AT Quizzer 1 Overview of Auditing Answer Key PDF
AT Quizzer 1 Overview of Auditing Answer Key PDF
AT Quizzer 1 Overview of Auditing Answer Key PDF
AT Quizzer 1
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Auditing Theory
Quizzer No. 1
2_
9. The Philippine Framework for Assurance Engagements identifies two types of assurance
engagement a practitioner is permitted to perform: a reasonable assurance engagement and a
limited assurance engagement. Which of the following is the objective of a reasonable
assurance engagement?
a. A reduction in assurance engagement risk to a level that is acceptable in the
circumstances of the engagement as a basis for a negative form of expression of the
practitioners conclusion.
b. A reduction in assurance engagement risk to a very low level in the circumstances of
the engagement as a basis for a disclaimer of the practitioners conclusion.
c. A reduction in assurance engagement risk to an acceptably low level that is acceptable
in the circumstances of the engagement as a basis for a positive form of expression of
the practitioners conclusion.
d. A reduction in assurance engagement risk to a level that is acceptable in the
circumstances of the engagement as a basis for a qualified form of the practitioners
conclusion.
10. Assurance engagements involve
a. Two separate parties: a professional accountant and an intended user.
b. Two separate parties: a professional accountant and a responsible party.
c. Two separate parties: a responsible party and an intended user.
d. Three separate parties: a professional accountant, a responsible party, and an
intended user.
11. When performing an assurance service, professional accountants use standards or
benchmarks to evaluate or measure the subject matter of an assurance engagement. This
element of an assurance engagement is called:
a. Criteria
b. Conclusion
c. GAAP
d. Assertion
12. The subject matter of an assertion may include:
a. Historical or prospective financial information.
b. Internal controls.
c. Compliance with regulation.
d. All of the above.
13. In an assurance engagement, the person or class of persons for whom the professional
accountant prepares the report for a specific use or purpose is the:
a. Intended user.
b. Responsible party.
c. Management.
d. Client.
14. An expectation of the public is that the auditor will recognize that the primary users of audit
services are
a. the employees.
b. the Securities and Exchange Commission.
c. the investors and creditors.
d. the board of directors.
15. In the context of the Framework, the auditors satisfaction as to the reliability of an assertion
being made by one party for use by another party is called
a. Opinion.
b. Assurance.
c. Examination.
d. Verification.
16. Which of the following statements concerning the intended user of a professional accountants
report is incorrect?
a. The intended user should never be established by agreement between the professional
accountant and the responsible party or those engaging or employing the professional
accountant.
b. In some circumstances, the intended user may be established by law.
c. The responsible party may also one of the intended users.
d. The responsible party and the intended user may both be within the same organization.
17. When providing consulting services, the CPA acts primarily as a(n):
a. independent accountant
b. expert on compliance with industry standards
c. technology specialist
d. objective advisor on the use of information
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18. Which of the following is a difference between attestation standards and auditing standards?
a. Attestation standards cover attest engagements other than those involving GAAP
financial statements.
b. Attestation standards do not require independence in mental attitude.
c. Auditing standards apply only to CPAs while attestation standards apply to all
accountants.
d. Attestation standards do not include standards of reporting.
19. The attest function:
a. Is an essential part of every engagement performed by a CPA.
b. Requires a complete review of all transactions during the period under examination.
c. Requires a review of a sample of transactions during the period under examination.
d. Includes the preparation of a written report of the CPAs conclusion.
20. Assurance services differ from consulting services in that they
I. Focus on providing advice.
II. Involve monitoring of one party by another.
a.
b.
c.
d.
I only.
II only.
Both I and II.
Neither I nor II.
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27. The Framework of Philippine Standards on Auditing distinguishes audits from related services.
Related services include all of the following, except:
a. Reviews
b. Agreed-upon procedures.
c. Compilations.
d. Management consulting.
28. When the professional accountant has obtained sufficient appropriate evidence to be satisfied
that the subject matter is plausible in the circumstances, he or she can provide what level of
assurance?
a. None
b. High
c. Moderate
d. Absolute
29. The objective of the attest function is to
a. Ascertain the consistent application of GAAP.
b. Determine the validity of the transactions examined.
c. Express an opinion on the fairness of the financial statements.
d. Detect fraud.
30. A concept relating to the accumulation of the audit evidence necessary for the auditor to
conclude that there are no material misstatement in the financial statements taken as whole is:
a. Reasonable assurance
b. Positive assurance
c. Moderate assurance
d. Negative assurance
31. It is the auditors duty
a. to prevent fraud and error.
b. to obtain reasonable assurance that material misstatements arising from fraud and
error are detected.
c. both a and b
d. neither a nor b
32. Engagements frequently performed by professional accountants that are not assurance
engagements include the following except:
a. Agreed upon procedures
b. Audit of financial statements
c. MAS
d. Compilation of financial statements
33. An assurance engagement
a. Is an engagement in which practitioner is engaged to issue, or does issue, a written
communication that expresses a conclusion about the reliability of a written assertion
that is the responsibility of another party.
b. Is an engagement involving a systematic process of objectively obtaining and
evaluating evidence regarding assertions about economic actions and events, to
ascertain the degree of correspondence between those assertions and established
criteria, and communicating the results to interested users.
c. Is an engagement in which the auditor provides a moderate level of assurance that the
information subject to the engagement is free of material misstatements.
d. Is an engagement intended to enhance the credibility of information about a subject
matter by evaluating whether the subject matter conforms in all material respects with
suitable criteria, thereby, improving the likelihood that the information will meet the
needs of an intended user.
34. The subject matter of an assurance engagement may take many forms, including
a. Data
b. Behavior
c. Systems and processes
d. All of the above
35. A practitioner should plan and conduct the assurance engagement in an effective manner to
meet the objective of the engagement. Which of the following matters need not be a concern of
the practitioner in planning the work?
a. Criteria to be used.
b. Engagement objective.
c. Personnel and expertise requirements.
d. Specific format of the assurance report.
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36. Which of the following statements is correct concerning an auditors responsibilities regarding
financial statements?
a. An auditors responsibilities for audited financial statements are confined to the
expression of the auditors opinion.
b. The fair presentation of audited financial statements in conformity with GAAP is an
implicit part of the auditors responsibilities.
c. Making suggestions that are adopted about the form and content of an entitys financial
statements impairs an auditors independence.
d. The auditors report should provide an assurance as to the future viability of the entity.
37. When a CPA expresses an opinion on the financial statements, his responsibilities extend to
a. The underlying wisdom of the clients management decision.
b. Active participation in the implementation of the advice given to the client.
c. An ongoing responsibility for the clients solvency.
d. Whether the results of the clients operating decisions are fairly presented in the
financial statements.
38. The expertise that distinguishes auditors from accountants is in the
a. Ability to interpret generally accepted accounting principles.
b. Requirement to possess education beyond the Bachelors degree.
c. Accumulation and interpretation of evidence.
d. Ability to interpret PAS statements.
39. A financial statement audit aids in the communication of economic data because the audit
a. Assures the readers of the financial statements that any fraudulent activity has been
corrected.
b. Guarantees that the financial data are fairly presented.
c. Lends credibility to the financial statements.
d. Confirms the accuracy of the managements financial representations.
40. The auditors opinion
a. Guarantees the credibility of the financial statements.
b. Is an assurance as to the future viability of the entity.
c. Is not an assurance as to the efficiency with which management has conducted the
affairs of the entity.
d. Detect fraud.
41. Level of assurance provided by the auditors opinion in an audit is
a. absolute
b. high
c. moderate
d. none
42. Level of assurance provided by the auditors opinion in a compilation engagement is:
a. absolute
b. high
c. moderate
d. none
43. Level of assurance provided by the auditors opinion in a review is
a. absolute
b. high
c. moderate
d. none
44. Level of assurance provided by the auditors opinion in an agreed-upon procedures
engagement is:
a. absolute
b. high
c. moderate
d. none
45. Absolute assurance in auditing is not attainable because of
a. the need for judgment.
b. the use of testing
c. the inherent limitation and internal control systems
d. all of the above
46. According to Preface on Assurance Engagements, these are the standards or benchmarks
used to evaluate or measure the subject matter of an assurance engagement:
a. criteria
b. engagement process
c. assertions
d. generally accepted auditing standards
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47. The criteria for evaluating quantitative information vary. For example, in the audit of historical
financial statements by CPA firms, the criteria are usually
a. International accounting standards.
b. Generally accepted accounting principles.
c. Regulations of the Bureau of Internal Revenue.
d. Regulations of the Securities and Exchange Commission.
48. The framework for auditing and related services as addressed by PSA includes
a. Reviews
b. Tax services
c. Management Advisory Services
d. Accounting services
49. The framework for auditing and related services as addressed by PSA excludes
a. Review
b. Compilation
c. Management Advisory Services
d. Agreed upon Procedures
50. The decision of whether the criteria are suitable involves considering whether the subject
matter of the assurance engagement is capable of reasonably consistent evaluation or
measurement using such criteria. Which of the following characteristics is not considered
necessary in determining whether the criteria are suitable?
a. Relevance
b. Neutrality
c. Reliability
d. Sufficiency
51. First Statement In exceptional circumstances, an auditor may judge if necessary to depart
from a PSA in order to more effectively achieve the objective of an audit. When such situation
arises, the auditor is not required to justify the departure.
Second Statement PSAs need only be applied to material matters.
a.
b.
c.
d.
52. An auditor needs not abide by a Philippine Standard on Auditing if the auditor believes that
a. The amount is insignificant.
b. The requirement of the PSA is impractical to perform.
c. The requirement of the PSA is impossible to perform.
d. Any of the above three is correct.
53. According to PSA 120, a compilation presents information in the form of financial statements,
that is, the representation of management. The accountant who prepares the compilation
undertakes to express
a. limited assurance on the statements
b. minimal assurance on the statements
c. no assurance on the statements
d. full assurance on the statements
54. In an engagement to perform agreed upon procedures, an auditor is engaged to
a. Carry out those procedures of an audit to which the auditor and the entity and any
appropriate third parties have agreed and to report on factual findings.
b. Use accounting expertise as opposed to auditing expertise to collect, classify, and
summarize financial information.
c. Provide a moderate level of assurance that the information is free of material
misstatement.
d. Provide a high, but not absolute level of assurance that the information is free of
material misstatement.
55. Which of the following is least likely considered a part of the financial reporting framework?
a. Generally accepted auditing standards (GAAS).
b. Generally accepted accounting principles (GAAP).
c. International Accounting Standards/International Financial Reporting Standards
(IAS/IFRS).
d. Another authoritative and comprehensive basis of reporting.
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56. What best describes the word assurance in the context of the Philippine Standards on
Auditing?
a. Auditors satisfaction as to the reliability of an assertion being made by one party for
use by another party.
b. Level of assurance which may be provided is determined by the reporting objective.
c. Expressed positively in the report.
d. Assurance is of limited in nature.
57. This refers to the audit procedures that, in the auditors judgment and based on the PSAs are
deemed appropriate in the circumstances to achieve the objective of an audit.
a. Analytical procedures.
b. Scope of an audit.
c. Audit sampling.
d. Documentation.
58. Auditing standards differ from auditing procedures in that procedures relate to:
a. Measures of performance
b. Audit principles
c. Acts to be performed
d. Audit judgments
59. Auditing is based on the assumption that financial data and statements are
a. In conformity with GAAP.
b. Verifiable.
c. Presented fairly.
d. Consistently applied.
60. Every CPA professional is required to perform the audit of financial statements according to
PSAs in order to
a. Eliminate audit risk.
b. Eliminate the professional judgment in resolving audit issues.
c. Have a measure of the quality of audit performance.
d. To reduce the audit program to be prepared by the auditor.
61. Which of the following would not represent one of the primary problems that would lead to the
demand for independent audits of a companys financial statements?
a. Management bias in preparing financial statements.
b. The downsizing of business and financial markets.
c. The complexity of transactions affecting financial statements.
d. The remoteness of the users from the organization and thus the inability of the user to
directly obtain financial information from the company.
62. The audit process is
a. A special application of the scientific method of inquiry.
b. Regulated by PICPA.
c. The only service a CPA is allowed to perform by law.
d. Performed only by CPAs.
63. Which of the following is more difficult to evaluate objectively?
a. Efficiency and effectiveness of operations.
b. Compliance with government regulations.
c. Presentation of financial statements in accordance with generally accepted accounting
principles.
d. All three of the above are equally difficult.
64. An operational audit is designed to
a. Assess the efficiency and effectiveness of managements operating procedures.
b. Assess the presentation of managements financial statements in accordance with
generally accepted accounting principles.
c. Determine whether management has complied with applicable laws and regulations.
d. Determine whether the audit committee of the board of directors is effectively
discharging its responsibility to oversee managements operations.
65. Operational auditing is mainly concerned about:
a. Past protection provided by current internal control.
b. Future improvements for management goals.
c. Verification of fair presentation of financial data.
d. Accuracy of data of financial records.
66. An audit conducted to determine whether an entity is following specific procedures or rules set
down by some higher authority.
a. Operational audit
b. Compliance audit
c. Financial audit
d. Detailed audit
Auditing Theory
Quizzer No. 1
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Auditing Theory
Quizzer No. 1
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a.
b.
c.
d.
Advisory services
No
Yes
Yes
Yes
Transactions services
Yes
Yes
No
Yes
Assurance services
No
No
Yes
Yes
Auditing Theory
Quizzer No. 1
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87. First Statement Interpretations to PSAs will have the same authority as the PSAs.
Second Statement PAPS should also have the same authority as the PSAs.
a.
b.
c.
d.
Auditing Theory
Quizzer No. 1
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