MIDTERMS QUIZ 1 GDOCS

If the auditor is unable to agree to a change of the engagement and is not permitted
to continue the original engagement, the auditor should
- Withdraw from the engagement

The auditor shall agree the terms of the audit engagement with management or
those charged with governance, as appropriate. The agreed terms shall be recorded
in a/an
a. Letter of audit inquiry
b. Engagement letter
Yung sagot is audit engagement letter pero search nyo na din baka kasi (a)
yung sagot
c. Confirmation letter
d. Management representation letter

Which of the following is not a specialized industry?

a. Mining
b. Manufacturing
c. Broadcasting Companies
d. Shared Services Center (SSC)

Which of the following is not a specialized industry?

a. Business Process Outsourcing (BPO)
b. Merchandising
c. Oil Extraction
d. Hospitals

Which of the following should an auditor obtain from the predecessor auditor prior to
accepting an audit engagement?
- Facts that might bear on the integrity of management

Which of the following standards are to be applied, as appropriate, in the audit of

historical financial information?
- PSAs

An auditor is required to establish an understanding with a client regarding the

services to be performed for each engagement. This understanding generally
includes
- The auditor’s responsibility for ensuring that those charged with
governance are aware of any significant deficiencies in internal control
that may come to the auditor’s attention.
The level of confidence that a practitioner provides about the reliability of an
assertion is called
- Assurance

An audit involves ascertaining the degree of correspondence between assertions

and established criteria. In the case of financial statement audit, which of the
following is not a valid criterion?
Whenever a CPA professional is engaged to perform an audit of financial statements
according to Philippine Standard on Auditing, he is required to comply with those
standards in order to
- Have a measure of the quality of audit performance

What makes these industries specialized

- A specialized industry is likely either to have specific financial reporting
standards, or to have distinct accounting policies.

Before accepting an engagement to audit a new client, an auditor is required to

- Make inquiries of the predecessor auditor after obtaining the consent of
the prospective client.

The objective of an audit of financial statements is

- To express an opinion whether the financial statements are prepared in

all material respects, in accordance with an identified financial reporting
framework.

Which of the following is not correct regarding the communication between

successor and predecessor auditors?

- The burden of initiating the communication rests with the predecessor

auditor.
Which of the following standards are to be applied to compilation engagements,
engagements to apply agreed-upon procedures to information, and other related
services engagements as specified by the AASC?
- PSRSs
Recording, classifying, and summarizing economic events in logical manner for the
purpose of providing financial information for decision making is commonly called:
- accounting
The current period’s auditor who did not audit the prior period’s financial
statements is called
a. Predecessor auditor
 b. Other auditor
c. Principal auditor
d. Incoming auditor

An audit involves ascertaining the degree of correspondence between assertions

and established criteria. In the case of financial statement audit, which of the
following is not a valid criterion?
- Philippine Standards on Auditing

Audit documentation may be recorded on paper or on electronic or other media. The

following are examples of audit documentation, except
- The entity’s accounting records

Which of the following is not normally performed in the pre-engagement phase?

- Assessing the control risk
The purpose of having communication between the predecessor and successor is
- To help successor auditor evaluate whether to accept the engagement.

Before accepting an engagement to audit a new client, a CPA is required to obtain

- The prospective client’s consent to make inquiries of the predecessor
auditor, if any.

An auditor’s engagement letter most likely will include

- Management’s acknowledgment of its responsibility for such internal
control as it determines is necessary to enable the preparation of
financial statements that are free from material misstatement.

Which of the following factors most likely would cause an auditor to decline a new
audit engagement?
- Concluding that the entity’s management probably lacks integrity.

Which of the following conditions most likely would pose the greatest risk in
accepting a new audit engagement?
- There will be a client-imposed scope limitation.

In assessing whether to accept a client for an audit engagement, an auditor should

consider the
i. Client’s business risk
ii. Auditor’s business risk
BOTH DIN BA SAGOT NIYO?? HEHEHE
Which of the following is an assurance engagement?

a. Review (padouble check, baka mali huhu)

b. Agreed-upon procedures
c. Taxation
d. Compilation

The auditor’s satisfaction as to the reliability of an assertion being made by one party
is called:
- Assurance

These statements are issued by the AASC to provide interpretive guidance and
practical assistance to auditors in the implementation of PSAs and to promote good
practice.
- PAPSs

Which of the following statements does not describe condition that creates a demand
for auditing?
- Users can directly assess the quality of information.

Early appointment of independent auditor will enable

- A more efficient examination to be planned

In issuing an engagement letter, the auditor should, consider the use and source of
specialized accounting principles, with particular reference to industry practice.

- In issuing an engagement letter, the auditor should, consider the

contents and format of any special purpose reports required alone.

Which of the following is not true?

- The audit may not consider the adequacy of resources and/or inter-firm
arrangements to carry out the work necessary at the number of
domestic and international locations of the bank at which audit
procedures are likely to be required.

An audit is conducted on the premise that management and, where appropriate,

those charged with governance, have acknowledged and understand that they have
responsibilities that are fundamental to the conduct of an audit in accordance with
PSAs. Which of the following is not one of those responsibilities?
- The preparation of financial statements in accordance with relevant
pronouncements issued by the AASC.
Acceptance and continuance of client relationships and specific audit engagements
include considering all of the following except:
- Whether the internal control of the client is adequate enough to detect
and prevent material misstatement in the financial statements.

The incoming auditor is also known as the _______ auditor.

- Successor

What makes these industries specialized?

- A specialized industry is likely either to have specific financial reporting
standards, or to have distinct accounting policies.

The following are usually included in an auditor’s engagement letter, except

a. A reference to PSAs.
b. The financial statements are the responsibility of the company’s
management.
c. List of audit procedures to be used in inventory observation. (padouble
check po hihi)
d. A reference to PFRS.

Which of the following statements would least likely appear in an auditor’s

engagement letter?
- After performing our preliminary analytical procedures, we will discuss
with you the other procedures we consider necessary to complete the
engagement.

The auditor of a parent entity is also the auditor of its component. Which of the
following factors may influence the auditor’s decision whether to send a separate
engagement letter to the entity’s component?
- Whether a separate auditor’s report is to be issued on the component.

These statements are issued by the AASC to provide interpretive guidance and
practical assistance to auditors in the implementation of PSAs and to promote good
practice.
a. PAPSs
MIDTERM QUIZ 2 GDOCS
Which of the following elements ultimately determines the specific auditing
procedures that are necessary in the circumstances to afford a reasonable basis for
an opinion?

- Auditor judgment

Which of the following is not true?

- It is particularly important that the auditor evaluates the relevance and

adequacy of the expert’s findings or conclusions. The auditor can pass
all responsibility over to an expert.

Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.

The auditor noted that the accounts receivable department is separate from other
accounting activities. Credit is approved by a separate credit department. Control
accounts and subsidiary ledgers are balanced monthly. The accounts receivable
manager writes off delinquent accounts after one year or sooner, if a bankruptcy or
other unusual circumstance is involved. Credit memoranda are prenumbered and
must correlate with receiving reports. Which of the following areas could be viewed
as an internal control weakness of the organization?

- Write-offs of delinquent accounts

What materiality level is used by the auditor in determining which line items in the
financial statements are to be tested?
- Performance Materiality

Rule 68 of the Securities Regulation Code (SRC) prescribes the requirements

applicable to the form and content of financial statements to be filed by stock
corporations except those whose paid-up capital is less than

- P50,000

Which of the required materiality levels is calculate by multiplying a certain

percentage by the appropriate benchmark which is either an element or component
of an entity’s financial statements?
 - Overall materiality

Which of the following is the primary basis used to decide materiality for a profit-
oriented entity?
- Net income before tax

Which is not a similarity between external and internal auditors?

- Both must be independent of the company

Fact Pattern: Sales procedures that were encountered during the regular annual
audit of Marvel Wholesale Distributing Company are described below.
Customer orders are received by the sales-order department. A clerk computes the
dollar amount of the order and sends it to the credit department for approval. Credit
approval is stamped on the order and returned to the sales-order department. An
invoice is prepared in two copies, and the order is filed in the customer order file.
The customer copy of the invoice is sent to the billing department and held in the
pending file, awaiting notification that the order has been shipped. The shipping copy
of the invoice is routed through the warehouse, and the shipping department has
authority for the respective departments to release and ship the merchandise.
Shipping department personnel pack the order and prepare a three-copy bill of
lading: The original copy is mailed to the customer, the second copy is sent with the
shipment, and the other is filed in sequence in the bill of lading file. The invoice
shipping copy is sent to the billing department. The billing clerk matches the received
shipping copy with the customer copy from the pending file. Both copies of the
invoice are priced, extended, and footed. The customer copy is then mailed directly
to the customer, and the shipping copy is sent to the accounts receivable clerk. The
accounts receivable clerk enters the invoice data in a sales-accounts receivable
journal, posts the customer's account in the subsidiary customers' accounts ledger,
and files the shipping copy in the sales invoice file. The invoices are numbered and
filed in sequence.

To gather audit evidence concerning the proper credit approval of sales at the
Marvel Company, the auditor would select a sample of transaction documents from
the population represented by the

- Customer order file. (padouble check)

An auditor is required to establish an understanding with a client regarding the

services to be performed for each engagement. This understanding generally
includes
 - The auditor’s responsibility for ensuring that those charged with
governance are aware of any significant deficiencies in internal control
that may come to the auditor’s attention.

Ryan Co. was incorporated under the laws of Republic of the Philippines and
registered with the Philippine Securities and Exchange Commission (SEC) per
Registration No. AS201901234 on April 15, 2015. The company is a holder of
secondary licenses issued by regulatory agencies and provide the following financial
information to the auditor:

Using the presumed metrics and benchmark compute for the overall materiality
amount of the company assuming the entity is in the mining industry.
- 2,250,000 samezz wehhh

Early appointment of independent auditor will enable

- A more efficient examination to be planned

Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
Checks from customers are received in the company mailroom each day. Which of
the following controls should be in place to safeguard them?
- Require a specific mail clerk to list and restrictively endorse each check.

Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
The auditor noted that the accounts receivable department is separate from other
accounting activities. Credit is approved by a separate credit department. Control
accounts and subsidiary ledgers are balanced monthly. The accounts receivable
manager writes off delinquent accounts after one year or sooner, if a bankruptcy or
other unusual circumstance is involved. Credit memoranda are prenumbered and
must correlate with receiving reports. Which of the following areas could be viewed
as an internal control weakness of the organization?
- Write-offs of delinquent accounts

To obtain evidence concerning the proper credit approval of sales, the auditor would
select a sample of transaction documents from the population represented by the
- Customer order file.
Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
To determine whether an entity’s internal control operated effectively to minimize
errors of failure to post invoices to the customers’ accounts ledger, the auditor would
select a sample of transactions from the population represented by the
- Bill of lading file

Ice Paris, CPA is auditing the Financial Statements of Hilo, Inc. for the year ended
January 31, 2021. Ice has compiled a list of possible risks, including both errors and
fraud that may result in the misstatement of Hilo’s financial statements and a
corresponding list of internal controls that, if properly designed and implemented,
could assist Hilo in preventing or detecting the errors and fraud. For each possible
risk (possible errors and frauds), select one internal control procedure from the given
choices that, if properly designed and implemented, most likely could assist Hilo in
preventing or detecting the errors and irregularities. Goods ordered by customers are
shipped but are not billed to anyone.
- Shipping documents are compared with sales invoices when goods are
shipped.
In connection with your audit of the financial statements of Mentos Company, you
gathered the following information about its sales procedures:
Customer orders are received by the sales-order department. A clerk computes the
peso amount of the order and send it to the credit department for approval. Credit
approval is stamped on the order and returned to the sales order department. A
sales invoice is prepared, and the sales order is filed in the customer order file.
The customer copy of the sales invoice is sent to the billing department and held in
the pending file awaiting notification that the order has been shipped.
The shipping copy of the sales invoice is routed through the warehouse and the
shipping department as authority for the respective departments to release and ship
the goods.
Shipping department personnel pack the order and prepare a three-copy bill og
lading:
Original copy – mailed to the customer
Second copy – sent with the shipment
Third copy – filed in sequence in the bill of lading file
The shipping copy of the sales invoice is sent to the billing department.
The billing clerk matches the received shipping copy of the sales invoice with the
customer copy from the pending file. Both copies of the invoice are prices, extended,
and footed. The customer copy is then mailed to the customer, and the shipping
copy is sent to the accounts receivable clerk.
The accounts receivable clerk enters the sales invoice data in the sales journal,
posts the customer’s account in the accounts receivable subsidiary ledger, and files
the shipping copy in the sales invoice file. The sales invoice are numbered and filed
in sequence.
In determining whether the internal control operated effectively to minimize errors of
failure to post sales invoices to the accounts receivable subsidiary ledger, the auditor
should select a sample of transactions from the population represented by the
- Sales invoice file. (padouble check po)
___________ is the amount set by the auditor for particular classes of transactions,
account balances or disclosures for which misstatements, well though lower than
overall materiality could reasonably be expected to influence the economic decisions
of users of the financial statements.
- Specific materiality
In connection with your audit of the financial statements of Mentos Company, you
gathered the following information about its sales procedures:

Customer orders are received by the sales-order department. A clerk computes the
peso amount of the order and send it to the credit department for approval. Credit
approval is stamped on the order and returned to the sales order department. A
sales invoice is prepared, and the sales order is filed in the customer order file.

The customer copy of the sales invoice is sent to the billing department and held in
the pending file awaiting notification that the order has been shipped.

The shipping copy of the sales invoice is routed through the warehouse and the
shipping department as authority for the respective departments to release and ship
the goods.

Shipping department personnel pack the order and prepare a three-copy bill og
lading:

Original copy – mailed to the customer

Second copy – sent with the shipment

Third copy – filed in sequence in the bill of lading file

The shipping copy of the sales invoice is sent to the billing department.

The billing clerk matches the received shipping copy of the sales invoice with the
customer copy from the pending file. Both copies of the invoice are prices, extended,
and footed. The customer copy is then mailed to the customer, and the shipping
copy is sent to the accounts receivable clerk.

The accounts receivable clerk enters the sales invoice data in the sales journal,
posts the customer’s account in the accounts receivable subsidiary ledger, and files
the shipping copy in the sales invoice file. The sales invoice are numbered and filed
in sequence.

To obtain evidence concerning the proper credit approval of sales, the auditor would
select a sample of transaction documents from the population represented by the

- Bill of lading file.

Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
Shipping documents should be traced to and compared with sales records or
invoices to
- Ensure that shipments are billed to customers.
Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
- Final authorization of credit memos by personnel in the sales
department could permit an employee defalcation scheme.

MATERIALITY - Bailey, Jason, Ryan

Quiz - Materiality

MIDTERMS REVIEWER & SOLUTIONS

REVIEWER: APCASPL-Reviewer.pdf
FAYE SOLUTIONS: SPL Reviewer
KEI SOLUTIONS: Midterm-Reviewer-Ans-Sta.-Maria.xlsx
MIDTERM EXAM (all answers under the ‘midterm exam’ section is correct)
What document is prepared to authorize the removal of the necessary quantity of
raw materials from storeroom to factory?
- Materials requisition

You are the external auditor of Tine Inc. Selected pre-adjustment account balances
and adjusting information of Sunny for the year ended December 31, 2022 are as
follows:

Retained Earnings, January 1, 2022 440,670

Sales salaries and Commissions 35,000
Advertising Expense 16,090
Legal Services 2,225
Insurance and Licenses 8,500
Travel Expense – Sales Representatives 4,560
Depreciation Expense – Sales/Delivery equipment 6,100
Depreciation Expense – Office Equipment 4,800
Interest Revenue 700
Utilities Expense 6,400
Telephone and Postage Expense 1,475
Supplies Inventory 2,180
Miscellaneous Selling Expenses 2,200
Dividends 33,000
Dividend Revenue 7,150
Interest Expense 4,520
Allowance for Bad Debts (Cr. Balance) 370
Officers’ Salaries Expense 36,600
Sales 495,200
Sales Returns and Allowances 11,200
Sales Discounts 880
Gain on Sale of Assets 18,500
Inventory, January 1, 2022 89,700
Inventory, December 31, 2022 20,550
Purchases 173,000
Freight-in 5,525
Accounts Receivable, December 31, 2022 261,000
Gain from Discontinued Operations (before taxes) 40,000
Ordinary Shares Outstanding 39,000

Adjusting Information

· Cost of inventory in the possession of consignees as of December 31, 2022, was

not included in the ending inventory balance amounted to 33,600.
· After preparing an analysis of aged accounts receivable, a decision was made to
increase the allowance for bad debts to a percentage of the ending accounts
receivable balance of 3%.

· Purchase returns and allowances were unrecorded. They are computed as a

percentage of purchases (not including freight-in) – 6%.

· Sales commissions for the last day of the year had not been accrued.

Total sales for the day – 3,600

Average sales commissions as a percent of sales – 3%

· No accrual had been made for a freight bill received on January 3, 2023, for
goods received on December 29, 2022. - 800

· An advertising campaign was initiated November 1, 2022. This amount was

recorded as prepaid advertising and should be amortized over a 6-month period. No
amortization was recorded. – 1,818

· Freight charges paid on sold merchandise and not passed on to the buyer were
netted against sales. Freight charge on sales during 2022 amounted to 4,200

· Interest earned but not accrued – 690

· Depreciation expense on a new forklift purchased March 1, 2022, had not been
recognized. (Assumed that all equipment will have no salvage value and the straight-
line method is use. Depreciation is calculated to the nearest month).

Purchase price – 7,800

Estimated life in years - 10

· A “real account” is debited upon the receipt of supplies. Supplies on hand at year-
end amounted to 1,600.

· Income tax rate (on all items) – 35%

Gain from discontinued operations (net of taxes) would amount to

- 26,000 (40,000 - (40,000 x 0.35))
Earnings per share for 2022 would amount to
- 3.47
Net income after taxes for 2022 would amount to
- 135,064
The gross profit for 2022 would amount to
- 282,825

The easiest way to prevent the acceptance of unordered goods is to

- Always require that a valid purchase order exists before goods can be
accepted at the time of delivery

A sound internal control procedure should require that defective merchandise

returned by customers be presented initially to the
- Receiving clerk
_____ is a standing order to purchase specified items at a designated price, from a
particular supplier for a set period of time.
- Blanket purchase order
Jonas, CPA, has just accepted an engagement to audit the financial statement of
Brother, Inc. for the year ending December 31, 2022. After obtaining an
understanding of the client’s design of the accounting and internal control systems
and their operation, he then proceeded in performing test of controls related to
performing test of controls of the expenditure (acquisitions and disbursements)
activities.
An auditor usually examines receiving reports to support entries in the
- Voucher register and sales returns journal
A client’s materials-purchasing cycle begins with requisitions from user departments
and end with the receipt of materials and the recognition of a liability. An auditor’s
primary objective in reviewing this cycle is to
- Evaluate the reliability of information generated as a result of the
purchasing process.
In examining cash disbursements, an auditor plans to choose a sample using
systematic selection with a random start. The primary advantage of such a
systematic selection is that population items.
- Do not have to be prenumbered in order for the auditor to use the
technique.
You are auditing the December 31, 2022, accounts payable balance of one of the
client’s divisions. The division controller’s office has provided you with a schedule
listing the creditors and the amount owed to each at December 31, 2022. Which of
the following audit procedures would be your best choice for determining that no
individual account payable has been omitted from the schedule?
- Examine support for selected January 2023 payments to creditors,
ascertaining that those relating to 2022 are not on the schedule.
A company uses an automated accounts payable system to process its
disbursements. An internal auditor wants to reconcile the accounts payable balance
listed in the firm’s month-end trial balance report to the master accounts payable file,
which is stored on magnetic tape. Which of the following application audit techniques
would be most appropriate on this task?
- Use general-purpose audit software to recompute the file balance.
What materiality level is used by the auditor in determining which line items in the
financial statements are to be tested?
- Performance materiality
Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
Shipping documents should be traced to and compared with sales records or
invoices to
- Ensure that shipments are billed to customers.
The fieldwork pertinent to the audit of the Kirkland Food and Beverage
Corporation, a manufacturing company and reporting under Full PFRS, for the year
ended December 31, 2021 has been completed by the staff of Bio and Associates,
CPAs. The Company provide the following financial information to the auditor:

Cash and cash equivalents ?

Trade and other receivables – net 20,032

Inventories ?

Current portion of biological assets – net ?

Prepaid expenses and other current assets 7,201

Investments – net 4,859

Property, plant and equipment – net 84,624

Right-of-use assets – net 4,824

Investment property - net 2,951

Biological assets – net of current portion 2,352

Goodwill – net ?
Other intangible assets – net 39,538

Deferred tax assets 2,857

Other noncurrent assets – net 30,241

Loans payable 10,780

Non-Controlling Interest 62,213

Trade payables and other current liabilities 54,438

Lease liabilities – current portion 379

Income and other taxes payable 6,044

Dividends payable 47

Current maturities of long-term debt – net of debt 12,621

issue costs

Long-term debt – net of current maturities and 54,478

debt issue costs

Deferred tax liabilities 26

Lease liabilities – net of current portion 4,403

Other noncurrent liabilities 1,247

Capital stock 6,251

Additional paid-in-capital 366,620

Equity adjustments from common control (328,273)

transactions

Equity reserves (1,745)

Retained earnings:

Appropriated 28,613

Unappropriated 41,122
Treasury stock (30,182)

As the senior in charge of the audit, you are now in the process of determining the
overall materiality of the company using the table below.

Relevant metric, including % of the relevant metrics, % of the relevant metrics,

the benchmark including the benchmark, including the benchmark,
for non-public interest for public interest entities
entities

Net Benchmark (PBTCO) 3 – 10% 3 – 5%

Net Assets/Equity 0.5 – 3% 0.5 – 2%

Gross Benchmark (Total

Assets, Total Revenues 0.5 – 3% 0.5 – 1%
or Total Expenses

The audit team deemed it appropriate to consider total assets as appropriate

benchmark for the year.
When determining whether a higher or lower amount of materiality is appropriate,
you consider the factors below that are applicable to the entity.

Factor Assessment

Concentration of ownership or Lower

management

Debt arrangements Lower

Business environment Lower

Earnings/EPS Sensitivities Lower

Compute for the benchmark amount of the company.

- 289,082 (use liabilities & equity in computing for total assets instead)

The auditor’s primary objective in obtaining an understanding of the client’s controls

over the purchasing function is to
- Determine the reliability of financial reporting by the purchasing
function
Leonor Manufacturing Corporation mass produces ten different products. The
company’s controller is interested in strengthening internal control over the
accounting for materials used in production. He/She would most likely design and
implement
- A perpetual inventory system
Keister, CPA, has just accepted an engagement to audit the financial statement of
Friendly, Inc. for the year ending December 31, 2022. After obtaining an
understanding of the client’s design of the accounting and internal control systems
and their operation, he then proceeded in performing test of controls related to
production activities.
An auditor reviews job cost sheets to test which transaction assertion?
- Accuracy
Which cycle is not linked to the production cycle?
- Investing and financing cycle
Which of the following is an internal control weakness for a company whose
inventory of supplies consists of a large number of individual items?
- The warehouse manager is responsible for maintenance of perpetual
inventory records.
To make a year-to-year comparison of inventory turnover most meaningful, the
auditor will perform the analysis
- By product
Which of the following is an essential control procedure to ensure the accuracy of the
recorded inventory quantities?
- Establishing a cutoff for goods received and shipped
Which of the following conditions most likely would pose the greatest risk in
accepting a new audit engagement?
- There will be a client-imposed scope limitation.
A properly designed internal control should require that defective merchandise
returned by customers be presented initially to the
- Receiving clerk
Antacid Co. was incorporated under the laws of Republic of the Philippines and
registered with the Philippine Securities and Exchange Commission (SEC) per
Registration No. AS201901234 on April 15, 2015. The company is a holder of
secondary licenses issued by regulatory agencies and provide the following financial
information to the auditor:

Total assets P13,500,000,000

 Total liabilities 10,100,000,000

Total equity 3,400,000,000

Income P?

Expense 550,000,000

Income before tax 50,000,000

Income tax ?

Net Income P35,000,000

As the senior in charge of the audit, you are now in the process of determining the overall materiality
of the company using the table below.

Relevant metric, including the % of the relevant metrics, % of the relevant metrics,
benchmark including the benchmark, for including the benchmark, for
non-public interest entities public interest entities

Net Benchmark (PBTCO) 3 – 10% 3 – 5%

Net Assets/Equity 0.5 – 3% 0.5 – 2%

Gross Benchmark (Total

Assets, Total Revenues or
0.5 – 3% 0.5 – 1%
Total Expenses

The audit team deemed it appropriate to consider total assets as appropriate benchmark for the year.

When determining whether a higher or lower amount of materiality is appropriate, you consider the
factors below that are applicable to the entity.

Factor Assessment

Concentration of ownership or management Higher

Debt arrangements Higher

Business environment Higher

Earnings/EPS Sensitivities Lower

Taking into consideration the factors affecting the aggregation risk, the audit team
determined the performance materiality at an increased level (50%).
The engagement team decided that the AMPT shall be equivalent to 5% of
materiality for the financial statements as a whole due to the factors the engagement
team have identified in determining the performance materiality for the financial
statements as a whole, as well as in determining the appropriate percentage of the
benchmark used in computing the amount of Materiality.
Using the presumed metrics and benchmark compute for the performance
materiality amount of the company assuming the entity is in the mining industry.
- 59,062,500

Early appointment of independent auditor will enable

- A more efficient examination to be planned
The condensed trial balance of Pitbull Corporation for the year ended December
31, 2022 follows:

Debit Credit

Total assets 7,082,500

Total liabilities ?

Ordinary shares 1,250,000

Additional paid-in capital 2,097,500

Donated capital 90,000

Retained earnings, 1/1/2022 1,650,000

Net sales 6,250,000

Cost of sales 3,750,000

Selling and administrative expenses 1,212,500

Interest expense 122,500

Gain on sale of long-tern investments 130,000

Income tax expense 300,000

Loss on disposition of plant assets 225,000

Loss due to earthquake damage 475,000

? ?

Other financial data for the year ended December 31, 2022:
Income Tax
Estimated tax payments – 200,000
Accrued – 100,000
Total charged to income tax expense (Does not properly reflect current or deferred
income tax expense or intraperiod income tax allocation for income statement
purposes.) – 300,000
The applicable tax rate on all types of taxable income for the current and future years
is 30%.
Temporary difference
Excess of book basis over tax basis in depreciable assets (arising from equipment
donated as a capital contribution on December 31, 2022 and expected to be
depreciated over five years beginning in 2023). There were no temporary differences
prior to 2022. – 90,000
Nondeductible expenditure
Officers’ life insurance expense – 70,000
Earthquake damage
This damage is considered unusual and infrequent.
Capital structure
Ordinary shares, par value P5 per share, traded on a national exchange:
Number of shares:
Outstanding at 1/1/22 – 200,000
Issued on 3/3/22 as a 10% share dividend – 20,000
Sold for P25 per share on 6/30/22 – 30,000
Outstanding at 12/31/22 – 250,000

The net income for 2022 would amount to

- 368,500
The gross profit for 2022 would amount to
- 2,500,000

Which of the following is not true?

a. The auditor should consider the adequacy of expertise in the context of the
electronic funds transfer (EFT) systems used by the bank
b. The auditor should consider the adequacy of expertise in the context of the
computer information systems (CIS) used by the bank
c. The audit may not consider the adequacy of resources and/or inter-firm
arrangements to carry out the work necessary at the number of domestic and
international locations of the bank at which audit procedures are likely to be
required.
d. The auditor should consider the availability of sufficient expertise in the
aspects of banking relevant to the audit of the business activities of the bank
- C. The audit may not consider the adequacy of resources and/or inter-
firm arrangements to carry out the work necessary at the number of
domestic and international locations of the bank at which audit
procedures are likely to be required.

Proper authorization of write-offs of uncollectible accounts should be approved in

which of the following departments?
- Treasurer

Which of the following is a source document that would be found in the expenditure
cycle?
- Purchase order

Which of the following factors most likely would cause an auditor to decline a new
audit engagement?
- Concluding that the entity’s management probably lacks integrity.

As the senior in charge of the audit, you are now in the process of conducting the
preliminary fluctuation analysis using the Prior Year and Current Year’s Financial
Statements. Presented below are the balance sheet and income statement of Anne
Heerap Corporation

2018 2019 2020

Cash 120,000 ? 375,000

Accounts 250,000 200,000 300,000

Receivable

Prepaid Expenses ? 240,000 0

Inventory 450,000 550,000 650,000

Building – Net 1,200,000 1,150,000 1,100,000

Furniture – Net 250,000 220,000 190,000

Total Assets 2,450,000 ? ?

Accounts Payable ? 180,000 ?

Notes Payable – 180,000 180,000 -

Current

Notes Payable – 540,000 360,000 360,000

Noncurrent

Retirement Liability 0 0 200,000

Common Stock, 1,000,000 ? ?

P10 par, 100,000
issued and
outstanding

Share Premium 250,000 250,000 250,000

Retained Earnings 360,000 590,000 685,000

Total Liabilities and 2,450,000 ? 2,615,000

Stockholders’
Equity

Sales ? 12,000,000 11,000,000

 Cost of Sales 7,800,000 9,800,000 ?

Gross Profit 2,200,000 ? 3,100,000

Expenses

Salary Expense ? 750,000 760,000

Depreciation 80,000 80,000 ?

Expense

Utilities Expense 420,000 450,000 500,000

Rent Expense 180,000 240,000 260,000

Operating Income 800,000 ? 780,000

Interest Expense 120,000 120,000 120,000

Net Income ? ? ?

No additional investment and sales of stock since 2018.

Total Noncurrent Liabilities for 2020?
- 560,000

Before accepting an engagement to audit a new client, an auditor is required to

- Make inquiries of the predecessor auditor after obtaining the consent of
the prospective client.

Which of the following is of least concern to an auditor in assessing the risks of

material misstatement?
a. Checks are signed by one person
b. Treasurer does not verify the names and addresses of check payees
c. Signed checks are distributed by the controller to approved payees
d. Cash receipts are not deposited intact daily
- A. Checks are signed by one person

In connection with your audit of the financial statements of Mentos Company, you
gathered the following information about its sales procedures:
Customer orders are received by the sales-order department. A clerk computes the
peso amount of the order and send it to the credit department for approval. Credit
approval is stamped on the order and returned to the sales order department. A
sales invoice is prepared, and the sales order is filed in the customer order file.
The customer copy of the sales invoice is sent to the billing department and held in
the pending file awaiting notification that the order has been shipped.
The shipping copy of the sales invoice is routed through the warehouse and the
shipping department as authority for the respective departments to release and ship
the goods.
Shipping department personnel pack the order and prepare a three-copy bill og
lading:
Original copy – mailed to the customer
Second copy – sent with the shipment
Third copy – filed in sequence in the bill of lading file
The shipping copy of the sales invoice is sent to the billing department.
The billing clerk matches the received shipping copy of the sales invoice with the
customer copy from the pending file. Both copies of the invoice are prices, extended,
and footed. The customer copy is then mailed to the customer, and the shipping
copy is sent to the accounts receivable clerk.
The accounts receivable clerk enters the sales invoice data in the sales journal,
posts the customer’s account in the accounts receivable subsidiary ledger, and files
the shipping copy in the sales invoice file. The sales invoice are numbered and filed
in sequence.
In determining whether the internal control operated effectively to minimize errors of
failure to post sales invoices to the accounts receivable subsidiary ledger, the auditor
should select a sample of transactions from the population represented by the
- Bill of lading file.
To obtain evidence concerning the proper credit approval of sales, the auditor would
select a sample of transaction documents from the population represented by the
- Customer order file.

The auditor shall agree the terms of the audit engagement with management or
those charged with governance, as appropriate. The agreed terms shall be recorded
in a/an
- Engagement letter

An auditor’s engagement letter most likely will include

- Management’s acknowledgment of its responsibility for such internal
control as it determines is necessary to enable the preparation of
financial statements that are free from material misstatement.
If the auditor is unable to agree to a change of the engagement and is not permitted
to continue the original engagement, the auditor should
- Withdraw from the engagement

The incoming auditor is also known as the _______ auditor.

- Successor

Which of the following is not true?

a. In issuing an engagement letter, the auditor should, consider the use and
source of specialized accounting principles, with particular reference to
industry practice.
b. In issuing an engagement letter, the auditor should, consider the use and
source of specialized accounting principles, with particular reference to any
requirements contained in the law or regulations applicable to banks
c. In issuing an engagement letter, the auditor should, consider the contents and
format of any special purpose reports required alone.
d. In issuing an engagement letter, the auditor should, consider the use and
source of specialized accounting principles, with particular reference to
pronouncements of the banking supervisory and other regulatory authorities
and relevant professional accounting bodies

- C. In issuing an engagement letter, the auditor should, consider the

contents and format of any special purpose reports required alone.

Which of the following would the auditor consider to be an incompatible operation for
a cashier if the cashier receives remittances from the mailroom?
- Posting the receipts to the accounts receivable subsidiary ledger cards.

The auditor may accept or continue an audit engagement only when the basis upon
which it is to be performed has been agreed, through
I. Establishing whether the preconditions for an audit are present
II. Confirming that there is a common understanding between the auditor and
management and, where appropriate, those charged with governance of the
terms of the audit engagement.
- Both I and II

Before accepting an engagement to audit a new client, a CPA is required to obtain

- The prospective client’s consent to make inquiries of the predecessor
auditor, if any.

Your client, a merchandising concern, has annual sales of P30,000,000 and a 40%
gross profit rate. Tests reveal that 2% of the peso amount of purchases do not get
into inventory because of breakage and inventory pilferage by employees. The
company estimates that these losses could be reduced to 0.5% of purchases by
designing and implementing certain controls costing approximately P350,000.
Should the controls be designed and implemented?
- No, because the cost of designing and implementing the added controls
exceeds the projected savings.

Which of the following should an auditor obtain from the predecessor auditor prior to
accepting an audit engagement?
- Facts that might bear on the integrity of management

ESSAY: Corales, CPA, is auditing the financial statements of Alfamart, a local

retailer of clothes, appliances, sporting goods, and electronics. During prior 3 years’
audit of Alfamart, Corales noticed that management was less concerned about the
timely recording of expenses and liabilities than revenues and assets. As a result,
very little of Alfamart’s internal control resources were expended in assuring an
accurate and timely recording of accounts payable. Corales also believes that
Alfamart’s management may be motivated to delay recording its liabilities at year
end, so Corales is approaching the search for unrecorded liabilities with caution.
How would the nature, timing, and extent of Corales’s substantive auditing
procedures most likely be affected by Alfamart’s deficient control environment?

Faye MT Answer: Due to Alfamart's deficient control environment, the possibility of

misstatement being detected timely is low. In turn, this will affect the nature, timing,
and extent of Corales's substatinve auditing procedures. To respond to this issue,
Corales may perform surprise audit procedures on the expenses and liabilities; given
that, these accounts are often overlooked by management. The auditor may also
obtain more persuasive evidences; provided that, Alfamart has a weak control
environment. It is also essential that areas with high potential misstatement are
evaluated to identify the magnitude of the misstatement and its effects.

Which of the following is not normally performed in the pre-engagement phase?

- Assessing the control risk

Which of the following is probably the most effective control for the prevention of
kickbacks to purchasing agents?
- A corporate policy to prohibit purchasing agents from accepting
kickbacks

Which of the following controls is often lacking in a retail cash sales environment?
- Segregation of functions
FINALS QUIZ 3 GDOCS
Which of the following controls would an entity most likely use in safeguarding
against the loss of trading securities?
- An independent trust company that has no direct contact with the
employees who have record-keeping responsibilities has possession of
the securities.

A potential threat to the payroll processing activity is theft or fraudulent distribution of

payroll checks. One control that can be implemented to help prevent paychecks
being issued to “ghost” employees is
- Paychecks should be physically distributed by someone who does not
authorize or record payroll.

The audit program for long-term debt should include steps that require the
- Examination of any bond trust indenture.

During an audit of a public held company, the auditor should obtain written
confirmation regarding debenture transactions from the
- Trustee

An audit program for the audit of the retained earnings account should include a step
that requires verification of
- Authorization for both cash and stock dividends.

The following controls are appropriate for property, plant, and equipment (PPE),
except
- Disposal of fully depreciated PPE items

Effective controls over the payroll function may include

- Verification of agreement of job time tickets with employee clock card
hours by a payroll department employee.

Which of the following is not a proper control over investment securities?

- Segragation of custodial and treasury functions

Which of the following questions is most likely to be included by an auditor on an
internal control questionnaire for notes payable?
- Are direct borrowings on notes payable authorized by the board of
directors?

Organizational independence in the processing of payroll can be achieved by

segregating the functions of authorization, record-keeping, and custody of assets.
Which one of the following functional separations is not required for internal control
purposes?
- Separation of payroll preparation and maintenance of year-to-date
records.

Which of the following controls is most effective in providing reasonable assurance

that salary, wage, and benefit expenses are incurred only for work performed?
- All time cards and reports are reviewed and approved in writing by
immediate line supervisors who do not have responsibilities for
paycheck distribution.

Which of the following internal control activities would an entity most likely implement
to assist in satisfying the completeness assertion related to noncurrent investments?
- The internal auditor compares the securities in the bank safe-deposit
box with recorded investments.

The question that an auditor would least likely include on an internal control
questionnaire concerning the initiation and execution of equipment transactions is
- Are procedures in place to monitor and properly restrict access to
equipment?

Which of the following controls would most likely detect equipment acquisitions that
are misclassified as maintenance expense?
- Investigation of variances within a formal budgeting system.
FINALS QUIZ 4 GDOCS
Which of the following statements best describes the “date of the financial
statements?”
- The date of the end of the latest period covered by the financial
statements.

Which of the following audit procedures would most likely assist an auditor in
identifying conditions and events that may indicate there could be substantial doubt
about an entity’s ability to continue as a going concern?
- Review compliance with the terms of debt agreements

An auditor is concerned with completing various phases of the audit after the
balance sheet date. This subsequent period extends to the date of the
- Auditor’s report

Analytical procedures used in the overall review stage of the audit generally include
- Considering unusual or unexpected account balances that were not
previously identified.

Which of the following internal control activities would an entity most likely implement
to assist in satisfying the completeness assertion related to noncurrent investments?
- The internal auditor compares the securities in the bank safe-deposit
box with recorded investments.
Padouble check monte carlo ^^
Same sa cash bal 6172 din acu ninna pano mo nakuha?
5912+(1830-1380)-95-95

Which of the following conditions or events most likely would cause an auditor to
have substantial doubt about an entity’s ability to continue as a going concern?
- Usual trade credit from suppliers is denied

Which of the following internal control activities would an entity most likely implement
to assist in satisfying the completeness assertion related to noncurrent investments?
- The internal auditor compares the securities in the bank safe-deposit
box with recorded investments.

Which of the following is not a proper control over investment securities?

a. Proper authorization of transactions.

The condensed trial balance of Pitbull Corporation for the year ended December 31,
2022 follows:
The net income for 2022 would amount to - 225,000 (pacheck po)
376500 na is me pero not sure

1. Investments are properly described and classified in the financial statements. - E

2. Recorded investments represent investments actually owned at the balance sheet
date. - F
3. Investments are properly valued at the balance sheet date. -D

During an audit of a public held company, the auditor should obtain written
confirmation regarding debenture transactions from the
- Trustee

A potential threat to the payroll processing activity is theft or fraudulent distribution of

payroll checks. One control that can be implemented to help prevent paychecks
being issued to “ghost” employees is
- Paychecks should be physically distributed by someone who does not
authorize or record payroll.

The following controls are appropriate for property, plant, and equipment (PPE),
except
a. Disposal of fully depreciated PPE items.
The following controls are appropriate for property, plant, and equipment (PPE),
except
- Disposal of fully depreciated PPE items.

Organizational independence in the processing of payroll can be achieved by

segregating the functions of authorization, record-keeping, and custody of assets.
Which one of the following functional separations is not required for internal control
purposes?

Effective controls over the payroll function may include

- Verification of agreement of job time tickets with employee clock card
hours by a payroll department employee.

FINALS REVIEWER & SOLUTIONS

REVIEWER APCASPL-Reviewer-with-Final-Exam.docx
SOLUTIONS Finals Reviewer Solutions.xlsx

AGRICULTURE PRACTICE PROBLEMS

Agriculture Practice Problems.docx

FINAL EXAM GDOCS

SOLUTION WORKSHEET: show ur solutions biches

Pls add ur solutions in the gsheets tenchu uwu :3
May emoji ba ang gdocs?
Last exam na gais,,,, xD wala exam mamaya? Bobo HAHAHAHAHA ay di pala to
yung last,,, may ape pa pala wtf tANGA MO okay bitch BV tangina may ape pa tanga
yan si tintin e

PROBLEMS: TAPOS PALAGAY SOLUTION SA WORKSHEET

Pitbull Corporation - gross profit for 2022 - 2,500,000 (padouble check) Same anss
pano to? 6250000-3750000

PitBull Corp Net Income 1,227,500 (Not Sure) GALING MIDTERMS TOHHH HA
Strange com - bio assets = 9,160,000 (NOT SURE)
=7760K (NOT SURE)
8,300,000 (NOT SURE) (5,000+1,500+1,800)

Strange - impairment loss of assets held for sale - 10,000 (NOT SURE check
solution na ginamit sa gsheets) takte gais possible rin na 90k sagot dito
Money gais baka naman :3. Same deferred lang ahahha
How much shall be disclosed as fair value of Investment Property at December 31,
2022? -0 hala bakittt (kasi hinihingi is fv pero sabi sa prob is naka ibang method
hehe Pero nottt sure pero 0 din me)

Jason Corp- Prepaid Rentals 675,000

Income tax payable - 50k

The question that an auditor would least likely include on an internal control
questionnaire concerning the initiation and execution of equipment transactions is
- Are procedures in place to monitor and properly restrict access to
equipment?

The relationship between materiality and risk is ordinarily

a. Inverse
Which of the required materiality levels is calculate by multiplying a certain
percentage by the appropriate benchmark which is either an element or component
of an entity’s financial statements?
- Overall materiality
Which of the following statements does not describe condition that creates a demand
for auditing?
- Users can directly assess the quality of information.
Which is not a similarity between external and internal auditors?

a. Both must be independent of the company

Which of the following controls is most effective in providing reasonable assurance

that salary, wage, and benefit expenses are incurred only for work performed?
- All time cards and reports are reviewed and approved in writing by
immediate line supervisors who do not have responsibilities for
paycheck distribution.
The auditor’s satisfaction as to the reliability of an assertion being made by one party
is called:
- Assurance

The question that an auditor would least likely include on an internal control
questionnaire concerning the initiation and execution of equipment transactions is
- Are procedures in place to monitor and properly restrict access to
equipment?
An audit program for the audit of the retained earnings account should include a step
that requires verification of
- Authorization for both cash and stock dividends.
Which of the following would the auditor consider to be an incompatible operation if
the cashier receives remittance?
a. The cashier prepares the daily receipts
b. The cashier makes the daily deposit at a local bank
c. The cashier posts the receipts to the accounts receivable subsidiary ledger cards.
d. The cashier endorses the checks
Whenever a CPA professional is engaged to perform an audit of financial statements
according to Philippine Standard on Auditing, he is required to comply with those
standards in order to
- Have a measure of the quality of audit performance
An audit program for the audit of the retained earnings account should include a step
that requires verification of
- Authorization for both cash and stock dividends.

Jason prepaid rentals adjusted 675k (minus lang yung nasa caje at paje)

An audit involves ascertaining the degree of correspondence between assertions

and established criteria. In the case of financial statement audit, which of the
following is not a valid criterion?
- Philippine Standards on Auditing

Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
The auditor noted that the accounts receivable department is separate from other
accounting activities. Credit is approved by a separate credit department. Control
accounts and subsidiary ledgers are balanced monthly. The accounts receivable
manager writes off delinquent accounts after one year or sooner, if a bankruptcy or
other unusual circumstance is involved. Credit memoranda are prenumbered and
must correlate with receiving reports. Which of the following areas could be viewed
as an internal control weakness of the organization?
- Write-offs of delinquent accounts

Nasa midterm

Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
Checks from customers are received in the company mailroom each day. Which of
the following controls should be in place to safeguard them?
- Require a specific mail clerk to list and restrictively endorse each check.

Donovan Viscayda, CPA has just accepted an engagement to audit the financial
statements of Northern Abra Forwarders, Inc. for the year ending December 31,
2021. After obtaining an understanding of the client’s design of the accounting and
internal control systems and their operation, he then proceeded in performing test of
controls related to revenue and collection activities.
Shipping documents should be traced to and compared with sales records or
invoices to
- Ensure that shipments are billed to customers.
The following securities are exempted from the registration requirement under
Subsection 8.1 of the Securities Regulation Code (SRC), except
- A bank’s own shares of stock.

The audit program for long-term debt should include steps that require the
- Examination of any bond trust indenture eto sagot ko cos nasa quizlet
and last quiz :>

Which of the following is not a specialized industry?

- Manufacturing & Merchandising (hiwalay na tanong)
Which of the following is not a specialized industry?
- The primary purpose of the Company is to engage in manufacturing and
trading of high-density polyethylene engineering products.

Which of the following is not true?

- It is particularly important that the auditor evaluates the relevance and

adequacy of the expert’s findings or conclusions. The auditor can pass
all responsibility over to an expert.

The following controls are appropriate for property, plant, and equipment (PPE),
except
- Disposal of fully depreciated PPE items.

A potential threat to the payroll processing activity is theft or fraudulent distribution of

payroll checks. One control that can be implemented to help prevent paychecks
being issued to “ghost” employees is
- Paychecks should be physically distributed by someone who does not
authorize or record payroll.

During an audit of a public held company, the auditor should obtain written
confirmation regarding debenture transactions from the
- Trustee

The level of confidence that a practitioner provides about the reliability of an

assertion is called
- Assurance

Which of the following is not a proper control over investment securities?

- Segregation of custodial and treasury functions

The objective of an audit of financial statements is

- To express an opinion whether the financial statements are prepared in
all material respects, in accordance with an identified financial reporting
framework.

Which of the following is not a proper control over investment securities?

- Segragation of custodial and treasury functions
Which of the following controls would an entity most likely use in safeguarding
against the loss of trading securities?
 - An independent trust company that has no direct contact with the
employees who have recordkeeping responsibilities has possession of
the securities.

Wag niyo ibold questions, nakakalito.

Which of the following elements ultimately determines the specific auditing
procedures that are necessary in the circumstances to afford a reasonable basis for
an opinion?
- Auditor judgment

Organizational independence in the processing of payroll can be achieved by

segregating the functions of authorization, record-keeping, and custody of assets.
Which one of the following functional separations is not required for internal control
purposes?

b. Separation of payroll preparation and maintenance of year-to-date

records.

Recording, classifying, and summarizing economic events in a logical manner for the
purpose of providing financial information for decision making is commonly called:
- Accounting
What makes these industries specialized?
- A specialized industry is likely either to have specific financial reporting
standards, or to have distinct accounting policies.
An employee misappropriates cash receipts from sales on account. Which of the
following acts would conceal this defalcation and be least likely to be detected by an
auditor?
- Understating the cash receipts journal.
- Understating the sales journal. (nasa old docs)
Which of the following internal control activities would an entity most likely implement
to assist in satisfying the completeness assertion related to noncurrent investments?
- The internal auditor compares the securities in the bank safe-deposit
box with recorded investments.
What materiality level is used by the auditor in determining which line items in the
financial statements are to be tested?
- Performance Materiality
Proper authorization of write-offs of uncollectible accounts should be approved in
which of the following departments?
 a. Treasurer

Which of the following controls would most likely detect equipment

acquisitions that are misclassified as maintenance expense?

a. Investigation of variances within a formal budgeting system.

Which of the following questions is most likely to be included by an auditor on an

internal control questionnaire for notes payable?
- Are direct borrowings on notes payable authorized by the board of
directors?
Audit documentation may be recorded on paper or on electronic or other media. The
following are examples of audit documentation, except
- The entity’s accounting records
___________ is the amount set by the auditor for particular classes of transactions,
account balances or disclosures for which misstatements, well though lower than
overall materiality could reasonably be expected to influence the economic decisions
of users of the financial statements.
- Specific materiality

Which of the following standards are to be applied, as appropriate, in the audit of

historical financial information?
- PSAs
Which of the following is the primary basis used to decide materiality for a profit-
oriented entity?
- Net income before tax

Which of the following standards are to be applied to compilation engagements,

engagements to apply agreed-upon procedures to information, and other related
services engagements as specified by the AASC?
- PSRSs

Audit documentation may be recorded on paper or on electronic or other media. The

following are examples of audit documentation, except
- The entity’s accounting records

In connection with your audit of the financial statements of Mentos Company, you
gathered the following information about its sales procedures:
Customer orders are received by the sales-order department. A clerk computes the
peso amount of the order and send it to the credit department for approval. Credit
approval is stamped on the order and returned to the sales order department. A
sales invoice is prepared, and the sales order is filed in the customer order file.
The customer copy of the sales invoice is sent to the billing department and held in
the pending file awaiting notification that the order has been shipped.
The shipping copy of the sales invoice is routed through the warehouse and the
shipping department as authority for the respective departments to release and ship
the goods.
Shipping department personnel pack the order and prepare a three-copy bill og
lading:
Original copy – mailed to the customer
Second copy – sent with the shipment
Third copy – filed in sequence in the bill of lading file
The shipping copy of the sales invoice is sent to the billing department.
The billing clerk matches the received shipping copy of the sales invoice with the
customer copy from the pending file. Both copies of the invoice are prices, extended,
and footed. The customer copy is then mailed to the customer, and the shipping
copy is sent to the accounts receivable clerk.
The accounts receivable clerk enters the sales invoice data in the sales journal,
posts the customer’s account in the accounts receivable subsidiary ledger, and files
the shipping copy in the sales invoice file. The sales invoice are numbered and filed
in sequence.
To obtain evidence concerning the proper credit approval of sales, the auditor would
select a sample of transaction documents from the population represented by the
- Bill of lading file

Which of the following would the auditor consider to be an incompatible operation for
a cashier if the cashier receives remittances from the mailroom?

- Posting the receipts to the accounts receivable subsidiary ledger cards.

Rule 68 of the Securities Regulation Code (SRC) prescribes the requirements

applicable to the form and content of financial statements to be filed by stock
corporations except those whose paid-up capital is less than
- 50,000
These statements are issued by the AASC to provide interpretive guidance and
practical assistance to auditors in the implementation of PSAs and to promote good
practice.
- PAPSs
Which of the following controls is often lacking in a retail cash sales environment?
- segregation of functions
Effective controls over the payroll function may include
- Verification of agreement of job time tickets with employee clock card
hours by a payroll department employee.
A sound internal control procedure should require that defective merchandise
returned by customers be presented initially to the
- Receiving clerk
Organizational independence in the processing of payroll is achieved by functional
separations that are built into the system. Which one of the following functional
separations is not required for internal control purposes?
- Separation of payroll preparation and maintenance of year-to-date
records.