Title AT-8905

Description
Duration 600
Keywords
section material
question
Which of the following would an auditor most likely use in determining the auditor’s
The auditor is required to determine three different levels of materiality: (1) materiality for
What materiality level would be considered by the auditor to determine whether the proposed
Which of the following factors are normally considered by the auditor in determining the
In considering materiality for planning purposes, the auditor believes that misstatements
Which of the following statements is not correct about materiality?
Which of the following statements concerning materiality thresholds in incorrect?
The concepts of audit risk and materiality are interrelated and must be considered together
In evaluating the fair presentation of the financial statements, the auditor should assess
A client decides not to correct misstatements communicated by the auditor that collectively
A basic premise underlying the application of analytical procedures is that
For audits of financial statements made in accordance with PSAs, the use of analytical
In performing analytical procedures, set the following procedures in proper order.
Analytical procedures used in planning an audit should focus on
The objective of performing analytical procedures as risk assessment procedures in an audit
Which of the following statements concerning analytical procedures is true?
Analytical procedures may be classified as being primarily
Which of the following items tend to be the most predictable for purposes of analytical
The primary objective of analytical procedures used in the overall review stage of an audit is
Analytical procedures in the overall review should be:
S1: Related party transactions refers to a person or entity that has the ability to control the
The auditor should review information provided by those charged with governance and
When auditing related party transactions, an auditor places primary emphasis on
The auditor needs to be aware of the existence of related parties and transactions between
Which of the following would not necessarily a related-party transaction?
Which of the following most likely would indicate the existence of related parties?
Which of the following auditing procedures is most likely to assist an auditor in identifying
Which of the following auditing procedures most likely would assist an auditor in identifying
After determining that a related party transaction has, in fact, occurred an auditor should
An auditor most likely would modify an unqualified opinion if the entity’s financial statements
Which of the following are included in the activities of the internal audit function?
The external auditor should obtain a sufficient understanding of the internal audit function
If the external auditor decides that it is efficient to consider how the work performed by the
Which of the following factors should an external auditor obtain updated information about
Which of the following is an incorrect statement concerning the relationship of the internal
Which of the following is not an auditor’s expert upon whose work an auditor may rely?
Which of the following statements is correct concerning an auditor’s use of the work of an
The work of an expert who is related to the client may be acceptable under certain
If the results of the auditor’s expert’s work do not provide sufficient appropriate audit evidence
When issuing an unmodified auditor’s report, the auditor
no type
option1
The anticipated sample size of the planned substantive tests.
Overall materiality
Overall materiality
I and II only
P40,000
The concept of materiality recognizes that some matters are important for fair
Materiality thresholds may change between the planning and review stages of the audit.
Audit risk is the risk that the auditor may unknowingly express a modified opinion when,
I only.
The financial statements are free from material misstatement, and no disclosure is
The study of financial ratios is an acceptable alternative to the investigation of unusual
Yes Yes Yes
I, II, III, IV
Reducing the scope of tests of controls and substantive tests.
Unusual transactions and events.
Analytical procedures may be omitted entirely for some financial statement audits.
Tests of controls.
Relationships involving balance sheet accounts
Obtain evidence from details testing to corroborate particular assertions.
Applied to every item on the financial statements
True, true
I only
Confirming the existence of the related parties.
GAAP in the Philippines require disclosure in the financial statements of certain related
Sales to another corporation with a similar name.
Writing down obsolete inventory just before year-end.
Retesting ineffective controls previously reported to the audit committee.
Inspecting correspondence with lawyers for evidence of unreported contingent liabilities.
Substantiate that related party transactions were consummated on terms equivalent to
Disclosing loans to related parties at interest rates significantly below prevailing market
I and II only
The understanding of the internal audit function is an important substantive test to be
Efficiency and experience
The reporting status of the internal auditor within the organization.
The external auditor is not required to give consideration to the internal audit function
Actuary
An auditor may not use an expert in the determination of physical characteristics relating
The auditor is required to perform substantive test procedures to verify the expert’s
Report the matter to the appropriate regulatory agency of the government.
May refer to the work of an auditor’s expert.
option2
The entity’s year-to-date financial results and position.
Planning materiality
Scoping materiality
I and III only
P50,000
An auditor considers materiality for planning purposes in terms of the largest aggregate
The smallest aggregate level of errors or fraud that could be considered material to any
The phrase in the auditor’s report “present fairly, in all material respects, in accordance
II only.
The financial statements are not in accordance with the applicable financial reporting
Statistical tests of financial information may lead to the discovery of material errors in the
Yes No Yes
II, I, III, IV
Providing assurance that potential misstatements will be identified.
Noncompliance with laws and regulations that went undetected because of internal control
Analytical procedures used in planning the audit should not use nonfinancial information.
Substantive tests.
Transactions subject to management discretions
Identify areas that represent specific risks relevant to the audit.
Performed by the partner or manager on the engagement
False, false
II only
Verifying the valuation of the related party transactions.
Related parties and transactions between such parties are considered unusual features of
Purchases from another corporation that is controlled by the corporation’s chief
Failing to correct previously identified internal control deficiencies.
Sending second request for unanswered positive confirmations of accounts receivable.
Vouching accounting records for recurring transactions recorded just after the balance
Perform analytical procedures to verify whether similar transactions have occurred, but
Describing an exchange of real estate for similar property in a nonmonetary related-party
I and III only
The audit programs, working papers, and reports of internal auditors may often be used
Independence and review skills
The educational level and professional experiences of the internal auditor.
The internal auditors may determine the extent to which audit procedures should be
Engineer
If there is a material difference between an expert’s findings and the assertions in the
The auditor should obtain an understanding of the methods and assumptions used by the
Resolve the matter.
Should refer to the work of an auditor’s expert to indicate a division of responsibility.
option3
The results of the internal control questionnaire.
General materiality
Specific materiality
II and III only
P60,000
Materiality judgments are made in light of surrounding circumstanced and necessarily
In general, the more misstatements the auditor expects, the higher should be the
If misstatements are not important individually but are important in the aggregate, the
Both I and II.
The financial statements contain uncorrected misstatements that should result in a
Plausible relationships among data may reasonably be expected to exist and continue in
No Yes Yes
I, II, IV, III
Enhancing the auditor’s understanding of the client’s business.
Relate party transactions.
Analytical procedures usually are effective and efficient for tests of controls.
Tests of ratios.
Relationships involving income statement accounts
Assist the auditor in assessing the validity of the conclusions reached.
Based on financial statement data before all audit adjustment and reclassifications have
True, false
Both I and II
Evaluating the disclosure of the related party transactions.
The source of audit evidence affects the auditor's assessment of its reliability.
Loan from the corporation to a major stockholder.
Depending on a single product for the success of the entity.
Reviewing information provided by management identifying related parties and being alert
Reviewing confirmations of loans receivable and payable for indications of guarantees.
Obtain an understanding of the purpose of the transaction.
Stating that a particular related-party transaction occurred on terms equivalent to those
II and III only
The procedures performed by the internal audit staff may eliminate the external auditor’s
Training and supervisory skills
Whether policies prohibit the internal auditor from auditing areas where relatives are
Under certain circumstances, the internal auditors may assist the external auditor in
Appraiser
If an auditor believes that the determinations made by an expert are unreasonable, only
The entity should not have an understanding of the nature of the work to be performed
Withdraw from the engagement.
Should include in the auditor’s report the identity of the auditor’s expert and the extent of
option4
The contents of the management representation letter.
Specific materiality
Performance materiality
I, II, and III
P100,000
An auditor’s consideration of materiality is influenced by the auditor’s perception of the
Aggregate materiality thresholds are a function of the auditor’s preliminary judgment
Material fraud but not material errors cause financial statements to be materially
Neither I nor II.
The financial statements are free of material misstatement, but the disclosure of the
These procedures cannot replace tests of balances and transactions
Yes Yes No
II, I, IV, III
Assuming the adequacy of the available evidential matter.
Recorded transactions that were properly authorized.
Analytical procedures alone may provide the appropriate level of assurance for some
Tests of details of balances.
Data subject to audit testing in the prior period
Satisfy doubts when questions arise about a client’s ability to continue in existence.
Performed only when material misstatement is expected
False, true
Neither I nor II
Ascertaining the rights and obligations of the related parties.
A related party transaction may be motivated by other than ordinary business
Sales of land to corporation by the spouse of a director.
Borrowing money at an interest rate significantly below the market rate.
Inspecting communications with law firms for evidence of unreported contingent liabilities.
Performing analytical procedures for indications of possible financial difficulties.
Determine whether a particular transaction would have occurred if the parties had not
Presenting the peso volume of related-party transactions and the effects of any change in
I, II, and III
The work performed by internal auditors may be a factor in determining the nature,
Competence and objectivity
Whether the board of directors, audit committee, or owner-manager oversees
The nature, timing, and extent of the external auditor’s substantive tests may be affected
Internal auditor
The work of an expert who is related to the client may be acceptable under certain
The expert should not have an understanding of the auditor’s corroborative use of the
Express an unqualified opinion with reference to the work of the expert.
Should not refer to the expert’s work.
explanation
Usually items presented in FS

Adjustment is for the entire FS

Foundation of materiality is GAAP

sabi is not material ung impact, edi unqualified parin and no disclosure required. that is only suggest
Correct answer is foundation of analytic procedure
Can perform to these three but REQUIRED only in planning and review

Analytical procedure is required for RAP and Review Stage in PSA. not quired for test of control and
Most predictable is income statement becuase of not having cummulative balance

Because in review stage or completing the audit is perform by higher positions

Adherence is IS 24
Usual
A is unrealistic

lawyer - litigations and claims

Related party transaction should be described or give details. The error here is it explains only the

Only two
Competence
Externalt auditor will decide
Employed by entity but least reliable

Unmodified is no reference.
Unmodified should have no reference to any work of others. Should be the auditor's work only.
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