LONG Quiz Correction of Errors FINAL

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Pablo Borbon Campus
College of Accountancy, Business, Economics and International Hospitality Management

SHORT QUIZ I
ACC313- Auditing and Assurance Concepts and Applications
Second Semester, AY 2023-2024
Name: _____________________________________ Score: ___________

Section: ____________________________________ Date: ___________
Multiple Choice- THEORIES

General Direction: Refer on the last page for your answer sheet.
1. What are the purposes of planning the audit?

1. To ensure appropriate attention is devoted to different areas of the audit
2. To identify potential problem areas
3. To facilitate delegation of work to the audit team members
4. To ensure the audit is completed within budget and time constraints
A. 1, 2, 3 and 4 C. 1, 2 and 3
B. 1, 3 and 4 D. 2 and 3
2. Which of the following statements is/are correct with regard to the relationship between the
audit plan and the audit strategy for an external audit engagement.
(1) The audit plan should be developed before the audit strategy is established
(2) The audit plan and the audit strategy should be established and developed at the same
time
(3) The overall audit strategy should be more detailed than the audit plan
(4) The audit strategy should be established before the detailed audit plan is developed.
A. (1) and (3) C. (3) and (4)
B. (2) only D. (4) only
3. The auditor may accept or continue an audit engagement only when the basis upon which it is
to be performed has been agreed, through
I. Establishing whether the preconditions for an audit are present
II. Confirming that there is a common understanding between the auditor and management
and, where appropriate, those charged with governance of the terms of the audit engagement
A. I only C. Both I and II
B. II only D. Neither I nor II
4. If the auditor is unable to agree to a change of the engagement and is not permitted to continue
the original engagement, the auditor should
A. Insist on continuing the original engagement
B. Express a qualified opinion
C. Express an adverse opinion
D. Withdraw from the engagement
5. In assessing the technical competence of an internal auditor, an external auditor most likely
would obtain information about the
A. Quality of working paper documentation, reports, and recommendations
B. Organizational level to which the internal auditor reports
C. Influence of management on the internal auditor’s duties
D. Entity’s commitment to integrity and ethical values.
Rizal Avenue Extension, Batangas City, Philippines +63 43 980-0385 loc. 1124
www.batstate-u.edu.ph cabeihm.pb@g.batstate-u.edu.ph
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Pablo Borbon Campus

6. S1 Business risk is broader in scope than the risk of material misstatement.
S2 Most business risks have financial consequences and they may have an effect on the financial
statements of an entity.
A. True, false C. True, true
B. False, true D. False, false
7. The following are components of internal control, except
A. Control Activities
B. The entity’s risk assessment process
C. Control environment
D. Business risk
8. The primary objective of procedures performed to obtain an understanding of internal control is
to provide an auditor with
A. Knowledge necessary to plan the audit
B. A basis for modifying tests of controls
C. Information necessary to prepare flowcharts
D. Evidence to use in reducing detection risks
9. The purpose of tests of controls over shipping is to determine whether
A. Shipments are billed
B. Billed goods have been shipped
C. Credit is approved before goods are shipped
D. Shipping department personnel are competent
10. Tracing shipping documents to sales invoices provides evidence that
A. Shipments were recorded as sales
B. Recorded sales were shipped
C. Invoice sales were shipped
D. Shipments were billed
COMPREHENSIVE PROBLEM
The first audit of the financial statements of LEEMAR CO. was made for the year ended
December 31, 2024. In reviewing the books, the auditor found out that the certain adjustments
had been overlooked at the end of 2023 and 2024. He also discovered that other items had been
improperly recorded. These omissions and other failures for each year are summarized as
follows: Income reported by LEEMAR CO. is P2,000,000 and P5,000,000 for 2023 and 2024.
December
2023 2024
Salaries payable 145,600 130,000
Interest receivable 43,200 35,500
Interest Expense* 9,000 3,200
Prepaid Insurance 64,000 51,300
Advances from customers 78,400 93,500
*Interest expense was recorded as rent expense
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Pablo Borbon Campus

Required:
1. Assuming that the nominal accounts for 2024 have not yet been closed into the income
summary account, prepare all the necessary adjusting journal entries on December 31,
2024.
2. What is the net effect on the working capital for 2023 and 2024?
3. What is the adjusted income for 2023 and 2024?
---------------------------------------------------------------------------------------------------------------------
Name: _____________________________________ Score: ___________
Section: ____________________________________ Date: ___________
THEORIES
1 [A] [B] [C] [D] 6 [A] [B] [C] [D]
2 [A] [B] [C] [D] 7 [A] [B] [C] [D]
3 [A] [B] [C] [D] 8 [A] [B] [C] [D]
4 [A] [B] [C] [D] 9 [A] [B] [C] [D]
5 [A] [B] [C] [D] 10 [A] [B] [C] [D]
PROBLEM
Requirement 1. Write the journal entries on this page or at the back of this page.
Requirement 2.Indicate the amount and if overstated or understated.

Effect on 2023:______________________ Effect on 2024:______________________
Requirement 3.
Adjusted income-2023:_______________ Adjusted income 2024:_________________

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Business Use

Pablo Borbon Campus

College of Accountancy, Business, Economics and International Hospitality Management

Name: ___________________________ Score: _

Multiple Choice- THEORIES

1. What are the purposes of planning the audit?

Pablo Borbon Campus

College of Accountancy, Business, Economics and International Hospitality Management

*Interest expense was recorded as rent expense

Pablo Borbon Campus

College of Accountancy, Business, Economics and International Hospitality Management

Requirement 2.Indicate the amount and if overstated or understated.

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