Phil. CPA Licensure Exam - Auditing

The following are components of assurance engagement risk EXCEPT

• business risk

• control risk

• detection risk

• inherent risk

Which of the following meets the definition of an assurance engagement but does NOT need to be performed in accordance to the Framework for Assurance Engagement?

• Consulting (or advisory) engagements, such as management and tax consulting.

• The preparation of tax returns where no conclusion conveying assurance is expressed.

• Agreed-upon procedures engagements and compilations of financial or other information.

• Engagements to testify in legal proceedings regarding accounting, auditing, taxation or other matters.

The primary objective in the conduct of an annual audit by a CPA firm is to

• conform with governmental requirements

• provide assurance on the detection of fraud

• provide assurance to investors and other external parties of the dependability of the financial statements

• permit management and those charged with governance to avoid personal responsibility for any deficiencies in the financial statements

Which of the following is correct about forensic audits?

• All audit engagements are forensic in nature.

• Forensic audits are equivalent to compliance audits.

• Forensic audits are performed by law-firms; they are not performed by CPA firms.

• Forensic audits are usually performed in situations in which fraud has been found or suspected.

Under the Code of Ethics, threats may be created by a broad range of relationships and circumstances. The threat that a professional accountant will promote a client's or employer's position to the point that the professional account's objectivity is compromised is

• advocacy threat

• familiarity threat

• intimidation threat

• self-review threat

Which one is NOT an example of a conflict of interest under the Code of Ethics?

• Representing two clients regarding the same matter who are in a legal dispute with each other.

• Providing services to both a vendor and a purchaser in relation to different transactions.

• Providing strategic advice to a client on its competitive position while having a joint venture or similar interest with a major competitor of the client.

• Advising a client to invest in a business in which, for example, the spouse of the professional accountant in public practice has a financial interest.

Which pronouncements are to be applied to compilation engagements, and engagements to apply agreed-upon procedures to information as specified by the Philippines' Auditing and Assurance Standards Council (AASC)?

• Philippine Standards on Auditing (PSAs)

• Philippine Standards on Related Services (PSRSs)

• Philippine Standards on Review Engagements (PSREs)

• Philippine Standards on Assurance Engagements (PSAEs)

An audit supervisor reviewed the work performed by the staff to determine if the audit was adequately performed. The supervisor accomplished this by primarily reviewing which of the following?

• Analytical procedures

• Checklists

• Financial statements

• Working papers

Which is least likely beneficial in adequately planning an audit of financial statements?

• Aid the auditor to identify and resolve potential problems on a timely basis

• Assist in coordination of work done by auditors of components and experts

• Aid the auditor to devote appropriate attention to all areas of the audit

• Assist in the selection of engagement team members with appropriate levels of capabilities and competence

In planning and conducting a high-level assurance engagement, which of the following statements should the practitioner do?

• Acknowledge an engagement only if the subject matter is the responsibility of another party.

• Accept the engagement only if the subject matter is identifiable and in a form that can be subjected to evidence gathering procedures.

• Be satisfied that those performing the engagement possess collectively the necessary professional expertise to perform the engagement.

• Obtain knowledge of the engagement circumstances sufficient to identify and understand the events and transactions that may have a significant effect on the subject matter.