CHAPTER 1 d.
The auditor should be independent
Auditing standards are divided into three classes, which one
is not included?
a. General standards
b. Standard qualification
c. Field work standards
d. Reporting standards
Associated with unique characteristics of clients’ business
or industry
a. Inherent risk
b. Control risk
c. Detection risk
d. Audit risk
Which of the following is not one of the reasons why
auditors provide only reasonable assurance on the financial
statement?
a. Auditors believe that reasonable assurance is
sufficient in the vast majority of cases
b. The auditor commonly examines a sample, rather than
the entire population of the transaction
c. Fraudulently prepared financial statements are often
difficult to detect
d. Accounting presentations contain complex estimates
which involve uncertainty
There are four conditions that give rise to the need for
independent audits of financial statements. One of these
conditions is consequence. In this context, consequence
means that the:
a. Auditor must anticipate all possible consequence of
the report issued
b. Financial statements are used for important
decisions
c. Impact of using different accounting methods may not
be fully understood by the users of the statements
d. Users of the statements may not sully understand the
consequences of their actions
The level of assurance provided by an auditor on an audit
report is:
a. Reasonable
b. Moderate
c. Low
d. None
Most of the independent auditor’s work in formulating an
opinion on financial statements consists of
a. Comparing recorded accountability with assets
b. Obtaining and examining evidence
c. Studying and evaluating internal control
d. Examining cash transactions
Which one of the following assumptions when auditing
financial statement is false?
a. Compliance to PFRS results in fair presentation of
financial statements
b. The data in the financial statements are verifiable
c. Effective internal control system contributes little
to the reliability of financial information
The trait that distinguishes auditors from accountants is
the:
a. Auditor’s education beyond the Bachelor’s degree
b. Auditor’s accumulation and interpretation of
evidence related to company’s financial statements
c. Auditor’s ability to interpret accounting standards
d. Auditor’s ability to interpret FS
Broadly defined, the subject matter of any audit consists of,
a. Economic data
b. Assertion
c. Financial statements
d. Operating data
Which of the following is one of the limitations of an audit
a. Nature of evidence obtained
b. Scope limitations imposed by the entity
c. Confidentiality of information
d. Inadequacy of the accounting records
An audit that involves obtaining and evaluating evidence
about the efficiency and effectiveness of an entity’s
operating activities in relation to specified objectives is a(an)
a. Financial statements audit
b. Operational audit
c. External audit
d. Compliance audit
Which of the following types of audit uses laws and
regulations as its criteria?
a. Performance audit
b. Operational audit
c. Financial statement audit
d. Compliance audit
Which of the following is not one of the major differences
between financial and operational auditing?
a. The financial audit report has widespread distribution,
but the operational audit report has limited distribution
b. Financial audits are limited to matters that directly
affect the fairness of the financial statement
presentation, but operational audits cover any aspects
of efficiency and effectiveness
c. Financial audits deal with the information on the
financial statements, but operational audits are
concerned with the information in the ledgers and
journals
d. The financial audit is oriented to the past, but an
operational audit concerns performance for the future
In auditing financial accounting data, the primary concern
is with:
a. Determining if taxable income has been calculated
correctly
b. Analyzing the financial information to be sure that it
complies with government requirements
c. Determining if fraud has occurred
d. Determining whether recorded information
properly reflects the economic events that occurred
during the accounting period

A typical objective of an operational audit to determine
whether an entity’s
a. Specific operating units are functioning efficiently
and effectively
b. Financial statements present fairly the results of
operations
c. Operational information is in accordance with GAAP
d. Internal control structure is adequately operating as
designed
The primary purpose of an independent financial
statements audit is to
a. Provide users with an unbiased opinion about the
fairness of information reported in the financial
statements
b. Provide a basis for assessing management’s
performance
c. Comply with government regulatory requirements
d. Assure management that the financial~
CHAPTER 12
According to PSA 3000, assurance should exhibit five
elements including
a. A two party relationship
b. Financial information
c. Financial reporting framework
d. A written assurance report
If there had been a material scope limitation on a review
engagement, the CPA may
a. Issue an audit report contains an unmodified opinion
about the financial statements
b. Express either qualified opinion or disclaim an
opinion about the financial statements
c. Issue the unmodified review report
d. Not provide any assurance on the financial
statements
(sa book nakasulat is yung b, so it’s up to you)
Which of the following procedures is not included in a
review engagement of a non-public entity?
a. Procedures designed to identify unusual fluctuation
b. Inquiries of a management
c. Inquiries regarding subsequent event
d. A study and evaluation of internal control
When providing limited assurance that nothing came to the
CPA’s attention that would indicate that the financial
statements are not in accordance with the financial
reporting standards, the CPA should:
a. Obtain corroborative evidence to support
management’s responses to inquiries
b. Test the accounting records that identify
inconsistencies with the prior year’s financial
statements
c. Develop an audit program
d. Understand the accounting principles of the
industry in which the business entity’s operates
The procures employed in doing are:
a. Designed to enable the accountant to express a limited
assurance
b. Designed to enable the accountant to express any form
of assurance
c. Not designed to enable the accountant to express
any form of assurance
d. Less extensive than review procedures but more
extensive than agreed-upon procedures
How many separate parties are involved in an assurance
engagement?
a. 2
b. 5
c. 3
d. 4
An assurance engagement should have which of the
following elements?
a. Subject Matter: Yes Criteria: no
b. Subject Matter: No Criteria: No
c. Subject Matter: No Criteria: Yes
d. Subject Matter: Yes Criteria: Yes
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. Criteria are sufficiently complete when they contribute
to conclusions that are clear, comprehensive, and not
subject to different interpretations
b. Reliable criteria contribute to conclusions that are
clear, comprehensive, and not subject to significantly
different interpretations.
c. Neutral criteria contribute to conclusions that are
free from bias.
The concept of reasonable insurance is provided for in
which one of the following engagements?
a. Review
b. Agreed upon procedures
c. Compilation
d. Audit
Assurance provide services differ from consulting services
in 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
The use of negative assurance in audit reports on financial
statements is
a. A violation of the professional standards
b. Encouraged by PICPA
 c. A help in clarifying the degree of responsibility being
assumed by the auditor
d. Properly located in the opinion paragraph of the
unmodified report
Which of the following is an example of an assurance
engagement?
a. Compilation of financial information
b. Reporting on financial statements prepared using
other comprehensive basis of accounting
c. Preparation of tax returns
d. Management advisory services
Which of the following results in a conclusion that
represents positive assurance
a. Review
b. Compilation
c. Agreed upon procedure engagement
d. Examination
Criteria that are embodied in laws or regulations, or issued
by authorized or recognized bodies of experts that follow a
transparent due process are called
a. Specifically developed criteria
b. Established criteria
c. Suitable criteria
d. General criteria
The author’s satisfaction as to the reliability of an assertion
being made by one party is called
a. Assurance
b. Audit risk
c. Precision
d. Materiality
Assurance po ito.
CHAPTER 2
The general standards of the generally accepted auditing
standards include a requirement that
a. The fieldwork to be adequate planned.
b. The auditor’s report to state whether the financial
statements are presented in conformity with PFRS
c. Due professional care be exercised by the auditor
d. The auditor to obtain sufficient, competent evidential
matter
An auditor need not abide with a specific requirement of
PSA if the auditor believes that:
a. The requirement of the PSA is impractical to perform
b. The requirement of the PSA is impossible to perform
c. Any of the given three choice is correct.
d. The amount is insignificant
The auditor is not liable to his client for
a. Dishonesty
b. Negligence
c. Errors in applications of judgement
d. Fraud
Which of the following does not pertain to standards of
fieldwork?
a. Obtaining sufficient competent evidential matter.
b. Technical training and proficiency.
c. Adequate planning and supervision.
d. Proper study and evaluation of internal control as a
basis for reliance thereon.
In making a decision to accept or retain a client, the firm
should consider
a. Its ability to comply with ethical requirements
b. All three should be considered
c. The integrity of the client’s management
d. Its competence
What is the general character of the three generally
accepted auditing standards classified as standards of field
work?
a. The need to maintain an independence in mental
attitude in all matters relating to audit.
b. The criteria of audit planning and evidence
gathering.
c. Criteria for the content of the auditor’s report on
financial statements and related footnote
d. The competence of persons performing the audit.
In compliance with the element of human resources, the
firm should address issues relating to,
a. Consultation
b. Assignment of engagement teams
c. Engagement performance
d. Differences of opinion
Which of the following pronouncements issued by AASC is
designed to resolve issues relating to PSAs?
a. Interpretations
b. Philippine Auditing Practices Statements
c. Generally Accepted Auditing Standards
d. Statements of Auditing Standards in the Philippines.
A quality control policy that requires personnel in the firm
to adhere to independence, integrity, objectivity,
confidentiality and professional behavior, relates to
a. Ethical Requirements
b. Assignment
c. Human Resource
d. Consultation
The objective of the quality control policies to be adopted
by an audit firm will ordinarily incorporate all of the
following except;
a. Leadership responsibilities
b. Risk assessment
c. Human resources
d. Engagement performance
Which of the following is an element of a CPA firm’s quality
control system that should be considered in establishing its
quality control policies and procedures?
a. Using statistical sampling techniques
b. Complying with laws and regulations
c. Independence
d. Consideration of audit risk and materiality.
The objective of the consistency standard is to provide
assurance that
a. The comparability of financial statements between
periods is not materially affected by changes in
accounting principles without disclosures.
b. There are no variations in the format and presentation
of financial statements.
c. Substantially different transactions and events are not
accounted for on an identical basis.
d. The auditor is consulted before material changed are
made in the application of accounting principles.

A firm of independent auditors must establish and follow

quality control policies and procedures because these
standards
a. Are required by the SEC for auditors of all films.
b. Are necessary to meet increasing requirements of
auditors’ liability as insurers
c. Include formal filling of records of such policies and
procedures to regulatory agency.
d. Give reasonable assurance that the firm as a whole
will comply with professional standards.

Which of the following standards are to be applied, as

appropriate, in the audit of historical financial information?
a. PSAs
b. PSREs
c. PSRSs
d. PSAEs

The risk that an auditor will fail to uncover a material

misstatement is eliminated
a. If client has good internal control.
b. If auditor observes the Code of Professional Ethics.
c. When the auditor complies with the PSA.
d. Under no circumstance.