ACC 141 Auditing and Assurance: Concepts and Applications 2

FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

GENERAL DIRECTIONS
READ THIS PAGE BEFORE STARTING THE ASSESSMENT

This is a 15-paged multiple-choice test and has a total score of sixty (60) points. You have
eighty (80) Minutes to finish this examination.

All things unnecessary for the test must be put in front of LEARNING OBJECTIVE:
the testing area. Use BLACK or BLUE ink ballpen only. Write all
your answers on the designated answer sheet. Further, This assessment measures the
erasures are strictly NOT allowed and will invalidate your competence of the student in
answers. terms of his/her application of
knowledge and skills in Auditing
You may NOT use smart phones or reference materials and Assurance: Concepts and
during the testing session. Only the allowed calculators Applications 2 (ACC 141).
should be used.

Try to answer all questions. In general, if you have some knowledge about a question, it is better to
try to answer it. You will not be penalized for guessing.

Be sure to allocate your time carefully so you can complete the entire test within the exam session.
You may go back and review your answers at any time during the exam session.

Those who are caught cheating or doing acts not allowed during the exam shall be instructed to
surrender their test papers and shall leave the testing room immediately. Subsequently, their papers
shall be rated as ZERO.

This concludes the instruction page.

You may now begin answering.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

1-5. Pirena Company completed the construction of a shopping mall at the end of 2018 for a total
cost of P200 million. The mall has an estimated economic life of 25 years. The mall was constructed for
the purpose of earning rentals by letting out space in the shopping mall to tenants.

An independent valuation expert was used by the company to fair value the shopping mall on
annual basis. According to the fair valuation expert, the fair values of the shopping mall at the end of
2019 and 2020 were P240 million and P230 million, respectively.

Questions:
Based on the above data, answer the following:
1. If Pirena Company opted to use the cost model to measure the shopping mall, how much
should be recognized in profit or loss in 2020 as a result of the fair value changes?
a. P46,000,000 c. P30,000,000
b. P10,000,000 d. Nil

2. If Pirena Company opted to use the cost model to measure the shopping mall, how much
should be recognized in profit or loss in 2020 as depreciation expense?
a. P9,600,000 c. P9,200,000
b. P8,000,000 d. Nil

3. If Pirena Company opted to use the cost model to measure the shopping mall, how much is the
carrying amount of the shopping mall to be reported in its statement of financial position as of
December 31, 2020?
a. P230,000,000 c. P200,000,000
b. P192,000,000 d. P184,000,000

4. If Pirena Company opted to use the fair value model to measure the shopping mall, how much
should be recognized in profit or loss in 2020 as a result of the fair value changes?
a. P46,000,000 c. P30,000,000
b. P10,000,000 d. Nil

5. If Pirena Company opted to use the fair value model to measure the shopping mall, how much
should be recognized in profit or loss in 2020 as depreciation expense?
a. P9,600,000 c. P9,200,000
b. P8,000,000 d. Nil

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

When I Look At You Inc. completed the construction of a building at the end of 2008 for a total cost
of P100 million. The building is estimated to be economically useful for 25 years. The building was
constructed for the purpose of earning rentals under operating leases. The tenants began occupying
the building after its completion. The company opted to use the fair value model to measure the
building. An independent valuation expert was used by the company to estimate the fair value of the
building on an annual basis. According to the expert, the fair values of the building at the end of 2008,
2009 and 2010 were P105 million, P120 million and P118 million, respectively.

Based on the above and the result of your audit, answer the following:

6. How much should be recognized in profit or loss in 2008 as a result of the completion of the
building at the end of 2008?
a. P20,000,000
b. P9,000,000
c. P5,000,000
d. P 0

7. The depreciation expense in 2009 is

a. P4,000,000
b. P4,800,000
c. P4,200,000
d. 0

8. How much should be recognized in profit or loss in 2009 as a result of the fair value
changes?
a. P20,000,000
b. P19,200,000
c. P15,000,000
d. 0

9. How much should be recognized in profit or loss in 2010 as a result of the fair value
changes?
a. P18,000,000
b. P3,000,000
c. P2,000,000
d. 0

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

10. How much is the carrying amount of the shopping mail on December 31, 2010 if When I
Look At You used the cost model?
a. P100,000,000
b. P118,000,000
c. P96,600,000
d. P92,000,000

Mussels ni Karla Company accounted for noncurrent assets using the revaluation model. On
October 1, 2018, the entity classified a land as held for sale.

At that date, the carrying amount of the land was P5,000,000 and the balance in the revaluation
surplus was P1,500,000.

At the same date, the fair value of the land was estimated at P5,500,000 and the cost of
disposal at P100,000.

On December 31, 2018, the fair value less cost of disposal of the land did not change. The land
was sold on January 31, 2019 for P6,000,000.

11. What is the impairment loss in 2018?

a. 100,000
b. 500,000
c. 400,000
d. 0

12. What is the adjusted carrying amount of the land on December 31, 2018?

a. 5,000,000
b. 5,500,000
c. 5,400,000
d. 3,500,000

13. What amount should be reported as gain on disposal of land in 2019?

a. 1,000,000
b. 2,600,000
c. 500,000
d. 600,000

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

14. What amount of OCI is reclassified to retained earnings in 2019?

a. 1,500,000
b. 2,000,000
c. 500,000
d. 0

15. An auditor has set an audit objective of determining whether research and development
projects were properly authorized. Which of the following audit techniques will best meet this
objective?

a. Inquiry
b. Observation
c. Analytical review
d. Inspection of documents

16. An entity developed a new secret formula which is of great value because it resulted in a
virtual monopoly. The entity has capitalized all research and development costs associated with
this formula. The CPA who is examining this account, will probably
a. Confirm that the secret formula is registered and on file with the county clerk's office.
b. Confer with management regarding a change in the title of the account to "goodwill."
c. Confer with management regarding transfer of the amount from the statement of financial
position to the income statement.
d. Confer with management regarding ownership of the secret formula.
17. The most effective means for the auditor to determine whether a recorded intangible asset
possesses the characteristics of an asset is to
a. Evaluate the future revenue-producing capacity of the intangible asset.
b. Analyze research and development expenditures to determine that only those expenditures
possessing future economic benefit have been capitalized.
c. Vouch the purchase by reference to underlying documentation.
d. Inquire as to the status of patent applications.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

18. The auditee has just acquired another company by purchasing all its assets. As a result of
the purchase, "goodwill" has been recorded on the auditee's books. Which of the following
comparisons would be the most appropriate audit test for the amount of recorded goodwill?
a. The purchase price and the book value of assets purchased.
b. The figure for goodwill specified in the contract for purchase.
c. Earnings in excess of 15% of net assets for the past five years.
d. The purchase price and the fair market value of assets purchased.
19. In verifying the amount of goodwill recorded by a client, the most convincing evidence which
an auditor can obtain is by comparing the recorded value of assets acquired with the
a. Assessed value as evidence by tax bills.
b. Appraised value as evidenced by independent appraisals.
c. Seller's book value as evidenced by financial statements.
d. Insured value as evidence by insurance companies.
20. In auditing intangible assets, an auditor most likely would review or recompute amortization
and determine whether the amortization period is reasonable in support of management's
financial statement assertion of
a. Completeness
b. Valuation and allocation
c. Existence or occurrence
d. Rights and obligations
21. The most effective means for the auditor to determine whether a recorded intangible asset
possesses the characteristics of an asset is
A. Vouch the purchase by reference to underlying documentation.
B. Inquire as to the status of patent application.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

C. Evaluate the future revenue-producing capacity of the intangible asset.

D. Analyze the research and development expenditures to determine that only those expenditures
possessing future economic benefit have been capitalized.

22. In auditing intangible assets, an auditor most likely would review or recompute amortization
and determine whether the amortization period is reasonable in support of
management's financial statement assertion of
A. Valuation Allocation
C. Completeness
B. Existence
D. Rights and obligations

23. Assuming TLL has capitalized all research and development costs associated with patent.
York, CPA, who is examining this account will probably
A. Confer with management regarding transfer of the amount from the balance sheet to the income
statement.
B. Confirm that the patent is registered and on file with the intellectual property office.
C. Confer with management regarding a change in the title of the account to "goodwill."
D. Confer with management regarding ownership of the patent.

24. Which of the following comparisons would be the most appropriate audit test for the amount of
recorded goodwill?
A. The purchase price and the book value of net tangible and identifiable assets purchased.
B. The purchase price and the fair value of net tangible and identifiable assets purchased.
C. The figure for goodwill specified in the contract of purchase.
D. Earnings in excess of 5% of net assets for the past five years.

25. A corporate balance sheet indicates that one of the corporate assets is a patent. An auditor will
most likely obtain evidence regarding the continuing validity and existence of this patent by
obtaining a written representation from
A. A patent attorney.
B. The SEC.
C. The patent inventor.
D. The patent owner.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

On January 2, 2020, the Bohol, Inc. issued P2,000,000 of 8% convertible bonds at par. The bonds will
mature on January 1, 2024 and interest is payable annually every January 1. The bond contract entitles
the bondholders to receive 6 shares of P100 par value common stock in exchange for each P1,000
bond. On the date of issue, the prevailing market interest rate for similar debt without the conversion
option is 10%.

On December 31, 2021, the holders of the bonds with total face value of P1,000,000 exercised their
conversion privilege. In addition, the company reacquired at 110, bonds with a face value of P500,000.

The balances in the capital accounts as of December 31, 2020 were:

Common stock, P100 par, authorized 50,000 shares, issued

and outstanding, 30,000 shares P3,000,000
Premium on common stock 500,000

Market value of the common stock and bonds were as follows:

Date Bonds Common stock
December 31, 2004 118 40
December 31, 2005 110 42

Based on the above and the result of your audit, answer the following:
26. How much of the proceeds from the issuance of convertible bonds should be allocated to equity?
a. P634,000 b. P126,816 c. P221,664 d. P0

27. How much is the carrying value of the bonds payable as of December 31, 2020?
a. P2,000,000 b. P1,389,400 c. P1,796,170 d. P1,900,502

28. How much is the interest expense for the year 2021?
a. P160,000 b. P138,940 c. P179,617 d. P190,050

29. The entry to record the conversion on December 31, 2021 will include a credit to APIC of
a. P365,276 b. P400,000 c. P307,893 d. P0

30. How much is the loss on bond reacquisition on December 31, 2021?
a. P50,000 b. P96,053 c. P67,362 d. P0

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

The following information relates to the defined benefit pension plan of the Tiaong Company as of
January 1,2009:
Projected benefit obligation (PBO) P16,150,000
Fair value of plan assets 15,135,000
Unrecognized prior service cost 1,050,000
Unrecognized actuarial gain or loss 0

Pension data for the years 2009 and 2010 follows:

2009 2010
Current service cost P 870,000 P1,150,000
Contribution to the plan 1,200,000 1,250,000
Benefits paid to retirees 1,320,000 1,400,000
Actual return on plan assets 263,500 1,800,000
Amortization of past service cost 210,000 186,667
Actuarial change increasing PBO 800,000 -
Settlement interest rate 11% 11%
Long-term expected rate of return on
Plan assets 10% 10%
As of January 1,2010,the remaining expected service life of employee was 5 years.

QUESTIONS:
Based on the above result of your audit, answer the following:
31.What is the 2009 net pension expense?
a. P2,593,000 c. P1,200,000
b. P4,370,000 d. P1,343,000

32.The projected benefit obligation as of December 31,2009 is

a. P18,276,500 c. P17,476,500
b. P16,973,000 d. P16,173,000

33.The prepaid/accrued pension expense on December 31,2009 is

a. P1,358,000 c. P108,000
b. P3,153,000 d. P 0

34.What is the 2010 net pension expense?

a. P1,863,702 c. P1,547,082

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

b. P1,250,000 d. P1,819,232

35.The prepaid/accrued pension expense on December 31,2010 is

a. P 0 c. P1,655,082
b. P3,143,302 d. P 721,702

The noncurrent liabilities of Pitogo Company at December 31, 2009 included the following:
Note Payable, bank P3,600,000
Liability under finance lease 2,623,000
Note payable, supplier 1,500,000
Transactions during 2010 and other information relating to Pitogo’s liabilities were as follows:
a) The note payable to the bank bears interest at 20% and is dated May 1,2009. The principal
amount of P3,600,000 is payable in four equal annual installments of P900,000 beginning May
1, 2010. The first principal and interest payment was made on May 1, 2010.
b) The finance lease is for a ten-year period. Equal annual payments of P750,000 are due on
December 31, of each year. The interest rate implicit in the lease is 18%. The amount of
P2,623,200 represents the present value of the six remaining lease payments (due December
31, 2010 through December 31, 2015) discounted at 18%.
c) The note payable to supplier bears interest at 19% and matures on September 30, 2011. On
February 25, 2011, after the end of the reporting period, but before the 2010 statements were
authorized for issue, Pitogo Company consummated a noncancelable agreement with a lender
to refinance the 19%. P1,500,000 on a long term basis, on readily determinable terms that have
not yet been implemented. Both parties are financially capable of honoring the agreement, and
there have been no violations of the agreement’s provisions.
d) On April 1, 2010, Pitogo issued for P7,005,675, P6,000,000 face amount of its 20%, P100,000
bonds. The bonds were issued to yield 15%. The bonds are dated April 1, 2010 and mature on
April 1, 2015. Interest is payable annually on April 1.

QUESTIONS:
Based on the above and the result of your audit, determine the following:
36. Liability under finance lease as of December 31, 2010
a. P1,873,200 c. P2,017,544
b. P2,345,376 d. P1,123,200
37. Carrying amount of bonds payable as of December 31, 2010
a. P6,893,813 c. P6,856,527
b. P7,417,536 d. P7,117,536

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

38. Total noncurrent liabilities as of December 31, 2010

a. P12,211,357 c. P10,711,357
b. P10,154,190 d. P 9,817,014
39. Current portion of long-term liabilities as of December 31, 2010
a. P3,150,000 c. P2,727,832
b. P2,812,824 d. P2,169,864

40. Total interest expense for the year 2010

a. P2,145,314 c. P1,673,139
b. P2,408,028 d. P1,673,139

Butit Wholesale Foods, Inc., leases its single warehouse from Baboy Leasing Company. The terms of
the lease provide for minimum lease payments of P150,000 per quarter, payable at the beginning of the
quarter. The initial lease term runs for ten years with no renewal or purchase options. The warehouse
was useful for an estimated life of fifteen years. The cost of the warehouse to Baboy was P3,000,000
and the market value at the date of the completion was approximately 24,200,000. The explicit interest
rate stated in the lease agreement is 8%. The lease was signed and the warehouse was occupied on
January 2, 2020.

The company closes its books every December 31. You were assigned to audit the company's
warehouse lease.

41. The warehouse should be recorded in Roehl's books on January 2, 2020 at:
a. 0 b. 4,103,322 c. 4,185,388 d. 4,200,000

42. What is the balance of the long-term lease liability, if there are any as of December 31, 2020?
a. 0 b. 3,823,326 c. 3,895,418 d. 3,749,793

43. How much from the long-term lease ilability should be presented in the balance sheet as short-
term?
a. 0 b. 303,075 c. 309,137 d. 600,000

On January 1, 2020, Duron Corp. started leasing a building from Butiki Leasing Co. for a 10 year term.
The lease agreement does not provide for provision for bargain purchase and that the asset shall be
reverted back to Butiki after the lease term. The estimated useful life of the asset is 15 years and its
prevailing fair value on the inception of the lease was at P6.6M.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

The lease is payable at the rate of P500,000 every January 1 and July 1 starting the 2020. The implicit
rate of lease known to both parties was at 10% while the incremental borrowing rate was at 12%.
Duron accounted for the lease as an operating lease charging rental expense for the semi-annual
payments made.

44. What is the effect of any adjustments to be made to the 2020 net income?
a. 0 b. 345,734 c. 405,672 d. 248,639

45. What is the short term portion of any lease liability as of December 31, 2020?
a. 447,204 b. 425,908 c. 1,000,000 d. none

Wood, Inc. is a public enterprise whose shares are traded in the over-the-counter market. At December
31, 2014, Wood had 6,000,000 authorized shares of P10 par value ordinary shares, of which 2,000,000
shares were issued and outstanding The shareholders' equity accounts at December 31, 20013, had
the following balances:
Ordinary shares P20,000,000
Additional paid-in capital 7,500,000
Accumulated profit 6,500,000

Transactions during 2014 and other information relating to the shareholders' equity accounts were as
follows:
 On January 5, 2014, Wood issued at P54 per share, 100,000 shares of P50 par value, 9%
cumulative convertible preference shares. Each share of preference share is convertible, at the
option of the holder, into two shares of ordinary shares. Wood had 600,000 authorized shares of
preference shares. The preference share has a liquidation value equal to its par value.
 On February 1, 2014, Wood reacquired 20,000 shares of its ordinary shares for P16 per share.
 On April 30, 2014, wood sold 500,000 shares (previously unissued) of P10 par value ordinary
shares to the public at P17 per share.
 On June 18, 2014, Wood declared a cash dividend of P1 per share of ordinary share, payable
on July 12, 2014, to shareholders of record on July 1, 2014.
 On November 10, 2014, Wood sold 10,000 shares of treasury shares for P21 per share.
 On December 14, 2014, Wood declared the yearly cash dividend on preference share, payable
on January 14, 2015, to shareholders of record on December 31, 2014.
 On January 20, 2015, before the books were closed for 2014, Wood became aware that the
ending inventories at December 31, 2013 were understated by P300,000 (after tax effect on
2013 net income was P180,000). The appropriated correction entry was recorded the same day.
 After correcting the beginning inventory, net income for 2014 was P4,500,000. From the

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

information provided above, determine the adjusted balance of the following stockholders'
equity accounts:
A B C D
46. Accumulated profits beginning
(As restated) 6,620,000 6,800,000 6,580,000 6,680,000
47. Accumulated profits ending,
Unappropriated 8,100,000 8,250,000 8,090,000 7,990,000
48. Total contributed capital 41,450,000 41,610,000 41,400,000 41,000,000
49. Treasury stocks 320,000 160,000 210,000 110,000
50. Total stockholders' equity 49,700,000 49,650,000 49,540,000 49,380,000

51. Under which of the following circumstances would the use of the blank from of confirmations of
accounts receivable most likely be preferable to positive confirmation?
a. Subsequent cash receipts are unusually difficult to verify.
b. The recipients are likely to sign the confirmations without devoting proper attention to them.
c. Analytical procedures indicate that few exceptions are expected.
d. The combined assessed level of inherent risk and control risk is low.

52. Which of the following populations should the auditor start form when testing for the completeness
of reported sales of a manufacturing company and to ascertain that all valid sales are appropriately
billed to customers and are ultimately recorded as sales?
a. Sales receipts
b. Sales invoices
c. Sales orders
d. Goods dispatch notes

53. Sales records or invoices should be traced back to and compared with shipping documents to:
a. Ascertain that all recorded sales pertain to goods that are actually delivered to customers.
b. Esture that shipments to customers are billed.
c. Determine whether payments are properly applied to customer accounts.
d. Determine whether unit prices billed are in accordance with sales contracts.

54. The auditor wants to obtain evidence in support to the financial statement assertion of occurrence
of sales transactions and the corresponding existence of the related receivable balance. The auditor
would most likely do which of the following substantive test procedure?
a. Trace the shipping documents and sales invoices to the entry in the sales journal.
b. Trace the approved customer orders to the shipping documents and the sales invoices.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

c. Trace the sales invoice to the daily sales summary.

d. Trace back journal entries to the sales journal to the sales invoice and shipping documents.

55. As part of auditing the company's revenue/receipt cycle, the auditor decided to render a sales cut-
off by tracing entries several days before and after the balance sheet date from the company's sales
journal to the source documents which include the sales order, the sales invoice and the delivery
receipt. Which of the following is correct regarding the sales cut-off procedures?
a. Vouching entries several days before the balance sheet date to the source documents is necessary
to gather evidence regarding completeness assertion of receivables while vouching entries several
days after the balance sheet date to the source documents is necessary to gather evidence regarding
the existence assertion of receivables.
b. Vouching entries several days before and after balance sheet date to the source documents is
necessary to gather evidence regarding valuation assertion of receivables.
c. Vouching entries several days before the balance sheet date to the source documents is necessary
to gather evidence regarding existence assertion of receivables while vouching entries several days
after the balance sheet date to the source documents is necessary to gather evidence regarding rights
assertion of receivables.
d. Vouching entries several days before the balance sheet date to the source documents is necessary
to gather evidence regarding rights assertion of receivables while vouching entries several days after
the balance sheet date to the source documents is necessary to gather evidence regarding valuation
assertion of receivables.

56. Your audit of the accounts receivable through analytical procedures revealed that the accounts
receivable turnover ratio had fallen from 7.5 times to 4.4 times from the previous year. Which of the
following is a valid audit insight from the said information?
a. There might have been a more liberal credit policy thus the auditor should increase sample size on
accounts receivable confirmation to gather further audit evidence on accounts receivable existence and
rights assertion.
b. There might have been a more stringent credit policy thus the auditor should gather further audit
evidence in support of the valuation assertion on accounts receivable.
c. There might have been a more stringent credit policy thus the auditor should increase sample size on
accounts receivable confirmation to gather further audit evidence in support of the valuation assertion
on accounts receivable.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

d. There might have been a more liberal credit policy thus the auditor should gather further audit
evidence in support of the valuation assertion on accounts receivable.

57. In gathering evidence regarding the valuation assertion of an audit client's accounts receivable, the
auditor should inquire with the management regarding their policy of providing bad debt expense and
the corresponding allowance and more importantly, gather evidence regarding the reasonableness of
such policy. Which of the following may be a possible source of evidence regarding the reasonableness
of an audit client's policy of providing bad debts?
a. Subsequent events happening after the balance sheet date but before the issuance of the financial
statements.
b. Historical experience of the audit client regarding writing off uncollectible accounts.
c. Bad debt experience of similar company within the same industry
d. All of the above

58. The auditor wants to obtain evidence in support to the financial statement assertion of
completeness of purchase transactions and the corresponding accounts payable balance. The auditor
would most likely do which of the following substantive test procedure?
a. Trace back journal entries to the purchases journal to the supplier's sales invoice and shipping
documents and receiving reports.
b. Trace the approved purchase orders to the receiving reports.
c. Send accounts payable confirmation letter to a sample of suppliers whose account balances remain
outstanding as of the balance sheet date.
d. Trace the receiving reports to the supplier sales invoices, then to the entries in the purchases.

59. The auditor traced a sample of the purchase orders and the related receiving reports to the
purchases journal. The purpose of this substantive test procedure is most likely to:
a. Determine that purchases were properly recorded which is consistent with gathering evidence in
support of the completeness assertion aver purchases and accounts payable.
b. Test whether the recorded purchases are for goods actually received and ordered which is consistent
with gathering evidence in support of the occurrence assertion over purchases and existence assertion
over accounts payable.
c. Determine that purchases were properly recorded which is consistent with gathering evidence in
support of the occurrence assertion over purchases and existence assertion over account payable.

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 ACC 141 Auditing and Assurance: Concepts and Applications 2
FINAL COMPREHENSIVE EXAM

Name: GUESSA FRANCESCA L. GELERA Date: APRIL 6, 2022

Section: BSA 3A

d. Test whether the recorded purchases are for goods actually received and ordered which is consistent
with gathering evidence in support of the completeness assertion over purchases and accounts
payable.

60. As part of auditing the company's purchasing/disbursement cycle, the auditor decided to render a
purchases cut-off by tracing entries several days before and after the balance sheet date, December
31, from the company's purchases journal to the source documents, which include the purchase order,
the sales invoice of the supplier and the receiving report, Which of the following is correct regarding the
purchases cut-off procedures?
a. December entries are traced back to the source documents to gather evidence regarding the
existence assertion over payables; January entries are traced back to the source documents to gather
evidence regarding the completeness assertion over payables.
b. December entries are traced back to the source documents to gather evidence regarding the
completeness assertion over payables, January entries are traced back to the source documents to
gather evidence regarding the existence assertion over payables.
c. December entries are traced back to the source documents to gather evidence regarding the
valuation abortion over payable, January entries are traced back to the source documents to gather
evidence regarding the existence assertion over payables.

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