operating
effectiveness of the control structure justifies such an assessment.

Contains proportionately fewer monetary errors or deviations from prescribed controls than
exist in the balance or class as a whole.

Contains misstatements that could be material to the financial statements when aggregated
with misstatements in other account balances or transactions classes.

Question 84 0 / 1 pts

Analytical procedures also include consideration of relationships, for example:

I. Among elements of financial information that would be expected to conform to a

predictable pattern based on the entity’s experience.

II. Between financial information and relevant non-financial information.

You Answered I

Correct Answer I, II

II

None of the choices

Question 85 0 / 1 pts

Which of the following statements is/are correct?

I. For the purpose of audit sampling in test of controls, “error” refers to deviations.

II. For the purpose of audit sampling in substantive tests, “error” refers to misstatements.

III. Based on PSA 530, if a class of transactions or account balance has been divided into
strata, the misstatement is projected collectively for all strata.

Correct Answer I, II

None of the choices

All of the choices

You Answered I, III

II, III

Question 86 0 / 1 pts

Flora, CPA is performing tests of controls over nontrade purchases. Flora would like to
find out whether the company’s control of reviewing nontrade purchase before being
entered in the accounting system is operating effectively. Accordingly, Flora determined
that the supervisor stamped nontrade purchase after it has been reviewed. In this
situation, Flora tested fifty (50) nontrade purchase orders to identify they have been
stamped or not. She also set the tolerable rate at 7%, the expected population at 5% and
the allowance for sampling risk at 2%. Afterwards, the results showed that three nontrade
purchase orders where not stamped and reviewed by the supervisor before it was
 recorded. In this situation, what will be Flora’s evaluation of the sampling results for this
particular control?

Correct Answer
Flora needs to modify the planned assessed level of control risk because the sample
deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

Flora needs to modify the initial assessed level of control risk because the tolerable deviation
rate plus the allowance for sampling risk exceeds the expected population deviation rate.

Flora shall accept the sample results as support for the initial assessed level of control risk
because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable
rate.

You Answered
Flora shall accept the sample results as support for the initial assessed level of control risk
because the tolerable deviation rate less the allowance for sampling risk equals the
expected population deviation rate.

Question 87 1 / 1 pts

Which of the following controls is a processing control that reconciles the input control
totals with the totals of items that have updated the file?

Correct! Run-to-run totals

File and operator controls

Sequence tests

Validity tests

Question 88 1 / 1 pts

Test of Controls Sampling Risks includes:

 I. Risk of assessing control risk too high (alpha risk, type I error)

II. Risk of assessing control risk too low (beta risk, type II error)

II

Correct! Both

None of the Choices

Question 89 1 / 1 pts

Consists of seeking information from knowledgeable persons, both financial and

nonfinancial, within the entity or outside the entity.

Observation

Inspection of records or documents

Correct! Inquiry

Inspection of tangible assets

Question 90 0 / 1 pts

What is an auditor’s evaluation of a statistical sample for attributes when a test of 400
documents results in 16 deviations if the tolerable rate is 5%, the expected population
deviation rate is 3% and the allowance for sampling risk is 2%?

Accept the sample results as support for planned reliance on the control because the
expected population deviation rate plus allowance for sampling risk equals the tolerable rate.

Modify planned reliance on the control because the tolerable rate plus the allowance for
sampling risk exceeds the expected population deviation rate.
Correct Answer
Modify planned reliance on the control because the sample deviation rate plus allowance for
sampling risk exceeds the tolerable rate.

You Answered
Accept the sample results as support for planned reliance on the control because the
tolerable rate less the allowance for sampling risk equals the expected population deviation
rate.

Question 91 1 / 1 pts

Which of the following statements is/are correct?

Statement I: The tolerable rate of deviations for a test of a control is generally lower than
the expected rate of errors in the related accounting records.

Statement II: In determining the sample size for a test of controls, an auditor should
consider the expected deviation rate, desired confidence level, and the tolerable deviation
rate.

Both I & II

Correct!
II only

Neither I nor II

I only

Question 92 0 / 1 pts

Which statement is incorrect regarding the evaluation of general CIS controls and CIS
application controls?

You Answered
If general CIS controls are not effective, there may be a risk that misstatements might occur
and go undetected in the application systems.
 Manual procedures exercised by users may provide effective control at the application level.

The general CIS controls may have a pervasive effect on the processing of transactions in
application systems.

Correct Answer
Weaknesses in general CIS controls cannot preclude testing certain CIS application controls.

Question 93 1 / 1 pts

General controls relate to controls over:

I. program development and maintenance

II. systems software support

III. operations

IV. physical system security

V. access to programs

I, III, V

I, II, IV

I, II, III, IV

None of the choices

Correct!
I, II, III, IV, V

Question 94 1 / 1 pts

Benjamin, CPA decided to use stratification in his random sampling. Which of the
following is the BEST reason why Benjamin choose to use stratification rather than
unstratified random sampling?
 Benjamin wants to focus on the larger items in the population

Benjamin wants to give every sampling unit an equal chance of being included in the sample.

Benjamin wants a larger sample size.

Correct!
Benjamin wants to reduce as much as possible the degree of variability in the overall
population.

Question 95 1 / 1 pts

The most critical aspect regarding separation of duties within information systems is
between

Correct!
Programmers and computer operators

Programmers and systems analysts

Project leaders and programmers

Data control and file librarians

Question 96 0 / 1 pts

On the four situations presented below. Which circumstance constitutes significant

deficiency in internal control?

System analysts should not be able to enter transactions in the programs they created.

You Answered
Computer operators are not given access to the software support documentation.

System analysts should not be able to operate computers.

Correct Answer Supervision of programmers to the computer operators.

 Question 97 1 / 1 pts

Consists of generalized computer programs designed to perform common audit tasks or

standardized data processing functions.

Customized or purpose-written programs

Correct!
Package or generalized audit software

Utility programs

System management programs

Question 98 0 / 1 pts

Test of controls is performed when:

Correct Answer the auditor plans to rely on the operating effectiveness of internal controls.

You Answered the auditor believes that the internal control is not operating effectively

the auditor has no plans to rely on the operating effectiveness of internal controls.

All of the choices

Question 99 1 / 1 pts

In sampling plan for test of details, an auditor must generally consider each of the
following except

Tolerable error

Correct!
Population size

Variation within the population

Acceptable risk of incorrect acceptance

 Question 100 0 / 1 pts

Which of the following combinations results in a larger sample size?

Decrease the desired confidence level and decrease the tolerable deviation rate

You Answered Increase the tolerable deviation rate and increase the expected deviation rate

Correct Answer Increase the desired confidence level and decrease the tolerable deviation rate

Decrease the desired confidence level and increase the expected deviation rate

Question 101 1 / 1 pts

If the size of the sample to be used in a particular test of attributes has not been
determined by utilizing statistical concepts but the sample has been chosen in
accordance with random selection procedures.

The auditor will have to evaluation the results by reference to the principles of discovery
sampling

Correct!
The auditor may or may not achieve desired allowance for sampling risk at the desired level
of confidence

The auditor has committed a nonsampling error

No inferences can be drawn from the sample

Question 102 0 / 1 pts

A main problem present in a CIS environment is that incompatible duties may be

performed by the one person. One compensating control for this is the use of
 Access controls

You Answered Third party observer

Self-checking digits

Correct Answer A computer log

Question 103 0 / 1 pts

If no changes have occurred since the controls were last tested, a CPA should

Rely entirely on the performance of substantive audit procedures.

Test the operating effectiveness of such controls at least once in every fourth audit.

Correct Answer
Rely on the prior year audit’s assessment of internal controls and use this assessment in the
current year.

You Answered
Test the operating effectiveness of such controls at least once in every third audit.

Question 104 0 / 1 pts

Joy, CPA is determining the sample size for an attribute sampling. Which of the following
factors will she consider in determining the sample size for a test of control?

The risk of incorrect rejection

You Answered The ratio between the sample audit values and sample book values

Correct Answer Expected population deviation rate

The audit opinion to be issued

 Question 105 1 / 1 pts

When performing a substantive test of details for the existence and valuation assertions of
accounts receivable, Albert, the auditor, concluded that the sample results supported the
conclusion that the accounts receivable was materially misstated. However, it in fact not
materially misstated. This situation illustrates the risk of:

Incorrect acceptance

Correct!
Incorrect rejection

Assessing control risk too high

Assessing control risk too low

Question 106 1 / 1 pts

An advantage of using statistical sampling is that such techniques

Have been established in the courts to be superior to nonstatistical sampling

Eliminate the need for judgmental decision

Define the value of reliability necessary to provide audit assurance

Correct!
Mathematically measure risk

Question 107 0 / 1 pts

To obtain evidence that online access controls are properly functioning, an auditor most
likely would

You Answered
Create checkpoints at periodic intervals after live data processing to test for unauthorized
use of the system.
 Examine the transaction log to discover whether any transactions were lost or entered twice
due to a system malfunction

Vouch a random sample of processed transactions to assure proper authorization

Correct Answer
Enter invalid identification numbers or passwords to ascertain whether the system rejects
them.

Question 108 1 / 1 pts

Which of the following statements is/are correct?

Statement I. The quantity of audit evidence needed is affected by the risk of misstatement
and also by the quality of such audit evidence.

Statement II. The reliability of audit evidence is influenced by its source and by its nature
and is dependent on the individual circumstances under which it is obtained.

Correct! both I and II

II only

Neither I nor II

I only

Question 109 0 / 1 pts

The use of computers will result in an increased number of individuals having access to
the computer. To compensate for this, a control that is used to avoid unapproved access
to sensitive programs.

Record count

Correct Answer Log ins and passwords for each user

You Answered Segregation of duties within CIS department

 Data Disaster Recovery

Question 110 0 / 1 pts

ABCD Company has changed from a manual system to a computerized payroll system in
which employees record time in and out with magnetic proximity cards. The computer
system automatically updates all payroll records. Because of this change

Integrated Test Facility must be used.

Correct Answer Part of the audit trail is altered.

Employee collusions are eliminated.

You Answered The potential for payroll-related fraud is diminished.

Question 111 0 / 1 pts

There are various approaches to test general controls, some are:

I. Auditors may test the program development and maintenance by obtaining and
examining documentation or plans related to program development. Also, the auditor may
inquire personnel and review minutes of the meeting of personnel charged with computer
information systems responsibilities.

II. To test system software the auditor may inquire with appropriate personnel or examine
company software manual.

III. For testing operations, the auditor may observe the separation of duties of systems
analyst, programmers and computer operators or inquiry of operators about their
adherence to policies and operation manuals.

IV. The auditor tests physical security relating computer information systems by examining
documentary evidence about the use of backup or inquire about the security over physical
access to the information technology facility.

V. Testing the controls over access to programs includes an examination of documentary

evidence related to authorization of access or, if any, review log access including access
violations

I, II
 I, II, III

Correct Answer None of the choices

You Answered I, II, III, IV, V

I, II, III, IV

Question 112 0 / 1 pts

If all other factors specified in a sampling plan remain constant, increasing the acceptable
risk of incorrect acceptance would cause the requires ample size to

You Answered Increase

Correct Answer Decrease

Remain the same

Become indeterminate

Question 113 0 / 1 pts

Which of the following is not one of the essential concepts of internal controls?

Correct Answer
It can be expected to absolute assurance regarding that the achievement of the entity’s
objectives.

None of the choices.

It is effected by those charged with governance, management, and other personnel in an

entity.
You Answered It is a process.

It is a means or tool used by management to achieve the entity’s objectives.

Question 114 1 / 1 pts

Application control is normally divided into the following categories:

I. Input controls

II. Processing controls

III. Output controls

Correct! I, II, III

I, II

None of the choices

Question 115 1 / 1 pts

Auditors who prefer statistical sampling to non-statistical sampling may do so because

statistical sampling helps the auditor

Measure the sufficiency of the evidential matter obtained

Reduce the level of tolerable error to a relatively low amount

Minimize the failure to detect a material misstatement due to non-sampling risk.

Correct! Eliminate subjectivity in the evaluation of sampling results

Question 116 0 / 1 pts

 Which of the following approaches of gathering evidence is considered as most effective?

Correct Answer 100% examination

Test of reasonableness

Items for specific testing

You Answered Audit sampling

Question 117 1 / 1 pts

Which of the following statements concerning sample size is true?

An increase in the tolerable occurrence rate, other factors remaining unchanged, increases
sample size.

The more critical the attribute being tested, the higher will be the tolerable occurrence rate
set by the auditor, and the larger will be the sample size.

Correct!
The higher the expected occurrence rate, other factors remaining unchanged, the larger will
be the sample size.

The lower the acceptable risk of underassessment of control risk, the smaller will be the
sample size.

Question 118 1 / 1 pts

Substantive Procedures are audit procedures designed to detect material misstatements

at the:

None of the choices

 company level

financial statements level

Correct!
assertion level.

Question 119 0 / 1 pts

Which of the following statements is correct concerning statistical sampling in tests of

controls?

Correct Answer
The population size has little or no effect on determining sample size except for a very small
population.

You Answered
For a given tolerance rate, a larger sample size should be selected as the expected
population deviation rate decreases

The expected population deviation rate has little or no effect on determining sample size
except for very small populations

As the population size doubles, the sample size also should double

Question 120 0 / 1 pts

The nature of the risks and the internal control characteristics in computer information
systems environments generally include the following:

I. Lack of transaction trails

II. Uniform processing of transactions

III. Lack of segregation of functions

IV. Potential for errors and irregularities

V. Errors and irregularities that will not be observed due to less human involvement in
handling transactions
 VI. Initiation or execution of transactions

VII. The dependence of other controls over computer processing

VIII. Potential for increased management supervision

Correct Answer I, II, III, IV, V, VI, VII, VIII

I, III, V, VII

None of the choices

You Answered II, IV, VI, VIII

Question 121 1 / 1 pts

Which of the following statements is/are correct?

Statement I. Even if the auditor’s assessed level of risks of material misstatement is

significantly low, the auditor shall perform substantive procedures.

Statement II. Substantive procedures comprise of Test of Details and Substantive

analytical procedures.

I only

Neither I nor II

Correct!
both I and II

II only

Question 122 1 / 1 pts

Which of the following methods of testing application controls utilizes a generalized audit
software package prepared by the auditors?

Exception report tests

Integrated testing facility approach

 Test data approach

Correct!
Parallel simulation

Question 123 0 / 1 pts

An auditor want to assess the risk in a computerized environment. Under these

circumstances on which of the following activities would the auditor initially focus?

Errors and fraud

Application controls

You Answered General controls

Correct Answer Controls over outputs

Question 124 0 / 1 pts

Which of the following statements is/are correct?

Statement I: An increase in the reliance on substantive tests usually mean that the
reliance placed on internal controls decreases.

Statement II: An auditor evaluates the existing system of internal control in order to
determine the extent of substantive tests which must be performed.

I only

Correct Answer both I and II

You Answered
II only

Neither I nor II

Question 125 1 / 1 pts

 Which of the following tasks could not be performed when using a generalized audit
software package?

Correct!
Physical count of inventories.

Selecting inventory items for observations.

Summarizing inventory turnover statistics for obsolescence analysis.

Comparison of inventory test counts with perpetual records.

Question 126 0 / 1 pts

Tracing copies of sales invoices to shipping documents will provide evidence that all

You Answered Debits to the subsidiary accounts receivable ledger are for sales shipped.

Shipments to customers were recorded as receivables.

Shipments to customers were billed.

Correct Answer Billed sales were shipped.

Question 127 1 / 1 pts

Generalized audit software is a computer-assisted audit technique. It is one of the widely

used technique for auditing computer application systems. Generalized audit software is
most often used to

Correct!
Independently analyze data files.

Verify computer processing.

All of the choices.

Process data fields under the control of the operation manager.

 Question 128 0 / 1 pts

Which of the following characteristics distinguishes computer processing from manual

processing?

You Answered
The potential for systematic error is ordinarily greater in manual processing than in
computerized processing.

Errors or irregularities in computer processing will be detected soon after their occurrences.

Correct Answer
Computer processing virtually eliminates the occurrence of computational error normally
associated with manual processing.

Most computer systems are designed so that transaction trails useful for audit do not exist.

Question 129 0 / 1 pts

Reconciliations is:

an audit procedure that involves checking the mathematical accuracy of document and
records.

You Answered
an audit procedure that involves tracing an accounting information from source document to
another subsequent documents like journal or general ledger.

None of the choices

Correct Answer
an audit procedure establishing agreement between separate sources of information such
accounting records with bank statements.
 Question 130 0 / 1 pts

Which of the following is a disadvantage of the integrated test facility approach?

You Answered ITF is simply an automated version of auditing "around" the computer.

The auditor may not always have a current copy of the authorized version of the client's
program.

In establishing fictitious entities, the auditor may be compromising audit independence.

Correct Answer
Removing the fictitious transactions from the system is somewhat difficult and, if not done
carefully, may contaminate the client's files.

Question 131 1 / 1 pts

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

Correct!
Discovery sampling

Peso-unit sampling

Random sampling

Variables sampling

Question 132 1 / 1 pts

Which of the following is an access control?

Correct!
6-digit passcode

Back-up recovery plan

 Use of power generator

Integrated test facility

Question 133 0 / 1 pts

Classical Variables Sampling is

None of the choices

Correct Answer

a type of sampling enables the auditor to estimate the peso amount of an account balance.

You Answered
a type of statistical sampling plan is used in tests of controls when the auditor is interested in
an attribute of a population or when the auditor is concerned with acceptance or rejection of
a hypothesis.

a type of statistical sampling plan is applied to a population when a goal is to reach a

conclusion about a population in terms of monetary value in an audit of financial statements.

Question 134 0 / 1 pts

Which of the following statements is/are correct?

Statement I: An auditor who decided to perform test of controls would like to obtain
evidence to support his assessment of control risk at less than high level.

Statement II: The auditor may choose not to perform test of controls even if the
substantive procedures alone cannot provide sufficient appropriate audit evidence at the
assertion level.

II only

You Answered both I and II

Correct Answer I only

 Neither I nor II

Question 135 1 / 1 pts

Hazel, CPA, vouches a sample of entries in the voucher register to the supporting
documents to assess control risk for purchases. Which assertion would this test of
controls most likely support?

Valuation or allocation

Rights and obligations

Correct! Existence or occurrence

Completeness

Question 136 1 / 1 pts

Which of the following statistical selection techniques is least desirable for use by an
auditor?

Systematic selection

Stratified selection

Sequential selection

Correct! Block selection

Question 137 1 / 1 pts

A positive confirmation request is where:

None of the choices

All of the choices

 Correct!
the confirming party respond directly to the auditor indicating whether the confirming party
agrees or disagrees with information contained in the requests.

the confirming party responds only to the auditor if the external party disagrees with the
information provided in the requests.

Question 138 1 / 1 pts

The auditor faces a risk that the examination will not detect material misstatements in the
financial statements. In regard to minimizing this risk, the auditor primarily relies on:

Internal control.

Correct! Substantive tests.

Statistical analysis.

Tests of controls.

Question 139 0 / 1 pts

Albert, an auditor, was assigned to identify the management’s assertions about class of
transactions, events, related disclosures. Accordingly, which of the following is NOT an
assertion about class of transactions?

Cutoff

Correct Answer Consistency

You Answered Occurrence

 Completeness

Question 140 1 / 1 pts

It refers to plans made by the entity to obtain access to comparable hardware, software,
and data in the event of their failure, loss, or destruction.

Encryption

Correct! Back-up

Wide Area Network (WAN)

Anti-virus

Question 141 1 / 1 pts

Elijah, CPA decided to test the computer information system by testing the input and
output of the computer instead of testing the computer program itself. Which of the
following is a disadvantage of this kind of testing?

It will be able to detect fraud more effectively.

Correct! It will not detect program errors which do not show up in the output.

It will not give auditors evidence at all.

It will make the auditor’s opinion unqualified.

Question 142 0 / 1 pts

Which of the following statements is/are correct?

Statement I: In parallel simulation method, the client’s accounting system is being used by
the auditor to reprocess the transactions.
 Statement II: When using the integrated facility approach, the auditor uses a general audit
software or a customized program.

You Answered Both

Correct Answer Neither I nor II

II

Question 143 0 / 1 pts

The following are some of the types computer-assisted audit techniques:

I. Test Data Approach

II. Integrated Test Facility

III. Parallel Simulation

IV. Controlled Reprocessing

V. Embedded Audit Module

Correct Answer
I, II, III, IV, V

You Answered I, II, III, IV

I, II

None of the choices

Question 144 1 / 1 pts

Which of the following management assertions is an auditor most likely testing if the audit
objective states that all inventory on hand is reflected in the ending inventory balance?
 Inventory is properly presented in the financial statements.

The entity has rights to the inventory.

Correct!
Inventory is complete.

Inventory is properly valued.

Question 145 1 / 1 pts

Analytical procedures include the consideration of comparisons of the entity’s financial

information with, for example:

I. Comparable information for prior periods.

II. Anticipated results of the entity, such as budgets or forecasts, or expectations of the
auditor, such as an estimation of depreciation.

III. Similar industry information, such as a comparison of the entity’s ratio of sales to
accounts receivable with industry averages or with other entities of comparable size in the
same industry.

Correct!
I, II, III

I, II

None of the choices

Question 146 0 / 1 pts

A retailing entity uses the Internet to execute and record its purchase transactions. The
entity's auditor recognizes that the documentation of details of transactions will be
retained for only a short period of time. To compensate for this limitation, the auditor most
likely would:

Correct Answer Perform tests several times during the year, rather than only at year-end.

Plan for a large measure of tolerable misstatement in substantive tests.

You Answered Increase the sample of transactions to be selected for cutoff tests.

Compare a sample of paid vendors' invoices to the receiving records at year-end.

Question 147 0 / 1 pts

Benjamin, CPA used test data approach to test the computerized system of SB Company.
Which of the following statement correct regarding test data approach?

The dummy file should be permanent in the system of the client.

You Answered
Test data must consist all possible valid and invalid conditions

The program tested is different from the program used throughout the year by the client.

Correct Answer Test data are processed by the client’s computer under the auditor’s control.

Question 148 1 / 1 pts

Daniel, CPA, as part of the audit engagement, will be testing the general and application
controls of Agustin Company which uses a batch system. Which of the following is TRUE
concerning batch processing of transactions?

It used only in non-database applications.

Transactions are processed in chronological order, regardless of type.

Correct!

It is more likely to result in an easy-to-follow audit trail than is online transaction processing.

It cannot be used for large network of systems.

Question 149 0 / 1 pts

Which of the following statements related to sampling is incorrect?

Correct Answer
A statistical sample in which the characteristics in the sample are the same as those of the
population.

Population is the entire set of data from which a sample is selected and about which the
auditor wishes to draw conclusions.

You Answered
Random sample is a sample in which every possible combination of items in the population
has an equal chance of constituting the sample.

Sampling unit pertains to individual items constituting a population.

Question 150 1 / 1 pts

John Paul, CPA is performing an audit examination of Malfoy, Inc. He has already done
the work necessary to gain a general understanding of the company’s internal control. He
is now looking at the internal control policies and procedures within the accounting system
specifically for accounts receivable. He has decided to perform test of controls in this
area. Which of the following is least likely to be true?

Correct!
The system contains an excess number of possible problems so that testing is required.

The internal control system appears to be well designed.

He hopes to reduce the necessary amount of substantive testing.

He hopes to reduce overall audit time.

Quiz Score: 89 out of 150

 Question 1 2 / 2 pts

Which of the following statements is/are correct?

I. In the audit risk equation, detection risk is the controllable variable.

II. The two factors that contribute to the probability that unaudited financial
statements contain material errors or fraud are inherent risk and control
risk.

Correct! Both I & II

Neither I nor II

II only

II only

Question 2 2 / 2 pts

The auditor communicates the results of his or her work through the
medium of the

Correct! Audit report.

Financial statements.

Management letter.

Engagement letter.
 Question 3 2 / 2 pts

A CPA establishes QC policies and procedures for deciding whether to

accept a new client or continue to perform services for a current client.
The primary purpose for establishing such policies is to

Enable the auditor to attest to the integrity or reliability of a client.

Ensure that the client is capable of financing the resources needed in the
audit engagement.

Correct!
Minimize the likelihood of association with clients whose management
lacks integrity

Comply with the quality control standards established by regulatory bodies.

Question 4 0 / 2 pts

Which of the following conditions does not increase inherent risk?

The client has entered numerous related party transactions during the year
under audit.

The board of directors approved a substantial bonus for the president and
chief executive officer and also approved an attractive stock option plan for
themselves.
orrect Answer
The client hired an employee who was a former employee of its major
competitor.

ou Answered
The client has lost a major customer accounting for approximately 40% of
annual revenues.

Question 5 0 / 2 pts

Which of the following best describes the reason why an independent

auditor reports on financial statements?

Poorly designed internal control may exist.

orrect Answer
A management fraud may exist and is more likely to be detected by
independent auditors.

ou Answered
Different interests may exist between the company preparing the
statements and the persons using the statements.

A misstatement of account balances may exist and is generally corrected

as the result of the independent auditor's work.

Question 6 2 / 2 pts
 Which of the following is the correct order of steps in the audit process?

I. Prepare engagement letter

II. Perform tests of control

III. Develop an overall strategy for the expected conduct and scope of
audit

IV. Completing the audit

V. Perform substantive tests

I, II, III, V, IV

I, III, IV, II, V

Correct! I, III, II, V, IV

I, III, V, II, IV

Question 7 2 / 2 pts

On the basis of the audit evidence gathered and evaluated, an auditor

decides to increase the assessed level of control risk from that originally
planned. To achieve an overall audit risk level that is substantially the
same as the planned audit risk level, the auditor would

Increase inherent risk.

Decrease substantive testing.

Correct! Decrease detection risk.

Increase materiality levels.

 Question 8 2 / 2 pts

The acceptable level of detection risk and the combined level of inherent
risk and control risk are _________ related.

directly

proportionately

not

Correct! inversely

Question 9 0 / 2 pts

The overall objectives of the auditor in conducting an audit of financial

statements are

I. To obtain reasonable assurance about whether the financial statements

as a whole are free from material misstatements, whether caused by
fraud or error

II. To report on the financial statements

III. To obtain persuasive rather than conclusive evidence

IV. To detect all misstatements, whether due to fraud or error

orrect Answer I, II and III only

ou Answered I and II only

II and IV only
 None of the other choices

I, II, III and IV

Question 10 2 / 2 pts

Which of the following has the primary responsibility for the fairness of the
representations made in the financial statements?

Correct! Client's management

PRC-Board of Accountancy

Independent auditor

Audit committee

Question 11 0 / 2 pts

Assuming you an auditor who was approached by a new client to perform

an audit for the first time, you should make inquiries of the predecessor
auditor. This is a necessary procedure because the predecessor may be
able to provide you with information that will assist you in determining

orrect Answer Whether the engagement should be accepted.

Whether the company follows the policy of rotating its auditors.

Whether the predecessor's work should be utilized.

ou Answered
Whether, in the predecessor's opinion, internal control of the company has
been satisfactory.

Question 12 2 / 2 pts

Warning signs that cause the auditor to question management integrity

must be taken seriously and pursued vigorously. Which of the following
may lead the auditor to suspect management dishonesty?

The client has been named as a defendant in a product liability suit.

Correct!
The president and chief executive officer of the client corporation has held
numerous meetings with the controller for the purpose of discussing
accounting practices that will maximize reported profits.

The client has experienced a decrease in revenue from increased import

competition.

A new regulation making customer licenses more difficult to obtain may

adversely affect the client's operations.

Question 13 2 / 2 pts

The state of mind that permits the expression of a conclusion without

being affected by influences that compromise professional judgment.
 Objectivity

Professional Skepticism

Correct! Independence of Mind

Independence in Appearance

Question 14 2 / 2 pts

Which of the following is not a component of audit planning?

Correct!
Observing the client's annual physical inventory taking and making test
counts of selected items.

Obtaining an understanding of the business.

Making arrangements with the client concerning the timing of audit field
work and use of the client's staff in completing certain phases of the
examination.

Developing audit programs.

Question 15 2 / 2 pts

Users of financial statements demand independent audit because

Users demand assurance that fraud does not exist.

Correct! Management may not be objective in reporting.

Management relies on the auditor to detect error and fraud.

Users expect auditors to correct management errors.

Question 16 2 / 2 pts

An audit involves ascertaining the degree of correspondence between

assertions and established criteria. In the case of an audit, of financial
statements, which of the following would not be considered as suitable
criteria?

Philippine Accounting Standards

International Accounting Standards

Correct! Philippine Standards on Auditing

Philippine Financial Reporting Standards

Question 17 2 / 2 pts

Which of the following standards deals with agreeing the terms of audit?

PSA 220

Correct! PSA 210

PSA 300

PSA 200
 Question 18 2 / 2 pts

Which of the following conditions supports an increase in detection risk?

Internal control over shipping, billing, and recording of sales revenue is

weak.

Correct! Internal control over cash receipts is excellent.

Study of the business reveals that the client recently acquired a new
company in an unrelated industry.

Application of analytical procedures reveals a significant increase in sales

revenue in December, the last month of the calendar year.

Question 19 0 / 2 pts

You are the auditor assigned to AB Corp. for the year-ended December
31, 2020. Which of the following statements best describes your
responsibility regarding the detection of fraud as the auditor?

An auditor is responsible for the failure to detect fraud only when an

unqualified opinion is issued.
 An auditor must extend auditing procedures to actively search for evidence
of fraud where the examination indicates that fraud may exist.

ou Answered
An auditor is responsible for the failure to detect fraud only when such
failure clearly results from nonperformance of audit procedures specifically
described in the engagement letter.

orrect Answer
An auditor should design audit procedures that will provide reasonable
assurance that the financial statements are free from material
misstatement due to errors and/or fraud.

Question 20 2 / 2 pts

Which of the following matters would an auditor most likely consider when
establishing the scope of the audit?

The entity’s time table for reporting

Audit areas where the is high risk of material misstatement

Correct!
The expected audit coverage, including the number and locations of the
entity’s components to be included.

The entity’s time table for reporting

Question 21 2 / 2 pts
 The understanding and agreement between the client and the auditor as
to the degree of responsibilities to be assumed by each are normally set
forth in a(an)

management letter.

audit report.

representation letter.

Correct! engagement letter.

Question 22 2 / 2 pts

When an auditor believes that an understanding with the client has not
been established, he or she should ordinarily

Perform the audit with increase professional skepticism.

Assess control risk at the maximum level and perform a primarily

substantive audit.

Modify the scope of the audit to reflect an increased risk of material

misstatement due to fraud.

Correct! Decline to accept or perform the audit.

Question 23 2 / 2 pts
 What is the responsibility of a successor auditor to communicate with the
predecessor auditor in connection with a prospective new client?

The successor auditor should contact the predecessor auditor if the client
authorizes contact.

Correct!
The successor auditor should obtain permission from the prospective client
to contact the predecessor auditor.

The successor auditor has no responsibility to contact the predecessor

auditor.

The successor auditor need not contact the predecessor if the successor is
aware of all available relevant facts.

Question 24 2 / 2 pts

In pursuing its quality control objectives with respect to acceptance of a

client, a CPA firm is not likely to

Make inquiries of the proposed client's legal counsel.

Review financial statements of the proposed client.

Make inquiries of previous auditors.

Correct! Review the personnel practices of the proposed client.

 Question 25 2 / 2 pts

Which of the following statements is/are correct?

I. According to PSA 300, the auditor may still change the overall audit
strategy and the audit plan during the course of the audit.

II. According to PSA 300, the auditor may organize meetings with
management and those charged with governance to discuss the nature,
timing and extent of the audit work.

Correct! Both I & II

Neither I nor II

I only

II only

Question 26 2 / 2 pts

If it is probable that the judgment of a reasonable person would have

been changed or influenced by the omission or misstatement of
information, then the information is

Pervasive.

Correct! Material.

Relevant.

Significant.
 Question 27 2 / 2 pts

Which of the following statements is/are correct?

I. An auditor may not eliminate audit risk because of the inherent

limitations of audit but it may be reduced by doing more audit procedures.

II. Engagement risk may be eliminated by not accepting a particular client.

Neither I nor II

Correct! Both I & II

I only

II only

Question 28 2 / 2 pts

Which of the following statements is/are correct?

I. During the risk assessment phase, the auditor shall design the overall
responses to the assessed risk of material misstatement.

II. In risk response phase, the auditor shall evaluate the audit evidence
obtained to determine if additional audit procedures are required to be
done.

Correct! Neither I nor II

I only

Both I & II
 II only

Question 29 2 / 2 pts

Which of the following statements is/are correct?

I. Reasonable assurance means that the auditor guarantees that the

financial statements are free from material misstatements.

II. Risk-based audit approach is different from account-based approach

because it begins with the assessment of the types and likelihood of
misstatements in the financial statements as a whole.

Both I & II

Neither I nor II

I only

Correct! II only

Question 30 0 / 2 pts

Which of the following statements is/are correct?

I. Financial risk and business risk are risks that exist before the audit
engagement.

II. Business risk may be affected by the geographic location of the entity,
the economic climate and technological changes.

I only
 II only

ou Answered Neither I nor II

orrect Answer Both I & II

Quiz Score: 48 out of 60

Quiz 3: Risk Response & Audit Sampling
Due Mar 26 at 11am Points 60 Questions 30 Available Mar 26 at 10am - Mar 26 at 11am about 1 hour
Time Limit 45 Minutes

Instructions
Dear students,

For this quiz, you are given a MAXIMUM OF 45 MINUTES to answer and submit the quiz provided. This shall be taken on March 26,
2021, Friday, 10:00 to 11:00 a.m. only. The 45-minute time limit will begin to run as soon as you click "Take the Quiz". This means
that the time will continue to run even if you leave the quiz for whatever reason.

The quiz is composed of 30 theory questions worth 2 points each.

PLEASE BE REMINDED OF THE FOLLOWING:

1. This is an independent quiz; do not work with others and do not use any references or review materials during the quiz. Taking
photos/screenshots of the contents of the quiz, disclosing information to other students regarding the contents of the quiz, or answering
the quiz on behalf of another person are considered cheating. Students who commit such acts will be sanctioned in accordance with the
HAU Student Handbook.
2. All answers will be submitted through the Canvas questions. Take note that you cannot go back to the previous item anymore. (No
multiple attempts)

Do your your best. God bless you!

This quiz was locked Mar 26 at 11am.

Attempt History
Attempt Time Score
LATEST Attempt 1 34 minutes 22 out of 60

Score for this quiz: 22 out of 60

Submitted Mar 26 at 10:35am
This attempt took 34 minutes.

Question 1 2 / 2 pts

The auditor should perform tests of controls on

Relevant controls that have a material effect on the financial statements.

Correct!
Relevant controls when the auditor intends to rely on such controls in determining the nature, timing and
extent of substantive procedures.

Relevant controls that were reviewed

Operating effectiveness of relevant controls which represent material weaknesses.

 Question 2 2 / 2 pts

The tolerable deviation rate for a control test is generally

Lower than the expected deviation rate in the related accounting records.

Correct! Higher than the expected deviation rate in the related accounting records.

Unrelated to the expected deviation rate in the related accounting records.

Identical to the expected deviation rate in the related accounting records

Question 3 2 / 2 pts

The use of prenumbered invoices, then accounting for their numeric sequence, would prove which of
the following assertion?

Occurrence

Accuracy

Correct! Completeness

Cutoff

Question 4 0 / 2 pts

An advantage of using statistical over non-statistical sampling methods in tests of controls is that the
statistical methods

You Answered Can more easily convert the sample into a dual-purpose test useful for substantive testing.

Eliminate the need to use judgment in determining appropriate sample sizes.

Correct Answer Provide an objective basis for quantitatively evaluating sample risk.

Afford greater assurance than a non-statistical sample of equal size.

Question 5 2 / 2 pts
 In determining the existence of accounts receivable, which of the following would the auditor consider
most reliable?

Credits to accounts receivable from the cash receipts book after the close of business at year-end.

Correct! Confirmation replies received directly from customers.

Direct telephone communication between auditor and debtor.

Documents that supports the accounts receivable balance.

Question 6 0 / 2 pts

Tests of controls are designed to obtain evidence to support the auditor’s assessment of control risk

at zero level

Correct Answer at less than high level

You Answered at the lowest level

at maximum level

Question 7 2 / 2 pts

A bank auditor is interested in estimating the average account balance of its depositors based on a
sample. This substantive test is an example of

Sequence sampling.

Discovery sampling.

Correct! Variables sampling.

Attribute sampling.

Question 8 0 / 2 pts

Auditors may use positive and/or negative forms of confirmation requests for accounts receivable. An
auditor most likely will use
You Answered
The positive form when the control structure related to receivables are satisfactory, and the negative form
when controls are unsatisfactory.

The positive form to confirm all balances, regardless of size.

Correct Answer
A combination of the two forms, with the positive form used for large balances and the negative form for
small balances.

A combination of the two forms, with the positive form used for trade receivables and the negative form for
other receivables.

Question 9 0 / 2 pts

Assertions used by the auditor fall into three categories. Existence is included under

You Answered All of the choices.

Assertions about presentation and disclosure.

Assertions about classes of transactions and events for the period under audit.

Correct Answer Assertions about account balances at the period end.

Question 10 0 / 2 pts

Which of the following types of procedures will aid the auditor in obtaining evidence regarding the
mathematical accuracy of accounting records and other information?

Confirmation

Inspection

Correct Answer Recalculation

You Answered Analytical Procedures

Question 11 2 / 2 pts
 An auditor is testing credit authorization procedures by examining sales invoices for credit approval by
the credit department. The procedures will be considered to be working adequately if 96% of all
sales invoices either indicate approval or are cash sales. The auditor selects a random sample of 100
invoices. In this situation, which of the following outcomes illustrates underassessment or the risk of
assessing control risk too low?

The auditor finds five deviations and concludes that procedures work inadequately. The true population
deviation rate is 6%.

The auditor finds no deviations and concludes that the procedures work adequately. The true population
deviation rate is 2%.

The auditor finds five deviations and concludes that procedures work inadequately. The actual population
deviation rate is 2%.

Correct!
The auditor finds no deviations and concludes that procedures work adequately. The true population
deviation rate is 5%.

Question 12 2 / 2 pts

An auditor performs a test to determine whether all merchandise for which the client was billed was
received. The population for this test consists of all

Receiving reports.

Merchandise received.

Canceled checks.

Correct!
Vendors' invoices.

Question 13 0 / 2 pts

While performing a test of details during an audit, an auditor determined that the sample results
supported the conclusion that the recorded account balance was materially misstated. It was, in fact,
not materially misstated. This situation illustrates the risk of

Assessing control risk too low.

 Assessing control risk too high.

Correct Answer Incorrect rejection.

You Answered Incorrect acceptance.

Question 14 2 / 2 pts

Which of the following statements is correct concerning statistical sampling in tests of controls?

The expected population deviation rate has little or no effect on determining sample size except for very
small populations.

Correct!

The population size has little or no effect on determining sample size except for very small populations.

As the population size doubles, the sample size also should double.

For a given tolerable rate, a larger sample size should be selected as the expected population deviation
rate decreases.

Question 15 2 / 2 pts

A number of factors influences the sample size for a substantive test of details of an account
balance. All other factors being equal, which of the following would lead to a larger sample size?

Correct! Smaller measure of tolerable error

Lowering of assessed level of control risk

Smaller expected frequency of errors

Lowering of assessed inherent risk through use of analytical review procedures

Question 16 2 / 2 pts

Which of the following best illustrates the concept of sampling risk?

 An auditor may select audit procedures that are not appropriate to achieve the specific objective.

The documents related to the chosen sample may not be available for inspection.

Correct!
A randomly chosen sample may not be representative of the population as a whole on the characteristic of
interest.

An auditor may fail to recognize errors in the documents examined for the chosen sample.

Question 17 0 / 2 pts

Substantive audit procedures

Correct Answer May be either tests of transactions, tests of balances, or analytical procedures.

Are designed to detect deviations from prescribed entity procedures.

May be eliminated under certain circumstances.

You Answered
Will increase proportionately with the auditor's assessment of control risk.

Question 18 0 / 2 pts

How would increases in tolerable misstatement and assessed level of control risk affect the sample
size in a substantive test of details?

Correct Answer
Decrease sample size; Increase sample size

Decrease sample size; Decrease sample size

You Answered Increase sample size; Decrease sample size

Increase sample size; Increase sample size

Question 19 2 / 2 pts
 You are part of the engagement team of Frontliners Auditing Firm which was assigned as auditor of
COVID Company. During the course of the audit, you anticipate reliance on the client’s internal
control. Thus, you would

No longer perform tests of controls and proceed to substantive tests.

Reduce the extent of substantive tests as a result of reliance to internal control.

Correct!
Test controls and use the results of testing as a basis for determining the nature, extent and timing of
substantive tests.

Perform tests of controls and increase the amount of substantive tests.

Unanswered Question 20 0 / 2 pts

The risk of incorrect acceptance and the risk of assessing control risk too low relate to the

Correct Answer Effectiveness of the audit.

Preliminary estimates of materiality levels.

Allowable risk of tolerable misstatement.

Efficiency of the audit.

Unanswered Question 21 0 / 2 pts

Which of the following is the least persuasive type of audit evidence?

Correspondence between auditor and vendors.

Correct Answer Copies of sales invoices inspected by the auditor.

Documents mailed by outsiders to the auditor.

Computations made by the auditor.

Unanswered Question 22 0 / 2 pts

 In determining the sample size for a test of controls, an auditor should consider the likely rate of
deviations, the allowable risk of assessing control risk too low, and the

Nature and cause of deviations.

Population size.

Risk of incorrect acceptance.

Correct Answer Tolerable deviation rate.

Unanswered Question 23 0 / 2 pts

Which of the following audit procedures would be most appropriate to address the existence assertion
for sales?

Confirm cash deposits in banks

Review collectibility

Perform analytical procedures

Correct Answer Confirm receivables balances

Unanswered Question 24 0 / 2 pts

Which of the following would most likely be detected by an auditor's review of a client's sales cutoff?

Unauthorized goods returned for credit.

Correct Answer Unrecorded sales for the year

Excessive sales discounts.

Lapping of year end accounts receivable.

Unanswered Question 25 0 / 2 pts

Which of the following statements is/are correct?

I. The reliability of evidence is influence by its nature and materiality.

 II. Sufficiency is the measure of the quantity of evidence which the standards require.

II only

Correct Answer Neither I nor II

Both I & II

I only

Unanswered
Question 26 0 / 2 pts

An auditor is testing internal control procedures that are evidenced on an entity’s vouchers by
matching random numbers with voucher numbers. If a random number matches the number of a
voided voucher, that voucher ordinarily should be replaced by another voucher in the random sample
if the voucher

Cannot be located.

Represents an immaterial peso amount.

Correct Answer Has been properly voided.

Constitutes a deviation.

Unanswered
Question 27 0 / 2 pts

Which of the following sampling methods is most useful to auditors when testing for internal control
effectiveness?

Variables sampling

Unrestricted random sampling with replacement

Stratified random sampling

Correct Answer Attribute sampling

Unanswered
Question 28 0 / 2 pts
 When performing a test of a control with respect to control over cash receipts, an auditor may use a
systematic sampling technique with a start at any randomly selected item. The biggest disadvantage
of this type of sampling is that the items in the population

Correct Answer May occur in a systematic pattern, thus destroying the sample randomness.

May systematically occur more than once in the sample.

Must be systematically replaced in the population after sampling.

Must be recorded in a systematic pattern before the sample can be drawn.

Unanswered Question 29 0 / 2 pts

Which of the following audit procedures is least likely to detect an unrecorded liability?

Mailing a standard bank confirmation form.

Analysis and recalculation of interest expense.

Reading the minutes of board of directors' meetings

Correct Answer Analysis and recalculation of depreciation expense.

Unanswered Question 30 0 / 2 pts

Which of the following factors is most important in determining the appropriateness of audit
evidence?

The objectivity of the auditor gathering the evidence.

The independence of the source of evidence.

The quantity of the evidence obtained.

Correct Answer The reliability of the evidence in meeting the audit objective.

Quiz Score: 22 out of 60