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audit 1 > chapter 1 questions > Flashcards

chapter 1 questions Flashcards

1
Q

T/F
Assurance engagements require independence on the part of the auditor.

A

T

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2
Q

T/F
The degree of satisfaction achieved (the level of assurance which may be provided) is directly related to the scope of procedures performed and their results.

A

T

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3
Q

T/F
Assurance refers to the responsible party’s satisfaction as to the reliability of an assertion being made by one party for use by another party.

A

F
Assurance refers to the practitioner’s satisfaction

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4
Q

T/F
Assurance engagements performed by professional accountants are intended to enhance the credibility of information.

A

T

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5
Q

T/F
An engagement may be classified as an assurance
engagement once it meets all six elements required by
the Framework for Assurance Engagements.

A

F
five elements only (3SECC)

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6
Q

T/F
The responsible party and the intended user need to be from separate organizations.

A

F
he responsible party and the intended user need not be from separate organizations.

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7
Q

T/F
The term practitioner is broader in scope compared to the term auditor

A

T

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8
Q

T/F
A professional accountant may agree to perform an
assurance engagement which they are not competent to
carry out.

A

F
A professional accountant shall not agree to perform an assurance engagement which they are not competent to carry out.

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9
Q

T/F
The responsible party is always the one who engages the professional accountant.

A

F
The intended user may be the one who engages the professional accountant.

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9
Q

T/F
The responsible party or parties is the person(s)
responsible for the subject matter.

A

T

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10
Q

T/F
The intended user is the person or class of persons who engages the professional accountant/CPA.

A

F

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11
Q

T/F
The responsible party may also be one of the intended
users.

A

T

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12
Q

T/F
The subject matter of an assurance engagement may
be presented as a point in time or covering a period of
time.

A

T

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13
Q

T/F
Criteria are the standards or benchmarks used to evaluate or measure the subject matter of an assurance engagement.

A

T

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14
Q

T/F
In the case of an audit of. financial statements, the suitable criteria. to be used are Philippine Standards on Auditing (PSAS).

A

F
The criteria in an FS audit is PFRS or GAAP.

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15
Q

T/F
Appropriateness refers to quantity, while sufficiency refers to quality, of evidential matter.

A

F

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16
Q

T/F
Evidence obtained directly by the practitioner is less reliable than evidence. obtained indirectly or by inference.

A

F

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17
Q

T/F
The responsible party expresses a conclusion that provides a level of assurance as to whether the subject
matter conforms, in all material respects, with the identified suitable criteria.

A

F
The practitioner expresses a conclusion that provides a level of assurance..

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18
Q

T/F
In an attestation engagement, the professional accountant expresses a conclusion on. The subject matter based on suitable criteria, regardless of whether the responsible party has made a written assertion on the subject matter

A

F
This statement describes a direct reporting assurance engagement.

19
Q

T/F
The CPA’s conclusion provides a level of assurance about the subject matter

A

T

20
Q

T/F
Absolute assurance is attainable owing to the fact that much of the evidence available to the CPA is persuasive rather than conclusive.

A

F
Absolute assurance is generally not attainable

21
Q

T/F
Professional standards prohibit CPAs from performing non-assurance engagements.

A

F
CPAs may perform non-assurance engagements

22
Q

T/F
An agreed-upon procedures engagement is an assurance engagement.

A

F
Agreed-upon procedures lack a written assurance report or conclusion. It is a non-assurance engagement

23
Q

T/F
Non-assurance engagements include: compilations, tax consulting, and compliance audits.

A

F
Compliance audits are classified as assurance engagements

24
Q

T/F
Consulting services are two party contracts.

A

T

24
Q

These are independent professional services that improve the quality of information for decision-makers, such as management and external users

A. Assurance services.
B. Audit services.
C. Attestation services.
D. Management consulting.

A

A

25
Q

This refers to the level of auditor’s satisfaction as to the reliability
of an assertion being made by one party for use by another party.

A. Confidence level.
B. Reasonableness level.
C. Assurance level
D. Tolerance level.

A

C

26
Q

Which of the following is
is not an element of assurance
engagements?

A. Subject matter
B. Engagement process
C. Evidence
D. Suitable criteria

A

B
Engagement process is an element according to the superseded PSA 100.

27
Q

Professional skepticism is an attitude that includes being alert to
the following except:

A. Information that calls into question the reliability of documents
and responses to inquiries to be used as evidence.
B. Circumstances that suggest the need for procedures in
addition to those required by relevant assurance standards.
C. Conditions that may indicate likely misstatement.
D. Evidence that is consistent with other evidence obtained.

A

D
Auditors must be alert regarding inconsistent evidence

28
Q

The person, or class of persons, whether as individuals or representatives of an entity, responsible for the subject matter.

A. Professional accountant
B, Responsible party
C. Intended user(s)
D. None of the answers.

A

B

29
Q

The person or class of persons for whom the professional accountant prepares the report for a specific use or purpose.

A, Professional accountant
B. Responsible party
C. Intended user(s)
D. None of the answers.

A

V

30
Q

Which of the following forms may the subject matter of an assurance engagement take?

A. Historical and prospective financial information.
B. Systems and processes.
C. Behavior.
D. All of them.

A

D
Subject matter may include financial or non-financial information, physical characteristics, systems and processes, and behavior.

31
Q

These are the standards or benchmarks used to evaluate or measure the subject matter of an assurance engagement:

A. Criteria.
B. Engagement process.
C. Assertions.
D. Generally accepted auditing standards.

A

A

32
Q

Which of the following characteristics is NOT considered necessary in determining whether the criteria are suitable?

A. Relevance.
B. Neutrality.
C. Reliability.
D. Sufficiency.

A

D
Sufficiency is an attribute of audit evidence.

33
Q

Which of the following is more difficult to evaluate objectively?

A. Efficiency and effectiveness of operations.
B. Compliance with government regulations.
C. Presentation of financial statements in accordance with GAAP.
D. All the three above are equally difficult.

A

A
Efficiency and effectiveness may involve subjective factors.

34
Q

In performing an assurance engagement, a professional
accountant typically:

A. Supplies litigation support services.
B. Assesses control risk at a low level.
C. Expresses a conclusion about an assertion.
D. Provides management consulting advice.

A

C

35
Q

The three commonly-sought types of assurance services are:

A. Audits, review, and compilations.
B. Audits, compilations, and other assurance services.
C. Reviews, compilations and other assurance service.
D. Audits, reviews and other assurance services.

A

D
Compilations are non-assurance engagements.

35
Q

When a CPA has obtained sufficient appropriate evidence to
conclude that the subject matter conforms, in all material respects,
with identified suitable criteria, he/she can provide a(n):
A, Limited assurance.
B. Absolute assurance.
C. Reasonable assurance.
D. No assurance.

A

C

36
Q

Which of the following best describes health care performance measurement service?

A. An engagement which provides assurance about whether
financial and non-financial information being reported from
the entity’s performance measurement system is reliable.
B. An engagement which involves the evaluation of the quality
of health care, medical services and looks into the health vcare delivery system.
C. An engagement which identifies a set of risks that affect the client organization. It involves the study of the link between
risks and the organization’s vision, mission, objectives and strategies and the development of new and relevant
measures.
D. None of these.

A

B
Choice C refers to Business Risk Assessment service.

37
Q

Which of the following statements is incorrect?

A: Assurance services report on the quality of information.
B. Assurance engagements encompass attestation
engagements.
C. All engagements performed by professional accountants are
assurance engagements. include agreed-upon
D. Non-assurance engagements procedures, compilation of financial or other information and tax consulting.

A

C

38
Q

Absolute assurance is generally not attainable as a result of such
factors as:

A. The use of selective testing
B. The inherent limitations of control systems
C. The use of judgment
D. All of these.

A

D

39
Q
  1. Which of the following is an assurance engagement?

A. Compliance audits.
B. Agreed-upon procedures engagements.
C. Management consulting.
D. Preparation of tax returns where no conclusion is expressed.

A

A

40
Q

This engagement involves the application of accounting expertise, as, opposed to auditing expertise, in collecting, classifying and summarizing financial information:

A. Compilation.
B. Agreed-upon procedures engagement.
C. Tax consulting.
D. Management consulting.

A

A

41
Q

A service that includes the determination of the tax consequences of planned or potential transactions, followed by making
suggestions on the most desirable course of action (to legally minimize the tax liability while achieving the client’s objectives):

A. Tax evasion.
B. Tax planning.
C. Tax shelter.
D. Tax compliance.

A

B

42
Q

At the end of this engagement, the CPA provides a report of Tactual findings as a result of undertaking procedures previously
agreed with the client:

A Tax consulting.
B. Management consulting.
C. Compilation.
D, Agreed-upon procedures engagement.

A

D

audit 1 (6 decks)

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