Saint Paul School of Business and Law

Palo, 6501, Leyte, Philippines

ACCOUNTANCY DEPARTMENT

AT-MCQ001:GENERALLY ACCEPTED AUDITING STANDARD

Sources: GAAS/Various test banks

Name: _______________________________________________
Schedule: ____________________________________________ Score: _____________

INSTRUCTIONS: Read each items carefully. Choose the best answer among the given
choices. Write your answer before the number. Use capital letter in answering. Strictly NO
ERASURES ALLOWED

1. As guidance for measuring the quality of the performance of an auditor, the auditor
should refer to
A. Statements of the Financial Accounting Standard Board
B. Generally Accepted Auditing Standards
C. Interpretations of the Statement on Auditing Standards
D. Statement on Quality Control Standards

2. Which of the following statements best describes the primary purpose of Statements on
Auditing Standards?
A. They are guides intended to set forth auditing procedures that are applicable to a
variety of situations
B. They are procedural outlines which are intended to narrow the areas of
inconsistency and divergence of auditor opinion
C. They are authoritative statements, enforced through the Code of Professional
Conduct, that are intended to limit the degree of auditor judgment
D. They are interpretations which are intended to clarify the meaning of generally
accepted auditing standards

3. Generally Accepted Auditing Standards (GAAS) and Philippine Standards on Auditing

(PSA) should be looked upon by practitioners as
A. Ideals to work towards, but which are not achievable
B. Maximum standards which denote excellent work
C. Minimum standards of performance which must be achieved on each audit
engagement
D. Bench mark to be used on all audit, reviews and compilations

4. An auditor needs not abide by a Philippines Standards on Auditing if the auditor believes
that
A. The amount is insignificant
B. The requirement of the PSA is impractical to perform
C. The requirement of the PSA is impossible to perform
D. Any of the above three is correct

5. Auditing standards are:

A. Statutory in nature
B. Rules imposed by the Securities and Exchange Commission
C. Rules imposed by the PICPA
D. General guidelines to help auditors

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 6. Which of the following best describes what is meant by generally accepted auditing
standards?
A. Pronouncements issued by the auditing Standards and Practices Council
B. Procedures to be used to gather evidence to support financial statements
C. Rules acknowledged by the accounting profession because of their universal
compliance
D. Measure of the quality of the auditors performance

7. When GAAS do not provide hard and fast rules, they provide subjective guidance
which allows auditors to:
A. Tailor their audit to procedures requested by management
B. Only apply those standards that are important to the audit
C. Accurately interpret the professions Code of Professional Conduct
D. Use adequate professional judgment when applying the standards

8. Every independent audit engagement involves both auditing standards and auditing
procedures. The relationship between the two may be illustrated by how they apply from
engagement to engagement. The best representation of this application is that, from one
audit engagement to the next,
A. Both auditing standards and auditing procedures are applied uniformly
B. Auditing standards are applied uniformly but auditing procedures may vary
C. Auditing standards may vary but auditing procedures are applied uniformly
D. Auditing standards are applied uniformly but auditing procedures are optional

9. Generally Accepted Accounting Principles (GAAP) are distinguished from Generally

Accepted Auditing Standards (GAAS) in that:
A. GAAP are the principles for representation of financial statements and underlying
transactions, while GAAS are the standards that the auditors should follow when
conducting an audit
B. GAAP are the principles auditors follow when conducting an audit, while GAAS
are the standards for presentation of financial statements and underlying
transactions
C. GAAP are promulgated by the SEC, while GAAS are promulgated by ASC.
D. When GAAP are violated, sufficiently strong GAAS may make up for most
GAAP deficiencies.

10. The Philippine Standards on Auditing issued by the Auditing and Assurance Standards
Council (AASC)
A. Are interpretations of generally accepted auditing standards
B. Are the equivalent of laws for audit practitioners
C. Must be followed in all situations
D. Are optional guidelines which an auditor may choose to follow or not follow
when conducting an audit

11. The standards which represent guidance in the personal traits an auditor must possess are
known as:
A. General standards
B. Standards of field work
C. Standards of reporting
D. Standards of operation

12. Which of the following best describes the character of the three generally accepted
auditing standards classified as general standards?
A. Criteria for competence, independence, and professional care of individual
B. Criteria for content of the financial statements and related footnote disclosure
C. Criteria for the content of the auditors report
D. The requirements for planning and supervision

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 13. The general standards stress the importance of
A. The personal qualities which the auditor should have
B. Evidence accumulation
C. Communicating the auditors findings to the reader
D. All of the above

14. An auditor is most likely to refer to one or more of the three general auditing standards in
determining
A. The nature of a report qualification
B. The scope of auditing procedures
C. Requirements for the consideration of internal control
D. Whether the auditor should undertake an audit engagement

15. The first general standard of generally accepted auditing standards states that
A. An independence in mental attitude is to be maintained
B. Due professional care is to exercised
C. The audit is to be performed by a person or persons having the adequate technical
training and proficiency as an auditor
D. The work is to be adequately planned

16. Which of the following is mandatory if the auditor is to comply with the general
standards of the generally accepted auditing standards?
A. Adequate technical training
B. Use of analytical procedures
C. Use of statistical sampling when feasible on an audit engagement
D. Confirmation of material account receivable balances

17. The first general standard requires that a person or persons have adequate technical
training and proficiency as an auditor. This standard is met by
A. Understanding business and finance
B. Education and experience in auditing
C. Continuing professional education
D. Knowledge if statement on auditing standards

18. Competence as a certified public account includes all of the following except
A. Having the technical qualifications to perform an engagement
B. Possessing the ability to supervise and evaluate the quality of staff work
C. Warranting the infallibility of the work performed
D. Consulting others if additional technical information is needed

19. The general standards of GAAS require an auditor to:

A. Maintain adequate technical training
B. Express an opinion on the financial statements
C. Supervise the engagement and the audit staff
D. Gather proper audit evidence for the engagement

20. The first general standard requires that the audit of financial statements be performed by
a person having adequate technical training and
A. Independence with respect to the financial statements and supplementary
disclosures
B. Exercising professional care as judged by peer reviews
C. Proficiency as an auditor which likely has been acquired from previous
experience
D. Objectivity as an auditor, as verified by proper supervision

21. In any case in which the incoming accountant is not qualified to perform the work, a
professional obligation exists to
A. Acquire the requisite knowledge and skills
B. Suggest someone else who is qualified to perform the work
C. Decline the engagement
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 D. Any of the above

22. Ultimately, the decision about whether or not an auditor is independent must be made by
the
A. Auditor
B. Audit committee
C. Client
D. Public

23. Which one of the following attributes is required of an auditor in relation to audit clients?
A. Rationalization
B. Bias
C. Loyalty
D. Independence

24. To be independent, the auditor:

A. Cannot place any reliance on the clients verbal and written assertions
B. Is responsible only to third-party users of the financial statements
C. Cannot perform any consulting services for an audit client
D. Must be impartial when dealing with the client

25. What is the meaning of the generally accepted auditing standard that requires that the
auditor be independent?
A. The auditor must be without bias with respect to the client entity
B. The auditor must adopt a critical attitude during the audit
C. The auditors sole obligation is to third parties
D. The auditor may have a direct ownership interest in the clients business if it is
not material

26. A CPA, while performing an audit, strives to achieve independence in appearance in

order to
A. Reduce risk and liability
B. Comply with the generally accepted standards of field work
C. Become independent in fact
D. Maintain public confidence in the profession

27. Which of the following best describes why publicly-traded corporation follow the
practice of having the outside auditors appointed by the board of directors or elected by
the stockholders?
A. To comply with the regulations of the Financial Accounting Standards Board.
B. To emphasize auditor independence from the management of the corporation
C. To encourage a policy of rotation of the independent auditor
D. To provide the corporate owners with an opportunity to voice their opinion
concerning the quality of the auditing firm selected by the directors

28. Practitioners independence

A. Minimize risk
B. Help achieve public confidence
C. Defends against liability
D. Achieves compliance with the standards of fieldwork

29. The auditors responsibility for illegal acts is:

A. Greater than for errors or fraud
B. Less than it is for errors or fraud
C. Restricted to information that comes to his attention
D. The same as it is for errors and fraud

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 30. An audit committee must be comprised of outside directors. Which of the following is
considered an outside director?
A. A member of company management
B. A retired executive from another company
C. The companys independent auditor
D. A consultant to the company

31. If the client refuses to accept and audit report that is qualified due to the known existence
of an illegal act, the auditor should:
A. Issue an adverse opinion if management agrees to fully disclose the matter.
B. Withdraw from the engagement and indicate the reasons to the audit committee in
writing.
C. Withdraw from the engagement and indicate the reasons to the Securities and
Exchange Commission or other regulatory body in writing.
D. Issue an unqualified opinion if management agrees to fully disclose the matter.

32. Reasonable assurance means:

A. Gathering of all available corroborating evidence for the auditor to conclude that
there are no material misstatements in the financial statements, taken as a whole
B. Gathering of the audit evidence necessary for the auditor to conclude that the
financial statements, taken as a whole are free from any misstatements.
C. Gathering of the audit evidence necessary for the auditor to conclude that the
financial statements are free of material unintentional misstatements.
D. Gathering of the audit evidence necessary for the auditor to conclude that there
are no material misstatements in the financial statements, taken as a whole.

33. Which of the following is not a general auditing standard?

A. Examination is to be performed by a person having adequate technical training
and proficiency.
B. The work is to be adequately planned.
C. Auditor is to maintain independence of material attitude.
D. Auditor is to exercise due professional care in performance of examination.

34. The exercise of due professional care requires that an auditor

A. Uses error-free judgment
B. Considers internal control, including tests of controls
C. Be responsible for fulfilling his or her duties diligently and carefully.
D. Examines all corroborating evidence available.

35. Which of the following is not required by the Generally Accepted Auditing Standards
that states that due professional care is to be exercised in the performance if the audit?
A. Observation of the standards of field work and reporting
B. Critical review of the audit work performed at every level of supervision
C. Degree of skill commonly possessed by others in the profession.
D. Responsibility for losses because of errors of judgment.

36. The standard of due audit care requires the auditor to

A. Apply judgment in a conscientious manner, carefully weighing the relevant
factors before reaching a decision.
B. Ensure that the financial statements are free from error.
C. Make perfect judgment decisions in all cases.
D. Possess skills clearly above the average for the profession.

37. Required auditor communication to the audit committee concerning illegal acts detected
includes:
A. All material items
B. All that are not adequately addressed by management
C. Only those that constitute management fraud.
D. Any such acts.

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 38. Due professional care requires
A. An auditor to exercise reasonable prudence in his work
B. The examination of all corroborating evidence available
C. The exercise of error-free judgment
D. A consideration of internal control structure that includes tests of controls.

39. Which of the following mostly describes the function of AASC (ASPC)?
A. To promulgate auditing standards, practice and procedures that shall be generally
accepted by the accounting profession in the Philippines.
B. To monitor full compliance by auditors to PSAs.
C. To assist the Board of Accountancy in conducting administrative proceedings on
erring CPAs in audit practice.
D. To undertake continuing research on both auditing and financial accounting in
order to make them responsive to the needs of the public.

40. The exercise of due professional care requires that an auditor

A. Examine all available corroborating evidence.
B. Critically review the judgment exercised at every level of supervision.
C. Reduce control risk below the maximum
D. Attain the proper balance of professional experience and formal education.

41. Which of the following best describes the reference to the expression taken as a whole
in the fourth generally accepted auditing standard of reporting?
A. It applies only to a complete set of financial statements
B. It applies equally to each item in each financial statement.
C. It applies equally to each material item in each financial statement.
D. It applies equally to a complete set of financial statements and to each individual
financial statement.

42. The Philippine Standards on Auditing issued by ASPC

A. Apply to independent examination of financial statements of any entity when such
an examination is conducted for the purpose of expressing an opinion.
B. Must not apply to other related activities of auditors.
C. Need to be applied on all audit related.
D. Require that in no circumstances would an auditor may judge it necessary to
depart from a PSA, even though such a departure may result to more effective
achievement of the objective of an audit.

43. Which of the following is not one of the three generally accepted auditing standards for
fieldwork?
A. Adequate planning and supervision
B. The need to express an opinion
C. Sufficient competent evidence
D. Understanding of the entity, including its internal control

44. Which of the following is a general standard?

A. Proper planning and supervision
B. Due professional care
C. Study the internal control structure
D. Gathering sufficient competent evidence

45. The third general standard states that due care is to be exercised in the performance of the
examination. This standard should be interpreted to mean that a CPA who undertakes an
engagement assumes a duty to perform
A. With reasonable diligence and without fault or error
B. As a professional who will assume responsibility for losses consequent upon in
error of judgment
C. To the satisfaction of the client and third parties who may rely upon it.
D. As a professional possessing the degree of skill commonly possessed by other in
the field.
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 46. The exercise of due professional care requires that an auditor
A. Use error-free judgment
B. Consider internal controls, including tests of controls
C. Critically review the work done at every level of supervision
D. Examine all corroborating evidence available

47. Which of the following is not required by the Generally Accepted Auditing Standard that
states that due professional care is to be exercised in performance of the audit?
A. Observance of the standards of fieldwork and reporting
B. Critical review of the audit work performed at every level of supervision
C. Degree of skill commonly possessed others in the profession.
D. Responsibility for losses because of errors of judgment

48. The third general standard states that due care is to be exercised in the performance of an
audit. This standard is generally interpreted to require
A. Objective review of the adequacy of the technical training and proficiency of firm
personnel.
B. Critical review of work done at every level of supervision
C. Thorough review of the existing internal control structure
D. Periodic review of CPA firms quality control procedures

49. A CPA who has been retained by a client that operates in an industry totally new to him
A. May not accept such an engagement
B. May accept the engagement only if the accounting firm specializes in the audit of
commercial banks.
C. May accept the engagement after attaining a suitable level of understanding of the
transactions and accounting practices unique to commercial banking.
D. May accept the engagement because training as a CPA transcends unique industry
characteristics.

50. The generally accepted standards of field work relate to

A. The competence, independence and professional care of persons performing the
audit
B. Criteria for the content of the auditors report on financial statements
C. Audit planning and evidence gathering
D. The need to maintain independence in mental attitude

SUCCESS IS NO ACCIDENT.
It is hard work, perseverance, learning, studying, sacrifice and most of
all, love of what you are doing
-Pele

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