Review Questions Questions

REVIEW QUESTIONS
Questions
1. What is meant by an assurance engagement?
2. What is the basic objective of an assurance engagement?

3. Give and explain briefly the most sought-after assurance services among
professional accountants.
4. Distinguish' between consulting and assurance services.
5. Give examples of assurance services on information technology.

6. Give and explain briefly three examples of non-assurance services by
7. Explain the elements of an assurance engagement.
8. Differentiate between assertion-based engagements and direct reporting
engagements.
9. What is meant by "criteria" in the context of assurance engagements?
What characteristics must professional accountants' posses for them to be
considered suitable
10. Describe briefly four (4) non-assurance engagements performed
frequently by professional accountants.
11. Describe three (3) emerging consultancy services being offered by
Multiple Choice Questions
1. Which of the following is false? Philippine Framework for Assurance

Engagements
a. describes the objective and elements of assurance engagements

intended to provide either a reasonable assurance or limited assurance.
b. identifies engagements to which Philippine Standards on Auditing,

Philippine Standards on Review Engagements, and Philippine Standards
on Assurance Engagements apply.
c. establishes standards or provides procedural requirements for the

performance of assurance engagements.
d. provides a frame of reference for the Auditing and Assurance

Standards Council in its adoption of International Standards on Auditing,
International Standards on Review Engagements and International
Standards on Assurance Engagements for application in the Philippines.
2. Which of the following is not an assurance engagement?
a. Compilation
b. Financial statements audit
c. Information reliability services
d. Reviews of prospective financial statements
3. Non-assurance engagements include all of the following except
a. agreed-upon procedures.
b. management consulting.
c. preparation of tax returns where no conclusion is expressed.
d. compliance audit.
4. Assurance engagements should exhibit the following elements except
a. a subject matter.
b. suitable criteria.
c. an engagement process.
d. appropriate professional fees.
5. Which of the following forms may the subject matter of an assurance

engagement take?
a. Historical financial information c. Behavior
b. Systems-and processes d. All of the above
6. Which of the following is not a, component of engagement risk?
a. Inherent risk c. Business risk

b. Control risk d. Detection risk
7. Engagement risk is influenced by the risks ‘associated with the following

except
a. nature and form of the subject matter.

b. Nature and form of the criteria applied to the subject matter
c. Nature and extent of the process used to collect and evaluate evidence.
d. unreasonably low professional fee.
8. An assurance engagement that provides a high level of assurance that the

financial statements are free of material misstatement is known as
a. review.
b. compilation.
c. agreed-upon procedures
d. independent financial statements audit.
9. Which of the following is not an assurance engagement?
a. Information System Reliability Service
b. Business Performance. Measurement

c. Risk Assessment Service
d. Management Consulting Service
10. When the professional accountant has obtained sufficient appropriate

evidence to conclude that the subject matter conforms in all material
respects with identified suitable criteria, he/she can provide
a. limited level of assurance. c. reasonable level of assurance.
b. absolute assurance. d. no assurance.
11. A practitioner should plan and conduct the assurance engagement in an

effective manner to meet the objective of the engagement. Which of the the
following work? Matters need not be a concern of the practitioner in planning
a. Criteria to be used
b. Engagement objective
c. Personnel and expertise requirements
d. Specific format of the assurance report
Cases
Case 1
Effective internal control is of significant concern to regulators, stockholders,

management, and other stakeholders in corporations. Therefore, CPAs are
getting significant requests to provide assurance about the effectiveness of
internal control.
Required:
(a) Explain how providing assurance about internal control provides

assurance about the reliability of other information provided by the company.
(b) Describe the broad engagement activities that would be involved in
performing an examination of the effectiveness of internal control.
Case 2
Assume that you are a partner with the firm of Santos & Lopez LLP. You
have been asked by Gonzales, Inc ., an industrial supply company, to
provide assurance about the change in existing customer satisfaction over
the last three years. Gonzales' management has indicated that the criteria it
intends to use to evaluate customer satisfaction are a combination of
customer retention rate and increase in peso sales. Gonzales' management
will provide a schedule of the customer satisfaction measures and a note
that describes the criteria used.
Required:
If Gonzales wants to provide the presentation and CPA's report for general
use by prospective customers, identify any available standards that provide
guidance for such a service and the type or types of services that your firm
could provide.
Describe the factors that you should consider in determining whether the
criteria are suitable.
(c) Assuming that you conclude that the criteria are suitable, draft your firm's
report assuming that you perform an examination of the subject matter.

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REVIEW QUESTIONS

2. What is the basic objective of an assurance engagement?

4. Distinguish' between consulting and assurance services.

5. Give examples of assurance services on information technology.

1. Which of the following is false? Philippine Framework for Assurance

a. describes the objective and elements of assurance engagements

b. identifies engagements to which Philippine Standards on Auditing,

c. establishes standards or provides procedural requirements for the

d. provides a frame of reference for the Auditing and Assurance

2. Which of the following is not an assurance engagement?

b. Financial statements audit

c. Information reliability services

d. Reviews of prospective financial statements

3. Non-assurance engagements include all of the following except

c. preparation of tax returns where no conclusion is expressed.

d. appropriate professional fees.

5. Which of the following forms may the subject matter of an assurance

a. Historical financial information c. Behavior

b. Systems-and processes d. All of the above

6. Which of the following is not a, component of engagement risk?

a. Inherent risk c. Business risk

7. Engagement risk is influenced by the risks ‘associated with the following

a. nature and form of the subject matter.

8. An assurance engagement that provides a high level of assurance that the

9. Which of the following is not an assurance engagement?

a. Information System Reliability Service

b. Business Performance. Measurement

d. Management Consulting Service

10. When the professional accountant has obtained sufficient appropriate

a. limited level of assurance. c. reasonable level of assurance.

b. absolute assurance. d. no assurance.

11. A practitioner should plan and conduct the assurance engagement in an

Effective internal control is of significant concern to regulators, stockholders,

(a) Explain how providing assurance about internal control provides

(b) Describe the broad engagement activities that would be involved in

performing an examination of the effectiveness of internal control.

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