QUEZON CITY

UNIVERSITY
Accountancy Department

AUDITING AND ASSURANCE

PRINCIPLES
ACPAUD1

5:00 PM – 8:00 PM
Session 2
 Last Week’s Topic
1. Different Types of Audit
2. Different Types of Auditors
3. Theoretical Framework of Auditing
4. Generally Accepted Auditing Standards
5. Accountancy Act
6. Code of Ethics of Professional Accountants
 Quiz
1. Certain fundamental beliefs called
"postulates" underlie auditing theory. Which
of the following is not a postulate of auditing?
1. No long-term conflict exists between the auditor
and the management of the enterprise under
audit.
a) Economic assertions can be verified.
b) The auditor acts exclusively as an auditor.
c) An audit has a benefit only to the owners.
2. The auditor communicates the results of his
or her work through the medium of the
a) Engagement letter
b) Management letter.
c) Audit report
d) Financial statements.
3. It refers to the level of auditor’s satisfaction as
to the reliability of an assertion being made by
one party for use by another party.
a) Confidence level
b) Assurance level
c) Reasonableness level
d) Tolerable level
4. Which of the following is true of the report based on
agreed-upon-procedures?
a) The report is restricted to those parties who have agreed
to the procedures to be performed.
b) The CPA provides the recipients of the report limited
assurance as to reasonableness of the assertion(s)
presented in the financial information.
c) The report states that the auditor has not recognized any
basis that requires revision of financial statements.
d) The report should state that the procedures performed
are limited to analytical procedures and inquiry.
5. Identify the following as financial audit (FA), compliance audit
(CA), and operational audit (OA).

• A supervisor is not carrying out his assigned responsibilities.

• A company’s tax return does not conform to income tax laws and
regulations.
• A municipality’s financial statements correctly show actual cash
receipts and disbursements.
• A company’s receiving department is inefficient.

a) CA, CA, FA, OA

b) OA, CA, FA, OA
c) OA, CA, CA, OA
d) CA, CA, FA, CA
6. Which of the following is not normally a
service rendered by public accountants?
a) Management consultation service
b) Internal auditing
c) Attest function
d) Taxation
7. Which of the following is not one of the
specified objectives of the Accountancy Act of
2004?
a) Examination for registration of CPAs.
b) Supervision, control, and regulation of accounting
practice.
c) Standardization and regulation of accounting
education.
d) Promulgation of accounting and auditing standards.
8. The following statements relate to CPA examination
ratings. Which of the following is incorrect?
a) To pass the examination, candidates should obtain a
general weighted average of 75% and above, with no
rating in any subject less than 65%.
b) Candidates who obtain a rating of 75% and above in at
least four subjects shall receive a conditional credit for
the subjects passed.
c) Candidates who failed in four complete examinations
shall no longer be allowed to take the examinations the
fifth time.
d) Conditioned candidates shall take an examination
9. The BOA shall not refuse the registration of
any person who successfully passed the CPA
examinations if
a) Convicted by a court of competent jurisdiction of
a criminal offense involving moral turpitude
b) Convicted for a political offense.
c) Guilty of immoral and dishonorable conduct
d) None of the above.
10 . In order to achieve the objectives of the
accountancy profession, professional accountants
have to observe a number of prerequisites or
fundamental principles. The fundamental
principles include the following, except
a) Objectivity
b) Professional Competence and due Care
c) Technical Standards
d) Confidence
ANSWERS
1. Certain fundamental beliefs called "postulates"
underlie auditing theory. Which of the following
is not a postulate of auditing?

a) No long-term conflict exists between the auditor

and the management of the enterprise under audit.
b) Economic assertions can be verified.
c) The auditor acts exclusively as an auditor.
d) An audit has a benefit only to the owners.
2. The auditor communicates the results of his
or her work through the medium of the
a) Engagement letter
b) Management letter.
c) Audit report
d) Financial statements.
3. It refers to the level of auditor’s satisfaction as
to the reliability of an assertion being made by
one party for use by another party.
a) Confidence level
b) Assurance level
c) Reasonableness level
d) Tolerable level
4. Which of the following is true of the report based on
agreed-upon-procedures?
a) The report is restricted to those parties who have agreed
to the procedures to be performed.
b) The CPA provides the recipients of the report limited
assurance as to reasonableness of the assertion(s)
presented in the financial information.
c) The report states that the auditor has not recognized any
basis that requires revision of financial statements.
d) The report should state that the procedures performed
are limited to analytical procedures and inquiry.
5. Identify the following as financial audit (FA), compliance audit (CA),
and operational audit (OA).
• A supervisor is not carrying out his assigned responsibilities.
• A company’s tax return does not conform to income tax laws and
regulations.
• A municipality’s financial statements correctly show actual cash receipts
and disbursements.
• A company’s receiving department is inefficient.

a) CA, CA, FA, OA

b) OA, CA, FA, OA
c) OA, CA, CA, OA
d) CA, CA, FA, CA
6. Which of the following is not normally a
service rendered by public accountants?
a) Management consultation service
b) Internal auditing
c) Attest function
d) Taxation
7. Which of the following is not one of the
specified objectives of the Accountancy Act of
2004?
a) Examination for registration of CPAs.
b) Supervision, control, and regulation of accounting
practice.
c) Standardization and regulation of accounting
education.
d) Promulgation of accounting and auditing standards.
8. The following statements relate to CPA examination
ratings. Which of the following is incorrect?
a) To pass the examination, candidates should obtain a general
weighted average of 75% and above, with no rating in any
subject less than 65%.
b) Candidates who obtain a rating of 75% and above in at least
four subjects shall receive a conditional credit for the
subjects passed.
c) Candidates who failed in four complete examinations shall
no longer be allowed to take the examinations the fifth time.
d) Conditioned candidates shall take an examination
9. The BOA shall not refuse the registration of
any person who successfully passed the CPA
examinations if
a) Convicted by a court of competent jurisdiction of
a criminal offense involving moral turpitude
b) Convicted for a political offense.
c) Guilty of immoral and dishonorable conduct
d) None of the above.
10 . In order to achieve the objectives of the
accountancy profession, professional accountants
have to observe a number of prerequisites or
fundamental principles. The fundamental
principles include the following, except
a) Objectivity
b) Professional Competence and due Care
c) Technical Standards
d) Confidence
TODAY’S DISCUSSION

Continuation
Code of Professional Ethics
 Read and Study
• Introduction to the International Ethics Standards
Board for Accountants
• The International Federation of Accountants’ Role
• Fundamental Principles of Professional Ethics for
Professional Accountants
• Conceptual Framework that requires a professional
accountant to identify, evaluate, and address threats
to compliance with the fundamental principles
• PART A―GENERAL APPLICATION OF THE
CODE

– Section 100 Introduction and Fundamental

Principles
– Section 110 Integrity
– Section 120 Objectivity
– Section 130 Professional Competence and Due
Care
– Section 140 Confidentiality
– Section 150 Professional Behavior
• Threats and Safeguards
– Self-interest threat
– Self-review threat
– Advocacy threat
– Familiarity threat
– Intimidation threat

• Broad Categories of Safeguards:

– Safeguards created by the profession, legislation or
regulation; and
– Safeguards in the work environment.

• Ethical Conflict Resolution

Part B - CODE OF ETHICS FOR A PROFESSIONAL
ACCOUNTANT IN PUBLIC PRACTICE

– Section 210 Professional Appointment

– Section 220 Conflicts of Interest
– Section 230 Second Opinions
– Section 240 Fees and Other Types of Remuneration
– Section 250 Marketing Professional Services
– Section 260 Gifts and Hospitality
– Section 270 Custody of Client Assets
– Section 280 Objectivity―All Services
– Section 290 Independence―Audit and Review Engagements
– Section 291 Independence―Other Assurance Engagements
• PART C—PROFESSIONAL ACCOUNTANTS IN
BUSINESS

– Section 310 Potential Conflicts

– Section 320 Preparation and Reporting of
Information
– Section 330 Acting with Sufficient Expertise
– Section 340 Financial Interests
– Section 350 Inducements