BAUDPRIX – SEATWORK 1 (Topic 1)

1. The concept of limited assurance is provided for in which of the following engagements?
Agreed-upon procedures
Compilation
Review
Audit

2. When performing an engagement to review a nonpublic entity’s financial statements, an accountant

most likely would:
Confirm a sample of significant accounts receivable balances.
Obtain an understanding of the effectiveness of entity’s internal control.
Ask about actions taken at board of director’s meetings.
Limit the distribution of the accountant’s report.

3. Your accounting firm has accepted a compilation engagement from a client in which your firm is not
independent. In that case you:
May accept the engagement and disclose the lack of independence and the reason for the lack of
independence.
May accept the engagement and not disclose the lack of independence.
May accept the engagement and disclose the lack of independence.
May not accept the engagement.

4. Which one of the following is not a provider of assurance services?

Philippine Institute of Certified Public Accountants
Government Auditors
Internal auditors
Certified Public Accountants

5. A report on factual findings is the end product of the auditor when performing
Examination
Audit
Review
Agreed-upon procedures

6. According to PSA 3000, assurance engagement should exhibit five elements including
A written assurance report
Financial reporting framework
A two-party relationship
Financial information
7. The characteristics for determining whether criteria in an assurance engagement are suitable
include the following, except
Understandability
Verifiability
Completeness
Neutrality

8. Which of the following statements about assurance engagements is not correct?

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.
The subject matter of an assurance engagement may take many forms such as data, systems, and
processes or behavior.
Not all engagements performed by professional accountants are assurance engagements.
The Philippine Standards on Assurance Engagements issued by AASC describe the objectives and
elements of assurance engagements to provide high, moderate or low level of assurance.

9. Statement I: Independence is an attribute necessary to perform assurance engagements and is only

required for assurance engagements providers.
Statement II: Independence standards are required for audits of public companies, but not for audits of
private companies.
Statement II: The practitioner normally expresses limited assurance in a positive manner.
Which is/are correct statement/s?
I, II and III
II and III only
I only
I and III only

10. Which of the following is not normally a service rendered by public accountants?
Taxation
Internal auditing
Attest function
Management consultation service

11. A CPA who is not independent may issue a

Compilation report
Report expressing a qualified opinion
Special report
Review report

12. Which of the following is incorrect about a compilation engagement?

The procedures performed do not enable the accountant to express any form of assurance.
The CPA should exercise due care when engaged to compile financial statements.
 The engagement ordinarily entails reducing detailed data to a manageable and understandable form.
The CPA uses his auditing expertise to collect, classify, and summarize financial information.

13. Statement I: Certified Public Accountants are the exclusive providers of assurance engagements as
the subject matter of assurance engagements is limited only to financial information of a business
entity.
Statement II: The responsible party can be one of the intended users, and may be the only one.
Both statements are correct
Both statements are incorrect
Only statement I is correct
Only statement II is correct

14. An engagement to apply agreed-upon procedure engagement may be accepted, provided

The CPA has audited the financial statements of the client.
The CPA is independent with respect to the client.
The client takes full responsibility for the adequacy of procedures to be performed.
The adequacy of the procedures to be performed will be determined by the CPA.

15. When performing a review of financial statements, the CPA is required to

Obtain understanding of the client’s business and industry.
Obtain corroborative evidence to support management’s responses to inquiries.
Assess the effectiveness of the client’s accounting and internal control systems.
Apply analytical procedures and make inquiries from third parties by sending confirmation letters.

16. Which of the following refers to “criteria” element of assurance engagement?

The subject matter, and subject matter information (assertion), of an assurance engagement.
Contains a conclusion that conveys the assurance obtained about the subject matter information.
Information obtained by the practitioner in arriving at the conclusions on which the opinion is based.
Benchmarks used to evaluate or measure the subject matter.

17. When the professional accountant has obtained sufficient appropriate evidence to conclude that
the subject matter conforms in all material respects with identified suitable criteria, he or she can
provide what level of assurance?
Absolute
High
Moderate
None

18. The term “accountant” has been used by AASC to refer to a CPA in public practice who is engaged
to
Audit financial statements
Review financial statements
 Apply agreed-upon procedures
Compile financial statements

19. Assurance services may improve all of the following except

Attestation services
Assurance services
Financial auditing
Internal auditing

20. Statement I: An audit of financial statements is a type of attestation engagement.

Statement II: Assurance is confined to an audit of client financial statements.
Both statements are correct
Both statements are incorrect
Only statement I is correct
Only statement II is correct

21. If the financial statements reviewed contain material misstatements, the practitioner’s review report
should
Express a qualification of the negative assurance.
Give an adverse statement.
Not provide any assurance.
Either a or b.

22. Statement I: The criteria by which an auditor evaluates the information under audit may vary with the
information being audited.
Statement II: Whether a particular engagement is an assurance engagement will depend upon whether it
exhibits all of the following three elements – a three party relationship, a subject matter and suitable criteria.
Both statements are correct
Both statements are incorrect
Only statement I is correct
Only statement II is correct

23. When a CPA is associated with the preparation of forecasts, all of the following should be
disclosed except
Major assumptions used
Probability of achieving the forecast
Character of work performed
Sources of information

24. Which one of the following is not a critical component of assurance services?
A CPA
A user who derives value
 An assurance service provider
A process on which service is provided

25. A service that always requires that a report is provided to a third party is
Audit
Attestation
Assurance
Both a and b

26. If the CPA has reason to believe that the information subject to review may be materially misstated,
the CPA should
Carry out additional or more extensive procedures.
Withdraw from the engagement.
Express an adverse opinion.
Express a qualified negative assurance.

27. Assurance services may include which of the following, except

Engagements to testify in legal proceedings regarding accounting, auditing, taxation, or other matters.
Evaluation of a division’s performance for management.
Examination of the economy and efficiency of governmental operations.
Attesting to financial statements

28. The use of negative assurance in audit reports on financial statements is

Properly located in the opinion paragraph of the unmodified report.
A help in clarifying the degree of responsibility being assumed by the auditor.
Encouraged by PICPA
A violation of the professional standards.

29. A risk that reflects the possibility that the information upon which the business decision was made
was inaccurate.
Control risk
Client acceptance risk
Business risk
Information risk

30. In performing an attestation engagement, a CPA typically

(1/1 Points)
Provides management consulting advice
Supplies litigation support services
Assess control risk at a low level
Expresses a conclusion about an assertion