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6" FloorCMFFIBullding B19.Cor R Papaand S Loyola Sts ReSA ‘Sampaloc. Mania The ReviewSchoo! of Accountancy 98796-9807 /734.3989 /(0910) 439-1320 resareview@hotmat com AUDITING THEORY IMI-EDY - MBN ~ FCT AT-01: FUNDAMENTALS OF AUDITING AND ASSURANCE SERVICES REQUIRED READINGS ‘+ Philippine Framework for Assurance Engagements (PEAE) + PSAE2000(Revised) ~ Assurance Engagements Other Than Audits or Reviews of Historical Financial Information| + Chapter 1, Auditing and Assurance Principles, 2017 Edition +_PSA Glossary of Terms 1. These are independent professional services that improve the quality of information or its context, for decision makers ‘A. Assurance services C Related services B. Non-assurance services D. All of the above 2. Which of the following is true about assurance services? Assurance services help information users make decisions based on more credible information Assurance services improve on the quality of information Assurance services can enhance the usefuiness of information All of the above > goo 3. Which of the following are the professional standards applicable to non-assurance services? A. Philippine Standards on Auditing B. Philippine Standards on Review Engagements . Philippine Standards on Related Services D. Philippine Standards on Assurance Engagements 4. Which of the following is true about non-assurance services? ‘A. Audit engagements are non-assurance services B. Review engagements are non-assurance services C. Non-assurance services lack one or more elemeit(s) of an assurance engagement D. All of the above are true about non-assurance services 5, 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. Assurance engagement C. Audit engagement B. Attestation engagement D. Management consulting engagement 6. Which of the following is NOT an element of an assurance engagement? ‘A. Sufficient appropriate evidence C. A suoject matter B. Appropriate professional fees D. Awritten assurance report 7. The person, persons or class of persons for whom the practitioner prepares the assurance report. A. General public C. Audit committee B. Responsible party D. Intended users 8. The person or persons who in a direct reporting engagement, is responsible for the suect matter; or in an assertion-based engagement is responsible for the subject. matter information (the assertion), and may be responsible for the subject matter, ‘A. General public C. Audit committee B. Responsible party 3. Intended users 9. Which of the following forms may the subject matter of an assurance engagement take? J. Financial performance or conditions II. Non-financial performance or conditions III. Physical characteristics IV. Systems and processes V. Behavior A. Land It 8. 1, land tt 1, Wand IV 1H, 11, 1V and v ReSA ~The ReviewSchool of Accountancy Page 1 of 3 ReSA: The ReviewSchool of Accountancy Auditing Theory: Fundamentals of Auditing and Assurance Serwces AT-01 10.As defined in the framework, subject matterrefers to the nature of the assertion the practitioner gathers sufficient evidence while subject matter information refers to the outcome of the evaluatior o: measurement of a subject matter. Which of the following examples does not properly describe the subject matter and its corresponding subject matter information? Audit of: Subject matter 2. Financial statement Financial position b. Operations Performance of an entity c. Systems and Assertion abour IT system Processes ‘effectiveness 4. Behavior Compliance with SEC Subject matter information Appropriate valuation, measurement & presentation of inventories in the SFP Zero customer complaints and product recall. ‘An entity's IT system Statement of _ compliance with all applicable SEC rulings and issuances 11, These are the benchmarks used to evaluate or measure the subject matter including, where relevant, benchmarks for presentation and disclosure. C. Criteria D. GAAP A. Assertions B. Engagement process 12.In an assurance engagement, this refers to the information obtained by the practitioner in arriving at the conclusions on which the conclusion is based. A. Criteria B. Evidence C. Assertions D. PSAs 13. Generally, the conclusion expressed in an assurance engagement may provide the following levels of assurance: + Reasonable level of assurance + Limited level of assurance ‘+ Absolute level of assurance B ¢ oD Yes No Yes Yes Yes Yes Yes No Yes Yes No 14. Absolute assurance is generally not aitainableas 2 result of such factors as: ‘+ The use of selective testing ‘© The inherent limitations of internal control ‘* Much of the evidence available to the practitioner is persuasive rather thari conclusive ‘= The use of judgment in gathering and evaluating evidence and forming conclusions. based on that evidence Bie GeiieeD Yes Yes Yes No Yes Yes Yes Yes. Yes Yes No Yes No Yes No No 15. The three commonly-sought types of assurance services are: ‘A. Audits, review, and compilations B. Audits, compilations, arc! other assurance services. C. Reviews, compilations and other assurance service. D. Audits, reviews and other assurance services, 16.A limited assurance engagement is one in which ‘The aim is a reduction in assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioner's conclusion. B. The aim is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, dul where that risk is greater than for a reasonable assurance engagement, us the basis for a negative form of expression of the practitioner's conclusion. C. The auditor is responsible not only for the conclusion but also for the subject matter D. None of the choices apply. 17. Which of the following statements exemplifies positive assurance? ‘A, “In our opinion internal control is effective, in all material respects, based on XYZ crteria.” B. “Based on our work described in this report, nothing has come to our attention that causes us to believe that internal control is not effective, in all material respects, based ‘on XYZ criteria.” C. Both Aand 8 D. Neither A nor B i 793889 (010) 499-1320 Page 2 of 3 ReSA: The ReviewSchoo! of Accountancy AT-01 Auditing Theory: Fundamentals of Auditing ang Assurance Services 18, This assurance engagement provides a limited level of assurance about the client's historical financial statements. A. Financial statements audit. B. Review of historical financial statements. CC. Forecasts and projections. D. Agreed-upon procedures. 19. Which of the following is an objective of a review engagement? ‘A. Expressing a positive opinion tha’ the financial information is presented in conformity with generally accepted accounting principles. 8. Expressing a limited assurance to users who have agreed as to procedures that will be performed by the CPA. C. Reporting whether material modifications should be made to such financial statements to make them conform with generally accepted accounting principles. 1D. Reporting that the financial statements, in ail material respects, fairly present the financial position and operating results of the client. 20. Which of the following procedures urdinarily performed during an audit are also performed in a review engagement? ‘A. Assessment of accounting ard internat contrat systems. B. Tests of controls. C._ Tests of records and responses to inquiries. D. Inquiry and analytical procedures. 21. Procedures in @ review engagement consist primanily of inquiry and analytical procedures. Regarding review procedures, which of the following statements Is correct? A. The auditor should not apply the same materiality considerations as would be applied if ‘an audit opinion on the financial statements were given. B. The judgment as to what is rmaterial is not made by reference to the information on which the auditor is reporting and the needs of those relying on that information, not to the level of assurance provided. C. There is @ greater risk that misstatements will not be detected in an audit than in a review. D. The auditor should apply judgment in determining the specific nature, timing and extent of review. procedures. 22.This is the risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated A. Audit risk C. Detection risk B. Assurance engagement risk D. Practitioner's risk 23. Which of the following best describes risk assessment services? ‘A. An engagement which provides assurance about whether financial and non-financial information being reported from the entity's performance measurement system is reliable. 8B. An engagement which involves the evaluation of the quality of health care, medical services and looks into the health care delivery system: C. An engagement which identifies a sei of risks that affect the client organization. It involves the study of the link between risks and the organization's vision, mission, objectives and strategies and the devetopmient of new and relevant measures. D. None bf the answers. -end of AT-01- ReSA% 735-9807 / 734-3989 / (0910) 429.1320 Page 3 of 3

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