ACCO 30043: Quiz Number 1

(Introduction to Assurance and

Audit Services)
INSTRUCTION: Identify the best answer for every items. Work INDEPENDENTLY. Any form of
cheating is equivalent to 5 on the final rating. This is good for 90 minutes. God bless!

Points: 0/40

1. NAME - By placing my full name (LAST NAME, FIRST NAME and MIDDLE INITIAL), I
clearly state that all works here are entirely on my own, to the best of my
knowledge and does not violate the University's Academic Policy especially on
matters of academic honesty. *

Quinalayo, Janella Faye H.

2. Section *

BSA 3-1 (San Juan)

BSA 3-1 (Taguig)

BSA 3-1 (Main)

BSA 3-2

BSA 3-3
 BSA 3-4

BSA 3-5

BSA 3-6

BSA 3-7

BSA 3-8

BSA 3-9

BSA 3-10

BSA 3-11

BSA 3-12

3. S1: The practitioner needs to be absolutely independent in performing an

assurance engagement although, the highest level of assurance that a practitioner
can give is a reasonable level only.
S2: It is the responsibility of the management to ensure that the subject matter is
free from material misstatements. *
(-/1 Points)

Only statement 1 is true

Only statement 2 is true

Both statements are true

Both statements are not true

4. Practitioner should accept an assurance engagement only if *

(-/1 Points)

The subject matter is in the form of financial information.

The criteria to be used are not available to the intended users.

The practitioner’s conclusion is to be contained in a written report.

 The subject matter is the responsibility of either the intended users or the practitioner.

5. The following are characteristics of suitable criteria, except: *

(-/1 Points)

Completeness

Reliability

Understanding

Neutrality

Relevance

6. ____________ is a study of a specific unit of an organization for the purpose of

measuring its performance. *
(-/1 Points)

Operational Audit

Compliance Audit

Financial Audit

Recurring Audit

7. A financial statement audit is *

(-/1 Points)

Confirms that financial statement assertion are accurate.

Lends credibility to the financial statements.

Guarantees that financial statements are presented fairly.

Assures that fraud had been detected.

 8. S1: Assurance refers to the responsible party’s satisfaction as to the reliability of an
assertion being made by one party for use by another party.
S2: The major beneficiaries of an internal audit are management and third-party
users of the financial statements. *
(-/1 Points)

True, True

False, True

True, False

False, False

9. The point person (individual) in the engagement team who has the responsibility
in the entire audit is? *
(-/1 Points)

Audit staff

Senior Auditor

Audit Manager

Partner in Charge

10. Which of the following is not valid criteria for assurance engagement? *
(-/1 Points)

Accounting standards generally acceptable in the Philippines

Other authoritative financial reporting framework

Philippine Standards on Auditing

International Accounting Standards

11. Which of the following is not primary category of attestation report? *
(-/1 Points)

Compilation report

Review report

Audit report

Special audit report based on a basis of accounting other than generally accepted
accounting principles.

12. S1: The purpose of an audit is to enhance the degree of confidence of intended
users in the financial statements.
S2: The audit should adequately cover all relevant (significant) aspects to the
entity. *
(-/1 Points)

Only statement 1 is false

Only statement 2 is false

Both statements are false

Both statements are not false

13. Which of the following is an assurance engagement? *

(-/1 Points)

The practitioner performed procedures on the designated subject matter of a wide

variety of assertions as a result of a need of specific parties.

An engagement where information of the same characteristics is group and present in

an orderly manner.

An engagement where the practitioner evaluates the reliability of any defined electronic
system.

The practitioner provides possible courses of actions to ensure that the operating
capability of the client will improve.
14. Identify the following as financial audit, compliance audit, and operational audit.

I. A supervisor is not carrying out his assigned responsibilities.

II. A company’s tax return does not conform to income tax laws and regulations.

III. A municipality’s financial statements correctly show actual cash receipts and
disbursements.

IV. A company’s receiving department is inefficient. *

(-/1 Points)

operational audit, compliance audit, compliance audit, operational audit

compliance audit, compliance audit, financial audit, compliance audit

operational audit, compliance audit, financial audit, operational audit

compliance audit, compliance audit, financial audit, operational audit

15. Which of the following best describes the reason why independent auditors report
on financial statements? *
(-/1 Points)

A management fraud may exist and it is more likely to be detected by independent

auditors.

Different interest may exist between the company preparing the statements and the
person using the statements.

A misstatement of account balances may exist and is generally corrected as the result of
the independent auditor’s work.

A poorly designed internal control structure may be in existence.

16. The following are requirements for a compilation engagement, except: *

(-/1 Points)

Knowledge of industry, accounting principles and practices

 Understanding of client's business

Fraud and Illegal Acts, Going Concern, and Subsequent Events

The nature and materiality of financial statement items

17. Which is true about the five elements of an assurance engagement? *

(-/1 Points)

Majority must be present for an engagement to be classified as assurance engagement

If all the elements are present, then the engagement is classified as assurance
engagement

At least one must be present for an engagement to be classified as assurance

engagement

If one element is lacking, then the engagement is classified as non-assurance

engagement

18. Which of the following best describes the scope of internal auditing as it has
developed to date? *
(-/1 Points)

Internal auditing involves appraising the economy and efficiency with which resources
are employed.

Internal auditing involves evaluating compliance with policies, plans, procedures, laws,
and regulations.

Internal auditing has evolved to verifying the existence of assets and reviewing the
means of safeguarding assets.

Internal auditing has evolved to more of an operational orientation from a financial

orientation.

19. S1: The CPA’s conclusion provides a level of assurance about the subject matter.
S2: The main difference between auditors and accountants is the auditor’s ability
to interpret PSAs. *
(-/1 Points)
 True, True

False, True

True, False

False, False

20. Which of the following is not a type of audit engagement? *

(-/1 Points)

An engagement that determines whether the financial statements are stated in

accordance with specified criteria

An engagement that is based on inquiry and analytical procedures performed by the

practitioner.

An engagement that evaluates the efficiency and effectiveness of any part of an

organization’s operating procedures and methods

An engagement that is conducted to determine whether the client is following specific

procedures, rules, or regulations set by some higher authority.

21. The following governs practitioner in the performance of assurance engagement,

except: *
(-/1 Points)

Philippine Standards on Review Engagement

Philippine Standards on Accounting

Philippine Standards on Quality Control

Code of Ethics for Professional Accountants in the Philippines

22. The framework for auditing and related services as addressed by PSA excludes *
(-/1 Points)

Compilation
 Review

Agreed upon procedure

Tax services

23. Which of the following is incorrect regarding the “three-party relationship”

element of assurance engagements? *
(-/1 Points)

Professional accountants are those persons who are members of PICPA in public
practice.

The responsible party and the intended user will often be from separate organizations
but need not be.

The responsible party is the person or persons, either as individuals or representatives

of an entity, responsible for the subject matter.

The intended user is the person or class of persons for whom the professional
accountant prepares the report for a specific use or purpose.

24. The risk that the client’s financial statements may be materially false and
misleading is referred to as the *
(-/1 Points)

business risk

information risk

attestation risk

assurance engagement risk

25. Which of the following is the best way for a practitioner to maintain its
independence in performing an assurance engagement? *
(-/1 Points)

Ask for reasonable and competitive engagement fee.

 Ensure a good long lasting relationship with the client.

Ensure that the evidence are sufficient and appropriate.

Ask for a good working environment and unnecessary gratuities from the client.

26. S1: Nowadays, the most cost-beneficial option to reduce the information risk is to
have users directly verify the information.
S2: The auditors fills-in the information gap between the principal owners/users of
the financial statements and the management. *
(-/1 Points)

True, True

False, True

True, False

False, False

27. The attest function: *

(-/1 Points)

Is an essential part of every engagement by the CPA, whether performing auditing, tax
work, or other services.

Includes the preparation of a report of the CPA's findings.

Requires a consideration of internal control.

Requires a complete review of all transactions during the period under examination.

28. An operational audit is designed to *

(-/1 Points)

Assess the efficiency and effectiveness of management’s operating procedures.

Assess the presentation of management’s financial statements in accordance with

Philippine Accounting Standards.
 Determine whether management has complied with applicable laws and regulations.

Determine whether the audit committee of the board of directors is effectively

discharging its responsibility to oversee management’s operations.

29. ______________ is the risk that financial statements are materially incorrect, even
though the audit opinion states that the financial reports are free of any material
misstatements. *
(-/1 Points)

Audit Risk

Inherent Risk

Control Risk

Detection Risk

30. The report issued when a practitioner performs an agreed-upon procedure will not
be communicated to outside parties because: *
(-/1 Points)

The agreed upon procedure is a non-assurance engagement where reports are solely
for use of internal parties.

The procedures agreed upon by the practitioner and the client are not know but outside
parties.

There may be a different interpretation of the report when issued to an outsider.

The report contains financial information which will never communicated with outside
parties.

31. S1: Commission on Audit auditors can perform effectiveness, efficiency but not
economy audit.
S2: Compliance audits are used to determine adherence to rules and regulations
set by the auditor. *
(-/1 Points)
 True, True

False, True

True, False

False, False

32. The responsibility for the preparation of the financial statements and the
accompanying footnotes belong to *
(-/1 Points)

management

management for the statements and the auditor for the notes

auditor

both management and the auditor equally

33. The concepts of practitioner, professional skepticism, and characteristics of

suitable criteria are all together discussed in _______________. *
(-/1 Points)

Philippine Standards on Auditing

Philippine Standard on Quality Control

Philippine Framework for Assurance Engagements

Philippine Standards on Related Services

34. Which of the following is not normally a service rendered by public accountants? *
(-/1 Points)

Management consultation service

Internal auditing
 Attest function

Taxation

35. An objective of a performance audit is to determine whether an entity's *

(-/1 Points)

Operational information is in accordance with accounting and auditing standards.

Specific operating units are functioning economically and efficiently.

Financial statements present fairly the results of operations.

Internal control is adequately operating as designed.

36. S1: Auditing requires that data should be externally generated.

S2: In an attestation management, the professional accountant expresses a
conclusion on the subject matter based on suitable criteria, regardless of whether
the responsible party has made a written assertion on the subject matter. *
(-/1 Points)

True, True

False, True

True, False

False, False

37. S1: The practitioner is said to be “not independent” in performing non-assurance

engagement because the practitioner will use only the information coming from
the client.
S2: The practitioner is said to be “independent” in performing an assurance
engagement because the practitioner will never use the information coming from
the client. *
(-/1 Points)

Only statement 1 is true

 Only statement 2 is true

Both statements are true

Both statements are false

38. The following statements relate to the accounting profession:

I. To merit public trust and confidence, the professional person must convince
the public that he will place public service ahead of personal reward.
II. A CPA certificate is evidence of basic competence in the discipline of
accounting at the time the certificate is granted.
III. A code of professional conduct is one of the most important distinguishing
characteristics of a profession.
State whether the above mentioned statements is/are true or false. *
(-/1 Points)

All of the statements are true.

Only two of the statements are true.

Only one of the statements is true.

All of the statements are false.

39. What is an assurance engagement? *

(-/1 Points)

Assurance engagement enables the auditor to express an opinion whether the financial
statements are prepared, in all material respects, in accordance with an identified
financial reporting framework.

Assurance engagement enables an auditor to state whether, on the basis of procedures

which do not provide all the evidence that would be required in an audit, anything has
come to the auditor's attention that causes the auditor to believe that the financial
statements are not prepared, in all material respects, in accordance with an identified
financial reporting framework.

Assurance engagement carries out those procedures of an audit nature to which the
auditor and the entity and any appropriate third parties have agreed and to report on
factual findings.
 Assurance engagement 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.

40. Which of the following is not an element of assurance engagement? *

(-/1 Points)

A third-party relationship involving a practitioner, a responsible party, and intended

users;

An appropriate subject matter;

Suitable criteria;

Sufficient appropriate evidence;

A written assurance report in the form appropriate to a reasonable assurance

engagement or a limited assurance engagement.

41. Which of the following is correct? *

(-/1 Points)

Appropriate subject matter – Financial Statements

Suitable Criteria – Internal Control Manual

Sufficient and Appropriate Evidence – Clients Accounting records

Written Report – Disclaimer of Opinion

42. A CPA should maintain objectivity and be free of conflicts of interest when
performing *
(-/1 Points)

Audits but not any other professional services.

All attestation services but not other professional services.

 All attestation and tax services but not other professional services.

All professional services.

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