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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

STA MESA MANILA


ACCO 4093 AUDITING THEORY
1st Evaluation Examination July 27, 2016

General Instruction: Read each question carefully and fully shade the choice of your correct answer on the scannable
sheet provided. Mark one item only for each question and avoid erasure on your scannable sheet. Keep calm.

1. Society has attached a special meaning to the term professional. A professional is:
a. someone who has passed a qualifying exam to enter the job market.
b. a person who is expected to conduct himself or herself at a higher level than the requirements of societys
laws or regulations.
c. any person who receives pay for the services performed.
d. someone who has both an education in the trade and on-the-job experience received under an experienced
supervisor.

2. Independence in auditing means:


a. maintaining an indirect financial interest. c. taking an unbiased and objective viewpoint.
b. not being financially dependent on a client. d. being an advocate for a client.

3. Situation A:Baj, staff auditor is providing audit services to the client and acquireshares in that client.
Situation B:Jang, a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock
in that client.
Situation C:Badyang, an audit manager in an office different than the office providing audit services has a
direct, immaterial financial interest in the audit client.
The CPA firm will lose its independence if:
a. Situation A only b. Situation A and C only c. Situation C only d. All of them

4. The financial interests of which of the following parties would not be included as a direct financial interest of the
CPA?
a. Spouse. c. Relative supported by the CPA.
b. Dependent child. d. Sibling living in the same city as the CPA.

5. A member in public practice may perform for a contingent fee any professional services for a client for whom the
member or members firm performs:
a. an audit. c. preparation of an original tax return.
b. consulting services. d. preparation of an amended tax return.

6. A member in public practice shall neither receive from, nor pay to, a client a commission when the member or
members firm also performs certain services for that client. Are commissions allowed if the CPA performs:
A compilation that will be used by An audit of prospective financial
a third party information
a. Yes Yes
b. No No
c. Yes No
d. No Yes

7. Anna Remeea, a CPA in public practice, contacts Ian Luna, an employee of Ting-Bating Ltd., and makes him an offer of
employment without first notifying Ting-Bating Ltd. According to the Code of Professional Conduct, Annas behavior:
a. is a violation of the Code of Professional Conduct. c. is a violation only if Ting-Bating Ltd. is a CPA firm.
b. is a violation only if Remelea and Luna are CPAs. d. is not a violation.

8. Which of the following statements is not true regarding the competence of audit evidence?
a. Relevance is enhanced by an effective information system.
b. To be competent, evidence must be both valid and relevant.
c. Validity is related to the quality of the clients information system.
d. Relevance must always relate to audit objectives.

9. As used in auditing, which of the following statements best describes "assertions"?


a. Assertions are the representations of management as to the reliability of the information system.
b. Assertions are the auditor's findings to be communicated in the audit report.
c. Assertions are the representations of management as to the fairness of the financial statements.
d. Assertions are found only in the footnotes to the financial statements.
10. In assessing audit risk, the CPA needs to do all of the following except
a. Gather audit evidence in support of recorded transactions.
b. Obtain an understanding of the client's system of internal control.
c. Understand the economic substance of significant transactions completed by the client.
d. Understand the entity and the industry in which it operates.

11. Which of the following tasks should be performed prior to the final audit?
a. Determining the fairness of property, plant, and equipment.
b. Confirming accounts receivable.
c. Testing internal control.
d. Collecting and evaluating evidence supporting the fairness of inventory values.

12. The primary purpose of an independent audit of financial statements is to


a. provide a basis for assessing managements performance.
b. comply with laws and regulations.
c. assure management that the financial statements are unbiased and free from material misstatements.
d. provide users with an unbiased opinion about the fairness of information presented in the financial statements.

13. Which of the following statements best describes a review service?


a. A review engagement focuses on providing assurance on the assertions contained in the financial statements of
a public company.
b. A review engagement focuses on providing assurance on the internal controls of a public company.
c. A review engagement focuses on providing limited assurance on financial statements of a private company.
d. A review engagement focuses on providing advice in a three-party contract.

14. In a review engagement the practitioner provides negative assurance in a report which is used. This can be best
described by the phrase:
a. Nothing has come to my attention c. We are unable to express an opinion
b. The financial statement presents fairly d. Except for the issues explained above.

15. An accountant who is not independent may issue a:


a. Compilation report b. Review report c. Comfort report d. Qualified opinion

16. Which of the following is mandatory if the auditor is to comply with generally accepted auditing standards?
a. Possession by the auditor of adequate technical training.
b. Use of analytical review on audit engagements.
c. Use of statistical sampling whenever feasible on an audit engagement.
d. Confirmation by the auditor of material accounts receivable balances.

17. As a guidance for measuring the quality of the performance of an auditor, the auditor should refer to:
a. Statements of the Financial Accounting Standards Board.
b. Generally Accepted Auditing Standards.
c. Interpretations of the Statements on Auditing Standards.
d. Statements on Quality Control Standards.

18. Which of the following is a violation of confidentiality of the Code of Professional Conduct?
a. The CPA, in response to a court subpoena, submits auditor-prepared working papers as evidence of possible
illegal acts perpetrated by the client.
b. The CPA discloses to the board of directors a scheme concocted by top managementto intentionally inflate
earnings.
c. The CPA warns Client B as to the inadvisability of acquiring Client A. The CPA bases this warning on knowledge of
Client A's financial condition and a belief that the management of Client A lacks integrity. This knowledge was
obtained by the CPA as a result of auditing Client A during the past several years.
d. The CPA, when questioned in court, admits to knowledge of certain illegal acts perpetrated by the client.

19. Which of the following best describes what is meant by generally accepted auditing standards?
a. Audit objectives generally determined on audit engagements.
b. Acts to be performed by the auditor.
c. Measures of the quality of the auditor's performance.
d. Procedures to be used to gather evidence to support financial statements.

20. Which of the following factors is most important concerning an auditor's responsibility to detect errors and fraud?
a. The susceptibility of the accounting records to intentional manipulations, alterations, and the misapplication of
accounting principles.
b. The probability that unreasonable accounting estimates result from unintentional bias or intentional attempts to
misstate the financial statements.
c. The possibility that management fraud, defalcations, and misappropriation of assets may indicate the existence
of illegal acts.
d. The risk that mistakes, falsifications, and omission may cause the financial statements to contain material
misstatements.

21. The standard of professional competence and due care requires the auditor to:
a. Apply judgment in a conscientious manner, carefully weighing the relevant factors before reaching a decision.
b. Ensure that the financial statements are free from error.
c. Make perfect judgment decisions in all cases.
d. Possess skills clearly above the average for the profession.

22. The first general standard requires that a person or persons have adequate technical training and proficiency as an
auditor. This standard is met by:
a. An understanding of the field of business and finance.
b. Education and experience in the field of auditing.
c. Continuing professional education.
d. A thorough knowledge of the Philippine Standards on Auditing.

23. Experience has shown that certain conditions in an organization are symptoms of possible management fraud.
Which of the following conditions would not be considered an indicator of possible fraud?
a. Managers regularly assuming subordinates' duties.
b. Managers dealing in matters outside their profit center's scope.
c. Managers not complying with corporate directives and procedures.
d. Managers subject to formal performance reviews on a regular basis.

24. Which of the following underlies the application of generally accepted auditing standards, particularly the standards
of field work and reporting?
a. The elements of materiality and relative risk. c. The element of corroborating evidence.
b. The element of internal control. d. The element of reasonable assurance.

25. The probability of an auditor's procedures leading to the conclusion that a material error does not exist in an account
balance when, in fact, such error does exist is referred to as:
a. Prevention risk. c. Control risk.
b. Inherent risk. d. Detection risk.

26. Which of the following concepts is most useful in assessing the scope of an auditor's program relating to various
accounts?
a. Attribute sampling. c. The reliability of information.
b. Materiality. d. Management fraud.

27. Given that an audit in accordance with generally accepted auditing standards is influenced by the possibility of
material errors and fraud, the auditor should conduct the audit with an attitude of:
a. Professional responsiveness. c. Objective judgment.
b. Conservative advocacy. d. Professional skepticism.

28. The president of the Philippines appoints the members of the Board of Accountancy based on the recommendation
submitted to the office of the president. Which of the following is an incorrect statement about the submission of
nominations?
a. The Accredited National Professional Organization of CPAs shall submit the names of its nominees to the PRC
not later than 60 days prior to the expiry of the term of an incumbent chairman or member.
b. There should be an adequate documentation to show the qualifications and primary field of professional
activity of each nominee.
c. The Accredited National Professional Organization of CPAs shall submit the names of its nominees to the PRC
not later than 45 days prior to the expiry of the term of an incumbent chairman or member.
d. If the Accredited National Professional Organization of CPAs fails to submit its own nominee(s) the PRC within
the prescribed period, the PRC, in consultation with the Board of Accountancy shall submit to the president of
Philippines a list of three nominees for each position.

29. Which of the following is not a qualification of a member of the Board of Accountancy?
a. He must a natural-born citizen and a citizen of the Philippines.
b. He must not be a director or officer of the Accredited National Professional Organization of CPAs at the time of
his appointment.
c. He must be of good moral character and must not have been convicted of crimes involving moral turpitude.
d. He must be a duly registered certified public accountant with at least ten years of experience in public
accounting.

30. The following statements relate to the term of office of the chairman and members of the Board of Accountancy.
Which of them is incorrect?
a. The chairman and members of the Board of Accountancy shall hold office for a term of three years.
b. Any vacancy occurring within the term of a member shall be filled up for the unexpired portion of the term
only.
c. Appointment to fill up an expired term is not to be considered as a complete term.
d. The Board of Accountancy member who has served two successive complete terms as chairman or member
shall be eligible for reappointment until the lapse of three years.

31. No person shall serve the Professional Regulatory Board of Accountancy for more than
a. 3 years c. 9 years
b. 6 years d. 12 years

32. Which of the following is not a function of the Board of Accountancy as specified in the Philippine Accountancy Act
of 2004?
a. To investigate violations of the Accountancy Law and the rules and regulations promulgated therewith.
b. To look from time to time into the conditions affecting the practice of the accountancy profession.
c. To create and direct accrediting agencies that are entrusted the functions of reviewing higher educational
institutions policies and practices leading to accreditation/reaccreditation of BSA program.
d. To determine and prescribe minimum requirements leading to the admission of candidates to the CPA
licensure examination.

33. The Financial Reporting Standards Council which is the accounting setting body is composed of a chair and:
a. Fourteen members c. Sixteen members
b. Fifteen members d. Seventeen members

34. The chairman and the members of both Financial Reporting Standards Council and Auditing and Assurance Standards
Council have a renewable term of:
a. 4 years c. 3 years
b. 2 years d. 5 years

35. Which of the following is not a requisite in applying for the CPA licensure examinations?
a. Natural-born citizen of the Philippines
b. Good moral character
c. Holder of the degree of Bachelor of Science in Accountancy
d. Has not been convicted of any criminal offense involving moral turpitude

36. Which of the following is incorrect?


a. Candidates who obtain a rating of 75% and in at least four subjects shall receive a conditional credit for the
subjects passed.
b. To successfully pass the licensure examination, the candidates should obtain a general weighted average of at
least 75% with no rating lower than 65% in any subject.
c. Conditional candidates shall take an examination in the conditional subject(s) within two years from the
preceding examination.
d. Candidates who failed in three complete examinations must enroll in refresher course consisting of twenty-four
units of the subjects given in the licensure examination.

37. Solicitation consists of the various means that CPA firms use to engage new clients. Which one of the following
would not be an example of solicitation?
a. Accepting new clients that approach the firm.
b. Taking prospective clients to lunch.
c. Offering seminars on current tax law changes to potential clients.
d. Advertisements in the yellow pages.

38. If requested to perform a review engagement for a nonpublic entity in which an accountant has an immaterial direct
financial interest, the accountant is
a. independent because the financial interest is immaterial and, therefore, may issue a review report.
b. not independent and, therefore, may not be associated with the financial statements.
c. not independent and, therefore, may not issue a review report.
d. not independent and, therefore, may issue a review report, but may not issue an auditors opinion.

39. Which of the following most completely describes how independence has been defined by the CPA profession?
a. Performing an audit from the viewpoint of the public.
b. Avoiding the appearance of significant interests in the affairs of an audit client.
c. Possessing the ability to act with integrity and objectivity.
d. Possessing the ability to act professionally and accordance with a professional code of ethics.

40. To emphasize auditor independence from management, many corporations follow the practice of
a. appointing a partner of the CPA firm to the corporations audit committee.
b. establishing a policy of discouraging social contact between employees of the corporation and the staff of the
independent auditor.
c. requesting that a representative of the independent auditor be on hand at the annual stockholders meeting.
d. having the independent auditor report to an audit committee of outside members of the board of directors.

41. When a CPA who is not independent is associated with financial statements, he would be precluded from expressing
an opinion because
a. the public would be aware of his lack of independence and would place little or no faith on his opinion.
b. he would place himself in the position of suffering an adverse decision in a possible liability suit.
c. he would be in the position of auditing his own work.
d. any auditing procedures he might perform would not be in accordance with generally accepted auditing
standards.

42. Which of the following statements best describes why the profession of certified public accountants has deemed it
essential to promulgate a code of ethics and to establish a mechanism for enforcing observance of the code?
a. A distinguishing mark of a profession is its acceptance of responsibility to the public.
b. A prerequisite to success is the establishment of an ethical code that stresses primarily the professionals
responsibility to clients and colleagues.
c. The law requires an establishment of a code of ethics.
d. An essential means of self-protection for the profession is the establishment of flexible ethical standards by the
profession.

43. In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential
information obtained during the course of a professional engagement?
a. The CPA is issued a summons enforceable by a court that orders the CPA to present confidential information.
b. A major stockholder of a client company seeks accounting information from the CPA after the management
declined to disclose the requested information.
c. Confidential client information is made available as part of a quality review of the CPAs practice by a peer review
team authorized by the PICPA.
d. An inquiry by a disciplinary body of PICPA requests confidential client information.

44. Which of the following best describes why publicly-traded corporations follow the practice of having the outside
auditor appointed by the board of directors or elected by the stockholders?
a. To comply with the regulations of the FRSC.
b. To emphasize the auditors independence from the management of the corporation.
c. To encourage a policy of rotation of the independent auditors.
d. To provide the corporate owners with an opportunity to voice their opinion concerning the quality of the
auditing firm selected by the directors.

45. A violation of the ethical standards would most likely have occurred when a CPA
a. made arrangement with a bank to collect notes issued by a client in payment of fees due.
b. joined an accounting firm made up of three non-CPA practitioners.
c. issued an unqualified opinion on the 2009 financial statements when fees for the 2008 audit were unpaid.
d. purchased a bookkeeping firms practice of monthly write-ups for a percentage of fees received over a three-year
period.

46. The concept of materiality would be least important to an auditor when considering the
a. decision whether to use positive or negative confirmations of accounts receivable.
b. adequacy of disclosure of a clients noncompliance with laws and regulations.
c. discovery of weaknesses in a clients internal control structure.
d. effects of a direct financial interest in the client upon the CPAs independence.

47. Which of the following is a violation of Confidentiality rule of the Code of Professional Conduct?
a. The CPA, in response to a court subpoena, submits auditor-prepared working papers as evidence of possible
noncompliance with laws and regulations perpetrated by the client.
b. The CPA discloses to the board of directors a scheme concocted by top management to intentionally inflate
earnings.
c. The CPA warns Client B as to the inadvisability of acquiring Client A. The CPA bases this warning on knowledge of
Client A's financial condition and a belief that the management of Client A lacks integrity. This knowledge was
obtained by the CPA as a result of auditing Client A during the past several years.
d. The CPA, when questioned in court, admits of having a knowledge of certain noncompliance with laws and
regulations perpetrated by the client.

48. An auditor who accepts an audit engagement and does not possess the industry expertise of the business entity,
should
a. engage financial experts familiar with the nature of the business entity.
b. obtain a knowledge of matters that relates to the nature of the entity's business.
c. refer a substantial portion of the audit to another CPA who will act as the principal auditor.
d. first inform management that an unqualified opinion cannot be issued.

49. A CPA, while performing an audit, strives to achieve independence in appearance in order to
a. Reduce risk and liability.
b. Comply with the generally accepted standards of field work.
c. Become independent in fact.
d. Maintain public confidence in the profession.

50. Which of the following best describes why publicly-traded corporations follow the practice of having the outside
auditor appointed by the board of directors or elected by the stockholders?
a. To comply with the regulations of the Financial Reporting Standards Council.
b. To emphasize the auditors independence from the management of the client entity.
c. To encourage a policy of rotation of the independent auditor.
d. To provide the corporate owners with an opportunity to voice their opinion concerning the quality of the
auditing firm selected by the directors.

51. Practitioners independence:


a. minimizes risk. c. defends against professional liability
b. helps achieve public confidence d. compliance with the standards of fieldwork.

52. If the client refuses to accept an audit report that is qualified due to a known existence of noncompliance to laws
and regulations, the auditor should:
a. Issue an adverse opinion if management agrees to fully disclose the matter.
b. Withdraw from the engagement and communicate the reasons to the audit committee in writing.
c. Withdraw from the engagement and communicate the reasons to the Securities and Exchange Commission or
other regulatory body in writing.
d. Issue an unqualified opinion if management agrees to fully disclose the matter.

53. Which of the following is not required by the Generally Accepted Auditing Standard that states that due professional
care is to be exercised in the performance of the audit?
a. Observance of the standards of field work and reporting.
b. Critical review of the audit work performed at every level of supervision.
c. Degree of skill commonly possessed by others in the profession.
d. Responsibility for losses because of errors of judgment.

54. The standard of due audit care requires the auditor to


a. Apply judgment in a conscientious manner, carefully weighing the relevant factors before reaching a decision.
b. Ensure that the financial statements are free from error.
c. Make perfect judgment decisions in all cases.
d. Possess skills clearly above the average for the profession.

55. Which of the following mostly describes the function of AASC?


a. To promulgate auditing standards, practices and procedures that shall be generally accepted by the accounting
profession in the Philippines.
b. To monitor full compliance by all auditors to PSAs.
c. To assist the Board of Accountancy in conducting administrative proceedings on erring CPAs in audit practice.
d. To undertake continuing research on both auditing and financial accounting in order to make them responsive to
the needs of the public.

56. The exercise of due professional care requires that an auditor


a. Examine all available corroborating evidence.
b. Critically review the judgment exercised at every level of supervision.
c. Reduce control risk below the maximum.
d. Attain the proper balance of professional experience and formal education.

57. Which of the following best describes the reference to the expression taken as a whole in the fourth generally
accepted auditing standard of reporting?
a. It applies only to a complete set of financial statements.
b. It applies equally to each item in each financial statement.
c. It applies equally to each material item in each financial statement.
d. It applies equally to a complete set of financial statements and to each individual financial statement.

58. The Philippine Standards on Auditing issued by AASC


a. apply to independent examination of financial statements of any entity when such an examination is conducted
for the purpose of expressing an opinion.
b. must not apply to other related activities of auditors.
c. need to be applied on all audit-related engagements.
d. No correct answer.

59. Which of the following represents a procedure that the auditor may use because plausible relationships among financial
statement balances are expected to exist?
a. Attributes testing c. Inherent tests of control
b. Enterprise risk assessment d. Analytical review

60. The main purpose of risk assessment procedures is to


a. Obtain an understanding of the entity and its environment, including its internal control, to assess the risks of material
misstatement at the financial statement and assertion levels.
b. Test the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the
assertion level.
c. Detect material misstatements at the assertion level.
d. All of the given choices are main purposes of risk assessment procedures.

CASE 1
The next three questions are based on the information below:
Matinik Corporation was under first time audit with their auditor named Rosita Marie. Matinik Corporation was engaged
in selling different kinds of flowers including roses and tulips. The company has its own land in Baguio were roses and
other flowers are grown. Rosita made an inquiry with client management and had the general manager, Phi Jey
interviewed as part of the understanding procedure. Also, Rosita performed walkthrough procedures in the processes
that are in place within the entitys operation. Based on the professional judgment of Rosita, the internal control for
cash, receivablesand inventory of the company is weak and determined materiality level of 10%. Theres no separation of
duties and no proper documentation were in place for both cash and receivables.

Rosita excerpt her working paper for analytical procedures and presented below:
12/31/2015 12/31/2014 Variance % Change
ASSETS
Current Assets
Cash P73,276,208 P76,003,337 (P2,727,129) (4%)
Receivables 776,084,412 682,908,893 93,175,519 14%
Inventories 582,502,935 605,395,681 (22,892,746) (4%)
Other current assets 4,739,521 15,232,184 (10,492,663) (69%)
P1,436,603,075 P1,379,540,095 P57,062,980 4%

61. Which of the following is true?


a. Rosita should obtain evidences to support the following balances above of her analytical procedures since she
also performed walkthrough procedures.
b. Cash and inventories are below materiality level in % change, thus no procedure will be performing for both
balances.
c. Based on the initial working paper of Rosita, a less extensive procedure is necessary for the audit of inventories.
d. Rosita should set the detection risk for cash, receivables and inventory at low level.

62. In the audit Rosita is performing, inherent risk is evaluated to help assess which of the following?
a. The risk that the internal control system will not detect a material misstatement of a financial statement
assertion.
b. The susceptibility of a financial statement assertion to a material misstatement assuming there are no related
controls.
c. The risk that the audit procedures implemented will not detect a material misstatement of a financial statement
assertion.
d. The internal audit departments objectivity in reporting a material misstatement of a financial statement
assertion it detects to the audit committee.

63. Based on the assessment of Rosita on the companys control risk and the relation to the audit risk model, which one
of the following statements is false?
a. The relationship between control risk and evidence is direct.
b. The control risk is assessed as high and detection risk should be assessed at low.
c. Rosita, the auditor concludes that an internal control system is completely ineffective to prevent or detect
errors,she would assign a 0% to control risk.
d. Control risk is a measure of the auditors assessment of the likelihood that errors will not be prevented or
detected by the clients internal control system.

64. A successor auditor is required to attempt communication with the predecessor auditor prior to
a. performing test of controls.
b. accepting the engagement.
c. making a proposal for the audit engagement.
d. testing beginning balances for the current year.

65. A successor auditors inquiries of the predecessor auditor should include questions regarding
a. the predecessors evaluation of audit risk and judgment about materiality.
b. the predecessors understanding as to the reasons for the change in auditors.
c. the predecessors knowledge of accounting matters of continuing significance.
d. subsequent events that occurred since the predecessors audit report was issued.

66. Which of the following circumstances would permit an independent auditor to accept an engagement after the close
of the fiscal year?
a. Assessment of control risk below the maximum level.
b. Receipt of an assertion from the preceding auditor that the entity will be able to continue as a going concern.
c. Remedy of limitations resulting from accepting the engagement after the close of the end of the year, such as
those relating to the existence of physical inventory.
d. Issuance of a disclaimer of opinion as a result of inability to conduct certain tests required by generally accepted
auditing standards due to the timing of acceptance of the engagement.

67. Using your knowledge of the relationships among acceptable audit risk, inherent risk, control risk, planned detection
risk, tolerable misstatement, and planned evidence; determine the effect on planned evidence (increase or decrease)
of changing each of the following factors while the other factors remain unchanged.
a. b. c. d.
An increase in acceptable audit risk Increase Increase Decrease Decrease
An increase in inherent risk Increase Decrease Increase Decrease
A decrease in control risk Decrease Increase Decrease Increase
An increase in planned detection risk Increase Increase Decrease Decrease
An increase in tolerable misstatement Decrease Increase Decrease Increase

68. Which of the following statements concerning audit risk and its components is incorrect?
a. Regardless of the assessed levels of inherent and control risks, the auditor should always perform some
substantive procedures for material account balances and classes of transactions.
b. The higher the assessment of inherent and control risks, the more evidence the auditor should obtain from the
performance of substantive procedures.
c. The assessed level of inherent risk need not be considered in determining the nature, timing, and extent of
substantive procedures required to reduce audit risk to an acceptably low level.
d. After obtaining an understanding of the accounting and internal control systems, the auditor should make a
preliminary assessment of control risk, at the assertion level, for each material account balance or class of
transactions.

69. Prior to commencing field work, an auditor usually discusses the general audit strategy with the clients
management. Which of the following details do management and the auditor usually agree upon at this time?
a. The schedules and analyses that the clients staff should prepare.
b. The effects that inadequate controls may have over the safeguarding of assets.
c. The specific matters to be included in the communication with the audit committee.
d. The minimum amount of misstatements that may be considered to be reportable conditions.
70. In assessing the competence of internal auditors, an independent CPA most likely would obtain information about
the
a. quality of the internal auditors working paper documentation.
b. influence of management on the scope of the internal auditors duties.
c. entitys ability to continue as a going concern for a reasonable period of time.
d. policies limiting internal auditors from communicating with the audit committee.

71. Which of the following shall be considered proof of compliance with the CPE requirement for accreditation of
accounting teachers?
I. Certification of CPE units from accredited CPE providers issued by the PICPA.
II. Certificate of Attendance or other proofs of meaningful participation in other CPE programs as approved by the
PRC/CPE Council upon recommendation of the PICPA of the individual CPA of a minimum of sixty (60) credit
units earned for the past immediate 3 years.
a. I only. c. Either I or II.
b. II only. d. Neither I nor II.

72. The Certificate of Accreditation issued by the PRC to an accounting teacher shall
a. be valid for 2 years and renewable every 2 years.
b. be valid for 3 years and renewable every 3 years.
c. be valid initially for 3 years and renewable annually.
d. remain in full force and effect unless revoked, cancelled or withdrawn.

73. In general, a material weakness in internal control may be defined as a condition in which material errors or
irregularities may occur and not be detected within a timely period by
a. An independent auditor during tests of controls.
b. Employees in the normal course of performing their assigned functions.
c. Management when reviewing interim financial statements and reconciling account balances.
d. Outside consultants who issue a special-purpose report on internal control structure.

74. After considering a client's internal control, an auditor has concluded that the system is well designed and is
functioning as anticipated. Under these circumstances, the auditor would most likely
a. Cease to perform further substantive tests.
b. Not increase the extent of planned substantive tests.
c. Increase the extent of anticipated analytical procedures.
d. Perform all tests of controls to the extent outlined in the preplanned audit program.

75. Who is the primary responsible in the financial statement?


a. Management c. Auditor
b. The users d. All of them

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