MB-AUDTH-SET B

Which one of the following best describes the assurance process?

• Proving the accuracy of the books and records

• Gathering evidence about specific and known assertions

• Assisting management in the successful operations of the company

• Assembling and filing tax returns and related supplemental information

Which of the following statements is correct?

• RA 9298 provides for and governs the supervision, control, and regulation of the practice of Filipino professional accountants in the Philippines and abroad.

• RA 9298 is aligned with the policy of the State to recognize accountants in revenue generation and development.

• A CPA, though not a lawyer, can teach law subjects in the BSA program.

• A person is deemed to be in public practice when he/she is involved in decision-making requiring professional knowledge in the science of accounting and the accounting aspects of finance and taxation or is employed in a position requiring a CPA.

When exercising professional judgment, this refers to the tendency of the CPA to use an initial piece of information as an anchor against which subsequent information is inadequately assessed.

• Availability bias

• Anchoring bias

• Confirmation bias

• Selective perception

Which of the following is least appropriately considered a condition or event that indicates that there could be substantial doubt about an entity's ability to continue as a going concern?

• Issuance of bonds at the prevailing interest rate.

• Uneconomic long-term commitments.

• Arrearages in dividends.

• An uninsured or underinsured catastrophe.

Statement I: If the auditor concludes that the identified or suspected non-compliance has a material effect on the financial statements and has not been adequately reflected in the financial statements, the auditor shall express a qualified opinion or disclaim an opinion on the financial statements. Statement II: If the auditor is precluded by management or those charged with governance from obtaining sufficient appropriate audit evidence to evaluate whether non-compliance that may be material to the financial statements has, or is likely to have, occurred, the auditor shall express a qualified opinion or adverse opinion on the financial statements based on a limitation on the scope of the audit.

• Only statement I is true.

• Only statement II is true.

• Both statements are true.

• Both statements are false.

Which of the following statements is true with respect to the concept of independence when an auditor prepares and audits those financial statements for a client?

• The auditor is not independent.

• The auditor is independent if he or she can maintain professional detachment.

• The auditor can audit the financial statements only if the audit process does not culminate in expressing an opinion on the financial statements.

• The auditor cannot audit the financial statements since a lack of integrity exists.

An auditor plans to apply substantive tests to the details of asset and liability accounts as of an interim date rather than as of the statement of financial position (SFP) date. The auditor should be aware that this practice:

• Eliminates the use of certain statistical sampling methods that would otherwise be available.

• Presumes that the auditor will reperform the tests as of the SFP date.

• Should be especially considered when there are rapidly changing economic conditions.

• Potentially increases the risk that errors that exist at the SFP date will not be detected.

Analytical procedures are required at the planning stage of all audits and as:

• Tests of control

• Substantive procedures

• A part of the final overall review

• Computer generated procedures

Which of the following best describes why auditors are concerned with detecting related party transactions?

• The financial statements must often be adjusted for the effects of material related party transactions.

• Material related party transactions must be disclosed in the notes to the financial statements.

• The substance of related party transactions will differ from their form.

• In a related party transaction, one party can exercise significant influence over the other party.

An auditor should request that management provide written representations regarding uncorrected misstatements in the financial statements that state:

• The individual and cumulative differences between the auditor's point estimates and the recorded amounts for uncorrected misstatements.

• Management's acceptance of responsibility for the auditor's opinion, if modified due to the uncorrected misstatements.

• Whether management believes that the effects of uncorrected misstatements are immaterial, individually and in the aggregate, to the financial statements as a whole.

• Management's rationale for not correcting misstatements noted during the course of the audit.