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Page 2

FEU Cavite

Auditing Theory Portion of the AUD CPA Exam

c. Number of deviations in the population
d. Number of deviations in the sample

6. Which of the following audit procedures would provide the least reliable
evidence that the client has legal title to inventories?

a. Confirmation of inventories at locations outside the client

b. Analytical review of inventory balances compared to purchase and
sales activities.

c. Observation of physical inventory counts.
d. Examination of paid vendors’ invoices.

7. The working papers prepared during the engagement are the property of:
a. The auditor, but do not include the working papers prepared by

client for the auditor.

b. The auditor, even including those prepared by client for auditor.
c. The client.
d. The auditor and client jointly.

8. The primary purpose for obtaining an understanding of an audit client’s
internal control structure is to:

a. Provide a basis for making constructive suggestions in a management

b. Determine the nature, timing and extent of tests to be performed in
the audit.

c. Obtain sufficient, appropriate evidential matter to afford a
reasonable basis for an opinion on the financial statements under


d. Provide information for a communication of internal control
structure-related matters to management.

9. Which of the following can an auditor observe as a general control
procedure used by companies?

a. Segregation of functional responsibilities.
b. Management philosophy and operating cycle.
c. Open lines of communication to the audit committee of the board of


d. External influences such as bank examiner audits.

10. An advantage of using internal control flowcharts instead of internal
control questionnaires to document information about internal control is

that flowcharts

a. Identify internal control weaknesses more prominently.
b. Provide a visual depiction of clients’ activities.
c. Indicate whether control procedures are operating effectively.
d. Reduce the need to observe clients’ employees performing routine


11. In an audit sampling application, an auditor:
a. Performs procedures on all the items in a balance and makes a

conclusion about the whole balance.

b. Performs procedures on less than 100% of the items in a balance and
formulates a conclusion about the whole balance.

c. Performs procedures on less than 100% of the items in a class of
transactions for the purpose of becoming familiar with the client’s

accounting system.

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FEU Cavite

Auditing Theory Portion of the AUD CPA Exam

A. Non-listed companies C. Insurance companies

B. Credit institutions D. Pension funds

197. A CPA in business may be:
A. a salaried employee.

B. a partner, director (whether executive or non-executive) or an owner


C. a volunteer or another working for one or more employing organization.

D. Any of these.

198. S1 The legal form of the relationship with the employing
organization, if any, has no bearing on the ethical responsibilities

incumbent on the professional accountant in business.

S2 A professional accountant in business has a responsibility to further

all the business aims of their employing organization.

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

199. CPA in business should maintain information for which he/she is
responsible in a manner:

A. That describes clearly the true nature of business transactions,

assets or liabilities.

B. That classifies and records information in a timely and proper manner.

C. That represents the facts accurately and completely in all material


D. All of these.

200. When a CPA in business is pressured to become associated with
misleading information or to become associated with misleading information

through the actions of others, what kinds of threats might arise?

A. Self-interest and self-review


C. Familiarity and self-review


B. Self-interest and intimidation


D. Self-review and advocacy



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