1.

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.

2. 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 consideration of internal control.
D. Requires a complete review of all transactions during the period under examination.

3. Governmental auditing often extends beyond examinations leading to the expression of opinion
on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness,
and also:
A. Accuracy.
B. Evaluation.
C. Compliance.
D. Internal control.

4. Statement 1: The auditors' report on a corporation's financial statements usually is addressed to

the president of the company.
Statement 2: An audit should be designed to provide reasonable assurance of detecting all illegal
acts.

A. True, True
B. True, False
C. False, True
D. False, False

5. Statement 1: Preliminary arrangements with clients should be outlined in the

management letter.
Statement 2: An audit plan includes a detailed listing of the audit procedures to be
performed in the verification of items in the financial statements.
Statement 3: The auditors' tests of controls are designed to substantiate the fairness of specific
financial statement accounts.

A. Only one statement is true.

B. Only two statements are true.
C. All statements are true.
D. None of the statements are true.

6. RCB CPA is being engaged to audit the financial statements of RR Corp. for the first time. Which
of the following factors would most likely cause RCB CPA to decline from the engagement?
A. RR Corp. has fired its prior auditor.
B. RR Corp. is unwilling to make financial records available to RCB CPA.
C. RCB CPA lacks a thorough understanding of the prospective client's operations and industry.
D. RCB CPA is unable to review the predecessor auditor's working papers.

7. is/are generally included in an auditor's engagement letter.

A. Limitations of the engagement.
B. Factors to be considered in establishing preliminary judgments about materiality.
C. Management's liability for illegal acts committed by its employees.
 D. The auditor's responsibility to obtain negative assurance relating to the occurrence of non-
compliance with laws and regulations.

8. When performing risk assessment, auditors identify risks, relate risks to what could go wrong,
consider the magnitude of risks and
A. Assess the risk of misstatements due to non-compliance with laws and regulations.
B. Consider the complexity of the transactions involved.
C. Consider the likelihood that the risks could result in material misstatements.
D. Determine materiality levels.

9. Financial statement audits are designed to obtain reasonable assurance of detecting material
misstatements due to:
Errors Misappropriation of assets Management fraud
A. Yes Yes Yes
B. Yes No Yes
C. Yes No No
D. No Yes Yes

10. Statement 1: Incompatible duties exist when an employee is in a position to perpetuate and
conceal errors or fraud.
Statement 2: Internal auditors should preferably report to the chief accounting officer of the
company.
Statement 3: The auditors' communication of internal control significant deficiencies should
be addressed only to senior management of the company.

A. True, True, True

B. True, True, False
C. True, False, False
D. False, False, True

11. Which of the following would most likely constitute a significant deficiency?
A. Management's failure to renegotiate unfavorable long-term purchase commitments.
B. Recurring operating losses that may indicate going concern problems.
C. Evidence of a lack of objectivity by those responsible for accounting decisions.
D. Management's current plans to reduce its ownership equity in the entity.

12. How frequently must an auditor test the operating effectiveness of controls that appear to function
as they have in past years and on which the auditor intends to rely?
A. Quarterly.
B. Each audit.
C. At least every second audit.
D. At least every third audit.

13. Which of the following is least likely to be evidence of operating effectiveness of controls?
A. Cancelled supporting documents.
B. Confirmations of accounts receivable.
C. Records documenting usage of computer programs.
D. Signatures on authorization forms.

14. As performance materiality is decreased, the auditor should plan more work on individual
accounts to
A. Find smaller misstatements.
B. Find larger misstatements.
C. Increase the tolerable misstatement in the accounts.
D. Decrease the risk of assessing control risk too low.

15. Beere, Cashew, and Company was registered with the Securities and Exchange Commission
(SEC) on March 2022. The firm also applied for a Certificate of Accreditation and was approved
on April 20, 2022. Such certificate will expire on

A. September 30, 2024

 B. December 31, 2024
C. March 31, 2025
D. April 20, 2025

16. Which of the following situations leads to an inefficient audit?

a. The auditor’s projected misstatements based on a sample is below the tolerable
misstatement threshold.
b. The results of attributes sampling resulted to a sample deviation rate that is below the
auditor’s expected deviation rate.
c. The auditor’s expected deviation rate exceeds the tolerable deviation rate, when the
controls are actually ineffective.
d. The auditor’s expected deviation rate exceeds the tolerable deviation rate, when the
controls are actually effective.

17. Tracing copies of computer-prepared sales invoices to copies of the corresponding computer-
prepared shipping documents provides evidence that
a. Shipments to customers were properly billed.
b. Sales billed to customers were actually shipped.
c. Entries in the accounts receivable master file were all billed properly.
d. Entries in the accounts receivable master file were all shipped properly.

18. Which of the following is least likely used by the auditor in testing the completeness of the
population (e.g. listing of sales transactions)?
a. Financial totals
b. Upper and lower limits for transaction dates
c. Hash totals
d. Validity checks

19. Accounts which do not exceed the scoping materiality threshold set by the auditor may still be
included in testing based on qualitative risk factors. Which of the following is not among those
qualitative risk factors considered by the auditor?
a. Accounting and reporting complexities
b. Risk of fraud and history of fraud or error
c. Level of judgment and estimates
d. Whether the audit client is a listed entity

20. Statement 1: A professional accountant may purchase all or part of another firm on the basis that
payments will be made to individuals formerly owning the firm or to their heirs or estates. Such
payments are not referral fees or commissions as defined by the IESBA Code.
Statement 2: If a reasonable and informed third party would not conclude that the professional
accountant’s judgment is compromised, the professional accountant may accept gifts and
hospitality provided by an employer or client.
a. True, True
b. True, False
c. False, True
d. False, False

21. Which of the following concepts or definition is not provided within the Auditor’s
Responsibilities paragraph in an unmodified report?
a. Materiality
b. Reasonable assurance
c. Misstatements arising from fraud or error
d. Purpose and intended users of the report

22. The main difference between an emphasis of matter (EOM) paragraph and an other matter (OM)
paragraph is that the includes a reference to the notes to financial
statements, and the includes a statement that the auditor’s opinion is not
modified.
a. Emphasis of matter; Other Matter
b. Other Matter; Emphasis of Matter
 c. Emphasis of Matter; Emphasis of Matter
d. Other Matter; Other Matter

23. The main objective of the auditor in auditing related party and related party transactions is to
.
a. Verify the completeness of disclosures involving related parties and related party
transactions.
b. Verify the existence of related parties and occurrence of related party transactions
disclosed in the financial statements.
c. Determine the reasonableness of measurement of the related party transactions.
d. Identify whether fraud has occurred in relation to related parties.

24. An adverse opinion may be issued by the auditor if .

a. The audit client uses the going concern assumption when the auditor determines that an
alternative basis of accounting should be used.
b. The going concern assumption is still appropriate, but there were material uncertainties
related to going concern that were not properly disclosed by management in the financial
statements.
c. Both A and B.
d. Neither A nor B.

25. Which of the following elements is not essential to an audit working paper prepared in
accordance with auditing standards?
a. Name of audit client.
b. Exceptions noted and how they were resolved.
c. Name and contact details of the preparer.
d. Tick marks or other indicators of procedures performed.

26. is a sample selection approach wherein the higher the amount of an item, the higher
its probability of being selected.
a. Monetary unit sampling
b. Random selection
c. Systematic selection
d. Biased selection

27. It is a software that controls the operation of a computer and directs the processing of programs
(as by assigning storage space in memory and controlling input and output functions) used by an
entity.
a. Operating system
b. Database system
c. Networking system
d. Accounting information system

28. It is a shared, immutable ledger that facilitates the process of recording transactions and tracking
assets in a business network. This technology is the foundation for the development of
cryptocurrencies and related applications.
a. Flat file
b. Database
c. Blockchain
d. Open Journal

29. A firm must demonstrate a commitment to quality through a culture that exists throughout the
firm, which recognizes and reinforces the firm’s role in serving the public interest, the importance
of professional ethics, the responsibility of all personnel to uphold such culture and the
importance of quality in the firm’s strategic decisions and actions. This element of quality
management is .
a. Relevant ethical requirements
b. Governance and leadership
c. Engagement performance
d. The firm’s risk assessment process
30. An audit client’s monitoring activities are considered .
a. Entity-level controls
b. Transaction-level controls
c. Both A and B
d. Neither A nor B

31. When a new audit report is issued on financial statements because of subsequent discovery of
material misstatements on previously issued financial statements, the audit report should include
a. No modification.
b. A qualified or adverse opinion depending on the pervasiveness of the misstatement
identified.
c. An emphasis of matter paragraph highlighting the reason for the revision of the
previously issued financial statements.
d. An other matter paragraph indicating that the auditor withdraws the opinion previously
issued.

32. The auditor’s risk assessment of fraud increases when an audit client
a. Requests from the auditor a list of locations that an auditor would observe the conduct
of an inventory count.
b. Requests from the auditor a list of documents that would be inspected as part of
substantive testing.
c. Requests from the auditor that certain locations be included or excluded from
inventory count observation.
d. Requests from the auditor an earlier closing meeting.

33. Which of the following audit procedures is performed by the auditor only to detect material
misstatements at the assertion level?
a. External confirmation
b. Analytical procedures
c. Reperformance
d. Inquiry

34. When auditing and reporting on the financial statements of a group, the is
responsible in testing the accuracy of translation of financial information of foreign components
into the currency of the group financial statements.
a. Group engagement team
b. Component auditor
c. Component’s internal audit department
d. Component’s board of directors

35. The current Board of Accountancy is composed of a Chairman and members.

a. Five (5)
b. Six (6)
c. Seven (7)
d. Eight (8)