FAR EASTERN UNIVERSITY

INSTITUTEOF ACCOUNTS, BUSINESSANDFINANCE

Department of Accountancy & Internal Auditing

ASSURANCE PRINCIPLES
2nd SEMESTER AY 2017 – 2018
Quiz 1 – Assurance Services
Name Date
(Family Name) (First Name) (Middle Name) Section
Professor Day/Time
Stud. No. Score
Room Rating

ANSWER KEY
Part 1 – Multiple Choice (15 POINTS)
No. Answer No. Answer SCORE COMPUTATION
1. C 11. C Part No. Total Items Actual Score
2. B 12. A I 15
3. A 13. D
4. C 14. C II 1 5
5. C 15. C 2 3
6. C 3 2
7. D 4 5
8. D 5 5
9. D 6 6
10. C 7 2
8 6
TOTAL

RATING

Part 2 – Discussion/Questions (15 POINTS)

Question No. 1
Correction No. Your Answers Here
1. A three party relationship.
2. An appropriate subject matter
3. Suitable criteria
4. Sufficient appropriate evidence
5. A written assurance report

Question No. 2
Correction No. Your Answers Here
1. The practitioner
2. The responsible party
3. The intended users.

Question No. 3
Correction No. Your Answers Here
a. Assurance engagement
b. Non-assurance engagement

Question No. 4
Correction No. Your Answers Here Correction No. Your Answers Here
(1) D (4) C
(2) E (5) B
(3) A
Question No. 5
Correction No. Your Answers Here Correction No. Your Answers Here
(1) Reliability (4) Neutrality
(2) Completeness (5) Understandability
(3) Relevance

Question No. 6
Correction No. Your Answers Here
a. NOT RELIABLE. The meaning of audience impact will depend on the perception of
the judges. Diversity in perception among judges is surely present. Lastly, such
criteria is hard to quantify to use as criterial in judging the contest.

Notes:
Reliability of the criteria allows reasonably consistent evaluation or measurement
of the subject matter when used in similar circumstances by similarly qualified
practitioners.

b. NOT RELEVANT. Audience impact has nothing to do with personal performance

of the contestant while singing his contest piece. It comes from the audience and
not from the personal effort of the contestant to prove that he/she is better that the
other contestants in terms of technicalities in singing. Judges’ scores must not be
influenced by outsiders and must not be based by reactions of the audience but by
the performance of the contestant.

Notes:
Relevance means a certain criteria contributes to conclusions that assist decision-
making by the intended users.

Question No. 7
Correction No. Your Answers Here
a. Marc David is not independent because he is part owner of Lexington Corporation.
b. Marc David may not be reliable to the eyes of third party users since he is part
owner of Lexington who at the same time is the auditor.

Question No. 8
Correction No. Your Answers Here
a. Investment in shares of stocks paid in cash or non-cash assets.
b. Financial statements.
c. Financial statements may be biased or one-sided in favor of management.
d. Financial or independent audit; simply audit or assurance service.
e. Management
f. His conclusion or opinion if the financial statements are fairly stated
g. Independent Auditor’s Report

PART 1 - MULTIPLE CHOICE (15 POINTS)
Choose the correct answer among the given choices.
Write the letter of your choice on the Answer sheet
provided. Use CAPITAL LETTERS. Pencil, friction
pen and liquid papers are not allowed.
1. The Worldcom case influenced the practice of
auditing because it resulted to crisis of
confidence in the financial system. Which of the
following is not a response of the auditing
profession in relation to crisis of confidence?
a. Auditing standards revisited.
b. Auditing independence revisited.
c. Auditor’s expectations and experience
considered.
d. Auditor’s role in corporate governance
considered.
2. The financial scandals like Worldcom and Enron
require the US Congress to address a number of
weaknesses found in the US corporate financial
reporting in the wake of the recent accounting
scandals, particularly publicly held entities. The
act passed by the US Congress that influenced
the auditing practice is called:
a. Sarbanes-Oxley Act of 2001
b. Sarbanes-Oxley Act of 2002
c. Sec Rulings of 2002
d. Accountancy Act of 2004
3. Financial statements are the responsibility of:
a. Management
b. Auditors
c. Both management and auditors
d. Intended users
4. A statement attached to the audited financial
statements duly signed by the management of
the company.
a. Independent Auditor’s Report
b. Statement of Internal Control Responsibility
c. Statement of Management Responsibility
d. Management Accountability Statement
5. The required signatories to statement of
management responsibility are:
a. The CFO and the independent auditor
b. The CEO and the independent auditor
c. The CEO and the CFO
d. The CEO, the CFO and the independent
auditor.
6. What are the responsibility of the auditor in the
audit of financial statements?
a. Verifying if the financial statements are
prepared in conformity with generally
accepted accounting standards.
b. Examination of internal controls.
c. Both A and B
d. Neither A not B
7. Which of the following is not a major provision of
Sarbanes-Oxley Act?
a. Requirement of auditor examination of
company internal controls.
b. Prohibition of certain client services by firms
conducting a client’s audit.
c. Improvement of corporate governance.
d. Accreditation of independent auditor with the
Board of Accountancy.
8. Which of the following is not a basis why
assurance services is important?
a. Many parties provide reports to users as an
aid to decision-making.
b. Reports may potentially be biased due to the
vested interests of the report providers.
c. Users may demand that credibility of report
be enhanced by having someone who is
both independent and expert examine the
report.
d. None of the above
b. It is an independent professional services
that improve the quality of information for
decision makers.
c. It may involve at least any of the following
parties: the practitioner, the responsible
party, and the intended users.
d. Assurance services performed by CPAs are
intended to enhance the credibility of
information about a subject matter by
evaluating whether the subject matter
conforms in all material respect with suitable
criteria.
11. It means an engagement in which a practitioner
expresses a conclusion designed to enhance the
degree 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. Accounting engagement
b. Audit engagement
c. Assurance engagement
d. Consultancy engagement
12. Which of the following demand for assurance
services means the separation of owners from
management prevents users having assessing
information quality.
a. Remoteness
b. Conflict of interest
c. Complexity
d. Consequence
13. Those in-charge of governance.
a. Board of Directors and CEO
b. President/CEO and CFO
c. Audit Committee and CEO
d. Board of Directors and Audit Committee
14. This is the gap between society’s expectations of
auditors and auditors’ performance as perceived
by society.
a. Performance gap
b. Reasonableness gap
c. Audit expectation gap
d. Unreasonable audit gap

9. With assurance services: 15. This refers to benchmarks used to evaluate or

a. Risk is reduced measure the subject matter including, whether
b. Client’s confidence increases relevant benchmarks for presentation ad
c. Credibility of financial statement increases disclosure.
d. All of the above. a. Audit criteria
b. Accounting criteria
10. Which of the following not correct about c. Suitable criteria
assurance services? d. Expected criteria
a. It helps improve the reliability and relevance
of the information used as the basis for their
decisions.