San Mateo Municipal College Auditing and Assurance – Principles

Guitnang Bayan, San Mateo, Rizal Nilo N. Iglesias, CPA, MBA, REA

Multiple Choice
Topic 2-Week 2 The Professional Standards
Instruction: Select the best answer.

1. Which of the following best describes what is meant by generally accepted auditing standards?
a) Audit objectives generally determined on audit engagements
b) Acts to be performed by the auditor
c) Measures of the quality of the auditor’s performance
d) Procedures to be used to gather evidence to support financial statement
2. Requirements for training, independence and due professional care are included in which group of the GAAS?
a) Field work
b) General
c) Reporting
d) Quality Control
3. The general standards of the GAAS include a requirement that
a) The fieldwork to be adequately planned
b) The auditor’s report to state whether the financial statements are presented in conformity with PFRS
c) Due professional care be exercises by the auditor
d) The auditor to obtain sufficient, competent evidential matter
4. What is the general character of the three (3) GAAS classified as general standards?
a) Criteria for competence, independence, and professional care of individuals performing the audit
b) Criteria of evidence gathering
c) Criteria for the content of the auditors’ report on financial statements and related footnote disclosures
d) The requirements for the planning of the audit and supervision of assistants if any
5. The third standard of field work states that sufficient competent evidential matter may in part be obtained
through the following methods except
a) Inspection
b) Observation
c) Confirmation
d) Reconciliation
6. The third GAAS of reporting in auditing refers to
a) Whether financial statements are presented in accordance with GAAP
b) Whether accounting principles have been consistently observed
c) Adequacy of disclosures
d) An expression of opinion on the financial statements taken as a whole
7. The auditor is not liable to his client for
a) Negligence
b) Fraud
c) Dishonesty
d) Errors in application of judgement
8. A firm of independent auditors must establish and follow the quality control policies and procedures because
these standards
a) Are necessary to meet increasing requirements of auditors’ liability as insurers
b) Are required by the SEC for auditors of all firms
c) Include formal filling of records of such policies and procedures to a regulatory agency
d) Give reasonable assurance that the firm will comply with professional standards
9. The main purpose of implementing a system of quality control is to provide the firm with reasonable assurance
that
a) The firm and its personnel will comply with PSA and legal requirements to enable the firm to issue an
appropriate report
b) The audit will be performed in accordance with PSA
c) The firm will issue a report that is appropriate in the circumstances
d) All the above
10. The objective of the quality control policies to be adopted by an audit firm will ordinarily incorporate all the
following except.
a) Risk assessment
b) Leadership responsibilities
c) Engagement performance
d) Human resources
11. 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) Complying with laws and regulations
b) Using statistical sampling techniques
c) Independence
d) Considering audit risk and materiality
12. Which of the following is one of the elements of CPA firm’s quality control system?
a) Leadership responsibilities
b) Computer assisted audit techniques
c) Control activities
d) Control environment
13. Which of the following quality control objectives would be least important to the auditor?
a) Engagement performance
b) Human resources
c) Determination of audit fee
d) Independence
14. 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 resources
d) Consultation
15. Maintaining or providing access to adequate reference libraries and other authoritative sources is a procedure
that is most likely performed to comply with the policy of
a) Monitoring
b) Skills and competence
c) Consultation
d) Assignment
16. Which of the following quality control procedures relates to engagement performance?
a) Hiring
b) Direction
c) Professional development
d) Advancement
17. In pursuing the firm’s quality control objectives with respect to assigning personnel to engagements, the
auditors may use policies and procedures such as
a) Designating senior qualified personnel to provide advice on accounting or auditing questions throughout the
engagement
b) Requiring timely identification of the staffing requirements of specific engagements so that enough qualified
personnel can be made available
c) Establishing at entry levels a policy for recruiting that includes minimum standards of academic preparation
and accomplishment
d) Evaluate clients upon occurrence of specified events to determine whether the relationship ought to be
continued
18. Quality control policies and procedures should provide the firm reasonable assurance that the policies and
procedures relating to the other elements of quality control are being effectively applied. This statement defines
the quality control element of
a) Planning
b) Independence, integrity, and objectivity
c) Assignment
d) Monitoring
19. In connection with the element of monitoring, a CPA firm’s system of quality control should provide for the
maintenance of
a) A file of minutes of staff meetings
b) Updated personnel files
c) Documentation to demonstrate compliance with its policies and procedures
d) Documentation to demonstrate compliance with peer review directives
20. A deficiency in the firm’s system of quality control is an indication that
a) The audit engagement was not performed in accordance with professional standards
b) The auditor’s report was not appropriate
c) Both a and b
d) Neither a nor b