AUDITING THEORY

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.

The Philippine Framework for Assurance Engagements

• A. Contains basic principles, essential procedures, and related guidance for the performance of assurance engagements.

• B. Defines and describes the elements and objectives of an assurance engagement, and identifies engagements to which PSAs, PSREs, and PSAEs apply.

• C. Provides a frame of reference for CPAs in public practice when performing audits, reviews, and compilations of historical financial information.

• D. Establishes standards and provides procedural requirements for the performance of assurance engagements.

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.

What type of assurance engagement is involved when the practitioner expresses a negative form of conclusion?

• A. Reasonable assurance engagement

• B. Negative assurance engagement

• C. Assertion-based assurance engagement

• D. Limited assurance engagement

Which of the following is not an assurance service?

• A. Examination of prospective financial information

• B. Audit of historical financial statements

• C. Review of financial statements

• D. Compilation of financial information

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.

What type of assurance engagement is involved when the practitioner expresses a positive form of conclusion?

• A. Limited assurance engagement

• B. Positive assurance engagement

• C. Reasonable assurance engagement

• D. Absolute assurance engagement

In some assurance engagements, the evaluation or measurement of the subject matter is performed by the responsible party, and the subject matter information is in the form of an assertion by the responsible party that is made available to intended users. These engagements are called

• A. Direct reporting engagements

• B. Assertion-based engagements

• C. Non-assurance engagements

• D. Recurring engagements

Which of the following statements concerning consulting services is false?

• A. The performance of consulting services for audit clients does not, in and of itself, impair the auditor’s independence.

• B. Consulting services differ fundamentally from the CPA’s function of attesting to the assertions of other parties.

• C. Consulting services ordinarily involve external reporting.

• D. Most CPAs, including those who provide audit and tax services, also provide consulting services to their clients.

Which of the following professionals has primary responsibility for the performance of an audit?

• A. The managing partner of the firm.

• B. The senior assigned to the engagement.

• C. The manager assigned to the engagement.

• D. The partner in charge of the engagement.