No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
iCARE First Preboard – AT
1. Holding other planning considerations equal, a decrease in the amount of misstatement
in a class of transactions that an auditor could tolerate most likely would cause the auditor
to
a. The planned substantive tests prior to the balance sheet date
b. Perform the planned auditing procedures close to the balance sheet date
c. Increase the assessed level of control risk for relevant financial statement
assertions
d. Decrease the extent of auditing procedures to be applied to the class of
transactions
2. Which is least likely beneficial in adequately planning an audit of financial statements?
a. Assist in coordination of work done by auditors of components and experts.
b. Assist in the selection of engagement team members with appropriate levels of
capabilities and competence.
c. Aid the auditor to identify and resolve potential problems on a timely basis.
d. Aid the auditor to devote appropriate attention to all areas of the audit.
3. Evidence is generally considered appropriate when
a. it consists of written statements made by managers of the enterprise under audit
b. it has the qualities of being relevant, objective, and free from known bias
c. it has been obtained by random selection
d. there is enough of it to afford a reasonable basis for an opinion on financial
statements
4. While assessing the risks of material misstatement auditors identify risks, relate risk to
what could go wrong, consider the magnitude of risks and .
a. determine materiality levels
b. consider the complexity of the transactions involved
c. assess the risk of misstatements due to illegal acts
d. consider the likelihood that the risk could result in material misstatements
5. Which of the following is least likely to be included in an auditor's inquiry of management
while obtaining information to identify the risks of material misstatement due to fraud?
a. Does it have programs to mitigate fraud risks?
b. Does it have knowledge of fraud on suspect fraud?
c. Are financial reporting operations controlled by and limited to one location?
d. Has it reported to the audit committee the nature of the company's internal
control?
6. Which of the following is a distinguishing characteristic of an attestation engagement?
a. Independence of the practitioner
b. Written assertions from the responsible party
c. Written assertions from the practitioner
d. Positive form of conclusion
7. An operational audit has as one of its objectives to:
a. make recommendations for improving performance.
b. determine whether the financial statements fairly present the entity’s operations.
c. evaluate the feasibility of attaining the entity’s operational objectives.
d. report on the entity’s relative success in attaining profit maximization.
1P a g e JABELLAR /AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
8. Which of the following is a type of audit evidence?
a. Oral responses to the auditor from employees of the company under audit.
b. Written communications from company employees or outsiders.
c. Observations made by an auditor.
d. All of the above.
9. Which one of the following is more difficult to evaluate objectively?
a. Presentation of financial statements in accordance with generally accepted
accounting principles.
b. Compliance with government regulations.
c. Efficiency and effectiveness of operations.
d. All three of the above are equally difficult.
10. When is the use of analytical procedures required in an audit?
I. In the planning phase
II. In the evidence-gathering phase
III. In the concluding phase
a. I only
b. I and II only
c. I and III only
d. I, II, and III
11. Sending confirmation letters to customers for their outstanding balances provide primary
evidence on
a. Completeness and valuation.
b. Valuation and rights and obligations.
c. Rights and obligations and existence.
d. Existence and completeness.
12. In determining the type of opinion to express, an auditor assesses the nature of the report
qualifications and the materiality of their effects. Materiality will be the primary factor
considered in the choice between.
a. An "except for" opinion and an adverse opinion.
b. An "except for" opinion and a qualified opinion.
c. An adverse opinion and a disclaimer of opinion.
d. An qualified opinion and a modified opinion.
13. The auditor’s judgment concerning the overall fairness of presentation of financial
position, results of operations, and changes in cash flow is applied within the framework
of:
a. quality control.
b. Philippine Standards on Auditing, which include the concept of materiality.
c. the auditor’s evaluation of the audited company’s internal control.
d. generally accepted accounting principles.
14. Litt Corporation’s stock is listed on a national stock exchange and registered with the
Securities and Exchange Commission. Litt’s management hires a CPA to perform an
independent audit of Litt’s financial statements. The primary objective of this audit is to
provide assurance to the:
a. investors in Litt Corporation’s stock.
b. stock exchange.
c. Securities and Exchange Commission.
d. management of Litt Corporation.
2P a g e JABELLAR /AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
15. The audit report date on a standard unqualified report indicates:
a. the last day of the fiscal period.
b. the date on which the financial statements were filed with the Securities and
Exchange Commission.
c. the last date on which users may institute a lawsuit against either client or auditor.
d. the last day of the auditor’s responsibility for the review of significant events that
occurred subsequent to the date of the financial statements.
16. In order to establish whether the preconditions for an audit are present, the auditor shall
determine whether the financial reporting framework to be applied in the preparation of
the financial statements is acceptable. The auditor should also obtain management's
agreement that it acknowledges and understands its responsibility (choose the exception).
a. For the preparation of the financial statements in accordance with the applicable
financial reporting framework, including where relevant their fair presentation.
b. To provide the auditor with unrestricted access to persons within and outside the
entity from whom the auditor determines it necessary to obtain audit evidence.
c. For such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
d. To provide the auditor with access to all information of which management is
aware that is relevant to the preparation of the financial statements such as
records, documentation and other matters.
17. Statement I: An entity's risk assessment process includes how management identifies business
risks relevant to the preparation of financial statements in accordance with the entity's
applicable financial reporting framework, estimates their significance, assesses the likelihood
of their occurrence, and decides upon actions to respond to and manage them and the results
thereof.
Statement II: Management's ability to make appropriate decisions in managing and controlling
the entity's activities and to prepare reliable financial reports affects the quality of system-
generated information.
Statement III: Separate evaluations of internal controls are usually performed by internal
auditors.
a. All statements are true.
b. Two of the statements are true.
c. Only one statement is true.
d. All of the statements are false.
18. Conditions requiring a departure from an unqualified audit report include all but which of the
following?
a. Management refused to allow the auditor to confirm significant accounts receivable
for which there were no alternative procedures performed.
b. Management decided not to allow the auditor to confirm significant accounts
receivable, but the auditor obtained sufficient appropriate evidence by examining
subsequent cash receipts.
c. The audit partner’s dependent child received a gift of 100 shares of a client’s stock for
her birthday from a grandparent.
d. Management has determined that fixed assets should be reported in the balance sheet
at their replacement values rather than historical costs. The auditors do not concur.
19. Which officer has the responsibility for the signature plate for checks?
a. President
b. Secretary
c. Treasurer
d. Vice President for Finance
3P a g e JABELLAR /AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
20. Which is considered a specific type of transaction authorization?
a. Establishment of requirements to be met in determining a customer's credit limits.
b. Setting of automatic reorder points for material or merchandise.
c. Approval of a detailed construction budget for a warehouse.
d. Establishment of sales prices for products to be sold to any customer.
21. Credits to the accounts receivable general and subsidiary ledgers are usually based on:
a. Sales invoices
b. Remittance advices
c. Shipping documents
d. Sales orders
22. The responsibility for the preparation of the financial statements and the accompanying
footnotes belongs to:
a. the auditor.
b. management.
c. both management and the auditor equally.
d. management for the statements and the auditor for the notes.
23. The auditor has no responsibility to plan and perform the audit to obtain reasonable
assurance that misstatements, whether caused by errors or fraud, that are not ________
are detected.
a. important to the financial statements
b. statistically significant to the financial statements
c. material to the financial statements
d. identified by the client
24. In communicating internal control deficiencies to management and/or those charged with
governance, which of the following should be included in the written communication made
by the auditor?
a. A description of the deficiencies and an explanation of their potential effects.
b. Explanation that the purpose of the audit was for the auditor to express an opinion
on the financial statements.
c. Explanation that the audit included consideration of internal control relevant to the
preparation of the financial statements to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of internal control.
d. All of the above.
25. This refers to the susceptibility of an accounting estimate and related disclosures to an
inherent lack of precision in its measurement.
a. Estimation uncertainty
b. Management bias
c. Inherent risk
d. Allowance for measurement errors
26. This refers to the risk that financial statements to be audited are already materially
misstated prior to the audit.
a. Audit risk
b. Assurance engagement risk
c. Risk of material misstatements
d. Detection risk
4P a g e JABELLAR /AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
27. Which of the following is not one of the inherent limitations of internal controls?
a. Collusion
b. Human error
c. Cost-benefit consideration
d. Lack of paper-based documentation
28. In comparing management fraud with employee fraud, the auditor’s risk of failing to
discover the fraud is:
a. greater for management fraud because managers are inherently more deceptive
than employees.
b. greater for management fraud because of management’s ability to override
existing internal controls.
c. greater for employee fraud because of the higher crime rate among blue collar
workers.
d. greater for employee fraud because of the larger number of employees in the
organization.
29. When planning the audit, if the auditor has no reason to believe that illegal acts exist, the
auditor should:
a. include audit procedures which have a strong probability of detecting illegal acts.
b. still include some audit procedures designed specifically to uncover illegalities.
c. ignore the issue.
d. make inquiries of management regarding their policies for detecting and
preventing illegal acts and regarding their knowledge of violations, and then
rely on normal audit procedures to detect errors, irregularities, and
illegalities.
30. Which of the following should initiate communication in an initial audit?
a. Predecessor auditor
b. Successor auditor
c. Audit client
d. Both A and B
31. A measure of the auditor’s assessment of the likelihood that there are material
misstatements in an account before considering the effectiveness of the client’s internal
control is called:
a. control risk.
b. acceptable audit risk.
c. statistical risk.
d. inherent risk.
32. The relationship between the acceptable level of audit risk and the detection risk that an
auditor should allow when performing engagements is
a. Direct
b. Inverse
c. A or B.
d. These are unrelated.
33. Which of the following is not a potential effect of an auditor’s decision that a lower
acceptable audit risk is appropriate?
a. More evidence is accumulated.
b. Less evidence is accumulated.
c. Special care is required in assigning experienced staff.
d. Review of audit documentation is performed by personnel not assigned to the
engagement.
5P a g e JABELLAR /AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
34. The amount or amounts set by the auditor at less 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.
a. Performance materiality
b. Tolerable misstatement
c. Tolerable deviation
d. Particular FS items materiality
35. Even with the most effectively designed internal control, the auditor must obtain audit
evidence, beyond testing the controls, for every:
a. transaction.
b. financial statement account.
c. material financial statement account.
d. financial statement account that will be relied upon by third parties.
*End of First Preboards*
6P a g e JABELLAR /AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
