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Audtheo2 PDF
Audtheo2 PDF
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9. The Philippine Framework for Assurance Engagements identifies two types of assurance
engagement a practitioner is permitted to perform: a reasonable assurance engagement and a
limited assurance engagement. Which of the following is the objective of a reasonable
assurance engagement?
a. A reduction in assurance engagement risk to a level that is acceptable in the
circumstances of the engagement as a basis for a negative form of expression of the
practitioner’s conclusion.
b. A reduction in assurance engagement risk to a very low level in the circumstances of
the engagement as a basis for a disclaimer of the practitioner’s conclusion.
c. A reduction in assurance engagement risk to an acceptably low level that is acceptable
in the circumstances of the engagement as a basis for a positive form of expression of
the practitioner’s conclusion.
d. A reduction in assurance engagement risk to a level that is acceptable in the
circumstances of the engagement as a basis for a qualified form of the practitioner’s
conclusion.
13. In an assurance engagement, the person or class of persons for whom the professional
accountant prepares the report for a specific use or purpose is the:
a. Intended user.
b. Responsible party.
c. Management.
d. Client.
14. An expectation of the public is that the auditor will recognize that the primary users of audit
services are
a. the employees.
b. the Securities and Exchange Commission.
c. the investors and creditors.
d. the board of directors.
15. In the context of the Framework, the auditor’s satisfaction as to the reliability of an assertion
being made by one party for use by another party is called
a. Opinion.
b. Assurance.
c. Examination.
d. Verification.
16. Which of the following statements concerning the intended user of a professional accountant’s
report is incorrect?
a. The intended user should never be established by agreement between the professional
accountant and the responsible party or those engaging or employing the professional
accountant.
b. In some circumstances, the intended user may be established by law.
c. The responsible party may also one of the intended users.
d. The responsible party and the intended user may both be within the same organization.
17. When providing consulting services, the CPA acts primarily as a(n):
a. independent accountant
b. expert on compliance with industry standards
c. technology specialist
d. objective advisor on the use of information
Auditing Theory Quizzer No. 1 3_
18. Which of the following is a difference between attestation standards and auditing standards?
a. Attestation standards cover attest engagements other than those involving GAAP
financial statements.
b. Attestation standards do not require independence in mental attitude.
c. Auditing standards apply only to CPAs while attestation standards apply to all
accountants.
d. Attestation standards do not include standards of reporting.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
22. Why does a company choose to have an independent auditor report on its financial
statements?
a. Independent auditors will always detect management fraud.
b. The company preparing the statements may have a vested interest in reporting certain
results.
c. Independent auditors guarantee the accuracy of the financial statements.
d. An independent audit is designed to search for deficiencies in the company’s internal
controls.
24. The primary responsibility for the adequacy of disclosure in the financial statements rests with
the
a. Partner assigned to the audit engagement.
b. Management of the company.
c. Securities and Exchange Commission.
d. Auditor in charge of the field work.
27. The Framework of Philippine Standards on Auditing distinguishes audits from related services.
Related services include all of the following, except:
a. Reviews
b. Agreed-upon procedures.
c. Compilations.
d. Management consulting.
28. When the professional accountant has obtained sufficient appropriate evidence to be satisfied
that the subject matter is plausible in the circumstances, he or she can provide what level of
assurance?
a. None
b. High
c. Moderate
d. Absolute
30. A concept relating to the accumulation of the audit evidence necessary for the auditor to
conclude that there are no material misstatement in the financial statements taken as whole is:
a. Reasonable assurance
b. Positive assurance
c. Moderate assurance
d. Negative assurance
32. Engagements frequently performed by professional accountants that are not assurance
engagements include the following except:
a. Agreed upon procedures
b. Audit of financial statements
c. MAS
d. Compilation of financial statements
34. The subject matter of an assurance engagement may take many forms, including
a. Data
b. Behavior
c. Systems and processes
d. All of the above
35. A practitioner should plan and conduct the assurance engagement in an effective manner to
meet the objective of the engagement. Which of the following matters need not be a concern of
the practitioner in planning the work?
a. Criteria to be used.
b. Engagement objective.
c. Personnel and expertise requirements.
d. Specific format of the assurance report.
Auditing Theory Quizzer No. 1 5_
36. Which of the following statements is correct concerning an auditor’s responsibilities regarding
financial statements?
a. An auditor’s responsibilities for audited financial statements are confined to the
expression of the auditor’s opinion.
b. The fair presentation of audited financial statements in conformity with GAAP is an
implicit part of the auditor’s responsibilities.
c. Making suggestions that are adopted about the form and content of an entity’s financial
statements impairs an auditor’s independence.
d. The auditor’s report should provide an assurance as to the future viability of the entity.
37. When a CPA expresses an opinion on the financial statements, his responsibilities extend to
a. The underlying wisdom of the client’s management decision.
b. Active participation in the implementation of the advice given to the client.
c. An ongoing responsibility for the client’s solvency.
d. Whether the results of the client’s operating decisions are fairly presented in the
financial statements.
39. A financial statement audit aids in the communication of economic data because the audit
a. Assures the readers of the financial statements that any fraudulent activity has been
corrected.
b. Guarantees that the financial data are fairly presented.
c. Lends credibility to the financial statements.
d. Confirms the accuracy of the management’s financial representations.
42. Level of assurance provided by the auditor’s opinion in a compilation engagement is:
a. absolute
b. high
c. moderate
d. none
46. According to Preface on Assurance Engagements, these are the standards or benchmarks
used to evaluate or measure the subject matter of an assurance engagement:
a. criteria
b. engagement process
c. assertions
d. generally accepted auditing standards
Auditing Theory Quizzer No. 1 6_
47. The criteria for evaluating quantitative information vary. For example, in the audit of historical
financial statements by CPA firms, the criteria are usually
a. International accounting standards.
b. Generally accepted accounting principles.
c. Regulations of the Bureau of Internal Revenue.
d. Regulations of the Securities and Exchange Commission.
48. The framework for auditing and related services as addressed by PSA includes
a. Reviews
b. Tax services
c. Management Advisory Services
d. Accounting services
49. The framework for auditing and related services as addressed by PSA excludes
a. Review
b. Compilation
c. Management Advisory Services
d. Agreed upon Procedures
50. The decision of whether the criteria are suitable involves considering whether the subject
matter of the assurance engagement is capable of reasonably consistent evaluation or
measurement using such criteria. Which of the following characteristics is not considered
necessary in determining whether the criteria are suitable?
a. Relevance
b. Neutrality
c. Reliability
d. Sufficiency
51. First Statement – In exceptional circumstances, an auditor may judge if necessary to depart
from a PSA in order to more effectively achieve the objective of an audit. When such situation
arises, the auditor is not required to justify the departure.
52. An auditor needs not abide by a Philippine Standard on Auditing if the auditor believes that
a. The amount is insignificant.
b. The requirement of the PSA is impractical to perform.
c. The requirement of the PSA is impossible to perform.
d. Any of the above three is correct.
53. According to PSA 120, a compilation presents information in the form of financial statements,
that is, the representation of management. The accountant who prepares the compilation
undertakes to express
a. limited assurance on the statements
b. minimal assurance on the statements
c. no assurance on the statements
d. full assurance on the statements
55. Which of the following is least likely considered a part of the financial reporting framework?
a. Generally accepted auditing standards (GAAS).
b. Generally accepted accounting principles (GAAP).
c. International Accounting Standards/International Financial Reporting Standards
(IAS/IFRS).
d. Another authoritative and comprehensive basis of reporting.
Auditing Theory Quizzer No. 1 7_
56. What best describes the word “assurance” in the context of the Philippine Standards on
Auditing?
a. Auditor’s satisfaction as to the reliability of an assertion being made by one party for
use by another party.
b. Level of assurance which may be provided is determined by the reporting objective.
c. Expressed positively in the report.
d. Assurance is of limited in nature.
57. This refers to the audit procedures that, in the auditor’s judgment and based on the PSAs are
deemed appropriate in the circumstances to achieve the objective of an audit.
a. Analytical procedures.
b. Scope of an audit.
c. Audit sampling.
d. Documentation.
58. Auditing standards differ from auditing procedures in that procedures relate to:
a. Measures of performance
b. Audit principles
c. Acts to be performed
d. Audit judgments
59. Auditing is based on the assumption that financial data and statements are
a. In conformity with GAAP.
b. Verifiable.
c. Presented fairly.
d. Consistently applied.
60. Every CPA professional is required to perform the audit of financial statements according to
PSAs in order to
a. Eliminate audit risk.
b. Eliminate the professional judgment in resolving audit issues.
c. Have a measure of the quality of audit performance.
d. To reduce the audit program to be prepared by the auditor.
61. Which of the following would not represent one of the primary problems that would lead to the
demand for independent audits of a company’s financial statements?
a. Management bias in preparing financial statements.
b. The downsizing of business and financial markets.
c. The complexity of transactions affecting financial statements.
d. The remoteness of the users from the organization and thus the inability of the user to
directly obtain financial information from the company.
66. An audit conducted to determine whether an entity is following specific procedures or rules set
down by some higher authority.
a. Operational audit
b. Compliance audit
c. Financial audit
d. Detailed audit
Auditing Theory Quizzer No. 1 8_
70. Operational audits generally have been conducted by internal auditors and governmental audit
agencies but may be performed by certified public accountants. A primary purpose of an
operational audit is to provide
a. A means of assurance that internal accounting controls are functioning as planned.
b. A measure of management performance in meeting organizational goals.
c. The results of internal examination of financial and accounting matters to a company’s
top level management.
d. Aid to the independent auditor, who is conducting the examination of the financial
statements.
71. In general, internal auditor’s independence will be greatest when they report directly to the:
a. Financial Vice President
b. Corporate Controller
c. Audit Committee of the Board of Directors
d. Corporate Stockholders
72. Governmental auditing, in addition to including audits of financial statements, often includes
audits of efficiency, effectiveness and
a. Adequacy
b. Evaluation
c. Accuracy
d. Compliance
75. Although a CPA does not guarantee his findings, his opinion is nevertheless valuable to various
third parties. The value of the CPA’s opinion lies in the fact that
a. he has the qualifications required by law to be a CPA.
b. he is under the supervision of the Professional Regulatory Board of Accountancy.
c. he has gathered sufficient, competent, evidential matter to support his opinion.
d. he has followed generally accepted auditing standards.
78. It refers to the level of 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. reasonableness level
d. tolerable level
79. Who is responsible for forming and expressing an opinion on financial statements?
a. Auditor
b. Management
c. Public
d. External Users
84. Which of the following is a correct statement relating to the theoretical framework of auditing?
a. The financial data to be audited can be verified.
b. Short-term conflicts do not exist between managers who prepare data and auditors
who examine data.
c. Auditors do not necessarily need independence.
d. An audit is of benefit only to the owners.
87. First Statement – Interpretations to PSAs will have the same authority as the PSAs.
Second Statement – PAPS should also have the same authority as the PSAs.
89. Which of the following is not represented in the Auditing and Assurance Standards Council?
a. Board of Accountancy
b. Bangko Sentral ng Pilipinas
c. Bureau of Internal Revenue
d. Securities and Exchange Commission
90. Which of the following usually need not be exposed for comments?
a. PSAs.
b. PAPSs.
c. Interpretations.
d. All should usually be exposed.
91. The exposure period allowed for each exposure draft of PSA to be considered by the
organizations and persons to whom it is sent for comment is generally
a. Four months
b. Three months
c. Two months
d. Six months
92. To emphasize auditor independence from management, many corporations follow the practice
of
a. Appointing a partner of the CPA firm conducting the examination to the corporation’s
audit.
b. Establishing a policy of discouraging social contact between employees of the
corporation and the staff of the independent auditor.
c. Requesting that a representative of the independent auditor be on hand at the annual
stockholders’ meeting.
d. Having the independent auditor report to an audit committee of outside members of the
board of directors.
93. Independent auditors of financial statements perform audits that reduce and control
a. The business risks faced by investors.
b. The information risk faced by investors.
c. The complexity of financial statements.
d. Quality reviews performed by other CPA firms.
96. Professional skepticism dictates that when management makes a statement to the auditors, the
auditors should
a. Disregard the statement because it ranks low of the evidence quality scale.
b. Corroborate the evidence with other supporting documentation whenever possible.
c. Require that the statement be put in writing. Believe that the statement in order to
maintain the professional client-auditor relationship.
Auditing Theory Quizzer No. 1 11_
99. Generally accepted auditing standards (GAAS) and Philippine Standards on Auditing (PSAs)
should be looked upon by practitioners as
a. Ideals to work towards, but which are not achievable.
b. Maximum standards which denote excellent work.
c. Minimum standards of performance which must be achieved on each engagement.
d. Benchmarks to be used on all audits, reviews and compilations.
100. Every independent audit engagement involves both auditing standards and auditing
procedures. The relationship between the two may be illustrated by how they apply from
engagement to engagement. The best representation of this application is that, from one
audit engagement to the next,
a. Both auditing standards and auditing procedures are applied uniformly.
b. Auditing standards are applied uniformly but auditing procedures may vary.
c. Auditing standards may vary but auditing procedures are applied uniformly.
d. Auditing standards are applied uniformly but auditing procedures are optional.
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