CHAPTER 2: THE PROFESSIONAL STANDARDS Flashcards
1
Q
- The Philippine Standards on Auditing (PSA) can be described as
a. Providing very specific guidance about the specific activities an auditor must
perform on each engagement.
b. Similar to Philippine Financial Standards (PFRS).
c. Defining the minimum standards of performance for an auditor.
d. Providing assurance that an auditor will not issue the wrong kind of opinion
A
c. Defining the minimum standards of performance for an auditor.
2
Q
- Which of the following best describes the function of Auditing and Assurance Standards
Council (AASC)?
a. To establish and promulgate generally accepted accounting principles in the
Philippines.
b. To investigate violations of Accountancy Act.
c. To promulgate auditing standards, practices and procedures that shall be generally accepted by the accounting profession in the Philippines.
d. To determine the minimum requirements for admission in the accounting profession.
A
c. To promulgate auditing standards, practices and procedures that shall be generally accepted by the accounting profession in the Philippines.
3
Q
- Pronouncements issued by AASC may be in the form of
Philippine Standards on Auditing
Philippine Standards on
Assurance Engagements
Philippine Standards on Review
Engagements
Philippine Standards on Related Services
a. Yes Yes Yes Yes
b. Yes No Yes No
c. No Yes Yes No
d. No Yes No Yes
A
a. Yes Yes Yes Yes
4
Q
- Which of the following is correct about Philippine Auditing Practices Statements (PAPS)?
a. These are issued to resolve issues relating to PSAs.
b. These statements are intended to have the authority of PSAs.
c. These statements are issued to provide practical assistance to auditors in
implementing PSAs or to promote goodpractice.
d. These statements are forms of interpretations issued by AASC.
A
c. These statements are issued to provide practical assistance to auditors in
implementing PSAs or to promote goodpractice.
5
Q
- Which of the following pronouncements issued by AASC is designed to resolve issues
relating to PSAs?
a. Philippine Auditing Practices Services
b. Interpretations
c. Statements of Auditing Standards in the Philippines
d. Generally Accepted Auditing Standards
A
b. Interpretations
6
Q
- Which of the following is not true of Philippine Auditing Practice Statements (PAPSs)?
a. These statements are not intended to replace PSAs.
b. These statements are intended to have the authority of the PSAs.
c. These statements are issued to provide practical assistance to auditors in implementing the PSAs.
d. These are not form of interpretations issued by the AASC.
A
b. These statements are intended to have the authority of the PSAs.
6
Q
- Based on the Structure of AASC pronouncements, related services include?
Assurance Review
Agreed-upon procedures
Compilation
a. Yes Yes No No
b. No No Yes Yes
c. Yes Yes Yes No
d. No Yes Yes Yes
A
b. No No Yes Yes
6
Q
- Which of the following statements is false?
a. In exceptional circumstances, an auditor may judge it necessary to depart from a PSA in order to more effectively achieve the objective of an audit. When such situation arises, the auditor is required to justify the departure.
b. PSAs need only be applied to material matters.
c. Issuance of final auditing standards, interpretations and statements requires
approval of the majority of the AASC members.
d. Issuance of exposure draft requires the approval of the majority of the AASC members.
A
c. Issuance of final auditing standards, interpretations and statements requires
approval of the majority of the AASC members.
7
Q
- The exposure period allowed for each exposure draft of PSA to be considered by the
organizations and persons to whom it is sent for comment is generally
a. Four months
b. Two months
c. Three months
d. Six months
A
c. Three months
8
Q
- The Philippine Standards on Auditing issued by AASC
a. Are applicable only when an independent audit involving an expression of an
opinion on financial statements is carried out.
b. Are the only authoritative source of standards for members of the accountancy
profession in the Philippines.
c. Are general guidelines to help auditors.
d. Require that in no circumstances would an auditor may judge it necessary to
depart from a PSA, even though such a departure may result to more effective
achievement of the objective of an audit.
A
c. Are general guidelines to help auditors.
9
Q
- A firm of independent auditors must establish and follow quality control policies and
procedures because these standards
a. Are necessary to meet increasing requirements of auditors’ liability as insurers.
b. Are required by the SEC for auditors of all firms.
c. Include formal filing of records of such policies and procedures to a regulatory
agency.
d. Give reasonable assurance that the firm as a whole will comply with professional
standards.
A
d. Give reasonable assurance that the firm as a whole will comply with professional
standards.
10
Q
- The main purpose of implementing a system of quality control is to provide the firm with reasonable assurance that
a. The firm and its personnel will comply with PSA and legal requirements to enable
the firm to issue an appropriate report.
b. The audit will be performed in accordance with PSA.
c. The firm will issue a report that is appropriate in the circumstances.
d. All of the above
A
d. All of the above
11
Q
- The nature and extent of a CPA firm’s quality control policies and procedures depend on
The CPA Firm’s
The nature of the CPA Firm’s Practice
Cost-benefit considerations
b. Yes Yes No
c. Yes No Yes
d. No Yes Yes
A
a. Yes Yes Yes
12
Q
- The objective of the quality control policies to be adopted by an audit firm will ordinarily
incorporate all of the following except:
a. Risk assessment
b. Leadership responsibilities
c. Engagement performance
d. Human resources
A
a. Risk assessment
13
Q
- The person responsible for the audit engagement and its performance, and for the
auditor’s report that is issued in behalf of the firm is the
a. Quality control reviewer
b. Engagement partner
c. Client’s management
d. Those charged with governance
A
b. Engagement partner
14
Q
- Which of the following is an element of a CPA firm’s quality control system that should be considered in establishing its quality control policies and procedures?
a. Complying with laws and regulations
b. Using statistical sampling techniques
c. Independence
d. Considering audit risk and materiality
A
c. Independence
15
Q
- Which of the following is one of the elements of a CPA firm’s quality control system?
a. Leadership responsibilities
b. Computer assisted audit techniques
c. Control activities
d. Control environment
A
a. Leadership responsibilities
16
Q
- Elements of a CPA firm’s quality control that should be considered in establishing its
quality control policies and procedures must include:
Monitoring
Ethical Requirements
Engagement Performance
a. Yes Yes Yes
b. Yes Yes No
c. Yes No Yes
d. No Yes Yes
A
a. Yes Yes Yes
17
Q
- Which of the following quality control objectives would be least important to the auditor?
a. Engagement performance
b. Human resources
c. Determination of audit fee
d. Independence
A
c. Determination of audit fee
18
Q
- A quality control policy that requires personnel in the firm to adhere to independence, integrity, objectivity, confidentiality and professional behavior, relates to
a. Ethical requirements
b. Assignment
c. Human resources
d. Consultation
A
a. Ethical requirements
19
Q
- Which of the following quality control policies and procedures does not relate to human resources and assignment?
a. Emphasize independence of mental attitude in training programs and in
supervision and review of the audits.
b. Monitor the effectiveness of recruiting programs.
c. Identify the criteria which will be considered in evaluating individual performance and expected proficiency.
d. Identify on a timely basis the staffing requirements of specific audits.
A
a. Emphasize independence of mental attitude in training programs and in supervision and review of the audits.
20
Q
- In pursuing a CPA firm’s quality control objectives, a CPA firm may maintain records
indicating which partners or employees of the CPA firm were previously employed by the CPA firm’s clients. Which quality control element would this be most likely to satisfy?
a. Monitoring
b. Assignment
c. Independence
d. Skills and competence
A
c. Independence
21
Q
- In connection with the element of engagement performance, a CPA firms’ system of quality control should ordinarily provide that all personnel.
a. Have the knowledge required to enable them to fulfill responsibilities assigned.
b. Review and test compliance with the firm’s quality control policies and
procedures.
c. Seek assistance from persons having appropriate levels of knowledge, judgment
and authority.
d. Appropriately maintain independence when providing assurance services
A
c. Seek assistance from persons having appropriate levels of knowledge, judgment
and authority.
22
Q
- Maintaining or providing access to adequate reference libraries and other authoritative sources is a procedure that is most likely performed to comply with the policy of
a. Monitoring
b. Skills and competence
c. Consultation
d. Assignment
A
c. Consultation
23
Q
- In compliance with the element of human resources, the firm should address issues relating to
a. Engagement performance
b. Assignment of engagement teams
c. Consultation
d. Difference of opinion
A
b. Assignment of engagement teams
23
Q
- Which of the following quality control procedures relates to engagement performance?
a. Hiring
b. Direction
c. Professional development
d. Advancement
A
b. Direction
24
Q
- In pursuing the firm’s quality control objectives with respect to assigning personnel to engagements, the auditors may use policies and procedures such as
a. Designating senior qualified personnel to provide advice on accounting or
auditing questions throughout the engagement.
b. Requiring timely identification of the staffing requirements of specific
engagements so that enough qualified personnel can be made available.
c. Establishing at entry levels a policy for recruiting that includes minimum standards
of academic preparation and accomplishments.
d. Evaluate clients upon occurrence of specified events to determine whether the relationships ought to be continued.
A
b. Requiring timely identification of the staffing requirements of specific
engagements so that enough qualified personnel can be made available.
25
Q
- In connection with the element of assignment, a CPA firm’s system of quality control should ordinarily establish procedures that
a. Provide adequate supervision at all levels, considering the training, ability and
experience of the personnel assigned.
b. Encourage personnel to use authoritative sources on complex or unusual matter.
c. Require preparation of time budgets for audits to determine manpower
requirements and to schedule the audit work.
d. Establish qualifications deemed necessary for various levels of responsibility within the firm.
A
c. Require preparation of time budgets for audits to determine manpower
requirements and to schedule the audit work.
26
Q
- Which of the following is a policy that must be established to comply with the quality control engagement performance?
a. The firm is to be staffed by personnel who have attained and maintained the
technical standards and professional competence required to enable them to
fulfill their responsibilities.
b. There is a sufficient direction, supervision, and review of work performed at all levels to provide reasonable assurance that the work performed meets
appropriate standards of quality.
c. The firm should assign responsibility for each engagement to an engagement
partner.
d. The continued adequacy and operational effectiveness of quality control policies
and procedures are to be observed.
A
b. There is a sufficient direction, supervision, and review of work performed at all levels to provide reasonable assurance that the work performed meets
appropriate standards of quality.
27
Q
- The work performed by the assistants should be reviewed by personnel of at least equal competence to consider all of the following except:
a. The conclusions expressed are consistent with the results of the work performed.
b. The work was adequately performed and documented.
c. The objectives of the audit have been achieved.
d. The engagement personnel are independent of the audit client.
A
d. The engagement personnel are independent of the audit client.
28
Q
- The primary factor that should be considered in determining the extent of supervision needed by an assistant is the assistant’s
a. Willingness to exercise due care
b. Competence
c. Professional certification
d. Independence
A
b. Competence
29
Q
- In making a decision to accept or retain a client, the firm should consider all of the
following except
a. Its competence
b. Its ability to comply with ethical requirements
c. The integrity of the client’s management
d. The type of opinion to be issued
A
d. The type of opinion to be issued
29
Q
- The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to
a. Enable the CPA firm to attest to the integrity of the client management.
b. Satisfy the CPA firm’s duty to the public concerning the acceptance.
c. Minimize the likelihood of association with clients whose management lacks integrity.
d. Anticipate before performing any field work whether an unmodified opinion can
be expressed.
A
c. Minimize the likelihood of association with clients whose management lacks integrity.
29
Q
- A CPA firm’s quality control procedures pertaining to the acceptance of a prospective audit client would almost likely include
a. Inquiry of management as to whether disagreements between the predecessor
auditor and the prospective client were resolved satisfactorily.
b. Consideration of whether sufficient competent evidential matter may be
obtained to afford a reasonable basis for an opinion.
c. Inquiry of third parties, such as the prospective client’s bankers and attorneys,
about information regarding the prospective client and its management.
d. Consideration of whether the internal control structure is sufficiently effective to
permit a reduction in the required substantive tests.
A
c. Inquiry of third parties, such as the prospective client’s bankers and attorneys,
about information regarding the prospective client and its management.
30
Q
- Quality control policies and procedures should provide the firm reasonable assurance that the policies and procedures relating to the other elements of quality control are being effectively applied. This statement defines the quality control element of
a. Planning
b. Independence, integrity and objectivity.
c. Assignment
d. Monitoring
A
d. Monitoring
31
Q
- In connection with the element of monitoring, a CPA firm’s system of quality control should ordinarily provide for the maintenance of
a. A file of minutes of staff meetings.
b. Updated personnel files.
c. Documentation to demonstrate compliance with its policies and procedures.
d. Documentation to demonstrate compliance with peer review directives.
A
c. Documentation to demonstrate compliance with its policies and procedures.
32
Q
- A deficiency in the firm’s system of quality control is an indication that:
a. The audit engagement was not performed in accordance with professional
standards.
b. The auditor’s report was not appropriate
c. Both a and b
d. Neither a nor b
A
d. Neither a nor b
33
Q
- The firm should establish policies and procedures designed to promote an internal
culture based on the recognition that quality is essential in performing engagements.
Such policies and procedures should require the firm’s chief executive officer (or
equivalent) or, if appropriate, the firm’s managing board of partners (or equivalent), to assume ultimate responsibility for the firm’s system of quality control.
a. Ethical requirements
b. Monitoring
c. Human resources
d. Leadership responsibilities for quality within the firm
A
d. Leadership responsibilities for quality within the firm
34
Q
- Who should take responsibility for the overall quality on each audit engagement?
a. Engagement quality control review
b. Engagement partner
c. Engagement team
d. CPA firm
A
d. CPA firm
35
Q
- The engagement partner should be satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and specific audit engagements have been followed and that conclusions reached in this regard are appropriate and have been documented. Acceptance and continuance of client relationships and specific audit engagements include considering:
I. The integrity of the principal owners, key management, and those changed with
governance of the entity.
II. Whether the engagement team is competent to perform the audit engagement
and has the necessary time and resources.
III. Whether the firm and the engagement team can comply with ethical requirements.
a. I only
b. I and II only
c. II and III only
d. I, II and III
A
d. I, II and III
36
Q
- The firm should establish policies and procedures designed to provide it with reasonable assurance that it has sufficient personnel with the capabilities, competence and commitment to ethical principles necessary to perform its engagements in accordance with professional standards and regulatory and legal requirements, and to enable the firm or engagement partners to issue reports that are appropriate in the circumstance.
a. Ethical requirements
b. Engagement performance
c. Monitoring
d. Human resource
A
d. Human resource
37
Q
- This quality control element requires a CPA firm to establish policies and procedures to provide it with reasonable assurance that engagements are performed in accordance with professional standards and regulatory and legal requirements, and that the firm or
the engagement partner issue reports that are appropriate in the circumstances.
a. Ethical requirements
b. Engagement performance
c. Monitoring
d. Human resources
A
b. Engagement performance
38
Q
- This quality control element is concerned with providing reasonable assurance that policies and procedures related to the other elements are suitably designed and being effectively implemented.
a. Monitoring
b. Engagement performance
c. Human resources
d. Ethical requirements
A
a. Monitoring
38
Q
- The engagement partner should take responsibility for the direction, supervision, and performance of the audit engagement in compliance with professional standards and regulatory and legal requirements, and for the auditor’s report that is issued to be
appropriate in the circumstances. Supervision includes the following except.
a. Tracking the progress of the audit engagement.
b. Addressing significant issues arising during the audit engagement, considering
their significant, and modifying the planned approach appropriately.
c. Informing the members of the engagement team of their responsibilities.
d. Identifying matters for consultation or consideration by more experienced
engagement team members during the audit engagement.
A
d. Identifying matters for consultation or consideration by more experienced
engagement team members during the audit engagement.
39
Q
- Quality Control of Audits of financial information states, in part, that for audits of financial statements of listed entities, the engagement partner should not issue the auditor’s report until the completion of the
a. Engagement Quality Control Review
b. Management Review
c. Engagement Team Review
d. Engagement Partner Review
A
a. Engagement Quality Control Review
