Professional Documents
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Auditing and Assurance Services (MCQ by Red Sirug)
Auditing and Assurance Services (MCQ by Red Sirug)
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financial statements?
a. Audit.
b. Review.
c. Compilation.
d. Each of the above provides the same level of assurance.
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.
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
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.
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
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
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.
17. Which of the following statements concerning the assurance engagements 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.
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.
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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 misstated or not materially misstated.
d. Through loss from litigation, adverse publicity, or other events arising in connection with a subject matter
reported on.
28. The following are components of assurance engagement risk, except
a. Business risk
b. Detection risk
c. Inherent risk
d. Control risk
29. The predominant type of attestation service performed by CPAs is:
a. Audit.
b. Review.
c. Compilation.
d. Management consulting.
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
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
32. When performing an assurance service, professional accountants use standards or benchmarks to evaluate or
measure the subject matter of an assurance engagement. This is known as:
a. PFRS.
b. Assertion.
c. Criteria.
d. Conclusion.
33. Which of the following services provides positive assurance through attestation?
a. Tax services
b. Review
c. Auditing
d. Accounting services
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.
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.
36. The subject matter of an assurance engagement can take the following forms except
a. The entitys 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.
37. Which of the following statements best describes review services?
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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.
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.
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.
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.
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.
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.
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.
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
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.
46. The attest function:
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a.
b.
c.
d.
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d. Auditing and attest services represent two distinctly different types of services.
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.
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.
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.
60. Compilation is an example of which one of the following types of services?
a. Auditing
b. Accounting
c. Consulting
d. Review
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.
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.
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
64. Assurance engagements should exhibit the following elements except
a. A subject matter
b. Suitable criteria
c. Evidence
d. Appropriate professional fees
65. 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
66. Which of the following is not an element of assurance engagements?
a. Subject matter
b. Evidence
c. Engagement process
d. Suitable criteria
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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.
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
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.
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 clients objectives:
a. Tax shelter
b. Tax evasion
c. Tax compliance
d. Tax planning
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.
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.
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.
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.
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.
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 CPAs conclusion provides a level of assurance about the subject matter.
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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
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.
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.
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.
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.
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
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
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.
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.
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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.
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.
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.
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"
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.
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
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
100.
a.
b.
c.
d.
CPAs in public practice who perform assurance engagements are governed by the following, except
Framework for Assurance Engagements
Philippine Standards on Quality Control
Code of Ethics for Professional Accountants in the Philippines
AASC's Engagement Standards (PSAs, PSREs, PSAEs, and PSRSs)
101.
The Philippine Framework for Assurance Engagements
a. Provides a frame of reference for CPAs in public practice when performing audits, reviews, and compilations of historical financial information.
b. Contains basic principles, essential procedures, and related guidance for the performance of assurance
engagements.
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c.
Establishes standards and provides procedural requirements for the performance of assurance engagements.
d. Defines and describes the elements and objectives of an assurance engagement, and
identifies engagements to which PSAs, PSREs, and PSAEs apply.
102.
a.
b.
c.
d.
103.
a.
b.
c.
d.
Which of the following procedures is normally performed in connection with a compilation engagement?
Inquire of management about subsequent events
Making inquiries of management concerning actions taken at board meeting
Applying analytical review procedures
Collect, classify and summarize financial information.
104.
a.
b.
c.
d.
105.
a.
b.
c.
d.
106.
a.
b.
c.
d.
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.
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
109.
a.
b.
c.
d.
The form of attestation that provides the highest form of assurance is a(n):
Review.
Assembly
Compilation.
Examination.
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.
111.
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a.
b.
c.
d.
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
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.
114.
a.
b.
c.
d.
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).
116.
a.
b.
c.
d.
The Philippine Standards on Auditing (PSA) require that a report be issued whenever a CPA firm:
Performs an audit.
Is associated with financial statements.
Is engaged to perform any services of any nature.
Performs SEC regulated work.
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.
118.
If the auditor learns that an entity is inappropriately using the auditors 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.
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