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BSA 31P > Chapter 12 [Salosagcol] > Flashcards

Chapter 12 [Salosagcol] Flashcards

1
Q

The pronouncements of the Auditing and Assurance Standards Council (AASC) do not cover

a. Review engagement
b. Compilation engagement
c. Consultancy
d. Agreed-upon procedures engagement

A

c

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2
Q

Which of the following best describes “related services”?

a. Audit and Review of the financial statements
b. Assurance and audit engagements
c. Compilation and agreed-upon procedures engagements
d. Review, compilation, and agreed-upon procedures engagements

A

c

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3
Q

The auditor’s satisfaction as to the reliability of an assertion being made by one party is called

a. Assurance
b. Audit risk
c. Precision
d. Materiality

A

a

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4
Q

The concept of limited assurance is provided for in which of the following engagements?

a. Audit
b. Review
c. Compilation
d. Agreed-upon procedures

A

b

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5
Q

A CPA may issue a review report

a. Only if the CPA is independent
b. Only if the CPA’s report contains an expression of an opinion
c. Provided the client is responsibility for the adequacy of the procedures to be performed
d. Even if the CPA is not independent

A

a

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6
Q

Which of the following statements best describes a review engagement?

a. A review engagement focuses on providing advice in a three party contract
b. A review engagement focuses on providing assurance on the internal controls of a public company
c. A review engagement focuses on providing limited assurance on financial statements of a company
d. A review engagement focuses on reasonable assurance on the assertions contained in the financial statements of a company

A

c

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7
Q

The objective of a review of financial statements is to

a. Express an opinion on the overall financial statements
b. Carry out audit procedures agreed on with the client and other users of the report
c. Assist the client in the preparation of the financial statements
d. State whether anything has come to the auditor’s attention that indicates that the financial statements are not presented fairly

A

d

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8
Q

When performing a review of financial statements, the CPA is required to

a. Apply analytical procedures and make inquiries from third parties by sending confirmation letters
b. Assess the effectiveness of the client’s accounting and internal control systems
c. Obtain corroborative evidence to support management’s responses
d. Obtain understanding of the client’s business and industry

A

d

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9
Q

Which of the following procedures is not included in a review engagement?

a. Inquiries of management
b. Inquiries regarding subsequent events
c. Procedures designed to identify unusual fluctuations
d. A study and evaluation of internal control

A

d

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10
Q

When providing limited assurance that nothing came to the CPA’s attention that would indicate that the financial statements are not acceptable in accordance with the applicable financial reporting framework, the CPA should

a. Obtain corroborative evidence to support management’s responses to inquiries
b. Test the accounting records that identify inconsistencies with the prior year’s financial statements
c. Understand the accounting principles of the industry in which the business entity operates
d. Develop an audit program

A

c

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11
Q

Assurance provided by a review is substantially less than an audit. Which of the following statements is true regarding these services?

a. A review requires more substantive evidence than an audit
b. An audit requires less evidence related to internal control than a review
c. A review requires less evidence than an audit
d. None of the above statements is true

A

c

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12
Q

When performing an engagement to review an entity’s financial statements, the practitioner most likely would

a. Limit the distribution of the review report
b. Ask about actions taken at board of director’s meetings
c. Obtain an understanding of the effectiveness of the entity’s internal control
d. Confirm a sample of significant accounts receivable balances

A

b

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13
Q

Inquiry and analytical procedures are the preliminary basis for a CPA to issue

a. A compilation report
b. A review report
c. A management advisory services report
d. An audit report

A

b

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14
Q

Which of the following procedures is not included in a review engagement?

a. Inquiries of management
b. Inquiries regarding events subsequent to the balance sheet date
c. Any procedures designed to identify relationships among data that appear to be unusual
d. Communicating any material weaknesses discovered during the study and evaluation of internal accounting control

A

d

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15
Q

A review does not provide assurance that the CPA will become aware of all significant matters that would be disclosed in an audit. However, if the CPA becomes aware that information coming to his attention is incorrect, incomplete, or otherwise unsatisfactory, he should

a. Withdraw immediately from the engagement
b. Perform the additional procedures he deems necessary to achieve limited assurance
c. Perform a complete audit and issue an audit report with appropriate qualifications
d. Downgrade the engagement to a compilation and issue the appropriate report

A

b

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16
Q

If the CPA has reasons to believe that the information subject to review may be materially misstated, the CPA should

a. Express a qualified negative assurance
b. Express an adverse opinion
c. Withdraw from the engagement
d. Carry out additional audit procedures

A

d

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17
Q

The review of a company’s financial statements by a CPA firm

a. Requires detailed analysis of the major accounts
b. Is substantially less in scope of procedures than an audit
c. Has similar scope as an audit and adds similar credibility to the statements
d. Culminates in issuance of a report expressing the CPA’s opinion as to the fairness of the statements

A

b

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18
Q

A practitioner’s unmodified report on a review of the financial statements should state that

a. The practitioner does not express an opinion or any form of assurance on the financial statements
b. Nothing has come to the practitioner’s attention that causes the practitioner to believe that the financial statements are not presented fairly, in all material respects, in accordance with PFRS
c. The practitioner obtained reasonable assurance about whether the financial statements are free of material misstatements
d. The practitioner examined evidence, on a test basis, supporting the amounts and disclosures in the financial statements

A

b

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19
Q

If there had been a material scope limitation on a review engagement, the CPA may

a. Express either a qualified opinion or disclaim an opinion on the financial statements
b. Not provide any assurance on the financial statements
c. Issue the unmodified review report
d. Issue an audit report that contains an unmodified opinion about the financial statements

A

b

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20
Q

If the financial statements reviewed contained material misstatements, the practitioner’s review report should

a. Express a qualified conclusion
b. Give an adverse conclusion
c. Not provide any assurance
d. Either a or b

A

d

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21
Q

The statement that “nothing came to our attention which would indicate that these statements are not fairly presented” expresses which of the following?

a. Disclaimer of opinion
b. Negative assurance
c. Negative confirmation
d. Piecemeal opinion

A

b

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22
Q

A practitioner has accepted an engagement to which inquiry and analytical procedures were employed. These procedures will form the basis for the issuance of

a. A compilation report
b. An audit report on supplemental information issued by the client
c. A management advisory report requested by the audit committee
d. A review report on comparative financial statements for a non-public company

A

d

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23
Q

A report on factual findings is the end product of the audit when performing

a. Examination
b. Audit
c. Review
d. Agreed-upon procedures

A

d

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24
Q

An agreed-upon procedures engagement is one in which

a. The practitioner and management agree that procedures will be applied to all accounts and circumstances
b. The practitioner and management agree that procedures will not be applied to all accounts and circumstances
c. The practitioner and management or a third party agree that the engagement will be limited to certain specific procedures
d. The practitioner and management or a third party agree that the practitioner will apply his or her judgment to determine procedures to be performed

A

c

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25
Q

Which of the following is true of the report based on agreed-upon procedures?

a. The report is restricted to those parties who have agreed to the procedures to be performed
b. The CPA provides the recipient of the report limited assurance as to the reasonableness of the assertions presented in the financial information
c. The report states that the practitioner has not recognized any basis that requires revision of the financial statements
d. The report should state that the procedures performed are limited to analytical procedures and inquiry

A

a

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26
Q

Engagement to apply agreed-upon procedures on certain accounts within a financial statement may be accepted provided

a. The CPA has expressed opinion on the financial statements taken as a whole
b. The CPA takes full responsibility for the adequacy of the procedures to be performed
c. The CPA provides only limited assurance about the reliability of the financial statements
d. The distribution of the report is limited only to specified parties involved

A

d

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27
Q

An engagement to apply agreed-upon procedures engagement may be accepted, provided

a. The CPA has audited the financial statements of the client
b. The CPA is independent with respect to the client
c. The client takes full responsibility for the adequacy of the procedures to be performed
d. The adequacy of the procedures to be performed will be determined by the CPA

A

c

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28
Q

Which of the following ethical principles does not apply to an agreed-upon procedure engagement?

a. Independence
b. Confidentiality
c. Professional behavior
d. Professional competence and due care

A

a

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29
Q

Which of the following is true of the report based on agreed-upon procedures?

a. The report is restricted to those parties who have agreed to the procedures to be performed
b. The CPA provides the recipients of the report limited assurance as to reasonableness of the assertion(s) presented in the financial information
c. The report states that the auditor has not recognized any basis that requires revision of the financial statements
d. The report should state that the procedures performed are limited to analytical procedures and inquiry

A

a

30
Q

A summary of findings rather than assurance is most likely to be issued on which engagement?

a. Review
b. Compilation
c. Examination
d. Agreed-upon procedures

A

d

31
Q

Which statement is incorrect regarding agreed-upon procedures?

a. Users of the report assess from themselves the procedures and findings reported by the auditor and draw their own conclusions from the auditor’s work
b. The report is restricted to those parties who have agreed to the procedures to be performed since others, unaware of the reasons for the procedures, may misinterpret the results
c. The auditor should conduct an agreed-upon procedures engagement in accordance with PSRS and the terms of the engagement
d. Where the auditor is not independent, a statement to that effect need not be made in the report of factual findings

A

d

32
Q

Distribution of which of the following types of reports is limited?

a. Audit
b. Review
c. Agreed-upon procedures
d. Compilation

A

c

33
Q

A CPA is not required to comply with the “Code of Ethics for Professional Accountants” promulgated by the Board of Accountancy when performing

a. Review
b. Agreed-upon procedures
c. Compilation
d. None of the above

A

d

34
Q

What level of assurance does an accountant give on a compilation report?

a. None
b. Moderate
c. Low
d. High

A

a

35
Q

Which of the following procedures would a CPA most likely perform in a compilation engagement?

a. Collect, classify, and summarize financial information
b. Apply analytical procedures
c. Assess risk components
d. Test the accounting records

A

a

36
Q

Ethical principles governing compilation of financial statements include

a. Independence; Competence; Confidentiality
b. Independence; Competence
c. Independence; Confidentiality
d. Competence; Confidentiality

A

d

37
Q

The procedures employed in doing compilation are

a. Designed to enable the accountant to express a limited assurance
b. Designed to enable the accountant to express a negative assurance
c. Not designed to enable the accountant to express any form of assurance
d. Less extensive than review procedures but more extensive than agreed-upon procedures

A

c

38
Q

Which of the following is incorrect about a compilation engagement?

a. The CPA uses his auditing expertise to collect, classify, and summarize financial information
b. The engagement ordinarily entails reducing detailed data to a manageable and understandable form
c. The CPA should exercise due care when engaged to compile financial statements
d. The procedures performed do not enable the accountant to express any form of assurance

A

a

39
Q

Which of the following procedures is normally performed in connection with a compilation engagement?

a. Inquire of management about subsequent events
b. Making inquiries of management concerning actions taken at board meetings
c. Applying analytical review procedures
d. Assemble financial information

A

d

40
Q

What assurance does the CPA provide under the following engagements?

a. Audit: High; Review: Moderate; Agreed-upon procedure: None; Compilation: None
b. Audit: Reasonable; Review: Limited; Agreed-upon procedure: Low; Compilation: None
c. Audit: Moderate; Review: Moderate; Agreed-upon procedure: None; Compilation: None
d. Audit: High; Review: Negative; Agreed-upon procedure: None; Compilation: Low

A

a

41
Q

The use of negative assurance in audit reports on financial statements is

a. A violation of the professional standards
b. Encouraged by PICPA
c. A help in clarifying the degree of responsibility being assumed by the auditor
d. Properly located in the opinion paragraph of the unmodified report

A

a

42
Q

When an independent CPA is associated with the financial statements of a publicly held company but has not audited or reviewed the financial statements, the appropriate form of report that must be issued must include a(n)

a. Negative assurance
b. Compilation opinion
c. Disclaimer of opinion
d. Adverse opinion

A

c

43
Q

Which of the following statement is not true about the reports provided by a CPA?

a. In the audit engagement, the auditor provides high level of assurance that the financial statements are free of material msistatement
b. In a review engagement, the CPA’s moderate assurance is expressed in the form of negative assurance
c. For agreed-upon procedures, the CPA provided a report on factual findings and no assurance is expressed
d. In a compilation engagement, no assurance is expressed and the users of financial information do not derive any benefit from the CPA’s involvement

A

d

44
Q

An auditor is associated with the financial information when he

a. Attaches report to the financial information
b. Attaches report to the financial information; Consents to the use of his name in a professional connection
c. Consents to the use of his name in a professional connection
d. None of the above

A

b

45
Q

A CPA who is not independent may issue a

a. Review report
b. Special report
c. Report expressing a qualified opinion
d. Compilation report

A

d

46
Q

A CPA should perform analytical procedures during engagement to

I. Audit
II. Review
III. Compile

a. Yes, Yes, Yes
b. Yes, Yes, No
c. No, Yes, No
d. Yes, No, No

A

b

47
Q

In a compilation engagement, if the accountant becomes aware of material misstatements, the accountant should try to agree appropriate amendments with the entity. If such amendments are not made and the financial information is considered to be misleading, the accountant should

a. Do nothing
b. Withdraw from the engagement
c. Issue a qualified or adverse opinion
d. Issue a negative assurance

A

b

48
Q

Your accounting firm has accepted a compilation engagement from a client in which your firm is not independent. In that case, you

a. May not accept the engagement
b. May accept the engagement and disclose the lack of independence
c. May accept the engagement and not disclose the lack of independence
d. May accept the engagement and disclose the lack of independence and the reason for lack of independence

A

b

49
Q

The concept of reasonable assurance is provided for in which of the following engagements?

a. Review
b. Compilation
c. Audit
d. Agreed-upon procedures

A

c

50
Q

Which of the following engagements would result in a conclusion that represents positive assurance?

a. Review
b. Compilation
c. Examinaton
d. Agreed-upon procedure engagement

A

c

51
Q

The distribution of which of the following types of reports is unrestricted?

a. Audits and reviews
b. Reviews and agreed-upon procedures
c. Examinations and agreed-upon procedures
d. Examinations, reviews, and agreed-upon procedures

A

a

52
Q

Which of the following statements about assurance engagements is not correct?

a. Assurance engagements are intended to enhance the credibility of information about a subject matter by evaluating whether the subject matter conforms in all material respects with suitable criteria
b. The subject matter of an assurance engagement may take many forms such as data, systems and processes or behavior.
c. Not all engagements performed by professional accountants are assurance engagements
d. The Philippine Standards on Assurance Engagements issued by the AASC describe the objectives and elements of assurance engagements to provide high, moderate, or low level of assurance

A

d

53
Q

Which of the following is an example of an assurance engagement?

a. Management advisory services
b. Reporting on financial statements prepared using other comprehensive basis of accounting
c. Compilation of financial information
d. Preparation of tax returns

A

b

54
Q

Which of the following services provides a moderate level of assurance about client’s financial statements?

a. Forecasts and projections
b. Compliance with contractual agreement
c. Review
d. Compilation

A

c

55
Q

Which of the following is not one of the elements of an assurance engagement?

a. Sufficient appropriate evidence
b. A subject matter
c. Suitable critera
d. An opinion about whether the subject matter conform, in all material respects, with identified criteria

A

d

Five Elements of an Assurance Engagement?
1. Three-Party Relationship
2. Subject Matter
3. Criteria
4. Evidence
5. Assurance Report

56
Q

According to PSAE 3000, assurance engagements should exhibit five elements including

a. Financial information
b. A two party relationship
c. Financial reporting framework
d. A written assurance report

A

d

Five elements of assurance engagements:
1. Three-party relationship
2. Subject Matter
3. Criteria
4. Evidence
5. Assurance Report

57
Q

Subject matter of an assurance engagement may take many forms including

a. Data; Systems; Behavior
b. Data; Behavior
c. Data; Systems
d. Systems; Behavior

A

a

58
Q

Which of the following is not one of the requirements before accepting an assurance engagement?

a. The practitioner should be competent and independent
b. The practitioner should accept the engagement only if the subject matter is the responsibility of another party
c. The practitioner should accept the engagement only if the subject matter is identifiable and in form that can be subjected to evidence gathering procedures
d. The responsible party and the intended users of assurance report should be from different organizations

A

d

59
Q

Which of the following generalizations is incorrect about the reliability of evidence gathering by practitioners?

a. Evidence form external sources is more reliable than that generated internally
b. Evidence generated internally is more reliable when subject to appropriate controls within the entity
c. Evidence obtained indirectly by the practitioner is more likely reliable than that obtained directly
d. Evidence in the form of documents and written representation is more likely to be reliable

A

c

60
Q

Which of the following is false? PSAE 3000

a. Describes the objective and elements of assurance engagements intended to provide either high or moderate level of assurance
b. Establishes standards for and provides guidance to professional accountants in public practice for the performance of engagements intended to provide a high level of assurance
c. Specifies the procedures that the professional accountant should adopt in the performance of all assurance engagements
d. Acts as a framework for the development by the Auditing and Assurance Standards Council of specified standards for particular type of assurance engagement

A

c

61
Q

When a CPA is associated with the preparation of forecasts, all of the following should be disclosed, except

a. Sources of information
b. Character of work performed
c. Major assumptions used
d. Probability of achieving the forecast

A

d

62
Q

Given one or more hypothetical assumptions, a responsible party may prepare, to the best of its knowledge and belief, an entity’s expected financial position, results of operations, and cash flows. This prospective financial information is known as

a. Pro-forma financial statements
b. Partial presentation
c. Financial projection
d. Financial forecast

A

c

63
Q

In an engagement to examine prospective financial information, the auditor should obtain sufficient appropriate evidence as to whether

I. Management’s best-estimate assumptions on which the prospective financial information is based are not unreasonable and, in the case of hypothetical assumptions, such assumptions are consistent with the purpose of the information
II. The prospective financial information is properly prepared on the basis of the assumptions
III. The prospective financial information is properly presented and all material assumptions are adequately disclosed, including a clear indication as to whether they are best-estimate assumptions or hypothetical assumptions
IV. The prospective financial information is prepared on a consistent basis with historical financial statements, using appropriate accounting principles

a. I, II, III, and IV
b. I, II, and III
c. I and II
d. I, II, and IV

A

a

64
Q

Financial forecast is a

a. Financial information based on assumptions about events that may occur in the future and assumptions by an entity
b. Prospective financial information prepared on the basis of assumptions as to future events which management expects to take place and the actions management expects to take as of the date that information is prepared
c. Prospective financial information prepared on the basis of hypothetical assumptions about future events and management actions which are not necessarily expected to take place
d. Prospective financial information prepared on the basis of a mixture of best-estimate and hypothetical assumptions

A

b

65
Q

An examination of financial forecast is professional service that involves

a. Assembling financial forecast that is based on management assumptions
b. Limiting the distribution of the accountants report to management and the board of directors
c. Assuming responsibility on the financial forecast
d. Evaluating the preparation of the financial forecast and the support underlying management assumptions

A

d

66
Q

When an accountant examines financial forecast that fails to disclose several significant assumptions used to prepare the forecast, the accountant should describe the assumption in the accountant’s report and issue a report that contains a(n)

a. Qualified opinion
b. Unmodified opinion with emphasis of matter paragraph
c. Adverse opinion
d. Disclaimer of opinion

A

c

67
Q

Accepting an engagement to examine financial projection most likely will be appropriate if the projection will be distributed to

a. All employees who work for the entity
b. Investing public
c. A bank with which the entity is negotiating for a loan
d. All stockholders of record as of the report date

A

c

68
Q

Which of the following is correct concerning prospective financial statements?

a. Only financial forecast would normally be appropriate for limited use
b. Only financial projection would normally be appropriate for limited use
c. Any type of prospective financial statements would normally be appropriate for limited use
d. Any type of prospective financial statements would normally be appropriate for general use

A

c

69
Q

Financial forecasts are based on

a. Hypothetical assumptions; Best estimates
b. Best estimates; A mixture of hypothetical assumptions and best estimates
c. Best estimates
d. A mixture of hypothetical assumptions and best estimates

A

c

70
Q

When the auditor believes that the presentation and disclosure of the prospective financial information is not adequate, the auditor should

a. Express a qualified opinion on the prospective financial information
b. Express an adverse opinion on the prospective financial information
c. Disclaim an opinion on the prospective financial information
d. Either A or B

A

d

71
Q

The party responsible for assumptions identified in the preparation of prospective financial statements is usually

a. A third party lending institution
b. The client’s management
c. The reporting accountant
d. The independent auditor

A

b

BSA 31P (26 decks)

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