No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

AT02-01 – FUNDAMENTAL PRINCIPLES OF ASSURANCE SERVICES

Relevant References:

 Chapter 1 – Auditing and Assurance Services: Theory and Principles, 2021 edition
 Preface to International Standards and Philippine Standards
 Philippine Framework for Assurance Engagements
 PSAE 3000 (Revised) - Assurance Engagements other than Audits or Reviews of
Historical Financial Information
 PSA Glossary of Terms

MULTIPLE CHOICE QUESTIONS

1. Which of the following statements best describes assurance services?
a. Independent professional services that are intended to enhance the credibility of
information to meet the needs of an intended user
b. Services designed to express an opinion on the fairness of historical financial
statements based on the results of an audit
c. The preparation of financial statements or the collection, classification, and
summarization of other financial information
d. Services designed for the improvement of operations, resulting in better outcomes

2. Which of the following may be under the scope of the Framework for Assurance
Engagement?
a. Agreed-upon procedures engagements and compilation of financial and other
information.
b. Preparation of tax returns where no conclusion conveying assurance is expressed.
c. Consulting (or advisory) engagements, such as management and tax consulting.
d. Preparation of tax returns where a conclusion conveying assurance is expressed.

3. Assurance services differ from consulting services that they

I. Focus on providing advice
II. Involve monitoring of one party by another

a. I only
b. II only
c. Both I and II
d. Neither I nor II

4. Assurance engagements should exhibit the following elements, except:

a. A subject matter.
b. Suitable criteria.
c. Sufficient appropriate evidence.
d. Appropriate professional fees.

5. Which of the following is incorrect regarding the practitioner?

a. The term practitioner is broader than the term auditor.
b. The practitioner is governed by ethical requirements (e.g. professional competence)
regarding the conduct of the engagements.
c. The practitioner must be independent to the responsible party but not necessarily to
the intended users.
d. The practitioner is responsible for determining the nature, timing or extent of
procedures required by the engagement.

6. “Subject matter information” as used in the Framework to Assurance Engagement shall

mean
a. The subject which is to be measured against a suitable criteria
b. Outcome of the evaluation or measurement of a subject matter
c. The assertion of the responsible party
d. Any data relating to the subject matter to be measured against the criteria

1P a g e JABELLAR/AJABINAL/RBERCASIO/JM AGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

7. Financial statements need to be prepared in accordance with one, or a combination of:

International Other authoritative or
Philippine Financial comprehensive
Standards on Reporting financial reporting GAAP in the
Auditing Standards framework Philippines
A. Yes Yes Yes Yes
B. No Yes Yes Yes
C. No Yes No Yes
D. Yes No No No

8. Suitable criteria are required for reasonably consistent evaluation or measurement of the
subject matter of an assurance engagement. Which of the following statements
concerning the characteristics of suitable criteria is correct?
a. Reliable criteria contribute to conclusions that are clear, comprehensive, and not
subject to significantly different interpretations.
b. Relevant criteria allow reasonably consistent evaluation or measurement of the
subject matter including, where relevant, presentation and disclosure, when used in
similar circumstances by similarly qualified practitioners.
c. Neutral criteria contribute to conclusions that are free from bias.
d. Criteria are sufficiently complete when they contribute to conclusions that are clear,
comprehensive, and not subject to different interpretations.

9. Which of the following statements is true concerning evidence in an assurance

engagement?
a. Sufficiency is the measure of the quantity of evidence.
b. Appropriateness is the measure of the quality of evidence, that is, its reliability and
persuasiveness.
c. The reliability of evidence is influenced not by its nature but by its source.
d. Obtaining more evidence may compensate for its poor quality.

10. Select the incorrect statement from the following generalization on the reliability of
evidence.
a. Evidence is more reliable when it is obtained from independent sources outside the
entity.
b. Evidence that is generated internally is more reliable when the related controls are
effective.
c. Evidence obtained directly by the practitioner is more reliable than when obtained
indirectly, even if the source is not competent.
d. Evidence provided by original documents is more reliable than evidence provided by
photocopies or facsimiles.

11. Which is correct concerning the concept of professional skepticism

a. An assumption that the responsible party is dishonest
b. A critical assessment, with a questioning mind on the validity of evidence obtained
c. An assumption that responsible party is trustworthy
d. Disregarding contradicting information against several of consistent evidence

12. Assurance engagement risk is the risk

a. That the practitioner expresses an inappropriate conclusion when the subject matter
information is materially misstated.
b. Of expressing an inappropriate conclusion when the subject matter information is not
materially misstated.
c. Through loss from litigation, adverse publicity, or other events arising in connection
with a subject matter reported on.
d. Of expressing an inappropriate conclusion when the subject matter information is
either materially misstated or not materially misstated.

2P a g e JABELLAR/AJABINAL/RBERCASIO/JM AGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

13. The objective of a review of financial statements

a. Is to enable the auditor to express an opinion whether the financial statements are
prepared, in all material respects, in accordance with an identified financial reporting
framework.
b. Is to enable 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.
c. Is to carry 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.
d. Is to use accounting expertise as opposed to auditing expertise to collect, classify and
summarize financial information.

14. The single feature that most clearly distinguishes auditing, attestation, and assurance is
a. Type of service
b. Scope of services
c. CPA’s approach to the service
d. Training required to perform the services

15. The risk that the client’s financial statements may be materially false and misleading is
referred to as the
a. Business risk
b. Information risk
c. Client risk
d. Risk assessment

16. A public accounting firm’s primary role in performing non-attest services is to:
a. Hedge against declines in the firm’s audit practice
b. Establish the firm as a consultant
c. Provide advice valuable to a client’s effectiveness
d. Acclimate staff members to the clients business and industry

17. An engagement to perform agreed-upon procedures may involve the auditor in performing
certain procedures concerning
I. Individual items of financial data.
II. A single financial statement.
III. A complete set of financial statements.

a. I and II only
b. II and III only
c. I and III only
d. I, II and III

18. When performing a compilation engagement, the accountant is required to

a. Assess internal controls.
b. Verify matters and explanations.
c. Obtain a general knowledge of the business and operations of the entity.
d. Make inquiries of management to assess the reliability and completeness of the
information provided.

19. Professional accountants not in public practice such as internal auditor who applies the
Framework and refer the Framework, PSAs, PSREs or PSAEs in their report but are not
independent of the entity in respect of which the engagement is performed are required to
do the following, except
a. Disclose the nature of the relationship
b. Not to restrict the purpose and users of the report
c. Disclose the lack of independence
d. The report shall not indicate the word “independent” in the title

3P a g e JABELLAR/AJABINAL/RBERCASIO/JM AGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

20. When an accountant is not independent of a client and is requested to perform a

compilation of its financial statements, the accountant
a. Is precluded from accepting the engagement
b. May accept the engagement and need not disclose the lack of independence
c. May accept the engagement and should disclose the lack of independence, but need
not indicate the reason for the lack of independence
d. May accept the engagement and should disclose both the lack of independence and
the reason for the lack of independence

“Be a yardstick of quality. Some people aren’t used

to an environment where excellence is expected.”
- Steve Jobs

4P a g e JABELLAR/AJABINAL/RBERCASIO/JM AGLINAO