AUDITING PROBLEMS

A. COMPUTE FOR THE CASH AND CASH EQUIVALENTS

Petty Cash Fund (Currency P3,000, Expense vouchers P12,000) P15,000

Money order 4,300
Traveler's checks 7,000
Purchase return CM 8,100
IOU from Vice President 8,000
Postdated checks from employee 4,500
Postage stamps 1,250
Current account - Security bank overdraft 10,000
Current account - China bank 45,000
Treasury bills acquired 3 months before maturity 100,000
Treasury bills matured on December 31, 2018 (Financial statement audit December 31, 2017) 1,500,000
Payroll account P130,000
Bank account - foreign (restricted) *translated using 12/31/17 exchange rate* 2,000,000
B. COMPUTE FOR:
1. Total collections from sales 4. Adjusted cash balance 12/31
2. Total payments for merchandise purchased 5. Total cash disbursements per book
3. Cash balance per books 12/31 6. Total cash receipts per book

Deposit in transit on December 31 P45,167

Service Charge 2,000
Outstanding Checks December 31 163,666
Bank balance December 31 520,159
Mark up on sales 30%

The company operated for 1 year from the trial balance on December 31, 2017 the following
items are presented:
Land P1,000,000
Inventory P69,000
Building 1,400,000
Furnitures and fixtures 367,000
Accounts Receivable 165,400
Accounts Payable 389,650
Notes Payable to bank 500,000
Share Premium P50,000
Ordinary Shares 1,200,000
Sales 6,235,200
Operating expense (including dep of P400,000) 1,005,150

C. COMPUTE FOR OUTSTANDING CHECKS ON NOVEMBER 30

Outstanding Checks December 31 P37,450

Deposit in Transit December 31 5,421
Customers NSF checks returned by bank in November and redeposited in December (no entry 7,600
on company’s books in either November or December)
Customers NSF checks returned by bank in December no entry on company books 16,000
Cash disbursements December 34,658
November Banks Service Charge (recorded on the books December) 2,000
Checks and debit memos recorded by bank in December (including a December service 24,320
charge of P1,000)
AUDITING THEORIES

1. When counting cash on hand the auditor must exercise control over all cash and other negotiable assets to prevent
A. Substitution/replacement of stolen assets
B. Irregular endorsement
C. Theft
D. Deposits in transit

2. The auditor may use positive or negative confirmation request. An auditor most likely will use...
A. Combination of the 2 forms, positive for trade balances and negative for other balances
B. Positive form to confirm all balances regardless of size
C. Negative form for small balances
D. Positive form when the level of inherent and control risk is low. Negative when it is high.

3. A system analyst have access to each of the ff except

A. Edit criteria
B. Source code
C. Password identification tables
D. User procedures

4. Employees of a manufacturing company are required to use time cards and job time tickets. Which of the ff
statements concerning use of this documents is incorrect?
A. Payroll should be calculated based on job time tickets
B. Job time tickets should be reconciled to time cards
C. Each employee should only have 1 time card
D. An employee may have 1 or more job time tickets in a day

5. Under which of the following circumstances would an auditor be most likely to intensify an audit of a P20 000 petty
cash fund?
A. Petty cash vouchers are not pre-numbered
B. Reimbursement occurs twice a week
C. The custodian endorses reimbursement checks
D. The custodian uses petty cash fund to cash employees’ checks

6. If a company's external auditor expresses an unqualified opinion readers of the audit report can assume
A. Internal control is effective
B. External auditor found no fraud
C. Financial statements are accurate
D. All material disagreements between company and auditor were resolved in the satisfaction of the external
auditor

7. A qualified opinion can be issued only when the auditor is

A. Not independent
B. Not able to accumulate evidence required
C. Accumulated evidence required by GAAS
D. Auditor is restricted by client for gathering information

8. The term reasonable assurance indicates

A. No misstatements exist in the FS
B. No material misstatements exist in the FS
C. Possibility of material misstatements still exist in the FS
D. Possibility that immaterial misstatements exist in the FS

9. Which of the following is not a requisite for the CPA examinations?

A. Good moral character
B. Holder of a degree BSA
C. Natural born citizen of the Philippines
D. Has not been connected to any criminal offense
10. Each page of the FS compiled by an accountant should include a reference such as
A. Subject to compilation restriction
B. See accountants compilation report
C. An audited see accountants report
D. See accompanying accountants report

11. When management prepares FS on the basis of a going concern and the auditor believes the company may not
continue as a going concern, the auditor should issue
A. Adverse opinion
B. Disclaimer of opinion
C. Unqualified opinion
D. Qualified opinion

12. At the completion of the audit, management will make a written statement that it is not aware of undisclosed
contingent liability. This statement would appear in the
A. Letter of representation
B. Management letter
C. Letter of inquiry
D. Letter of testamentary

13. They are not presented as complete financial sttaements capable of standing-alone but they are integral part of the
current period
A. Notes to financial statements
B. Supplementary report
C. Corresponding figures
D. Comparative financial statements

14. Which of the following procedures would an auditor least likely perform before the balance sheet date?
A. Assessment of control risk
B. Attendance at the physical inventory count
C. Confirmation if Accounts receivable
D. Identification of related parties

15. In the audit of PPE, the auditor tries to do all of the following, except
A. Determine the extent of property abandoned during the year
B. Judge reasonableness of the depreciation
C. Obtain an understanding of internal control
D. Assess adequacy of replacement funds

16. Which of the following generalization does not relate to the reliability of audit evidence?
A. Audit evidence generated internally is more reliable when the related controls are effective.
B. Audit evidence is more reliable when obtained from independent sources outside the entity
C. Audit evidence obtained directly by the auditor is more reliable than evidence obtained by inference
D. An auditor's opinion to be useful is formed within a reasonable time and based on evidence obtained at a
reasonable cause