SCHOOL OF BUSINESS AND ACCOUNTANCY

A.Y. 2024-2025 | MID-YEAR SEMESTER

QUIZ IN
OPERATIONS AUDITING

INSTRUCTIONS: Shade your answer on the answer sheet provided. Refrain from making
any erasure on your answer sheets. If uncertain, do not shade yet. You may use this
test paper for your solutions.
1. The purpose of an audit of financial statements is to
A. Relieve management or those charged with governance of the responsibility
for the preparation and presentation of the financial statements.
B. Obtain an absolute level of assurance that the financial statements as a
whole are free from material misstatement.
C. Enhance the degree of confidence of intended users in the financial
statements.
D. Assure the future viability of the entity by expressing an opinion on the
entity's financial statements.

2. The auditor is required to comply with all PSAs relevant to the audit of
an entity's financial statements. A PSA is relevant to the audit when
I. The PSA is in effect.
II. The circumstances addressed by the PSA exist
A. I only
B. II only
C. Either I or II
D. Both I and II

3. The overall objectives of the auditor in conducting an audit of financial

statements are
I. To obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether caused by fraud or
error.
II. To report on the financial statements.
III. To obtain conclusive rather than persuasive evidence.
IV. To detect all misstatements, whether due to fraud or error.
A. I and II only
B. II and IV only
C. I, II, and III only
D. I, II, III, and IV

4. The auditor is required to obtain reasonable assurance about whether the

financial statements are free of material misstatement, whether due to fraud
or error. In all cases when reasonable assurance cannot be obtained, the
auditor's report should contain a/an
A. Unmodified opinion
B. Qualified or adverse opinion
C. Qualified or disclaimer of opinion
D. Disclaimer of opinion

5. An audit in accordance with PSAs is performed on the premise that

management and, where appropriate, those charged with governance have
responsibilities that are fundamental to the conduct of the audit. Which of
the following is not one of those responsibilities?
A. To comply with all relevant PSAs in the preparation and presentation of
the entity's financial statements.
B. To provide the auditor with all information, such as records and
documentation, and other matters that are relevant to the preparation and
presentation of the financial statements.
C. To provide unrestricted access to those within the entity from whom the
auditor determines it necessary to obtain audit evidence.
D. To design, implement, and maintain internal control relevant to the
preparation and presentation of financial statements that are free from
material misstatement, whether caused by fraud or error.

6. The auditor is required to maintain professional skepticism throughout

the audit. Which of the following statements concerning professional
skepticism is false?
A. A belief that management and those charged with governance are honest and
have integrity relieves the auditor of the need to maintain professional
skepticism.
B. Maintaining professional skepticism throughout the audit reduces the risk
of using inappropriate assumptions in determining the nature, timing, and
extent of the audit procedures and evaluating the results thereof.
C. Professional skepticism is necessary to the critical assessment of audit
evidence.
D. Professional skepticism is an attitude that includes questioning
contradictory audit evidence obtained.

7. Professional judgment
A. Should be exercised in planning and performing an audit of financial
statements but need not be documented.
B. Can be used as the justification for the decisions made by the auditor
that are not supported by the facts and circumstances of the engagement.
C. Is necessary in the evaluation of management's judgments in applying the
entity's applicable financial reporting framework.
D. Is not used in making decisions about materiality and audit risk.

8. The primary reason for a financial statement audit by an independent CPA

is to
A. Provide increased assurance to users as to the fairness of the financial
statements.
B. Guarantee that there are no misstatements in the financial statements and
ensure that any fraud will be discovered.
C. Satisfy governmental regulatory requirements.
D. Relieve management of responsibility for the financial statements.

9. Independent auditing can best be described as

A. A branch of accounting.
B. A professional activity that measures and communicates financial and
business data.
C. A discipline which attests to the results of accounting and other
functional operations and data.
D. A regulatory function that prevents the issuance of im-proper financial
information.

10. Which of the following statements is correct concerning an auditor's

responsibilities regarding financial statements?
A. An auditor's responsibilities for audited financial statements are
confined to the expression of the auditor's opinion.
B. The fair presentation of audited financial statements in accordance with
an applicable financial reporting framework is an implicit part of the
auditor's responsibilities.
C. Making suggestions that are adopted about the form and content of an
entity's financial statements impairs an auditors independence.
D. The auditor's report should provide an assurance as to the future
viability of the entity.

11. A financial statement audit aids in the communication of economic data

because the audit
A. Assures the readers of financial statements that any fraudulent activity
has been corrected.
B. Guarantees that financial data are fairly presented.
C. Lends credibility to the financial statements.
D. Confirms the accuracy of management's financial representations.

12. Which of the following best describes the reason why an in-dependent
auditor reports on financial statements?
A. A poorly designed internal control system may be in existence.
B. Different interests may exist between the company pre-paring the
statements and the persons using the statements.
C. A misstatement of account balances may exist and is generally corrected
as the result of the independent auditor's work.
D. A management fraud may exist and it is more likely to be detected by
independent auditors.

13. Which of the following can be significantly affected by a financial

statement audit?
A. Business risk
B. Information risk
C. Inherent risk
D. The risk-free interest rate

14. The primary responsibility for the adequacy of disclosure in' the
financial statements rests with the
A. Partner assigned to the audit engagement.
B. Management of the company.
C. Securities and Exchange Commission.
D. Auditor in charge of the field work.

15. Which of the following elements does not relate to audit quality?
A. Audit competence
B. Audit fees
C. Independence
D. Due diligence

16. The following statements relate to internal auditing? Which is incorrect?

A. Internal auditing is carried out within an entity by employees of the
entity or by personnel contracted for the purpose.
B. Internal auditing has become a function that evaluates and improves an
organization's risk management, control and governance processes to add value
to the organization.
C. The internal auditor's judgments are subordinated to those of management.
D. Internal auditing has evolved into a highly professional activity that
extends beyond the appraisal of the efficiency and effectiveness of an
entity's operations.

17. Which of the following statements is an incorrect description of the

role internal auditors?
A. Internal auditors should review the means of minimizing risks and assist
management processes.
B. Internal auditors should assess risks within the business operations and
those from outside the business.
C. Internal auditors should appraise the economy and efficiency with which
resources are employed.
D. Internal auditors should have authority and responsibility for the
activities they audit.

18. Which of the following statements is not true in respect of the internal
auditor?
A. The scope of audits performed by the internal auditor is primarily in
respect of financial report audits.
B. An internal auditor does not require a license to practice.
C. Internal auditors are usually employed by companies and government units
D. Primary responsibility of the internal auditor is to the board of
directors.

19. Which of the following groups could be involved in an operational audit?

CPA Firms Internal Auditors Government Auditors
A. Yes Yes Yes
B. No No No
C. No Yes Yes
D. Yes Yes No

20. Which is not one of the three phases in an operational audit?

A. Evidence accumulation and evaluation'
B. Planning
C. Reporting and follow-up
D. Training and supervising employees

21. In performing an operational audit, the auditor primarily relies on which

of the following procedures?
A. Physical inspection
B. Analytical procedures
C. Inquiry and observation
D. Tracing and vouching

22. The term “efficiency" in performance auditing refers to

A. Using resources to maximize output for a given input, or to minimize input
for any given quantity and quality of output.
B. The achievement of intended results of operations, programs or activities.
C. The achievement of objectives within a specified time frame.
D. The acquisition of resources at appropriate

23. Before an effectiveness audit can be performed, there must be

A. Specific criteria developed to define effectiveness.
B. A compliance audit performed by as government auditor.
C. A review performed by either an independent or internal auditor.
D. A financial statement audit by an independent auditor.

24. Which of the following activities would generally account for a

significant proportion of an internal auditor's time?
A. Checking the company is complying with all of its rules and regulations
of operation.
B. Verifying all invoices before payment is made.
C. Ensuring the company is operating within budget.
D. Evaluating the effectiveness and efficiency of all phases of an entity's
operations.
25. Which of the following is a typical objective of an operational audit?
A. To determine whether an entity's internal control system is adequately
operating as designed.
B. To determine whether an entity's operational information is in accordance
with PFRS.
C. To determine whether an entity's financial statements present fairly the
results of operations.
D. To determine whether an entity's specific operating units are functioning
efficiently and effectively.

26. The primary orientation of operational auditing is towards

A. Future improvements to accomplish the goals of management.
B. The accuracy of the data reflected in management's financial records.
C. The verification that a company's financial report is fairly presented.
D. Past protection provided by existing internal control.

27. The purpose of an internal audit is

I. To evaluate the adequacy and effectiveness of company's internal controls.
II. To determine the extent to which assigned responsibilities are actually
carried out.
III. To collect evidence on whether the company is continuing as a going
concern.
A. I and II only
B. I and III only.
C. II and III only
D. I, II, and III

28. What is the proper organizational role of internal auditing?

A. To serve as an independent, objective assurance and consulting activity
that adds value to operations.
B. To assist the external auditor in order to reduce external audit fees.
C. To perform studies to assist in the attainment of more efficient
operations.
D. To serve as the investigative arm of the audit committee of the board of
directors.

29. Which of the following best describes the scope of internal auditing as
it has developed to date?
A. Internal auditing involves appraising the economy and efficiency with
which resources are employed.
B. Internal auditing has evolved to verifying the existence of assets and
reviewing the means of safeguarding assets.
C. Internal auditing has evolved to more of an operational orientation from
a strictly financial orientation.
D. Internal auditing involves evaluating compliance with policies, plans,
procedures, laws, and regulations.

30. Which of the following is considered a primary reason for creating an

internal audit department?
A. To evaluate and improve the effectiveness of control processes.
B. To ensure the accuracy, reliability, and timeliness of financial and
operating data used in management's decision making.
C. To relieve management of the responsibility for establishing effective
controls.
D. To safeguard resources entrusted to the organization.

END OF QUIZ
GOODLUCK ^^