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WorksheetsAUDITING THEORY
Total questions: 37
Worksheet time: 19mins
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.
What is the proper organizational role of internal auditing?
A. To serve as an independent, objective assurance and consulting activity that adds value to operations.
B. To assist the external auditor in order to reduce external audit fees.
C. To perform studies to assist in the attainment of more efficient operations.
D. To serve as the investigative arm of the audit committee of the board of directors.
A practitioner should accept an assurance engagement only if
A. The subject matter is in the form of financial information.
B. The criteria to be used are not available to the intended users.
C. The practitioner’s conclusion is to be contained in a written report.
D. The subject matter is the responsibility of either the intended users or the practitioner.
Independence is not a requirement for which of the following engagements?
Compilation
Review
Agreed-upon Procedures
Operational audits generally have been conducted by internal and COA auditors, but may be performed by certified public accountants. A primary purpose of an operational audit is to provide
A. A measure of management performance in meeting organizational goals.
B. The results of internal examinations of financial and accounting matters to a company’s top-level management.
C. Aid to the independent auditor, who is conducting the examination of the financial statements.
D. A means of assurance that internal accounting controls are functioning as planned.
Governmental auditing often extends beyond examinations leading to the expression of opinion on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness, and also
A. Accuracy.
B. Evaluation.
C. Compliance.
D. Internal control.
Which of the following statements concerning the use of firm or partnership name is incorrect?
A. In the case of an individual CPA, he/she shall do business under his/her registered name with the BOA and the PRC and as printed in his/her CPA certificate (for example, Juan Puruntong, CPA).
B. In the case of a firm, it shall do business under its duly registered and authorized firm name appearing in the registration documents issued by the Department of Trade and Industry (DTI) and other government offices and such firm name shall include the real name of the sole proprietor as printed in his/her CPA certificate (for example, Arnulfo Gumamela and Associates).
C. In the
Inquiries and analytical procedures ordinarily form the basis for which type of engagement?
A. Agreed-upon procedures.
B. Audit.
C. Examination.
D. Review.
Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of the following factors, except
A. The use of selective testing.
B. The fact that much of the evidence available to the practitioner is persuasive rather than conclusive.
C. The practitioner may not have the required assurance knowledge and skills to gather and evaluate evidence.
D. The use of judgment in gathering and evaluating evidence and forming conclusions based on that evidence.
The Board of Accountancy has the power to conduct an oversight into the quality of audits of financial statements through a review of the quality control measures instituted by auditors in order to ensure compliance with the accounting and auditing standards and practices. This power of the BOA is called
A. Quality assurance review C. Appraisal
B. Peer review D. Quality control
The death or disability of an individual CPA and/or the dissolution and liquidation of a firm or partnership of CPAs shall be reported to the BOA not later than _____ days from the date of such death, dissolution or liquidation.
15
30
60
90
Which of the following is the most appropriate action to be taken by a CPA who has been asked to perform a consulting services engagement concerning the analysis of a potential merger if he/she has little experience with the industry involved?
A. Accept the engagement but he/she should conduct research or consult with others to obtain sufficient competence.
B. Decline the engagement because he/she lacks sufficient knowledge.
C. Accept the engagement and issue a report that contains his/her opinion on the achievability of the results of the merger.
D. Accept the engagement and perform it in accordance with Philippine Standards on Auditing (PSAs).
PSRE 2400 (Engagements to Review Financial Statements), as amended by the AASC in February 2008, applies to
A. Reviews of any historical financial information of an audit client.
B. Reviews of any historical financial information by a practitioner other than the entity’s auditor.
C. Reviews of historical financial or other information by a practitioner other than the entity’s auditor.
D. Reviews of historical financial or other information of an audit client.
The following statements relate to the term of office of the chairman and members of the Board of Accountancy (BOA). Which is false?
A. The chairman and members of the BOA shall hold office for a term of three (3) years.
B. Any vacancy occurring within the term of a member shall be filled up for the unexpired portion of the term only.
C. No person who has served two successive complete terms as chairman or member shall be eligible for reappointment until the lapse of two (2) years.
D. Appointment to fill up an unexpired term is not to be considered as a complete term.
A partner surviving the death or withdrawal of all the other partners in a partnership may continue to practice under the partnership name for a period of not more than _____ years after becoming a sole proprietor.
1
2
3
4
When performing a compilation engagement, the accountant is required to
A. Assess internal controls.
B. Make inquiries of management to assess the reliability and completeness of the information provided.
C. Verify matters and explanations.
D. Obtain a general knowledge of the business and operations of the entity.
The auditor is required to maintain professional skepticism throughout the audit. Which of the following statements concerning professional skepticism is false?
A. A belief that management and those charged with governance are honest and have integrity relieves the auditor of the need to maintain professional skepticism.
B. Maintaining professional skepticism throughout the audit reduces the risk of using inappropriate assumptions in determining the nature, timing, and extent of the audit procedures and evaluating the results thereof.
C. Professional skepticism is necessary to the critical assessment of audit evidence.
D. Professional skepticism is an attitude that includes questioning contradictory audit evidence obtained.
Which of the following statements concerning the issuance of Certificates of Registration and Professional Identification Cards to successful examinees is correct?
A. The Certificate of Registration issued to successful examinees is renewable every three (3) years.
B. The Professional Identification Card issued to successful examinees shall remain in full force and effect until withdrawn, suspended or revoked in accordance with RA 9298.
C. The BOA shall not register and issue a Certificate of Registration and Professional Identification Card to any successful examinee of unsound mind.
D. The BOA may, after the expiration of three (3) years from the date of revocation of a Certificate of Registration, reinstate the validity of a revoked Certificate of Registration.
Which of the following statements concerning ownership of working papers is incorrect?
A. All working papers made by a CPA and his/her staff in the course of an examination remain the property of such CPA in the absence of a written agreement between the CPA and the client to the contrary.
B. Working papers include schedules and memoranda prepared and submitted by the client of the CPA.
C. Working papers include reports submitted by a CPA to his/her client.
D. Working papers shall be treated confidential and privileged unless such documents are required to be produced through subpoena issued by any court, tribunal, or government regulatory or administrative body.
Which of the following shall be issued to examinees who pass the CPA licensure examination?
A. Certificate of registration and death certificate.
B. Professional identification card and warrant of arrest.
C. Certificate of registration and professional identification card.
D. Warrant of arrest and death certificate.
The members of the Professional Regulatory Board of Accountancy shall be appointed by the
A. Philippine Institute of CPAs (PICPA).
B. Professional Regulation Commission (PRC).
C. President of the Philippines.
D. Association of CPAs in Public Practice (ACPAPP).
Any person who shall violate any of the provisions of the Accountancy Act or any of its implementing rules and regulations promulgated by the Board of Accountancy subject to the approval of the PRC, shall, upon conviction, be punished by
A. A fine of not more than P50,000.
B. Imprisonment for a period not exceeding two years.
C. A fine of not less than P50,000 or by imprisonment for a period not exceeding two years or both.
D. Lethal injection.
Which of the following statements is true concerning evidence in an assurance engagement?
A. Sufficiency is the measure of the quantity of evidence.
B. Appropriateness is the measure of the quality of evidence, that is, its reliability and persuasiveness.
C. The reliability of evidence is influenced not by its nature but by its source.
D. Obtaining more evidence may compensate for its poor quality.
The auditor is required to comply with all PSAs relevant to the audit of an entity’s financial statements. A PSA is relevant to the audit when
I. The PSA is in effect.
II. The circumstances addressed by the PSA exist.
A practitioner is associated with financial information when
I. The practitioner attaches a report to that financial information.
II. The practitioner consents to the use of his/her name in a professional connection.
The following statements relate to the submission of nominations to the Board of Accountancy. Which is correct?
A. The Accredited National Professional Organization of CPAs (APO) shall submit its nominations to the president of the Philippines not later than sixty (60) days prior to the expiry of the term of an incumbent chairman or member.
B. The APO shall submit its nominations to the PRC not later than thirty (30) days prior to the expiry of the term of an incumbent chairman or member.
C. If the APO fails to submit its own nominee(s) to the PRC within the required period, the PRC in consultation with the Board of Accountancy shall submit to the president of the Philippines a list of five (5) nominees for each position.
D. There should be adequate documentation to show the qualifications and primary field of professional activity of each nominee.
Which of the following terms best describes the audit of a taxpayer’s return by a BIR auditor?
A. Operational audit.
B. Internal audit.
C. Compliance audit.
D. Government audit.
Which of the following best describes the reason why independent auditors report on financial statements?
A. A management fraud may exist and it is more likely to be detected by independent auditors.
B. Different interests may exist between the company preparing the statements and the persons using the statements.
C. A misstatement of account balances may exist and is generally corrected as the result of the independent auditors’ work.
D. Poorly designed internal control may be in existence.
