Choose the letter of the correct answer.
1.
CPAs in public practice who perform assurance engagements are governed by the following, except:
a. Philippine Framework for Assurance Engagements
b. Code of Ethics for Professional Accountants in the Philippines
c. Philippines Standards on Related Services (PSRS)
d. Philippine Standards on Quality Control (PSQC)
2.
Which of the following is the broadest and most inclusive concept?
a. Audits of financial statements
b. Review services
c. Assurance services
d. Compilation services
3.
Which of the following attributes is more closely associated with assurance services performed by
practitioners than with other lines of professional work?
a. Integrity
b. Independence
c. Competence
d. Keeping informed on current professional developments
4.
Which of the following professional services would be considered an assurance engagement?
a. A management consulting engagement to provide IT advice to a client.
b. An engagement to report on compliance with statutory requirements.
c. An income tax engagement to prepare tax returns.
d. A compilation of financial statements from a client’s accounting records.
5.
What type of assurance engagement is involved when the practitioner expresses a positive form of
conclusion?
a. Reasonable assurance engagement
b. Limited assurance engagement
c. Absolute assurance engagement
d. Positive assurance engagement
e. Negative assurance engagement
6.
What type of assurance engagement is involved when the practitioner expresses a negative form of
conclusion?
a. Reasonable assurance engagement
b. Limited assurance engagement
c. Absolute assurance engagement
d. Positive assurance engagement
e. Negative assurance engagement
7.
For assurance engagements regarding historical financial information, reasonable assurance engagements
are called:
a. Audits
b. Reviews
c. Compilations
d. Examinations
8.
For assurance engagements regarding historical financial information, limited assurance engagements are
called:
a. Audits
b. Reviews
c. Compilations
d. Examinations
9.
What level of assurance is provided by the auditor in an audit engagement?
a. High, but not absolute
b. Absolute
c. Moderate
d. No assurance
10. What level of assurance is provided by a practitioner in a review engagement?
a. High, but not absolute
b.
c.
d.
Reasonable
Moderate
No assurance
11. A review of a company’s financial statements by a professional accountant:
a. Is designed to provide only limited or moderate assurance.
b. Is significantly less in scope than an audit and results in a report which provides positive assurance,
although not absolute assurance.
c. Is similar in scope to an audit and adds similar credibility to the statements.
d. Concludes with the issuance of a report expressing the CPA’s opinion as to the fairness of the
statements.
12. The review of a company’s financial statements by a CPA firm:
a. Is substantially less in scope of procedures than an audit
b. Requires detailed analysis of the major accounts.
c. Is of similar scope to an audit and adds similar credibility to the statements.
d. Culminates in issuance of a report expressing the CPA’s opinion as to the fairness of the statements.
13. In assertion-based assurance engagements, who performs the evaluation or measurement of the subject
matter against a specific criterion?
a. Practitioner
b. Responsible party
c. Intended users
d. Auditing and Assurance Standards Council
14. Which of the following is not an element of an assurance engagement?
a. An appropriate subject matter
b. Suitable criteria
c. Sufficient appropriate evidence
d. Reasonable engagement professional fee.
15. When performing an assurance service, practitioners use standards or benchmarks to evaluate or
measure the subject matter of an assurance engagement. These are referred to as:
a. Criteria
b. Norms
c. Conditions
d. Gauges
16. Relevant criteria contribute to conclusions that are:
a. Useful for decision making
b. Free from bias
c. Clear and comprehensive
d. Subject to different interpretations
17. Neutral criteria contribute to conclusions that are:
a. Useful for decision making
b. Free from bias
c. Clear and comprehensive
d. Subject to different interpretations
18. 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. Established criteria
c. Specifically developed criteria
d. General criteria
19. Professional skepticism is an attitude that includes being alert to the following, except:
a. Information that calls into question the reliability of documents and responses to inquiries to be used
as evidence.
b. Circumstances that suggest the need for procedures in addition to those required by relevant
assurance standards.
c. Conditions that may indicate likely misstatement.
d. Evidence that is consistent with other evidence obtained.
20. Which of the following pertains to the reliability of audit evidence?
a. The independence of the source of evidence.
b.
c.
d.
The expertise level of the audit who obtains the evidence.
Whether the audit client uses a manual or computerized accounting system
The quantity of the evidence obtained.
21. Which of the following characteristics is not considered necessary in determining whether the criteria are
suitable?
a. Relevance
b. Reliability
c. Sufficiency
d. Neutrality
22. By providing high level of assurance on financial statements, the auditor
a. Guarantees the fair presentation of the financial statements
b. Confirms the accuracy of the financial statements
c. Assures the readers that fraudulent activities of employees have been detected
d. Enhances the credibility of the financial statements.
23. Independent auditing can best be described as
a. A branch of accounting
b. A professional activity that measures and communicates financial and business data.
c. A discipline which attests to the results of accounting and other functional operations and data.
d. A regulatory function that prevents the issuance of improper financial information.
24. The independent audit is important to readers of financial statements because it:
a. Determines the future stewardship of the management of the company whose financial statements
are audited.
b. Measures and communicates financial and business data included in financial statements.
c. Involves the objective audit of and reporting in management-prepared financial statements.
d. Reports on the accuracy of all information in the financial statements.
25. Which of the following is more difficult to evaluate objectively?
a. Presentation of financial statements in accordance with the applicable financial reporting criteria.
b. Efficiency and effectiveness of operations.
c. Compliance with applicable government regulations.
d. All these are equally difficult to evaluate objectively.
26. Which of the following is a typical objective of an operational audit?
a. To determine whether an entity’s internal control system is adequately operating as designed.
b. To determine whether an entity’s operational information is in accordance with PFRS.
c. To determine whether an entity’s financial statements present fairly the results of operations.
d. To determine whether an entity’s specific operating units are functioning efficiently and effectively.
27. A typical objective of an operation audit is for the auditor to
a. Determine whether the financial statements fairly present the entity’s operations.
b. Evaluate the feasibility of attaining the entity’s operational objectives.
c. Make recommendations for improving performance.
d. Report on the entity’s relative success in attaining profit maximization.
28. The overall objective of internal auditing is to
a. Attest to the efficiency with which resources are employed.
b. Ascertain that controls are costs justified.
c. Provide assurance that financial data have been accurately recorded.
d. Assist members of the organization in the effective discharge of their responsibilities.
29. In conducting an appraisal of the economy and efficiency with which company resources are used, an
internal auditor’s responsibility is to
a. Verify the accuracy of asset valuation
b. Review the reliability of operating information
c. Verify the existence of assets
d. Determine operating standards have been established.
30. Results of compliance audits are typically reported to someone within the organizational unit being
audited rather than to a broad spectrum of outside users. Which of the following audits can be regarded
as generally being a compliance audit?
a.
b.
c.
d.
BIR agent’s examination of taxpayer’s returns.
COA auditor’s evaluation of the computer operations of government units.
An internal auditor’s review of a company’s payroll authorization procedures.
A CPA firm’s audit of the local school district.
31. Which of the following best describes the reason why an independent auditor reports on financial
statements?
a. A poorly designed internal control system may be in existence.
b. Different interests may exist between the company preparing the statements and the persons using
the statements.
c. A misstatement of account balances may exist and is generally corrected as the result of the
independent auditor’s work.
d. A management fraud may exist and it is more likely to be detected by independent auditors.
32. Which of the following criteria is unique to the independent auditor’s attest function?
a. General competence
b. Familiarity with the industry in which each client operates
c. Due professional care.
d. Independence
33. The primary goal of the CPA in performing the attest function is to
a. Detect fraud
b. Examine individual transactions so that the auditor may certify as to their validity
c. Assure the consistent application of correct accounting procedures
d. Determine whether the client’s assertions as embodied in the financial statements are fairly stated.
34. The primary purpose of an independent audit of financial statements is to:
a. Provide basis for assessing management’s performance
b. Comply with laws and regulations
c. Assure management that the financial statements are unbiased and free from material
misstatements
d. Provide users with an unbiased opinion about the fairness of information presented in the financial
statements.
35. A financial statement audit aids in the communication of economic data because the audit
a. Assures the readers of financial statements that any fraudulent activity has been corrected
b. Guarantees that financial data are fairly presented
c. Lends credibility to the financial statements
d. Confirms the accuracy of management’s financial reporting representations.
36. In the audit of historical financial statements, which of the following accounting bases is the most
common?
a. Cash basis accounting
b. Regulatory accounting principles
c. Generally accepted accounting principles
d. Liquidation basis of accounting.
37. The assumption underlying an audit of financial statements is that they will be used by
a. The regulatory agencies to verify information that is relevant to their supervisory functions
b. The board of directors as basis for declaring cash dividends
c. The public in making investment decisions
d. Different groups for different purposes.
38. In auditing financial statements, the primary concern is with
a. Determining whether recorded information properly reflects the economic events that occurred
during the accounting period.
b. Analyzing the financial information to be sure that it complies with government requirements.
c. Determining if fraud has occurred
d. Determining if taxable income has been calculated correctly.
39. The trait that distinguishes auditors from accountants is the
a. Auditor’s education beyond the bachelor’s degree
b. Auditor’s ability to interpret accounting standards
c.
d.
Auditor’s ability to interpret PFRS.
Auditor’s accumulation and interpretation of evidence related to the company’s financial statements.
40. Which of the following is not an assurance that the auditors give to the parties who rely on the financial
statements?
a. Auditors know how the amounts and disclosures in the financial statements were produced.
b. Auditors give assurance that the financial statements are accurate.
c. Auditors gathered enough evidence to provide a reasonable basis for forming an opinion.
d. If the evidence allows the auditors to do so, auditors give assurance in the form of opinion, as to
whether the financial statements taken as a whole are fairly presented in conformity with PFRS.
41. Which of the following statements does not describe a condition that creates a demand for auditing?
a. Conflict between an information provider and a user can result in biased information.
b. Information can have substantial economic consequences for a decision maker
c. Expertise is often required for information preparation and verification.
d. Users can directly assess the quality of information
42. Which one of the following is not among the conditions that give rise to a demand by external users for
independent audits of financial statements?
a. Remoteness of users.
b. Complexity of making economic decisions
c. Potential conflict of interest between users and preparers of the statements
d. Consequence for making decisions.
43. The market for auditing services is driven by
a. The regulatory authority of the Securities and Exchange Commission
b. A demand by external users of financial statements
c. Pronouncements issued by the AASC
d. Congress
44. Which of the following statements does not properly describe an element of theoretical framework of
auditing?
a. An audit benefits the public
b. The data to be audited can be verified
c. Short-term conflicts may exist between managers who prepare the data and auditors who examine
the data
d. Auditors act on behalf of the management.
45. The auditor’s judgement concerning the overall fairness of presentation of financial position, results of
operation, and changes in cash flow is applied within the framework of
a. Quality control
b. General accepted auditing standards which include the concept of materiality
c. The auditor’s evaluation of the audited company’s internal control
d. Philippine Financial Reporting Standards.
end