Fundamentals of Assurance Engagements [REDSIRUG]

Question 1

These are independent professional services that improve the quality of information for decision-making.
a. Management consultancy
b. Audit services
c. Assurance services
d. Attestation services

Answer 1

C

Question 2

Which of the following statements best describes assurance services?
a. Independent professional services designed to express an opinion on the fairness of historical financial statements based on the results of an audit.
b. Services that requires the preparation of financial statements or the collection, classification, and summarization of other financial information.
c. Independent professional services that are intended to enhance the credibility of information to meet the needs of an intended user.
d. Independent professional services designed for the improvement of operations, resulting in better outcomes.

Answer 2

C

Question 3

Which of the following best describes the objective of an assurance engagement?
a. To compare the company’s information and policies to those of other entities.
b. To improve the company’s outcomes.
c. To enhance the credibility of information in order to improve the likelihood that the information will meet the needs of an intended user.
d. None of the above.

Answer 3

C

Question 4

The degree of certainty that the practitioner has attained and wishes to convey is:
a. A conveyance.
b. An assertion.
c. A declaration.
d. An assurance.

Answer 4

D

Question 5

What level of assurance is provided by the auditor in an audit engagement?
a. Positive level of assurance
b. High, but not absolute, level of assurance
c. Moderate assurance
d. High level of assurance

Answer 5

B

Question 6

The level of assurance provided by an audit of detecting a material misstatement is referred to as:
a. Positive assurance.
b. High assurance.
c. Reasonable assurance.
d. Negative assurance.

Answer 6

C

Question 7

Of the following, which is the broadest concept?
a. Internal control audit.
b. Audit of financial statements.
c. Attestation services.
d. Assurance services.

Answer 7

D

Question 8

In performing attestation services, a CPA will normally:
a. Recommend uses for information.
b. Improve the quality of information, or its context, for decision makers.
c. Perform market analyses and cost estimates.
d. States a conclusion about a written assertion.

Answer 8

D

Question 9

Which of the following is the single feature that most clearly distinguishes auditing, attestation, and assurance:
a. CPA’s approach to the service.
b. Type of service.
c. Scope of services.
d. Training necessary to perform the service.

Answer 9

C

Question 10

Which of the following services provides the highest level of assurance to third parties about a company’s financial statements?

a. Audit.
b. Review.
c. Compilation.
d. Each of the above provides the same level of assurance.

Answer 10

A

Question 11

For assurance engagements regarding historical financial information, reasonable assurance engagements are called:
a. Review engagements.
b. Audit engagements.
c. Compilation engagements.
d. Agreed-upon procedures engagements.

Answer 11

B

Question 12

In some assurance engagements, the evaluation or measurement of the subject matter is performed by the responsible party, and the subject matter information is in the form of an assertion by the responsible party that is made available to intended users. These engagements are called
a. Recurring engagements
b. Non-assurance engagements
c. Direct reporting engagements
d. Assertion-based engagements

Answer 12

D

Question 13

The following are characteristics of “direct reporting” assurance engagements, except
a. The practitioner either directly performs the evaluation or measurement of the subject matter or obtains a representation from the responsible party that has performed the evaluation or measurement.
b. The subject matter information is in the form of an assertion by the responsible party that is made available to the intended users.
c. The representation of the responsible party that has performed the evaluation or measurement of the subject matter is not available to the intended users.
d. The subject matter information is provided to the intended users in the assurance report.

Answer 13

B

Question 14

What type of assurance engagement is involved when the practitioner expresses a positive form of conclusion?
a. Positive assurance engagement
b. Limited assurance engagement
c. Reasonable assurance engagement
d. Absolute assurance engagement

Answer 14

C

Question 15

What type of assurance engagement is involved when the practitioner expresses a negative form of conclusion?
a. Negative assurance engagement
b. Assertion-based assurance engagement
c. Limited assurance engagement
d. Reasonable assurance engagement

Answer 15

C

Question 16

Assurance engagements involve:
a. Two separate parties: a professional accountant and intended users.
b. Two separate parties: a professional accountant and a responsible party.
c. Three separate parties: a practitioner, a responsible party and intended users.
d. Three separate parties: a professional accountant, a responsible party, and intended users.

Answer 16

C

Question 17

Which of the following statements concerning the assurance engagement’s three party relationships is incorrect?
a. The responsible party and intended users may be from different entities or the same entity.
b. The term “practitioner” as used in the Framework for Assurance Engagements is broader than the term “auditor” as used in PSAs and PSREs.
c. An entity’s senior management (the responsible party) may engage a practitioner to perform an assurance engagement on a particular aspect of the entity’s activities that is the immediate responsibility of a lower level of management (the intended user).
d. In an assertion-based engagement the responsible party is responsible for the subject matter information (the assertion), and may be responsible for the subject matter.

Answer 17

C

Question 18

Which of the following statements concerning the intended user of a professional accountant’s report is incorrect?
a. The responsible party and the intended user may both be within the same organization.
b. The intended user should never be established by agreement between the practitioner and the responsible party or those engaging or employing the practitioner.
c. In some circumstances, the intended user may be established by law.
d. The responsible party may also be one of the intended users.

Answer 18

B

Question 19

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 the form that can be subjected to evidence gathering procedures.
d. The responsible party and the intended user of assurance report should be from different organizations.

Answer 19

D

Question 20

The following statements relate to the three parties involved in an assurance engagement. Which is correct?
a. The responsible party and the intended users should always be from different entities.
b. A practitioner should not accept an assurance engagement when the subject matter of the engagement requires specialized skills and knowledge beyond those ordinarily possessed by the practitioner.
c. A responsible party is the person who is responsible for the subject matter or the subject matter information.
d. In all assurance engagements, the responsible party is the engaging party, i.e., the party that engages the practitioner

Answer 20

C

Question 21

Suitable criteria are required for reasonably consistent evaluation or measurement of the subject matter of an assurance engagement. Which of the following statements concerning the characteristics of suitable criteria is correct?
a. Relevant criteria allow reasonably consistent evaluation or measurement of the subject matter including, where relevant, presentation and disclosure, when used in similar circumstances by similarly qualified practitioners.
b. Reliable criteria contribute to conclusions that are clear, comprehensive, and not subject to significantly different interpretations.
c. Criteria are sufficiently complete when they contribute conclusions that are clear, comprehensive, and not subject to different interpretations.
d. Neutral criteria contribute to conclusions that are free from bias.

Answer 21

D

Question 22

Criteria that are embodied in laws or regulations, or issued by authorized or recognized bodies of experts that follow a transparent due process are called:
a. Suitable criteria
b. General criteria
c. Established criteria
d. Specifically developed criteria

Answer 22

C

Question 23

Which of the following is not a characteristic of suitable criteria?
a. Completeness
b. Comparability
c. Neutrality
d. Relevance

Answer 23

B

Question 24

The criteria to be used for a particular engagement can either be established or specifically developed. Established criteria are those
a. Designed for the purpose of the engagement.
b. Embodied in laws or regulations or issued by authorized or recognized bodies of experts that follow a transparent due process.
c. Made available to the intended users.
d. Not made available to the intended users.

Answer 24

B

Question 25

A practitioner should accept an assurance engagement only if
a. The subject matter is the responsibility of either the intended users or the practitioner.
b. The subject matter is in the form of financial information.
c. The practitioner’s conclusion is to be contained in a written report.
d. The criteria to be used are not available to the intended users.

Answer 25

C

Question 26

In an assurance engagement, this refers to the information obtained by the practitioner in arriving at the conclusions on which the conclusion is based.
a. Generally accepted auditing standards
b. Assertions
c. Criteria
d. Evidence

Answer 26

D

Question 27

Assurance engagement risk is the risk
a. Of expressing an inappropriate conclusion when the subject matter information is not materially misstated.
b. That the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated.
c. Of expressing an inappropriate conclusion when the subject matter information is either materially miss-tated or not materially misstated.
d. Through loss from litigation, adverse publicity, or other events arising in connection with a subject matter reported on.

Answer 27

B

Question 28

The following are components of assurance engagement risk, except
a. Business risk
b. Detection risk
c. Inherent risk
d. Control risk

Answer 28

A

Question 29

The predominant type of attestation service performed by CPAs is:
a. Audit.
b. Review.
c. Compilation.
d. Management consulting.

Answer 29

A

Question 30

Which of the following characteristics is not considered necessary in determining whether the criteria are suitable?
a. Sufficiency
b. Relevance
c. Reliability
d. Neutrality

Answer 30

A

Question 31

The assurance report is often addressed to the intended users which may be:
a. The party responsible for the subject matter.
b. Established by agreement between the professional accountant and the responsible party.
c. Both A and B
d. Neither A nor B

Answer 31

C

Question 32

The assurance report is often addressed to the intended users which may be:
a. The party responsible for the subject matter.
b. Established by agreement between the professional accountant and the responsible party.
c. Both A and B
d. Neither A nor B

Answer 32

C

Question 33

Which of the following services provides positive assurance through attestation?
a. Tax services
b. Review
c. Auditing
d. Accounting services

Answer 33

C

Question 34

The three commonly-sought types of assurance services are:
a. Audits, reviews, and compilations.
b. Reviews, compilations, and other assurance services.
c. Audits, reviews, and other assurance services.
d. Audits, compilations, and other assurance services.

Answer 34

C

Question 35

Positive assurance is expressed through:
a. Attestation
b. Declaration
c. Conclusion
d. Stating whether anything has come to the auditor’s attention that indicates that the financial statements are not presented fairly.

Answer 35

A

Question 36

The subject matter of an assurance engagement can take the following forms except
a. The entity’s internal control.
b. Historical or prospective financial statements.
c. Performance of an entity that could indicate efficiency and effectiveness.
d. Evaluation of a capital investment proposal.

Answer 36

D

Question 37

Which of the following statements best describes review services?
a. Review engagements focus on providing assurance on the internal controls of a public company.
b. Review engagements focus on providing assurance on the assertions contained in the financial statements of a public company.
c. Review engagements focus on providing advice in a three-party contract.
d. Review engagements focus on providing limited assurance on financial statements of a private company.

Answer 37

D

Question 38

A review of a company’s financial statements by a CPA firm:
a. Is similar in scope to an audit and adds similar credibility to the statements.
b. Is significantly less in scope than an audit and results in a report which provides positive assurance, although not absolute assurance.
c. Concludes with the issuance of a report expressing the CPA’s opinion as to the fairness of the financial statements.
d. Is designed to provide only moderate assurance.

Answer 38

D

Question 39

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 report.
c. State whether anything has come to the auditor’s attention that indicates that the financial statements are not presented fairly.
d. Assist the client in the preparation of the financial statements.

Answer 39

C

Question 40

Which of the following is incorrect regarding a compilation engagement?
a. The CPA uses his auditing expertise to collect, classify and summarize financial information.
b. The CPA should exercise due care.
c. The engagement ordinarily entails reducing detailed data to a manageable and understandable form.
d. The procedures performed do not enable the accountant to express any form of assurance.

Answer 40

A

Question 41

The type of assurance that is provided by the CPA on a compilation report is:
a. Limited assurance.
b. No assurance.
c. Low assurance.
d. Negative assurance.

Answer 41

B

Question 42

Which of the following statements concerning compilation engagement is incorrect?
a. In a compilation engagement, the accountant is engaged to use accounting expertise as opposed to auditing expertise to collect, classify, and summarize financial information.
b. A compilation engagement ordinarily entails reducing detailed data to a manageable and understandable form without a requirement to test the assertions underlying that information.
c. Users of the compiled financial information derive some benefit as a result of the accountant’s involvement because the service has been performed with due professional skill and care.
d. The procedures employed in a compilation engagement enable the accountant to express a moderate level of assurance on the compiled financial information.

Answer 42

D

Question 43

Assurance services differ from consulting services in that they
I. Focus on providing advice.
II. Involve monitoring of one party by another.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

Answer 43

B

Question 44

For assurance engagements which are neither audits nor reviews of historical financial information, the following standard applies:
a. PSAs
b. PSREs
c. PSAEs
d. PSRSs

Answer 44

C

Question 45

Unlike consulting services, in assurance services:
a. There is confirmation that financial statement assertions are accurate.
b. Misstated account balances are generally corrected by an independent audit.
c. Competing interests may exist between management and the users of statements.
d. Ineffective internal controls may exist.

Answer 45

C

Question 46

The attest function:
a. Is an essential part of every engagement performed by a CPA.
b. Includes the preparation of a written report of the CPA’s conclusion.
c. Requires a complete review of all transactions during the period under examination.
d. Requires a review of a sample of transactions during the period under examination.

Answer 46

B

Question 47

Which of the following is an assurance service?
a. Performance measurement
b. Systems design and installation
c. Tax planning
d. Personal financial planning

Answer 47

A

Question 48

Non-assurance engagements include all of the following services, except:
a. Agreed-upon procedures engagements.
b. Compilations of financial or other information.
c. Examination of prospective financial information.
d. Management and tax consulting.

Answer 48

C

Question 49

Unlike consulting services, assurance services:
a. Make recommendation to management.
b. Report on how to use information.
c. Are two-party contracts.
d. Report on the quality of information.

Answer 49

D

Question 50

Identify the correct statement.
a. An audit provides limited assurance by attesting to the fairness of the client’s assertions.
b. A review provides positive assurance by attesting the reliability of the client’s assertions.
c. Management consulting services provide attestation in all cases.
d. Accounting services do not provide attestation.

Answer 50

D

Question 51

An attestation engagement is one in which a CPA is engaged to:
a. Assemble prospective financial statements based on the assumptions of the entity’s management without expressing any assurance.
b. Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party.
c. Provide tax advice or prepare a tax return based on financial information the CPA has not audited or reviewed.
d. Testify as an expert witness in accounting, auditing or tax matters, given certain stipulated facts.

Answer 51

B

Question 52

Assurance engagements encompass the following types of services, except:
a. Audit of historical financial statements.
b. Review engagements.
c. Management consulting.
d. Attestation services.

Answer 52

C

Question 53

A report on factual findings is the end product of the auditor when performing:
a. Audit.
b. Review.
c. Agreed-upon procedures.
d. Compilation.

Answer 53

C

Question 54

What assurance is provided by the auditor in an agreed-upon procedures engagement?
a. No assurance.
b. Low.
c. Moderate.
d. Reasonable.

Answer 54

A

Question 55

The term “accountant” has been used by Auditing and Assurance Standards Council to refer to a CPA in public practice who is engaged to:
a. Audit financial statements.
b. Review financial statements.
c. Apply agreed-upon procedures.
d. Compile financial statements.

Answer 55

D

Question 56

Which of the following best describes relationships among auditing, attest and assurance services?
a. Attest is a type of auditing service.
b. Assurance is a type of attest service.
c. Auditing is a type of assurance service.
d. Auditing and attest services represent two distinctly different types of services.

Answer 56

C

Question 57

When providing consulting services, the CPA acts primarily as a(n):
a. Independent practitioner.
b. Expert on compliance with industry standards.
c. Objective advisor on the use of information.
d. Confidential reviewer.

Answer 57

C

Question 58

Which of the following statements concerning consulting services is incorrect?
a. The performance of consulting services for audit clients does not, in and of itself, impair the auditor’s independence.
b. Consulting services differ fundamentally from the CPA’s function of attesting to the assertions of other parties.
c. Consulting services ordinarily involve external reporting.
d. Most CPAs, including those who provide audit and tax services, also provide consulting services to their clients.

Answer 58

C

Question 59

In an engagement to perform agreed-upon procedures, an auditor is engaged to:
a. Use accounting expertise as opposed to auditing expertise to collect, classify, and summarize financial information.
b. Provide a moderate level of assurance that the information is free of material misstatement.
c. Provide a high, but not absolute, level of assurance that the information is free of material misstatement.
d. Carry out those procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings.

Answer 59

D

Question 60

Compilation is an example of which one of the following types of services?
a. Auditing
b. Accounting
c. Consulting
d. Review

Answer 60

B

Question 61

Non-assurance engagements include all of the following except
a. Agreed-upon procedures.
b. Management consulting.
c. Preparation of tax returns where no conclusion is expressed.
d. Compliance audit.

Answer 61

D

Question 62

In performing an assurance engagement, a professional accountant typically
a. Provides management consulting advice.
b. Expresses a conclusion about an assertion.
c. Supplies litigation support services.
d. Assesses control risk at a low level.

Answer 62

B

Question 63

Which of the following is not an assurance engagement?
a. Information System Reliability Service
b. Business Performance Measurement
c. Risk Assessment Service
d. Management Consulting Service

Answer 63

D

Question 64

Which of the following forms may be the subject matter of assurance engagements?
a. Historical financial information
b. Systems and processes
c. Behavior
d. All of the above

Answer 64

D

Question 65

Assurance engagements should exhibit the following elements except
a. A subject matter
b. Suitable criteria
c. Evidence
d. Appropriate professional fees

Answer 65

D

Question 66

Which of the following is not an element of assurance engagements?
a. Subject matter
b. Evidence
c. Engagement process
d. Suitable criteria

Answer 66

C

Question 67

Engagement risk is influenced by the risks associated with the following except
a. Nature and form of the subject matter.
b. Nature and form of the criteria applied to the subject matter.
c. Nature and extent of the process used to collect and evaluate evidence.
d. Unreasonably low professional fee.

Answer 67

D

Question 68

Absolute assurance is 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 the above

Answer 68

D

Question 69

A CPA should not submit unaudited financial statements of a non-public entity to a client or others unless, as a minimum, the CPA complies with the provisions applicable to
a. Compilation engagements.
b. Review engagements.
c. Assurance engagements.
d. Audit engagements.

Answer 69

A

Question 70

This tax service includes the determination of the tax consequences of planned or potential transactions, followed by making suggestions on the most desirable course of action such as to legally minimize the tax liability while achieving the client’s objectives:
a. Tax shelter
b. Tax evasion
c. Tax compliance
d. Tax planning

Answer 70

D

Question 71

You own Dude, Inc., which manufactures wooden tables. You need to hire some accountants to prepare your monthly financial statements. The preparation of your financial statements is referred to as a(n):
a. Audit.
b. Compilation.
c. Review.
d. Special report.

Answer 71

B

Question 72

Distribution of a report is always restricted when:
a. Negative assurance is given.
b. There is a positive expression of opinion.
c. A review has been performed.
d. Agreed-upon procedures have been performed.

Answer 72

D

Question 73

The need for assurance services arises because:
a. There is a consonance of interests of the preparer and the user of the financial statements.
b. There is a potential bias in providing information.
c. Economic transactions are less complex than they were a decade ago.
d. Most users today have access to the system that generates the financial statements they use.

Answer 73

B

Question 74

Assurance services involve which of the following?
a. Relevance as well as reliability.
b. Nonfinancial information as well as traditional financial statements.
c. Electronic databases as well as printed reports.
d. All of the above.

Answer 74

D

Question 75

Which of the following statements is true?
a. The degree or level of assurance that may be provided by the practitioner is inversely related to the scope of procedures performed and their results.
b. Assurance engagements do not require independence.
c. The term “auditor” is broader in scope compared to the term “practitioner.”
d. Assurance engagements performed by professional accountants are intended to enhance the credibility of information.

Answer 75

D

Question 76

Which of the following statements is true?
a. Professional standards prohibit CPAs from performing non-assurance engagements.
b. Absolute assurance is attainable owing to the fact that much of the evidence available to the CPA is persuasive rather than conclusive.
c. 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.
d. The CPA’s conclusion provides a level of assurance about the subject matter.

Answer 76

D

Question 77

Assurance engagement include the following, except
a. An engagement conducted to provide a high level of assurance that the subject matter conforms in all material respects with identified suitable criteria.
b. An engagement conducted to provide a moderate level of assurance that the subject matter is plausible in the circumstances.
c. An engagement in accordance with the Philippine Standard on Assurance Engagement(s).
d. An engagement to perform agreed-upon procedures.

Answer 77

D

Agreed-upon procedures provide no assurance.

Question 78

The subject matter of an assurance engagement may include
I. Historical or prospective financial information
II. Internal controls
III. Compliance with regulation
a. I and II only
b. I and III only
c. II and III only
d. I, II, and III

Answer 78

D

Question 79

In assertion-based assurance engagements, the evaluation or measurement of the subject matter against criteria is performed by the
a. Intended users
b. Responsible party
c. Practitioner
d. AASC

Answer 79

B

Question 80

Which of the following statements is true concerning evidence in an assurance engagement?
a. The reliability of evidence is influenced not by its nature but by its source.
b. Sufficiency is the measure of the quantity of evidence.
c. Obtaining more evidence may compensate for its poor quality.
d. Appropriateness is the measure of the quality of evidence, that is, its reliability and persuasiveness.

Answer 80

B

Question 81

An unqualified conclusion is not appropriate for either reasonable or limited assurance engagement when:
I. Circumstances prevent the practitioner from obtaining evidence required to reduce assurance engagement risk to the appropriate level.
II. The responsible party or the engaging party imposes a restriction that prevents the practitioner from obtaining evidence required to reduce assurance engagement risk to the appropriate level.
a. I only
b. II only
c. Either I or II
d. Neither I nor II

Answer 81

C

Question 82

The following statements relate to the performance of an assurance engagement other than an audit or review of historical financial information covered by PSAs and PSREs. Which is incorrect?
a. The assurance report should be in writing and should contain a clear expression of the practitioner’s conclusion about the subject matter information.
b. Those persons who are to perform the engagement should collectively possess the necessary professional competence.
c. The practitioner is not allowed to use the work of persons from other professional disciplines.
d. The practitioner should consider materiality and assurance engagement risk when planning and per-forming an assurance engagement.

Answer 82

C

Question 83

Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of the following factors, except
a. The use of selective testing.
b. The fact that much of the evidence available to the practitioner is persuasive rather than conclusive.
c. The practitioner may not have the required assurance knowledge and skills to gather and evaluate evidence.
d. The use of judgment in gathering and evaluating evidence and forming conclusions based on that evidence.

Answer 83

C

Question 84

Which of the following standards are to be applied, as appropriate, in the audit of historical financial information?
a. PSAEs
b. PSREs
c. PSAs
d. PSRSs

Answer 84

C

Question 85

Which of the following standards are to be applied to compilation engagements and engagements to perform agreed-upon procedures to information?
a. PSRSs
b. PSAs
c. PSAEs
d. PSREs

Answer 85

A

Question 86

The Philippine Standards on Review Engagements (PSREs) are to be applied in
a. The audit of historical financial information.
b. Assurance engagements dealing with subject matters other than historical financial information.
c. The review of both historical and prospective financial information.
d. The review of historical financial information.

Answer 86

D

Question 87

PSRE 2400 (Engagements to Review Financial Statements), as amended by the AASC in February 2008, applies to
a. Reviews of any historical financial information of an audit client.
b. Reviews of historical financial or other information by a practitioner other than the entity’s auditor.
c. Reviews of historical financial or other information of an audit client.
d. Reviews of any historical financial information by a practitioner other than the entity’s auditor.

Answer 87

D

Question 88

The Philippine Standards on Assurance Engagements (PSAEs) are to be applied in
a. The audit or review of historical financial information.
b. Assurance engagements dealing with subject matters other than historical financial information.
c. Compilation engagements and agreements to apply agreed-upon procedures to information.
d. Assurance engagements dealing with historical financial information.

Answer 88

B

Question 89

The Philippine Standards on Quality Control (PSQCs) are to be applied to
a. All services that fall under the AASC’s engagement standards.
b. Assurance engagements only.
c. Review engagements only.
d. Compilation and review engagements only.

Answer 89

A

Question 90

These statements are issued by the AASC to provide interpretive guidance and practical assistance to auditors in the implementation of PSAs and to promote good practice.
a. PREPSs
b. PAPSs
c. PAEPs
d. PRSPSs

Answer 90

B

Philippine Auditing Practice Statements

Question 91

For the purpose of expressing negative assurance in the review report, the practitioner should obtain sufficient appropriate evidence primarily through
a. Inquiry and confirmation
b. Analytical procedures and substantive tests of details of transactions and account balances
c. Confirmation and tests of controls
d. Inquiry and analytical procedures

Answer 91

D

Question 92

A practitioner’s review of an entity’s financial statements does not provide assurance that he/she will become aware of all significant matters that would be disclosed in an audit. However, if the practitioner has become aware that information coming to his/her attention may be materially misstated, the practitioner should
a. Perform a complete audit and issue a modified auditor’s report.
b. Withdraw immediately from the engagement.
c. Carry out additional or more extensive procedures as are necessary to achieve limited assurance.
d. Downgrade the engagement to a compilation and issue the appropriate report.

Answer 92

C

Question 93

The following statements relate to a review of financial statements. Which is incorrect?
a. The objective of a review of financial statements is to enable a practitioner to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to the practitioner’s attention that causes the practitioner to believe that the financial statements are not prepared, in all material respects, in accordance with an identified financial reporting framework.
b. A review ordinarily involves an assessment of accounting and internal control systems, tests of records, and of responses to inquiries by obtaining corroborating evidence through inspection, observation, confirmation, and computation.
c. A review comprises inquiry and analytical procedures are designed to review the reliability of an assertion that is the responsibility of one party for use by another party.
d. The level of assurance provided in a review report is less than that given in an audit report.

Answer 93

B

Question 94

The following statements relate to a review of interim financial information performed by the entity’s independent auditor. Which is incorrect?
a. A review of interim financial information does not provide a basis for expressing an opinion whether the financial information is presented fairly, in all material respects, in accordance with an applicable financial reporting framework.
b. Similar to a financial statement audit, a review of interim financial information is designed to obtain reasonable assurance that the interim financial information is free from material misstatement.
c. In a review of interim financial information, the auditor should have an understanding of the entity and its environment, including its internal control, as it relates to the preparation of both annual and interim financial information, sufficient to plan and conduct the engagement.
d. A review of interim financial information may bring significant matters affecting the interim financial in formation to the auditor’s attention, but it does not provide all of the evidence that would be required in audit.

Answer 94

B

Question 95

When performing a compilation engagement, the accountant is required to
a. Make inquiries of management to assess the reliability and completeness of the information provided.
b. Assess internal controls.
c. Verify matters and explanations.
d. Obtain a general knowledge of the business and operations of the entity.

Answer 95

D

Question 96

Each page of the financial information compiled by the accountant should include the following reference, except
a. “Unaudited”
b. “Compiled, Negative Assurance Expressed”
c. “Compiled without Audit or Review”
d. “Refer to Compilation Report”

Answer 96

B

Question 97

An auditor may accept an engagement to perform specified procedures on the specific subject matter of specified elements, accounts, or items of a financial statement if
a. The report does not list the procedures performed.
b. The auditor is also the entity’s continuing auditor.
c. The financial statements are prepared in accordance with a special purpose framework.
d. Use of the report is restricted.

Answer 97

D

Question 98

An engagement to perform agreed-upon procedures may involve the auditor in performing certain procedures concerning
I. Individual items of financial data.
II. A single financial statement.
III. A complete set of financial statements.
a. I and II only
b. II and III only
c. I and III only
d. I, II, and III

Answer 98

D

Question 99

The following contain basic principles, essential procedures and related guidance, consistent with the concepts in the Framework, for the performance of assurance engagements, except
a. PSAs
b. PSREs
c. PSAEs
d. PSRSs

Answer 99

D

Philippine Standards on Related Services

Question 100

CPAs in public practice who perform assurance engagements are governed by the following, except
a. Framework for Assurance Engagements
b. Philippine Standards on Quality Control
c. Code of Ethics for Professional Accountants in the Philippines
d. AASC’s Engagement Standards (PSAs, PSREs, PSAEs, and PSRSs)

Answer 100

D

Question 101

The Philippine Framework for Assurance Engagements
a. Provides a frame of reference for CPAs in public practice when performing audits, reviews, and compi-lations of historical financial information.
b. Contains basic principles, essential procedures, and related guidance for the performance of assurance engagements.
c. Establishes standards and provides procedural requirements for the performance of assurance en-gagements.
d. Defines and describes the elements and objectives of an assurance engagement, and identifies engagements to which PSAs, PSREs, and PSAEs apply.

Answer 101

D

Question 102

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

Answer 102

C

Question 103

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 meeting
c. Applying analytical review procedures
d. Collect, classify and summarize financial information.

Answer 103

D

Question 104

An engagement to apply agreed-upon procedure 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 distribution of the report will be limited only to specified parties involved.
d. The adequacy of the procedures to be performed will be determined by the CPA.

Answer 104

C

Question 105

Pronouncements of Auditing and Assurance Standards Council (AASC) do not cover
a. Review engagement
b. Compilation engagement
c. Consultancy
d. Agreed-upon procedures engagement

Answer 105

C

Question 106

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

Answer 106

B

Question 107

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 AASC describe the objectives and elements of assurance engagements to provide either a high, moderate or low level of assurance.

Answer 107

D

Question 108

Which of the following services provides a moderate level of assurance about the client’s financial statements?
a. Forecasts and projections
b. Compliance with contractual agreement
c. Review
d. Compilation

Answer 108

C

Question 109

The form of attestation that provides the highest form of assurance is a(n):
a. Review.
b. Assembly
c. Compilation.
d. Examination.

Answer 109

D

Question 110

In an engagement to perform agreed-upon procedures, an auditor is engaged to:
a. Carry out those procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings.
b. Use accounting expertise as opposed to auditing expertise to collect, classify, and summarize financial information.
c. Provide a moderate level of assurance that the information is free of material misstatement.
d. Provide a high, but not absolute, level of assurance that the information is-free of material misstatement.

Answer 110

A

Question 111

The report on an agreed-upon procedures engagement should contain:
a. A general description of the procedures performed.
b. An expression of positive assurance based on the specific procedures performed.
c. A statement that the auditor is independent of the entity.
d. Identification of the purpose for which the agreed-upon procedures were performed.

Answer 111

D

Question 112

A report may be based upon applying agreed-upon procedures to specified elements, accounts, or items of a financial statement. The users of the report should participate in establishing the procedures to be performed. If the auditor cannot discuss the procedures with all the parties who will receive the report, he/she may:
I. Discuss the procedures to be applied with appropriate representatives of the parties involved.
II. Review relevant correspondence from the parties involved.
III. Distribute a draft of the type of report that will be issued to the parties involved.
a. I and II only
b. I and III only
c. II and III only
d. I, II, and III

Answer 112

D

Question 113

Which of the following statements concerning consulting services is false?
a. The performance of consulting services for audit clients does not, in and of itself, impair the auditor’s independence.
b. Consulting services differ fundamentally from the CPA’s function of attesting to the assertions of other parties.
c. Consulting services ordinarily involve external reporting.
d. Most CPAs, including those who provide audit and tax services, also provide consulting services to their clients.

Answer 113

C

Question 114

The form of communication with a client in a consulting services engagement should be
a. Either written or oral.
b. Written, and a copy should be sent to management alone.
c. Oral, with appropriate documentation in working papers.
d. Written, and copies should be sent to both management and the board of directors.

Answer 114

A

Question 115

Which of the following is the most appropriate action to be taken by a CPA who has been asked to perform a consulting services engagement concerning the analysis of a potential merger if he/she has little experience with the industry involved?
a. Accept the engagement but he/she should conduct research or consult with others to obtain sufficient competence.
b. Decline the engagement because he/she lacks sufficient knowledge.
c. Accept the engagement and issue a report that contains his/her opinion on the achievability of the results of the merger.
d. Accept the engagement and perform it in accordance with Philippine Standards on Auditing (PSAs).

Answer 115

A

Question 116

The Philippine Standards on Auditing (PSA) require that a report be issued whenever a CPA firm:
a. Performs an audit.
b. Is associated with financial statements.
c. Is engaged to perform any services of any nature.
d. Performs SEC regulated work.

Answer 116

B

Question 117

A practitioner is associated with financial information when:
I. The practitioner attaches a report to that financial information.
II. The practitioner consents to the use of his/her name in a professional connection.
a. I only.
b. II only.
c. Either I or II.
d. Neither I nor II.

Answer 117

C

Question 118

If the auditor learns that an entity is inappropriately using the auditor’s name in association with financial information, he/she should:
a. Remain silent.
b. Require management to cease doing so.
c. Inform any known third party users of the inappropriate use of his/her name in connection with the information.
d. Seek legal advice if necessary.

Answer 118

B