OPERATIONS AUDITING
ACCTG ELECT 1A
PRELIM EXAM
INSTRUCTIONS:
1. SEND YOUR ANSWERS in this email ad carumbamarilou4@[Link]
USE WORD OR EXCEL.. OTHER APPS OR FORM WILL NOT BE ACCEPTED (attached file)
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TAKE NOT[Link] THOSE WHO WILL NOT FOLLOW THE ABOVE INSTRUCTION, YOUR TEST PAPER WILL NOT
BE CHECK Or DEDUCTION OF 20% OR MORE ON YOUR SCORE DEPENDING ON THE LENGHT OF HOURS
LATE OR THE VIOLATIONS MADE.
NAME: Date: FEB. 26, 2022
Professor: Marilou Oro-Carumba, CPA,MPA,MBA Score:
PART I MULTIPLE CHOICE ( 2 points each)
1. Which of the following professional services would be considered an attestation
engagement?
a. A consulting service engagement to provide computer processing advice for a client.
b. An engagement to report on statutory requirements
c. An income tax engagement to prepare federal and state tax returns
d. The compilation of financial statements from a client’s financial records.
2. In performing an attestation engagement, a CPA typically
a. Supplies litigation support services
b. Assesses control risk at a low level
c. Expresses a conclusion about an assertion
d. Provides management consulting advice
3. Compliance auditing often extends beyond audits leading to the expression of opinion on the
fairness of financial presentation and includes audits of efficiency, economy effectiveness, as
well as
a. Accuracy b. Evaluation
c. Adherence to specific rules of procedures d. internal control
4. A summary of findings rather than assurance is most likely to be included in a(n):
a. Agreed-upon procedures report
b. Compilation report
c. Examination report
d. Review report
5. The attest function:
a. Is an essential part of every engagement by the CPA, whether performing auditing,
tax work,
or other services.
b. Includes the preparation of a report of the CPA’s findings
c. Requires a consideration of internal control
d. Requires a complete review of all transactions during the period under examination
6. attestation risk is limited to a low level in which of the following engagement(s)?
a. both examinations and reviews
b. Examinations, but not reviews
c. reviews, but not examinations
d. Neither examinations nor reviews
7. which of the following terms best describes the audit of a taxpayer’s tax return by an BIR
auditor?
a. Operational audit b. internal audit c. compliance audit d. government
audit
9. Inquiries and analytical procedures ordinarily form the basis for which type of engagement?
a. Agreed-upon procedures
b. Audit
c. Examinations
d. review
10. A typical objective of an organizational audit is for the auditor to:
a. Determine whether the financial statements fairly present the entity’s operations
b. Evaluate the feasibility of attaining the entity’s operational objectives
c. Make recommendations for improving performance
d. Report on the entity’s relative success in attaining profit maximization.
11. In the auditing environment, failure to meet auditing standards is often
a. an accepted practice
b. a suggestion of negligence
c. conclusive evidence of negligence
d. tantamount to criminal behavior
12. the prudent person concept establishes in law that
a. the CPA firm is not expected to be infallible
b. an audit in accordance with Standards on Auditing is subject to limitations and cannot
be
relied upon for complete assurance that all errors and irregularities will be found.
c. the courts do not require that the auditor become the insurer or guarantor of the
accuracy of
the statements
d. all three of the above are true.
13. to succeed in an action against the auditor, the client must be able to show that
a. the auditor was grossly negligent
b. the auditor was fraudulent
c. there is a close causal connection between the auditor’s breach of the standard of
due care
and the dangers suffered by the client
d. there was a written contract
14. The standard of due care to which the auditor is expected to be held is referred to as the
a. prudent person concept c. due care concept
b. common law doctrine d. reckless regard doctrine
15. the existence of extreme or unusual negligence, even through there was no intent to
deceive or do
harm, is
a. fraud b. constructive fraud c. gross fraud d. ordinary fraud
16. Most lawsuits against CPAs are filed by
a. Client c. third party beneficiaries
b. third parties d. government agencies, such as SEC
17. The Commission on Audit (COA):
a. is primarily concerned with rapid processing of all accounts payable incurred by the
national
government
b. responsibilities include conducting operational audits to ensure spending meets
Congress’s
requirements
c. is a multinational organization of professional accountants
d. is primarily concerned with budgets and forecasts approved by the SEC.
18. The risk associated with survivability and profitability is referred to as
a. information risk b. inherent risk c. relative risk d. business risk
19. Which of the following attributes is more essential for an auditor than of management?
a. integrity c. independence
b. competence d. keeping informed on current professional developments
20. Attestation risk is limited to a low level in which of the following engagement(s)?
a. Both examinations and reviews
b. examinations, but not reviews
c. reviews, but not examinations
d. neither examinations nor reviews
PART ll PROBLEMS – Discuss/explain your answer ( 10 points each question)
1. CASE 1
Michael Diaz, owner of Diaz Company, applied for a bank loan and was informed by the
banker that audited financial statements if the business had to be submitted before the bank
could consider the loan application. Michael then retained Arnold Benamer, CPA, to perform an
audit. Michael informed Arnold that audited financial statements were required by the bank
and that the audit must be completed within three weeks. Michael also promised to pay Arnold
a fixed fee plus a bonus of the bank approved the loan. Arnold agreed and accepted the
engagement.
The first step taken by Arnold was to hire two accounting students to conduct the audit. He
spent several hours telling them exactly what to do. Arnold told the students not to spend time
reviewing controls but instead to concentrate on proving the mathematical accuracy of the
ledger accounts and summarizing the data in the accounting records that support Diaz
Company’s financial statements. The students followed Arnold’s instructions and after two
weeks gave Arnold the financial statements, which did not include any notes. Arnold reviewed
the statements and prepared an unqualified audit report. The report, however did not refer to
financial reporting standards.
Required:
Indicate how the actions of Arnold resulted in a failure to comply with the Standards of
Auditing.
2. Evaluate the following quotation: “Every business, large or small, should have an annual audit
by a CPA
firm. To forgo an audit because of its cost is false economy”.
3. Name the core competencies required in the public accounting profession.
END
