Fundamentals Principles of Assurance Services

Question 1

[True/False]

Assurance services help enhance the reliability of financial information throughout the capital markets.

Answer 1

True

Question 2

[True/False]

Assurance refers to the practitioner’s contentment that the information made by an entity is reliable.

Answer 2

True

Question 3

[True/False]

Assurance services refers to engagements in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the practitioner about the outcome of evaluation of a subject matter.

Answer 3

False, to enhance the degree of confidence of the INTENDED USERS.

Question 4

[True/False]

The practitioner must be independent to the responsible party and to the public.

Answer 4

True

Question 5

[True/False]

The responsible party may not be from the same organization with the intended users but may be one of the intended users.

Answer 5

True

Question 6

[True/False]

The intended users must have at least one responsible party to constitute as an assurance engagement.

Answer 6

False, assurance engagement requires a three-party relationship: the practitioner, the responsible party, and the intended users

Question 7

[True/False]

Subject matter information relates to the nature of assertion with which the practitioner gathers sufficient evidence.

Answer 7

True

Question 8

[True/False]

A subject matter is considered appropriate if it can be subject to audit procedures on a test basis.

Answer 8

False, an appropriate subject matter can be subject to audit procedures on a test basis AND identifiable, and capable of consistent evaluation or measurement against the identified criteria

Question 9

[True/False]

The criteria serve as the yardstick to measure or evaluate the subject matter.

Answer 9

True

Question 10

[True/False]

The criteria used to evaluate a subject matter must be included in any document that contains the assurance report issued on such subject matter.

Answer 10

True

Question 11

[True/False]

Sufficiency and appropriateness of evidence are interrelated factors and, as such, are considered complements.

Answer 11

True

Question 12

[True/False]

The determination of materiality is a mathematical exercise which is a vital process in planning the nature, timing and extent of assurance engagement procedures.

Answer 12

False, the auditor’s determination of materiality is a matter of PROFESSIONAL JUDGMENT

Question 13

[True/False]

Inherent risk refers to the susceptibility of the subject matter information to misstatements before consideration of controls.

Answer 13

True

Question 14

[True/False]

A practitioner may consider a procedure not applicable if it would entail high level of costs to the assurance service.

Answer 14

False, high level of costs is NOT a valid basis for omitting an evidence gathering procedures.
The practitioner may:
a) identify and perform alternative procedures that can minimize the cost; or
b) in the absence of alternative procedures, the practitioner is still required to perform the procedures as long as he believes that it is necessary and beneficial to the entire engagement

Question 15

[True/False]

The more the practitioner intends to exhibit the attitude of professional skepticism, the more engagement procedures will be required.

Answer 15

True

Question 16

[True/False]

A practitioner is not expected to be an expert in the verification of authenticity of documentation of audit evidences.

Answer 16

False, he is expected to be an expert in the verification of authenticity of documentation of audit evidences

Question 17

[True/False]

Generally, evidence that is generated internally is more reliable than those from independent sources when the related controls are effective.

Answer 17

True

Question 18

[True/False]

Only limited procedures are performed by the practitioner on limited assurance engagements as a basis for a negative form of conclusion.

Answer 18

True

Question 19

[True/False]

Audits and reviews are assurance-based engagements as both the subject matter information and the practitioner’s assurance report are available to the intended users.

Answer 19

True

Question 20

[True/False]

The three-party relationship still exists in non-assurance engagements which includes the practitioner, the responsible party and the public.

Answer 20

False, there’s only a TWO-PARTY RELATIONSHIP which includes the practitioner and the responsible party

Question 21

[True/False]

IAASB sets high-quality international standards for assurance engagements and enhances quality control that promote public confidence to the accountancy profession.

Answer 21

True

Question 22

[True/False]

Engagement standards are issued to provide interpretative guidance and practical assistance to professional accountants that promote good practice in performing assurance engagements.

Answer 22

False, it is the PRACTICE STATEMENTS, not the engagement standards

Question 23

[True/False]

The report issued on non-assurance engagements must be expressed in a negative form.

Answer 23

False, the report is issued whether negative form OR other form of assurance

Question 24

[True/False]

Procedures to be done in performing audits and reviews are exclusively determined by the auditor.

Answer 24

True

Question 25

[True/False]

Only a moderate level of assurance is provided in management advisory services.

Answer 25

False, there’s no assurance on management advisory services

Question 26

Assurance engagement

A) is an engagement in which a practitioner is engaged to issue, or does issue, a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party.
B) is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.
C) is an engagement in which the auditor provides a moderate level of assurance that the information subject to the engagement is free of material misstatement
D) is an engagement 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, thereby improving the likelihood that the information will meet the needs of an intended user.

Answer 26

D) is an engagement 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, thereby improving the likelihood that the information will meet the needs of an intended user.

Question 27

Assurance services can be best described as

A) engagement designed to enable an independent practitioner to express an opinion as to the fairness of historical financial information.
B) processes that measures and communications financial data to intended users.
C) independent professional services intended to enhance the credibility of information to meet the needs of an intended user.
D) is broader than attestation but lesser in scope than audit.

Answer 27

C) independent professional services intended to enhance the credibility of information to meet the needs of an intended user.

Question 28

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) issued by the Philippine Auditing Standards and Practices Council as approved by the Board of Accountancy/Professional Regulation Commission.
D) an engagement to perform agreed-upon procedures.

Answer 28

D) an engagement to perform agreed-upon procedures.

Question 29

The three types of attestation services are

A) audits, review, and compilations
B) audits, compilations, and other attestation services
C) reviews, compilations, and other attestation services
D) audits, reviews, and other attestation services

Answer 29

D) audits, reviews, and other attestation services

Question 30

Which of the following is not an assurance engagement?

A) Audit of prospective financial statements
B) Review of interim historical financial statements
C) Comprehensive audit
D) Preparation of tax returns that use estimates

Answer 30

D) Preparation of tax returns that use estimates

Question 31

The single feature that most clearly distinguishes auditing, attestation, and assurance is

A) type of service
B) scope of service
C) CPA’s approach to the service
D) training required to perform the service

Answer 31

B) scope of service

Question 32

Unlike consulting services, assurance services

A) make recommendations to management
B) report on how to use information
C) report on quality information
D) are two-party contracts

Answer 32

C) report on quality information

Question 33

All, except one, are elements of an assurance engagement.

A) Subject matter
B) Written report
C) Sufficient appropriate evidence
D) Independence

Answer 33

D) Independence

Question 34

In a financial statement audit, which is not an element of assurance engagement?

A) Independent auditor, audit client management, audit client shareholders and/or directors
B) Philippine Standards on Auditing
C) Independent auditor’s report
D) Financial statements and the assertions

Answer 34

B) Philippine Standards on Auditing

Question 35

Which of the following is not included in the three-party relationship in an assurance engagement?

A) Auditor
B) Practitioner
C) Responsible party
D) Intended users

Answer 35

A) Auditor

Question 36

Which of the following is not a suitable criterion in the context of audit?

A) PSA
B) IFRS
C) GAAP
D) PFRS for SMEs

Answer 36

A) PSA

Question 37

Characteristics of suitable criteria do not include

A) relevance
B) neutrality
C) comparability
D) understandability

Answer 37

C) comparability

Question 38

One of the elements of an assurance engagement is appropriate subject matter. For the subject matter to be considered appropriate, it

I. should be identifiable, and capable of consistent evaluation or measurement against the identified criteria
II. can be subjected to procedures for gathering sufficient appropriate evidence to support a reasonable assurance or limited assurance conclusion, as appropriate

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Answer 38

C) Both I and II

Question 39

“Subject matter information” as used in the Framework to Assurance Engagement shall mean

A) the subject which is to be measured against suitable criteria
B) outcome of the evaluation or measurement of a subject matter
C) the assertion of the subject party
D) any data relating to the subject matter to be measured against the criteria

Answer 39

B) outcome of the evaluation or measurement of a subject matter

Question 40

Which of the following can be subject matter?

A) Financial and non-financial performance or condition
B) Behavior
C) Physical characteristics (e.g. capacity)
D) All of the above can be subject matter

Answer 40

D) All of the above can be subject matter

Question 41

Criteria that are embodied in laws or regulations or issued by authorized bodies of expert are called

A) legal criteria
B) suitable criteria
C) established criteria
D) specifically-developed criteria

Answer 41

C) established criteria

Question 42

The measure of the quality of evidence.

A) Appropriateness
B) Sufficiency
C) Relevance
D) Reliability

Answer 42

A) Appropriateness

Question 43

The measure of the quantity of evidence.

A) Appropriateness
B) Sufficiency
C) Relevance
D) Reliability

Answer 43

B) Sufficiency

Question 44

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

A) Confidence level
B) Assurance level
C) Reliability level
D) Tolerable level

Answer 44

B) Assurance level

Question 45

Which of the following is not a component of engagement risk?

A) Control risk
B) Inherent risk
C) Business risk
D) Detection risk

Answer 45

C) Business risk

Question 46

The form of conclusion in an assurance engagement are

A) positive and negative
B) high, medium, low
C) high and low
D) reasonable and limited

Answer 46

A) positive and negative

Question 47

The two levels of conclusion in an assurance engagement are

A) positive and negative
B) high, medium, low
C) high and low
D) reasonable and limited

Answer 47

C) high and low

Question 48

These refers to assurance engagements in which 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 the intended users.

A) Assertion-based engagement
B) Direct reporting engagement
C) Indirect reporting engagement
D) Reasonable assurance engagement

Answer 48

A) Assertion-based engagement

Question 49

These refers to assurance engagements in which 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 that is not available to the intended users.

A) Assertion-based engagement
B) Direct reporting engagement
C) Indirect reporting engagement
D) Reasonable assurance engagement

Answer 49

B) Direct reporting engagement

Question 50

Agreed-upon procedures engagement provides what level of assurance?

A) None
B) Absolute
C) High
D) Moderate

Answer 50

A) None

Question 51

Practitioner who perform assurance engagements is governed by the following, except

A) The Framework to Assurance Engagements
B) Code of Ethics for Professional Accountants in the Philippines
C) Philippine Standards on Quality Control
D) Philippine Financial Reporting Standards

Answer 51

D) Philippine Financial Reporting Standards

Question 52

An engagement conducted to provide

(a) a high level of assurance that the subject matter conforms in all material respects with identified suitable criteria; or
(b) a moderate level of assurance that the subject matter is plausible in the circumstances

A) Audit engagement
B) Review engagement
C) Reasonable assurance
D) Assurance engagement

Answer 52

D) Assurance engagement

Question 53

Assurance service engagements

A) do not require independence
B) require application of all attestation standards and GAAS
C) are performed currently without professional standards
D) do not require evidence

Answer 53

B) require application of all attestation standards and GAAS

Question 54

Which of the following may be under the scope of the Framework for Assurance Engagement?

A) Agreed-upon procedures engagements and compilation of financial and other information
B) Preparation of tax returns where no conclusion conveying assurance is expressed
C) Consulting (or advisory) engagements, such as management and tax consulting
D) Preparation of tax returns where a conclusion conveying assurance is expressed

Answer 54

A) Agreed-upon procedures engagements and compilation of financial and other information

Question 55

Which of the following is incorrect regarding the “three-party relationship” element of assurance engagements?

A) Professional accountants are those persons who are members of an IFAC member body, who should be in public practice.
B) The responsible party and the intended user will often be from separate organizations but need not be.
C) The responsible party is the person or persons, either as individuals or representatives of an entity, responsible for the subject matter.
D) The intended user is the person or class of persons for whom the professional accountant prepares the report for a specific use or purpose.

Answer 55

A) Professional accountants are those persons who are members of an IFAC member body, who should be in public practice.

Question 56

Which of the following is incorrect regarding practitioner?

A) The term practitioner is broader than the term auditor.
B) The practitioner is governed by ethical requirements (i.e. professional competence) regarding the conduct of the engagements.
C) The practitioner must be independent to the responsible party but not necessarily to the intended users.
D) The practitioner is responsible for determining the nature, timing or extent of procedures required by the management.

Answer 56

C) The practitioner must be independent to the responsible party but not necessarily to the intended users.

Question 57

Which is incorrect regarding the responsible party?

A) The responsible party and the intended party should not be from the same entity.
B) The responsible party may be one of the intended users and may or may not be the engaging party.
C) The responsible party ordinarily provides the practitioner with a written representation.
D) The responsible party may be responsible for the subject matter information and may also be responsible for the subject matter.

Answer 57

A) The responsible party and the intended party should not be from the same entity.

Question 58

The Framework of Philippine Standards on Auditing provides that financial statements needed to be prepared in accordance with one, or a combination of the following, except

A) accounting standards generally accepted in the Philippines
B) Philippine Accounting Standards
C) another authoritative and comprehensive financial reporting framework designed for use in financial reporting and is identified in the financial statements
D) accounting standards developed by the accountant of the business enterprise herself/himself

Answer 58

D) accounting standards developed by the accountant of the business enterprise herself/himself

Question 59

The following relates to intended users, choose the exception.

A) Intended users are the person/s for whom the practitioner prepares the assurance report.
B) Intended users may be identified by agreement between the practitioner and the responsible party or engaging party, or by law.
C) Intended users may include either practitioner or the responsible party.
D) In case broad range of interests by the readers of assurance report, intended user may be limited to major stockholders with significant and common interests.

Answer 59

C) Intended users may include either practitioner or the responsible party.

Question 60

The following cannot be a suitable criterion for an assurance engagement, except?

A) Practitioner’s own expectations
B) Practitioner’s judgment
C) Practitioner’s experience
D) Agreement between the responsible party and the intended users

Answer 60

B) Practitioner’s judgment

Question 61

According to the framework for assurance engagement, the criteria must be

A) sufficient and appropriate
B) sufficient or appropriate
C) suitable and available to intended users
D) suitable or available to intended users

Answer 61

C) suitable and available to intended users

Question 62

The following factors could affect the quantity and quality of available evidence that are attributable to the circumstance of the engagement. Which is the exception?

A) The fact that the subject matter information is prospective.
B) The timing of the practitioner’s appointment.
C) An entity’s document retention policy.
D) Restriction imposed by the responsible party.

Answer 62

A) The fact that the subject matter information is prospective.

Question 63

Which is incorrect concerning evidence?

A) The higher the risk of material misstatement is involved, the more is required.
B) The better the quality, the less is required.
C) The volume of evidence can compensate for its poor quality.
D) The reliability of evidence is influenced by its source and its nature.

Answer 63

C) The volume of evidence can compensate for its poor quality.

Question 64

Select the incorrect statement from the following generalization on the reliability of evidence.

A) Evidence is more reliable when it is obtained from independent sources outside the entity.
B) Evidence that is generated internally is more reliable when the related controls are effective.
C) Evidence obtained directly by the practitioner is more reliable than when obtained indirectly, even if the source is not competent.
D) Evidence provided by original documents is more reliable than evidence provided by photocopies or facsimiles.

Answer 64

C) Evidence obtained directly by the practitioner is more reliable than when obtained indirectly, even if the source is not competent.

Question 65

Which is incorrect?

A) Consistent evidence obtained from various sources or of different nature is more reliable.
B) It is generally more difficult to obtain assurance about subject matter information at a point in time than subject matter information covering a period of time.
C) When it is cost prohibitive or difficult to obtain an evidence, the auditor may shift to obtain from other alternatives.
D) The practitioner considers the relationship between cost of obtaining the evidence and the usefulness of the information.

Answer 65

B) It is generally more difficult to obtain assurance about subject matter information at a point in time than subject matter information covering a period of time.

Question 66

Which is correct concerning the concept of professional skepticism?

A) An assumption that the responsible party is dishonest.
B) A critical assessment, with a questioning mind on the validity of evidence obtained.
C) An assumption that responsible party is trustworthy.
D) Disregarding contradicting information against several of consistent evidence.

Answer 66

B) A critical assessment, with a questioning mind on the validity of evidence obtained.

Question 67

Which of the following statements is false regarding the consideration of materiality?

A) It is taken into consideration in the context of both qualitative and quantitative factors.
B) It is matter of professional judgment.
C) It requires understanding and assessment of the factors that might influence the decision of the intended users.
D) It is defined as a certain percentage (e.g., 5% of total asset, 1% of gross sales)

Answer 67

D) It is defined as a certain percentage (e.g., 5% of total asset, 1% of gross sales)

Question 68

When the professional accountant has obtained sufficient appropriate evidence to conclude that the subject matter conforms in all material respects with identifies suitable criteria, he can provide

A) moderate level of assurance
B) high level of assurance
C) absolute assurance
D) no assurance

Answer 68

B) high level of assurance

Question 69

Which of the fundamental principles in the Code of Ethics are required in the performance of non-assurance engagements?

I. Professional competence and due care
II. Independence
III. Confidentiality

A) I and II only
B) I and III only
C) II and III only
D) I, II and III

Answer 69

B) I and III only

Question 70

In an agreed-upon engagement, which of the following statements is incorrect?

A) Management, the auditor and any appropriate third-party user agree on the procedures to be performed.
B) Although procedures required are of an audit nature, independence is not required.
C) No assurance is rendered in the report.
D) The report is provided to a wide range of users for decision making.

Answer 70

D) The report is provided to a wide range of users for decision making.

Question 71

Evidence is more reliable when it is obtained from

A) internal sources within the entity
B) independent sources outside of the entity
C) internal sources outside of the entity
D) independent sources inside the entity

Answer 71

B) independent sources outside of the entity

Question 72

Which of the following primarily refers to the relevance and reliability of evidence?

A) Sufficiency
B) Adequacy
C) Appropriateness
D) Suitability

Answer 72

C) Appropriateness

Question 73

A professional accountant is required to be independent in which of the following engagements?

I. Audit of historical financial information
II. Review of historical financial information
III. Agreed-Upon Procedures

A. I only
B) I and II only
C) II and III only
D) I, II, and III

Answer 73

B) I and II only

Question 74

Which of the following statements is/are correct?

I. Audit is an assurance engagement while review is not.
II. More procedures are performed by a practitioner in a review than in an audit.

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Answer 74

D) Neither I nor II

Question 75

Which of the following is true about assurance services?

A) All assurance services are financial statement audits.
B) An assurance engagement must have five fundamental elements.
C) A fundamental element for an assurance engagement is engagement fee.
D) A review of historical financial statements is not an assurance service.

Answer 75

B) An assurance engagement must have five fundamental elements.

Question 76

Which of the following statements is/are correct?

I. Responsible parties and intended users may be from the same entity.
II. Responsible parties and intended users may be from the different entities.

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Answer 76

C) Both I and II

Question 77

The _____ is the outcome of the evaluation or measurement of a/an ______.

A) subject matter; subject matter information
B) subject matter information; subject matter
C) subject matter; evidence
D) evidence; subject matter

Answer 77

B) subject matter information; subject matter

Question 78

Classify the following subject matter.

I. Internal controls
II. Facility capacity

A) Physical characteristics, systems and processes
B) Systems and processes, physical characteristics
C) Behavior, physical characteristics
D) Physical characteristics, behavior

Answer 78

B) Systems and processes, physical characteristics

Question 79

Which of the following statements is/are correct?

I. Reliability of evidence is influence by its source and nature
II. Generalizations about reliability of evidence can be made without exceptions

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Answer 79

A) I only

Question 80

Which of the following types of evidence is most reliable?

A) Original copy of the Omnibus Loan and Credit Agreement
B) Photocopy of the Omnibus Loan and Credit Agreement
C) Scanned copy of the Omnibus Loan and Credit Agreement
D) Faxed copy of the Omnibus Loan and Credit Agreement

Answer 80

A) Original copy of the Omnibus Loan and Credit Agreement

Question 81

_____ is obtained from consistent evidence from different sources or of a different nature than from items or evidence considered individually.

A) More assurance
B) Less assurance
C) No assurance
D) Little assurance

Answer 81

A) More assurance

Question 82

Which of the following is an example of a formal criterion(a)?

I. Philippine Public Sector Accounting Standards
II. Number of times a committee meets in a year

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Answer 82

A) I only

Question 83

Which refers to reliability of criteria?

A) Contribute to conclusions that assist decision making by users.
B) Allow reasonably consistent evaluation or measurement of subject matter.
C) Contribute to conclusions that are clear, comprehensive, and not subject to significantly different interpretations.
D) Contribute to conclusions that are free from bias.

Answer 83

B) Allow reasonably consistent evaluation or measurement of subject matter.

Question 84

Which is true about assurance engagement risk?

A) It is more specific than audit risk, since it encompasses audits, reviews and compilation.
B) It is wider in scope than audit risk, since it encompasses audits, reviews and other assurance engagements.
C) It is more specific than audit risk, since it encompasses audits, reviews and other assurance engagements.
D) It is wider in scope than audit risk, since it encompasses audits, reviews and compilations.

Answer 84

B) It is wider in scope than audit risk, since it encompasses audits, reviews and other assurance engagements.

Question 85

Evaluate the following statement as to (1) level of assurance and (2) form of conclusion.

“In our opinion, internal control is effective, in all material respects, based on the COSO Framework.”

A) (1) positive; (2) reasonable
B) (1) reasonable; (2) positive
C) (1) negative; (2) limited
D) (1) absolute; (2) positive

Answer 85

B) (1) reasonable; (2) positive

Question 86

Which of the following statements is/are incorrect?

I. Financial statements audit are assurance services.
II. Review of historical financial statements are assurance services.

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Answer 86

D) Neither I nor II

Question 87

Which of the following is a distinguishing characteristic of attest engagements over direct reporting engagements?

A) Assertions
B) Assurance
C) Written report
D) Independence of the practitioner

Answer 87

A) Assertions

Question 88

Who is responsible for determining the nature, timing, extents of assurance procedures?

A) Practitioner
B) Practitioner and Responsible Party
C) Practitioner and Intended User
D) Practitioner, Responsible Party, and Intended User

Answer 88

A) Practitioner

Question 89

Which of the following statements is/are correct?

I. Whenever practical, the assurance report is addressed to all the intended users.
II. In certain cases, intended users may be limited to major stakeholders with significant and common interests.

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Answer 89

C) Both I and II

Question 90

Which of the following statements best describes the logical relationship among audits, attest engagements, and assurance engagements?

A) All attest engagements are audits, but not all audits involve attestation.
B) All assurance engagements, including review, involve attestation.
C) An audit provides assurance, but does not involve attestation.
D) All audits are attest engagements, but not all attest engagements are audit.

Answer 90

D) All audits are attest engagements, but not all attest engagements are audit.

Question 91

Which of the following statements is incorrect?

A) Intended users refer to the person, persons, or class of persons for whom the practitioner prepared the assurance report.
B) Responsible party pertains to the person or persons who in a direct reporting engagement, is responsible for the subject matter; or in an assertion-based engagement, is responsible for the subject matter information (the assertion), and may be responsible for the subject matter.
C) Criteria represent the benchmarks used to evaluate or measure the subject matter, including where relevant, benchmarks for presentation and disclosure.
D) Assertions pertain to all information gathered by the practitioner in evaluating the subject matter against criteria, on which the conclusion is based.

Answer 91

D) Assertions pertain to all information gathered by the practitioner in evaluating the subject matter against criteria, on which the conclusion is based.

Question 92

Which of the following procedures ordinarily performed during an audit also performed in a review engagement?

A) Assessment of accounting and internal controls
B) Tests of controls
C) Tests of records and responses to inquiries
D) Inquiry and analytical procedures

Answer 92

D) Inquiry and analytical procedures

Question 93

Assurance engagements may be classified according to (1) level of assurance being provided and (2) structure of the assurance engagement. Classify the following assurance engagements as to either (1) as to level of assurance or (2) as to structure.

I. Reasonable assurance engagement
II. Limited assurance engagement
III. Attestation engagement
IV. Direct reporting engagement

A) (1) I and III; (2) II and IV
B) (1) I and II; (2) III and IV
C) (1) III and IV; (2) I and II
D) (1) II and IV; (2) I and III

Answer 93

B) (1) I and II; (2) III and IV

Question 94

These are representations by management, explicit or otherwise, that are embodied in the financial statements.

A) Assertions
B) Criteria
C) Evidence
D) PSAs

Answer 94

B) Criteria

Question 95

It refers to the risk that a practitioner would express an inappropriate conclusion when the subject matter information is materially misstated.

A) Information risk
B) Assurance engagement risk
C) Risk of material misstatement
D) Audit risk

Answer 95

B) Assurance engagement risk

Question 96

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

A) An engagement to express an opinion whether the financial statements are prepared in all material respects, in accordance with an identified financial reporting framework.
B) An engagement, 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.
C) An engagement to 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.
D) An engagement to use accounting expertise as opposed to auditing expertise to collect, classify and summarize financial information.

Answer 96

B) An engagement, 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.

Question 97

The practitioner’s independence is not required in which of the following engagements?

A) Audit of historical financial statements
B) Review of historical financial statements
C) Examination of prospective financial statements
D) Installation of accounting information systems

Answer 97

D) Installation of accounting information systems

Question 98

An engagement is classified as a limited assurance engagement if

A) the objective is a reduction in assurance engagement risk to an acceptably low level as the basis for a positive form of expression of the practitioner’s conclusion.
B) the objective is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of expression of the practitioner’s conclusion.
C) the evaluation or measurement of the subject matter is performed by the responsible party, and the subject matter information is in the form of assertion by the responsible party that is made available to the intended users.
D) 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 that is not available to the intended users. The subject matter information is provided to the intended users in the assurance report.

Answer 98

B) the objective is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of expression of the practitioner’s conclusion.

Question 99

Which of the following is most likely a form a conclusion for a reasonable assurance engagement?

A) “In our opinion, internal control is effective, in all material respects, based on XYZ criteria.”
B) “Based on our work described in this report, nothing has come to our attention that causes us to believe that internal control is not effective, in all material respects, based on XYZ criteria.”
C) Both A and B
D) Neither A nor B

Answer 99

A) “In our opinion, internal control is effective, in all material respects, based on XYZ criteria.”

Question 100

Which of the following engagements is not covered by the pronouncements of AASC (Auditing and Assurance Standards Council)?

A) Audit and review engagements
B) Agreed-upon procedures engagements
C) Compilation engagements
D) Tax consulting engagements

Answer 100

D) Tax consulting engagements