ASSURANCE AND NON-ASSURANCE SERVICES
Basic Concepts
1. The auditor's satisfaction as to the reliability of an assertion being made by one party for use by another is called:
A.
Assurance
B. Reliance factor C. Precision
D. Materiality
2.
An engagement in which a practitioner expresses a conclusion designed to enhance the dearee of confidence of the intended users
other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria
A. Assurance engagement C. Audit engagement
8. Attestation engagement
D. Management consulting engagement
3.
For assurance engagements which are neither audits nor reviews of historical financial information, the foi!ovving standard applies:
A. PSAs
4.
5.
B. PSREs
C. PSAEs
Pronouncements of the Auditing and Assurance Standards Council (AASC) do not cover:
A, Review engagements C. Agreed-upon procedures engagements B. Compilations
D. PSRSs
D. Consultancy services
The Philippine Standards on Auditing issued by AASC:
A. Apply to ari independent examination of financial statements of any entity when such an examination is conducted for the
purpose of expressing an opinion thereon.
Must not apply to other related activities of auditors. C. Need to
be applied on all audit-related matters.
D. Require thet in no circumstances would an auditor may judge it necessary to devart from a PSA, even though such a departure
may result to more effective achievement of the objective of an audit.
Elernentssf Assurance Engaaements
6. This document defines the elements and objectives of an assurance engagement, but does not, by itself, estabiish standards or
provide procedural requirements for the performance of assurance engagements. A. PSRS B. PREPS C. PSAE o. PFAE
7.
Which of the following is NOT an element of an assurance engagement?
A. Sufficient appropriate evidence C. A subject matter
B. Appropriate professional fees
D. A written assurance report
8.
The person, persons or class of persons for whom the practitioner prepares the assurance report.
A. General public B. Responsible party
C Audit cornmittee D. Intended users
9. According to the IAASB Glossary of terms, this refers to a professional accountant in pub!ic practice.
A. Auditor
B. Practitioner
C. Public accountant
D. Professional
10. A professional accountant in public practice may refer to:
A professional accountant, irrespective of functional classification (for example, audit,
tax or consulting) in a firm that provides
c
professionai ser/ices.
Yes
No
Yes
No
A firm of CPAs in public practice.
No
No
Yes
Yes
Il. The Derson 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.
A. Generai public
B, Responsible party
C. Audit committee
D. Intended users
Subject Matter
12. Which of the following forms may the subject matter of an assurance engagement take?
Financial performance or conditions
11,
Non-financial performance or conditions .
Ill. Physical characteristics
IV. Systems and processes Behavior
A, l and Il
B. 1, 11 and 111
13. The outcome of the evaluation or measurement of a subject matter.
A. Audit report C. Subject analysis
B. Subject •matter information
C. 1, 111 and IV
D. 1, 11, 111, IV, V
D. Criteria
14. In this assurance engagement, the evaluation or measurement of the subject matter is petformed by the responsible paä/', 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, Audit of firpancial statements C. Assertion based engagements 3, Direct reporting engagements D. None of
the answers
15, In this assurance engagement; the practitioner either directly performs the evaluation or measurement of the subject matter, or
obtains a representation from the responsible party that has perform-ed the evaluation or measurement that IS not available to
the intended users. The subject matter information is provided to the i ntended users in the assurance report,
A.
Audit of financial statements
of the answers
C. Assertion based engagements B, Direct reporting engagements
D. None
Suitable Criteria
16. These are the benchmarks used to evaluate or measure the subject matter including, where relevant, benchmarks for presentation
and disclosure.
A. Assertions
B. Engagement proeess
C. Criteria
17. Which cf the following statements is incorrect?
A. Criteria can be formal or less formal,
B. There can be different criteria for the same subject matter.
C.
Suitable criteria are required for reasonably consistent evaluation or measurement cf a subject matter
D. Professional judgment is always inferior as compared to the requirements of suitable criteria,
18. The foaowir:g characteristics are considered necessary if criteria is to be deemed
as suitable for an assurance engagement.
Which of the following phrases best describes reiiabi//t/?
A. Ai!ows suitable criteria to contribute to conclusions that assist decision-making by the intended users
B. R.elevant factors that could affect the condusions in the context of the engagement circumstances are not omitted
C.
Aiiows reasonably consistent evaluation or measurement of the subject matter including, where relevant, presentation and
disclosure, when used in similar circumstances by similarly qualified practitioners
D. Contributes to conciusions that are free from bias
E.
Contributes -to conclusions that are clear, comprehensive, and not subject to significantly different interpretations
19. Tne financiai reporting framework adopted by management and, where appropriate, those charged with governance in the
preparation of the. financial statements that -is acceptable in view of the nature of the entity' and the objective of the financial
statements, or that is required by law or regulation.
A, Generally acceoted auditing standards B,
Financial reporting standards
C, Applicable financial reporting framework D.
Phifippine standards in. auditing
20. VVhich of the following is more difficult to evaluate objectivey?
A, Efficiency and effectiveness of operations. B.
Compliance with government regulations,
C. Presentation of financial statements in accordance with GAAP.
D. All the three above are equally difficult.
Evidence
21. 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. Criteria B. Evidence
C. Assertions
D. PSAs
22. An audit is an assurance engagement. Evidence.in an audit engagement comprises:
c
Accounting records and source documents
Corroborating information from other sources
Yes
No
No
Yes
Yes
Yes
No
No
23, The measure of the quality of audit evidence; that ist its relevance and its reliabi!ity in providing support for the conc}usions on which
the auditorts opinion is based.
A. Sufficiency
B, Adequacy
C. Appropriateness D, Scope
24 The measure of the quantity of audit evidence and its relevance to a particular assertion and its reliability.
A. Sufficiency
B. Adequacy
C. Appropriateness
D, Scope
25. This refers 'to the audit procedures deemed necessary in the circumstances to achieve the objective of the at-Idit
A, Scope of an audit
B, Audit program
C. Engagement area
D. Sectorization
26. The record of work performed, results obtained, and conclusions the practitioner reached •in an assurance
engagement.
A.
B.
Work program
Engagemerlt documentation
C,
D.
Data integrity sheet
Audit documentation
WLltten-Assur-äLIERgpgri
27. In performing an assurance engagement, a professional accountant typically:
A. Supplies litigation support services. B.
Authenticates documentation.
C. Expresses a conclusion about an assertion. D. Provides
management consulting advice.
28, Generally, the conclusion expressed in an assurance engagement may provide the following levels of assurance:
B
c
D
No
Limited ievel of assurance
Yes
Yes
Yes
Reasonable level of assurance
No
Yes
Yes
Yes
Absoiute level of assurance
No
Yes
Yes
No
29. According to level of assurance provided, there are two toes of assurance engagements: reasonable assurance engagements and
limited assurance engagements. Which of the following best describes reasonable assurance engagements?
A.
The objective of this assurance engagement is a reduction in assurance engagement risk to an acceptably low level in the
circumstances of the engagement as the basis for a positive form of expression of the practitioner's conclusion.
B.
-pne objective of this assurance engagement % a reduction in assurance engagement risk to a level that is acceptable in the
circumstances of the enäagement, but where that risk is greater tnan for a reasonable assurance engagement, as the basis
for a negative form of expression of the practitioner's conclusion, C. both a and b apply to reasonable assurance
engagements.
D.
None of the answers apply to reasonable assurance engagements.
30. Absolute assurance is generally not attainable as a result of such factors as:
The use of selective testing
The inherent limitations of internal control
Muéh of the evidence available to the practitioner is
persuasive rather than conclusive
The use of judgment in gathering and evaluating evidence and
forming conclusions based on that
evidence
•
3
c
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
No
No
Engaaement Risk and Leveis of Assurance
31. This is the risk that the practitioner expresses an inappropriate conclusiön when the subject matter information is materially
misstated.
A. Audit risk C. Detection risk
a. Assurance engagement risk
D. Practitioner's risk
32. When a CPA has obtained sufficient appropriate evidence to conclude that the subject matter conforms, in ail material respects, with
identified suitable criteria, he/she can provide a(n):
A.
Limited !eve; of assurance.
C. Reasonable level of assurance. B. Absolute assurance.
D. No assurance.
33. When a CPA has obtained sufficient appropriate evidence to condude that the subject matter is plausible in the circumstances, he/she
can provide a(n):
A. Limited level of assurance.
C. Reasonable level of assurance. B. Absolute assurance. D. No assurance.
34. Select the statement that exemplifies negative assurance:
A.
"In our opinion internal control js 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. "We do not express an opinion on the financial
statements," D, - Alf of the statements illustrate negative assurance.
Types of Assurance Engagements
35. The three commonly-sought types of assurance services are:
A.
Audits, review, and compilations.
a. Audits, compilations, and other assurance services. C. Reviews,
compilations and other assurance service.
D. Audits, reviews and other assurance services.
36. This assurance engagement provides reasonable assurance that the financial statements are free of material imisstatement:
A.
B.
Financial statements audit.
C. Compilation of financial information.
Review of historical financial staternents, D. Agreed-upon procedures engagement.
37. An independent audit aids in the communication of economic data because the audit A. confirms the accuracy of management's
financial representations.
B.
C.
fends credibility to the financial statements.
guarantees that financial data are fairiy presented.
D, assures the readers of financial statements that any fraudulent activity has been corrected.
38, This assurance engagement provides, a limited 'evel of assurance about the client's historical financial statements:
A.
Financial staternents audit.
C. Forecasts and projections.
B.
Review of historical financial statements. D. Agreed-upon procedures engagement,
39. The objective of this assurance engagement is to enable the auditor 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 auditor's attention,that causes the auditor to believe that the
financial statements are not prepared, in ali materiat respects, in accordance with an identified financial reporting framework.
A.
Compilation engagement C. Review engagement B. Comfort provision engagement D. Valuation services
40. Which of the following is an objective of a review engagement?
A.
B.
Expressing a positive opinion- that the financial information is presented in conformity with generaliy accented accounting
principles.
Expressing a iimited assurance to users AYho have agreed as to procedures that wili be performed by the
C.
Repotting. whether material modifications should be made to such financial statements to make them
D.
conform with generaily accepted accounting principles.
Reporting that the financial statements, in all material respects, fairly present the financial position and operating results of the
client.
41. Which of the following procedures ordinarily performed during an audit are also performed in a review engagement?
A.
Assessment of accounting and internal control systems.
B.
Tests of controls.
C.
Tests of records and responses to inquiries.
D.
Inquiry and anaivt;cal procedures.
42. Procedures a review engagernent consist primarily of inquiry and analytical procedures. Regarding review procedures, which of the
following statements -is Incorrect?
A.
B.
The auditor should apply the same materiality considerations as would be applied if an audit opinion on the financial statements
were givem
The judgment as to what is material is made by reference to the information on which the auditor is reporting and the needs of
those relying on that information, not to the level of assurance provided. C. There is a greater risk that misstatements wili not be
detected in an audit than in a review.
D. The auditof should a$ply
in détermnirtg- the specific nature, -timing and extent of review procedures.
43. Which of the following best describes health care performance measurement services?
A.
An engagernent which provides assurance about whether financiai and non-financial information being reported from the entity's
performance measurement system is reliable.
B.
An engagement whith involves the evaluation of the quality of health care, medicai services and looks into the hea!th care delivery
system.
C.
An e n gagement which identifies a set of risks that affect the client organization. It involves the study of the link between risks and
the organization's vision, mission, objectives and strategies and the development of new and relevant measures. Di None of the
answers.
A*gcuation witb_lnformation
44, A practitioner is associated with the subject matter when:
B
c
D
the practitioner reports on information about that subject matter Yes
Yes
No
No
the practitioner consents to the use of the practitioner's name in a professional connection with that subject
matter,
Yes
No
Yes
No
45. When a practitioner is inappropriately •associated with financial information, the following remedies are avaifabie, except:
A. Requirethe
other party (i.e., management) to cease associating the CPA with the subject matter.
B, Informing any known third patty users of the inappropriate use of the practitioner's name C. Seek. legal
acvgce
D. All of the above are availabie remedies.
Non-Assur_ance Engagements
46. A CPA firm's primary purpose for performing non-assurance services is to:
A. Prepare the CPA firm for the changing needs and requirements of the business community.
B.
Establish the CPA firm as a consultant, which will enable the CPA firm to ensure future viability and growth.
C.
Provide advice and technical assistance that will enable a client to conduct its business more effectively.
D. Enabie staff members of the CPA firm to acquire the necessary continuing education in all areas of business,
47. Not all engagements performed by practitioners are assurance engagements, Which of the following are considered as nonassurance engagements?
A, Agreed-upon procedures and compilation engagements.
B, Preparation of tax returns where no conclusion is expressed C. Consulting
or advisory engagements
D. All of the answers are non-assurance engagements.
48. Which of the following statements is incorrect?
A. Unlike consulting services, assurance services report on the quality of information, B. Audit en9agements encompass assurance
engagements.
C. Not all engagements performed by professional accountants are assurance engagements.
D. Non-assurance engagements include agreed-upon procedures, compilation of financial or other information, preparation
of tax returns where no conclusion is expressed, tax consulting and advisory engagements.
Consulting and AdU!E-r-Y 49. Assurance services are three-party contracts involving services that improve the quality of information,
while consulting services:
A. Are three-party contracts involving services that recommend uses for information,
B.
C.
D.
Are two-part/ contracts involving services that recommend uses for information.
Are üo-party services that require the use of accounting rather than auditing expertise,
Are three-pan/ services that require knowledge of the analytical approach and process.
50. This engagement involves the application of accounting expertise, as opposed to auditing expertise, in collecting, classifying and
summarizing financiai information:
A. Compilation.
C. Tax consulting.
B, Agreed-upon procedures engagement.
D. Management consulting.
51. According to Philippine Standards on Related Services, 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.
mgr-egg-upon Procedures Engagement
52. In this non-assurance engagement, the party engaging the CPA determines the procedures to be performed (In some situations, the
intended user determines the procedures to be performed). At the end of the
engagement, the CPA provides a report of factual findings as a result of undertaking these procedures. What type of engagement
has been described?
A. Com pilation.
C. Tax consulting.
B. Agreed-upon procedures engagement. D. Management consulting.
53. Which of the following is correct regarding agreed-upon procedures engagement?
A. An audtor is engaged to carry out those procedures of an accounting nature to which the auditor and the entity and any
appropriate third parties have agreed and to report on the factual findings. B. The recipients of the report must form their
own conclusions from the report of the auditor.
C. The report is avaiiabie to the general public.
D. A high but not absolute level of assurance is provided in an agreed-upon procedures engagernent.
54. Which of the following is correctof the report based on agreed-upon-procedures?
A. The report IS restricted to those parties who have agreed to the procedures to be performed.
B.
The CPA provides the recipients of the report limited assurance as to reasonableness of the assert i on(s) presented in the
financial information.
C.
The report states that the auditor has not recognized any basis that requires a revision of the financial
statements.
The report should state that the procedures performed are limited to analytical procedures and inquiry,
D.
Tax Services
55. This tax service includes the preparation of tax returns for individuals, corporations, estates and trusts, and
other entities:
A. Tax evasion.
C. Tax shelter.
B. Tax planning.
D. Tax compliance.
56. This tax service includes the determination of the tax consequences of pianned or potential transactions,
foilowed by making suggestions on the most desirable course of action (to legally minimize the tax liability while achieving the
client's objectives):
A.
Tax evasion.
C. Tax shelter.
B.
Tax planning.
D. Tax compliance.
The Lord has made a solemn promise, arid by I-fis power He will carry it out: ''Your' grain will no longer be food for your enemies, and foreigners will no
longer drink your wine. But you that planted and harvested the grain will eat the bread and praise the Lord. You that tended and gathered the grapes witl
drink the wine in the courts of my Terxnl±." Isaiah 62: 8-9