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Fundamentals of Auditing and Assurance Services Flashcards

1
Q

Who promulgated the auditing standards in the Philippines

A

Auditing and Assurance Standards Council (AASC)

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2
Q

Who created the AASC

A

Professional Regulation Commissions upon the recommendation of the Board of Accountancy

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3
Q

3 Frameworks in the practice of the accountancy profession

A
  1. Professional
  2. Regulatory
  3. Legal
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4
Q

4 Sectors in the Accountancy Profession

A
  1. Public Practice
  2. Commerce and Industry
  3. Education or Academe
  4. Government Service
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5
Q

AASC’s Engagement Standards (Professional Framework)

A
  1. PSA
  2. PSRE
  3. PSAE
  4. PSRS
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6
Q

Fundamental Ethical Principles

A

POPIC
1. Professional Competence and Due Care
2. Objectivity
3. Professional Behaviour
4. Integrity
5. Confidentiality

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7
Q

Essential Ethical Principle

A

Independence (in fact and in mind)

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8
Q

Legal Framework

A
  1. RA 9298 and IRR
  2. RA 10912 CPD Law
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9
Q

Two types of Professional Engagements

A
  1. Assurance Engagement
  2. Non-assurance Engagement
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10
Q

What is the content of the engagement standards

A
  1. Basic Principles
  2. Essential Procedures
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11
Q

What are “practice statements” for

A

Interpretative Guidance and Practice Assistance

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12
Q

What is an Assurance Engagement?

A

Engagement which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation of a subject matter against criteria

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13
Q

Regulatory Framework

A
  1. 2021 Revised Philippine Code of Ethics
  2. Rules and Regulations on Advertising and Promotion in the Philippines
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14
Q

Objectives of Assurance Engagement

A
  1. Evaluate a subject matter against identified suitable criteria
  2. Express about the subject matter
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15
Q

Classification of Assurance Engagements

(According to Level of Assurance)

A
  1. Reasonable Assurance Engagement
  2. Limited Assurance Engagement
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16
Q

Classification of Assurance Engagements

(According to Structure)

A
  1. Assertion-based Engagement (Attestation)
  2. Direct Reporting Engagement
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17
Q

Objective of Reasonable Assurance Engagement

A

Reduction in assurance engagement risk: **Acceptably Low Level **

Form of expression: Positive Form

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18
Q

Objective of Limited Assurance Engagement

A

Reduction in assurance engagement risk: **Level that is Acceptable **

Form of expression: Negative Form

19
Q

Assertion-based Engagement

A

**Responsible Party: **performs the evaluation of subject matter in an assertion based engagement

Form of assertion by RP: made available to intended users

20
Q

Direct Reporting Engagement

A

**Practitioner: ** directly performs the evaluation of subject matter or obtains representation from RP
​
Form of assertion by RP: not available to intended users

21
Q

Examples of Assertion-based Engagements

A
  1. Independent Audit Engagement
  2. Review Engagement
22
Q

Procedures to obtain evidence in Review Engagements

A
  1. Inquiry
  2. Analytical Procedures
23
Q

Elements of an Assurance Engagement

A
  1. Three party relationship
  2. Appropriate subject matter
  3. Suitable criteria
  4. Sufficient and appropriate evidence
  5. Written Assurance Report
24
Q

Three-party relationship involves

A
  1. Practitioner
  2. Responsible Party
  3. Intended Users
25
Q

What is an assertion

A

statement or claim made by management regarding the financial statements. These assertions provide a basis for the auditor to evaluate the accuracy and completeness of the financial information.

26
Q

Characteristics of a Suitable Criteria

A

CR-RUN

  1. Completeness
  2. Relevance
  3. Reliability
  4. Understandability
  5. Neutral
27
Q

Sufficiency of evidence

A

Quantity of evidence

28
Q

Appropriateness of evidence

A

Quality of evidence (relevance and reliability)

29
Q

Factors to determine reliability of evidence

A
  1. Independent sources outside the entity
  2. Effective controls
  3. Directly acquired (by practitioner)
  4. Documentary form
  5. Original documents
30
Q

Limitations of Assurance Engagements

A
  1. Selective testing/ Sampling risk
  2. Inherent limitations of internal control
  3. Nature of Evidence (persuasive rather conclusive)
  4. Human limitations (use of judgment)
31
Q

Engagements provided by Practitioners (Assurance Engagements)

A
  1. Audit
  2. Review
  3. Other Assurance Services
32
Q

Engagements provided by Practitioners (Non-Assurance Engagements)

A
  1. Agreed-upon procedures
  2. Compilation of financial or other information
  3. Preparation of Tax returns and tax consulting
  4. Management consulting and advisory services
33
Q

Assurance Engagement Risk

A

risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated

34
Q

Risk that subject matter information is materially misstated

A
  1. Inherent risk
  2. Control risk
35
Q

Inherent risk

A

The susceptibility of the subject matter information to a material misstatement, assuming there are no related controls

36
Q

Control risk

A

risk that a material misstatement will not be prevented and corrected on a timely basis by related internal controls

37
Q

Detection risk

A

risk that the practitioner will not detect a material misstatement that exists

38
Q

2 types of Applicable Financial Reporting Framework

A
  1. Fair Presentation Framework
  2. Compliance Framework
39
Q

Scope of Independent Audit (Audit Procedures)

A
  1. Risk Assessment Procedures
  2. Test of Controls
  3. Substantive Tests (Substantive Analytical Procedures and Substantive Test of Details)
40
Q

Phases in Risk Based Audit Process

A

I. Risk Assessment
II. Risk Response
III. Conclusion and Reporting

41
Q

Organization of CPA firms

A
  1. Sole Proprietorships
  2. Partnerships

Corporations are NOT allowed

42
Q

Audit Fee methods

A
  1. Per diem
  2. Flat fee
  3. Maximum fee
  4. Retainer fee
43
Q

Professional Organization

A

PICPA
- ACPAPP
- nACPAE
- ACPACI
- GACPA

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