FAR EASTERN UNIVERSITY ‘ASR PRN (Quiz 01 --SuGGESTED ANSWERS PART 1 ‘Question “Answer Cored statemeni/s T_| Resurance engagement maanzan engogamant in which anaudiar expresses | False | Audit of financal statements 2n opinion designed to enhance the degree of confidence ofthe intended users ather than the management about the outcome of the evaluation or meaturemant of financial statements ageing generally accepted accounting principles, General, users trequantiy cannot dreciy assess the qualiy finformation | True from which they base their decisions. | Users demand assurance engagements jon because our Securties and | False See demands Tor assurance Exchange Commission requires reports submited to them must be signed engagements by CPAs. Controling shareholders or mvastars demand avvurance rerices because | False | Contraling sarshalders can acre, they cannot drecty access the information from an entity from which they but they may not assess the qualty base thair decisions sf information ‘| The essential components of an assurance engagement ae threnpany | False | andawurance report Felationship, an appropriate subject matter, suitable cntena and sufficient appropriate evidence only. Three party relationships inclade the prado, the Yesponsibe pay and | True the intendad user, | The responsible pany and the Intended users should be fram afferent | False | maybe rom the same or ‘The relationship between the responsble party andthe intended userneads | True te be viewed within the contert of a spectic engagement and may differ from moretraéiionaly defined lines of responsibilty |The term “practioner” snot limited to the term "auaitor which relates | Te only to audit or review engagements relating to historical financial information. 'Apracitioner may be requested to perform assurance engagements on a | True wide range of subject matters | ie absotaaly al astances,s practioner Goes nat accept an engagement # | False] generally preliminary knowiedge of the engagement circumstances indicates that tical requirements regarding professional competence will not be satiieg ’An expert iv profesional whe specalbes in eld other than audit and | True accounting 7 The response party the pari responsible Tar the subjea’ matter or | True subject matter information in an sesurance engogement, ‘The respansible party ordinary provides the practtiner with a wentan | True rapresentation that evaluates or measures the subject matter agent the idantitied crteria, whether or not i isto be made available ae an acsertion tothe intended user. | ivan assarion-based engagement, the responsible pany l responsible Yor | False | maybe the subjed matter the subject matter information andthe subject matter. Tn a direct reporting engagement, the responsible pany & response Yor | Thue subject matter only 3. The vespansible pany shvays engages the pradilaner in an assurance | False | mayor may not eneage engagement in direc reporting engagement, the pracitioner efher performs the | Tre performance or evaluation af the subject matter against a criteria ar obtains fapresentation from the responsible party that has performed the tevaluation or measurement that not avalable to intend users i[Page Rian Ceasar P. Soliman, CPA, MBAGuestion “nawer Corea satemeni|s To, [Tha responsible panty maybe one ofthe intendaduserabutnotine anyone, | Tie The intended users are the person or class of persons for whom the | True practitioner prepares the assurance report for. TH, | When engagements are designed Yar speciied tended users or a specie | True purpose, the practitioner considers including a restriction in the assurance Fagor that limits Rs uee to thove users or that purpose ‘Assurance service as imited to quantitative information az wbjeai mater | False | sre not inited “E, | The important consideration Tor praditioners regarding ihe sibjed matter | Tue iswhetherthe information on which they are reperting's appropriate fr an surance engagement, in particular, that the information is capable of evaluation/measurement and if there are evidence avaible The citra of any evaluation should be on the pracitionersudgment and | False | mun be communieated should not be communieated to the user. 1B, | Givers nay be made public avaliable, induded nthe information reported | True on orinthe assurance report asell. Mf, however, criteria are only avaiable to Specific users, the assurance report is estrited to these users Citeria must aways be bared on enablahed crters in the tense that | False | Gitar way be emablahed or Should be embodied in aw or regulations or issuances of authorized body specticaly developed Td. [To express @ condusion on subjec’ matter, pradiioners need suffiaent | True appropriate evidence te ebtain assurance thatthe information is tree of material misstatement. in planning and performing the wor, practionarswil acaraive professional | True Judgment and consider what constitutes sufficient evidence and will use professional skepticism to question the validity ofthe evidence obtained. TE. | The pracitioner should presume that the management & duhonest m| False | should not presume dealing wih their responsibiltiee a an application of ‘professional skepticism Toformation einmatanalf ke emisvion ormitatamant could nluencethe | False] materal economic decisions of users taken on the base ofthe financial statements TE | Resurance engagament 1a W the ak that the practioner Wauer a | Tue incorrect conclusion when the subject matter is materially misstated The lower the acceptable assurance engagement rst, the mare ecanswe | True evidence ae required 17, | Reasonable assurance engagament where the objeaive a reducion mw | False | Aud assurance engagement risk to an acceptably low level inthe circumstances of the engagement 25 the basis or a paste farm of expression of the practitioners concusion (eg. Review of Historical Fnancal Statements) Tm aSSUraNGE, negative form of apinion means that the result af the | False | doasnat mean tevalation ofthe CPA wae not satisfactory 7B. [in an assurance engagement where the subject mater is hitarcalfinandal | False | audits and reviews are diferent wih information, tha terms audit and review of financial statements are used Fespec to level of assurance interchangeably to refer to those engagements. provided Not all engagements performed by prachioners are asvurance | Tre engagements. 7S, | Tndepandant audi engagement provides an absolute level av aszurancetnat | False | reasonable assurance the subject matter (eg historical financial information) i free fram material Compilation engagement is wherein a practioner is engaged to cany out | False | Agreed upon procedures ‘those praceduras of an audit nature to which the practioner and the entty engagement and any appropriate third parties have agread and to report on factual findings 20. | Fracitioners cannot provide absolute assurance a an engagement | False See lmiaions of assurance esurance engagements because some of the practitioners are incompetent engagements, incompetence of inwanat they 6a practitioners is nat among them 21Page Rian Ceasar P. Soliman, CPA, MBAGuestion “nawer Corea satemeni|s The charaderiaie of the wubject matter ony sometimes contrbute to] True limitations ofan assurance engagement lkefor example being qualitative or subjecve in nature 7H | Campiation engogamantlewhere the accountant ls engagedto ure suating | False | Secounting expertise as opposed to accounting expertise to calle, classify and summarize financial information The primary objecive of audit i to cary the covreciness of nancal | Fale | express an opinion about the statement, fairest BE. [im tndependent audis af hitrcal Thandial statements, © CPA ee] Tre requirement. “Accounting refers the recording, Gassing and summaraing ecanamie | True vents in logical manner forthe purpose of providing financial information for decision making BB, | independent suds of fwanchl Aatements an erample f both sesenion | Te based acsurance engagements and renconable asurance engagement, ‘Operations audits often extend beyond the financial aspec or acvity ofthe | True ergonition baing audited 7a, | an engument whereby the audar scart whether an entity folawa the | True provisions of a contrat isan example af compliance audits Being independent from an entity means that you should nat work Tor that | False | must nat have inandial nterea emtty underthe employer-emplayee relationship status, but havingfinancial interest with its alight so long as you are objective in performing your procedures as auditor 35, | internal auditors belong to spacal category of personnel mn which they ara | False | ternal auditors are employed By neither employed nor contracted by the entity that they are auiting the entity ‘The tres primary areas that lateral auditors work in klude governance, | True risk management and control processes 7, | Internal auditors can not reach the Fame level af independance az extemal | Tue auditors The internal audtors can macinise tha independence W they repr to | True person or persons who are independent of running the affairs ofthe entity ficectl lke the aud committe ofthe organization By. | Commission on Audi isthe supreme audit isttutlon nthe Philppines [Te Government auditors perfarma compliance auais, financial audits and as | True well as performance audits BE. | Members of the commission proper ofthe COA may be CPAs ar Tawyers | Tue provided that at any gwen paint in time they must not be from the same profession ‘Auditing governmant agencies with reiped to lean com pownt of view | Fale | management aut perspective ireerredta as program results audit BS, | Fram the point of view of the audiar, the ouiputthethe al engagement | False | auators report iethe audited financial tatemants needed by the intendea urs The independent auditor's report communicates to usersthe opinion ofthe | True auditor regarding the faieness af the financial statements in all material respects in accordance with established erteria, 36, | Rudi the sazurance engagements cannot ae provide sbvaute Teal of | Tre esurance due to lniations lke nature of financialreporting, nature of aud procedures andthe fact that aust must be complated whithin a reasonable amount of time and cos, ‘An audh report also. doas not wien to the entity future vabiny, | Tue effectiveness and efficiency of operations and extent of compliance of the ity with all applicable laws and regulations. 31 Page Rian Ceasa man, CPA, MBA