)
1.
The single feature that most clearly distinguishes auditing, attestation, and assurance is a. Type of service. b. Training required to perform the service. c. Scope of services. d. CPA’s approach to the service.
2.
The primary goal of the CPA in performing the attest function is to a. Detect fraud. b. Examine individual transactions so that the auditor may certify as to their validity. c. Determine whether the client's assertions are fairly stated. d. Assure the consistent application of correct accounting procedures.
3.
Internal auditing often extends beyond examinations leading to the expression of an opinion on the fairness of financial presentation and includes audits of efficiency, effectiveness, and a. Internal control. b. Evaluation. c. Accuracy. d. Compliance.
4.
Which of the following best describes the operational audit? a. It requires the constant review by internal auditors of the administrative controls as they relate to operations of the company. b. It concentrates on implementing financial and accounting control in a newly organized company. c. It attempts and is designed to verify the fair presentation of a company's results of operations. d. It concentrates on seeking out aspects of operations in which waste would be reduced by the introduction of controls.
5.
The auditor's judgment concerning the overall fairness of the presentation of financial position, results of operations, and changes in financial position is applied within the framework of a. Generally accepted accounting principles. b. Generally accepted auditing standards. c. Internal control. d. Information systems control.
6.
Which of the following is not considered an assertion as formulated by the Auditing Standards Board? a. Valuation or allocation. b. Mathematical accuracy. c. Rights and obligations. d. Presentation and disclosure.
7. Which of the following is not a distinguishing feature of risk-based auditing? a. Identifying areas posing the highest risk of financial statement errors. b. Analysis of internal control. c. Collecting and evaluating evidence. d. Concentrating audit resources in those areas presenting the highest risk of financial statement errors. 8.
To maximize independence, the director of internal auditing should report to the a. Audit committee. b. Controllr. c. Chieffinancial officer. d. Director of information systems.
9. The auditor communicates the results of his or her work through the medium of the a.Engagement letter. b. Management letter. c. Audit report. d.Financial statements. 10.
The best description of the scope of internal auditing is that it encompasses a. Primarily operational auditing.
b. Both financial and operational auditing. c. Primarily the safeguarding of assets and verifying the existence of such assets. d. Primarily financial auditing.
Management Advisory Services A. Fill in the blanks Black Company has provided the following i nformation regarding activity in the inventory and expense accounts during the year:
Raw Materials
Work
Balance Jan1
P100
Additions
in process
Finished Goods
Cost of goods Sold
P0
P2,700
P0
4,200
(7)
13,300
6,000
Withdrawals
(1)
(6)
(4)
(2)
Balance Dec31
P800
P0
(5)
(3)
Required: Determine the missing information
B. True / False Questions
1.
Managerial accounting must follow GAAP. True False
2.
Financial accounting reports to those inside the organization. True False
3.
Managerial accounting emphasizes decisions affecting the future. True False
4.
Manufacturing costs are product costs. True False
5.
Period costs include direct materials, direct labor and manufacturing overhead. True False
6.
Period costs are expensed in the period incurred. True False
7.
Direct materials and direct labor are also called prime costs. True False
8.
Conversion costs are manufacturing costs. True False
9.
Sales commissions are a product cost. True False
10. Manufacturing companies have one inventory account. True False 11. Variable costs per unit remain constant. True False 12. Fixed costs vary in total. True False 13. A direct cost cannot be easi ly traced to a cost object.
True
False
14. A cost that differs between two alternatives is a sunk cost. True False 15. A common cost is a type of indirect cost. True False 16. Selling and administ rative expenses are included in the schedule of cost of goods manufactured. True False 17. Factory rent is part of manufacturing overhead. True False 18. Depreciation on administrative off ice’s equipment is a product cost. True False 19. Finished goods inventory consists of units completed that ha ve not been sold to a customer. True False 20. Raw materials can be direct or indirect. True False
Multiple Choice Questions
1.
Which of the following is not a characteristic of managerial accounting: a) Emphasizes decisions affecting the future b) Mandatory for external reports c) Need not follow GAAP d) Reports to those inside the organization
2.
Which of the following is not a manufacturing cost: a) Direct materials b) Manufacturing overhead c) Administrative costs d) Direct labor
3.
How many classes of inventory accounts do manufacturing companies have: a) One b) Three c) Two d) Four
4. a) b) c) d)
Costs that are taken directly to the income statement as expenses in the period in which they are incurred are: Product costs Prime costs Sunk costs Period costs
5. a) b) c) d)
The potential benefit given up when one alternative is selected over another is a: Prime cost Sunk cost Opportunity cost Direct cost
6. a) b) c) d)
A direct cost is one which: Is not worth the effort of tracing to a specific cost object Remains constant no matter the activity level Can be easily and conveniently traced to a specific cost object Always sunk
7. At production level of 2000 units a cost is P20,000; at production level of 4500 units the same cost is P45,000. This is an example of a: a) Variable cost b) Direct cost c) Fixed cost d) Sunk cost
8. a) b) c) d)
Which of the following is an example of a fixed cost in a manufacturing company: The cost of raw materials The cost of electricity for running machines Wages of assembly line workers Depreciation on factory equipment
9. Mary works at a convenience store and is paid P400 a week. She considers enrolling in a college to earn a degree. She thinks she will have to quit her job if she goes to college. The wages that she will lose if she chooses college are: a) Sunk cost b) Opportunity cost c) Indirect cost d) Prime cost
10. Which cost is not relevant to the decision whether to purchase a new chocolate dipping machine or continue using the old one: a) The cost of the new machine b) Lower maintenance costs for the new machine c) The cost of the old machine d) Additional training required for operating the new machine
11. At the end of June XYZ company had the following balances: Direct materials used
P30,000
Direct labor
18,000
Factory rent
7,000
Indirect materials
5,000
Salary of production supervisor
4,000
Advertising costs
12,000
Rent on administrative office
3,500
Depreciationon factory equipment
6,100
The total manufacturing cost was: a)
P85,600
b)
P70,100
c)
P48,000
d)
P68,600
12. Company ABC had the following balances for the month of April: Finished goods, April 1 P45,000 Cost of goods manufactured 20,000 Finished goods, April 30 The cost of goods sold for April is: a)
P 51,000
14,000
b)
P 20,000
c)
P34,000
d)
P 65,000
13. Conversion costs consist of: a) Direct materials and direct labor b) Direct materials and manufacturing overhead c) Manufacturing and nonmanufacturing costs d) Direct labor and manufacturing overhead
14. A cost that goes into Work in Process inventory and then into t he Finished Goods inventory before appearing on the income statement as cost of goods sold is a: a) Period cost b) Fixed cost c) Opportunity cost d) Product cost
15. Fixed cost: a) Remains the same per unit b) Decreases per unit as the activity level rises c) Increases per unit as the activity level rises d) Varies in total 16. The following information was taken from compan y XYZ’s records for the current month. Raw materials used in production P 35,000 (P25,000 dire ct, P10,000 indirect); direct labor costs incurred P20,000; selling expenses P5,000; insurance on factory P4,000; administrative salaries P12,000; Rent P15,000 (80% factory, 20% administrative offices). The total inventoriable costs for the current month were:
a)
P88,000
b)
P61,000
c)
P71,000
d)
P74,000
17. Period costs are reported: a) On the balance sheet b) On the income statement c) As part of the schedule of cost of goods manufactured d) When the related products are sold 18. Commissions paid to salespersons (P10 per unit sold) are: a) Fixed cost b) Variable cost c) Sunk cost d) Differential cost
19. Which of the following statements is true: a) Product costs are expensed as incurred. b) Selling costs are considered sunk costs. c) Manufacturing overhead is a prime cost. d) Product costs are sometimes called inventoriable costs.
20. An increase in cost bet ween two alternatives is a: a) Direct cost b) Sunk cost c) Incremental cost d) Period cost
Theory of Accounts
1.
The overriding criterion by which accounting information can be judged is that of a. usefulness for decision making. b. freedom from bias. c. timeliness. d. comparability.
2.
Which of the following is a fundamental quality of useful accounting information? a. Comparability. b. Relevance. c. Consistency. d. Materiality.
3.
Which of the following is a fundamental quality of useful accounting information? a. Conservatism. b. Comparability. c. Faithful representation. d. Consistency.
4. What is meant by comparability when discussing financial accounting information? a. Information has predictive or feedback value. b. Information is reasonably free from error. c. Information that is measured and reported in a similar fashion across companies. d. Information is timely. 5.
What a. b. c. d.
6.
Which of the following is an ingredient of relevance? a. Completeness. b. Representational faithfulness. c. Neutrality. d. Predictive value.
7.
Which of the following is an ingredient of faithful representation? a. Predictive value. b. Timeliness. c. Neutrality. d. Feedback value. Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information? a. Understandability. b. Verifiability. c. Timeliness. d. Comparability.
8.
9.
.
is meant by consistency when discussing financial accounting information? Information that is measured and reported in a similar fashion across points in time. Information is timely. Information is measured similarly across the industry. Information is verifiable.
Company A issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information? a. Neutrality. b. Timeliness. c. Predictive value. d. Representational faithfulness.
What is the quality of information that enables users to better forecast future operations? a. Reliability. b. Materiality. c. Comparability. d. Relevance.
11.
Which of the following ingredients of fundamental qualities is part of faithful representation? a. Neutrality. b. Productive value. c. Confirmatory value. d. Timeliness.
12.
Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the information they already possess or can obtain from other sources, and their ability to process information. Consequently, for information to be useful there must be a linkage between these users and the decisions they make. This link is a. relevance. b. reliability. c. understandability. d. materiality.
13.
The two fundamental qualities that make accounting information useful for decision making are a. comparability and consistency. b. materiality and timeliness. c. relevance and faithful representation. d. reliability and comparability.
14.
Accounting information is considered to be relevant when it a. can be depended on to represent the economic c onditions and events that it is intended to represent. b. is capable of making a difference in a decision. c. is understandable by reasonably informed users of accounting information. d. is verifiable and neutral.
15.
The quality of information that gives assurance that it is reasonably free of error and bias a. relevance. b. faithful representation. c. verifiability. d. neutrality.
16.
Financial information does not demonstrate consistency when a. firms in the same industry use different accounting methods to account for the same type of transaction. b. a company changes its estimate of the salvage value of a fixed asset. c. a company fails t o adjust its financial statements for changes in the value of the measuring unit. d. none of these.
17.
When information about two different enterprises has been prepared and presented in a similar manner, the information exhibits the characteristic of a. relevance. b. reliability. c. consistency. d. none of these.
Business Law 1. Obligation is a juridical necessity to give, to do or not to do Right is the power which a person has to demand from another prestation
a. True, True
b. True, False
c. False, True
d. False, False
2. Fortuitous event is any event which can be forseen and inevitable. Generally, may an action for future negligence be waived? a. True, True
b. True, False
c. False, True
d. False, False
3. Resolutory obligation is the fulfillment of which will give rise to obligation Potestative condition is a suspensive condition which depends upon the sole will of the debtor a. True, True
b. True, False
c. False, True
d. False, False
4. Facultative obligation is one where only one prestation has been agreed upon but the obligor may render
another substitution. Generally, may the debtor pa y anyone of the solidary creditors? a. True, True
b. True, False
c. False, True
d. False, False
5. Merger in the person of the principal debtor or creditor do not extinguishes the principal obligation. In law, payment and performance are synonymous. a. True, True b. True, False c. False, True d. False, False 6. The following are kinds of negligence except one. a. Culpa Aquilana b. Quasi-delict c. Culpa criminal d. Culpa contractual 7.Obligation that bounds only one party to perform obligation, one debtor and one creditor a. b. c. d.
Individual Accessory Legal Unilateral
8.TRUE or FALSE. Negligence is the voluntary execution of a wrongful act, or a willfull omission knowing and intending the effects which naturally and necessarily arise from such act or omission. 9.Events which could not be foreseen or which t hough foreseen were inevitable. 10.Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. Which of the following are not a n exception? a. Not transmissible by law b. Not transmissible by their very nature c. Presumptions are rebuttable by evidence. d. There is a stipulation of the parties that they are not transmissible
