Auditing Block 2 3 4 5 6 QUIZZES

AUDITING BLOCK 2, 5, 6 QUIZZES
1) The characteristic of an ideal profession which limits membership or inclusion is known as
Regulation code
Professional authority
Community sanction
A culture
2) One of several factors that create a demand for an independent external audit is
The desire to maintain the status of the accounting profession as elite
To apply the core values and core competencies of an accountant
The increased of amount capital involved and number of potential investors
The need of reliable and credible financial information
3) A characteristic of ideal profession based on member’s expertise in the systematic theory
Knowledge is continued and further developed in the practice of the profession
Prevention of abuse, malpractice, & monopoly thru governance and rules of law
The professional accountant is responsible to the community for his actions
the professional determines what is good or bad for the client

4) The practice of accountancy includes the following except:
Practice in education/academe
Practice in public accountancy
Practice in government where the CPA is a senator
Practice in industry
5) A core value that requires CPAs to maintain impartiality and free of personal bias and conflict of
interest
Relevance in the global market
Worldwide Profession
Increased risk reporting
Objectivity
6) The characteristic in an ideal profession that prevents abuse of monopoly and to discipline members is
Community sanction
Regulation code
A culture
Systematic theory
7) A CPA should possess leadership skill as its core competency thru
Identifying strategic directions to meet the needs of clients
Inspiring and motivating others to achieve excellence

Exchanging reliable and relevant information effectively
Performing analysis and applying business acumen for decision making
8) Technology is one of 10 insights to 2025 CPA Horizon. Which following details refers to such insight?
Staying current with standards and trends
Vigilant in ensuring data is captured and managed properly
Expanding marketability to global acceptance
Increase visibility in multiple business areas
9) To acquire the required capabilities and competence, a CPA in public practice is bound by:
Professional and accounting standards and reporting requirements
Core competencies and Core values
Objectives and scopes formulated within the framework of the profession
Statistical management data developed within the organization
10) As a core value, a CPA attains competence by:
Skillful resolution over challenging ambiguities and complexities
Engaging in lifelong learning on developments in the profession
Building strategic collaboration of multidisciplinary solutions
Demonstrating technical proficiency thru superior expertise and knowledge
11) These are unique combination of human skills, knowledge and technology providing values and
results to CPAs
*
core objectivity
Core competencies
core proposition
Core values
12) Which of the following is not included among the core values of a CPA?
Honesty and holding to rigorous standards of professional ethics
Proficiency with high level of expertise and knowledge
Continually pursue new and broad skills and knowledge
13) Business, institutions and individuals must maintain records of the financial condition and progress
of the business in order to
Serve as a strong basis for credit and borrowing
Gather evidences in providing high level of assurance on the financial reports
Prove that financial statements were not carelessly prepared
Reduce, if not eliminate, information risk
14) The objective of financial statement audit is to determine
If the reports prepared by management conform to the required contract provisions.
Whether the company’s use of its resources is valid
Any reservation about management’s internal control system

Information risk is evidently reduced to the minimum
15) A mindset that a professional accountant should embrace includes professionalism and ethical
behavior which involve:
Applying professional skills and judgment to ambiguous and imperfect situations
Presenting more current information to be disclosed in the financial reports
Upholding the Code of Ethics with emphasis on ethical behavior
Acting as navigator supporting the needs of governing bodies and management
16) Which of the following is not included among the core competencies of a CPA?
Influencing, inspiring, motivating others to achieve excellence
Meeting the ever-changing needs globally
Expertise in analysis and business acumen to provide guidance to clients
Building alliances and collaboration to provide solutions to complex problems
17) These are the essentials and enduring beliefs of the CPA profession which it upholds over time
Core values
Core integrity
Core competencies
Core objectivity
18) Demographic shift is one of 10 insights to 2025 CPA Horizon. Which following refers to such insight?
*
Flexible work arrangement & work at home options
Emerging specialization to enhance expertise
Leverage strengths to expand market values
More time spending values to clients
19) In developing capabilities and competencies in education as required, a CPA may include as a
development activity:
Appropriate Research Program
Accounting standards and reporting requirements
Off-the-job training
Regulatory and professional ethics
20) A person becomes a Certified Public Accountant by:
Attending a prestigious CPA review school
Passing the CPALE after obtaining the BSA college degree
Merely acquiring an extensive experience in an accounting firm
Issuance of a college diploma before passing the CPALE
21) Which of the following refers to the core competencies to sustain advantage for a CPA?
Support minorities, women, and young CPAs in the workplace
Evaluate new services to offer globally and locally
Increase visibility in multiple areas of business and society
Effective exchange of meaningful information using appropriate skills

22) Who among the following CPA belongs to the public sector?
A CPA-instructor in Urdaneta City University
A CPA connected with the Commission on Audit
An audit team leader in Sycip, Gorres, and Velayo Auditing firm
A branch accountant in Metrobank
23) A free-market economy can exist and further strengthened thru sharing of:
Financial data reflective of the economic conditions of both assets and obligations
Data that favors one party over another
Income statement that can evaluate and guide business operations
Financial reports of agencies imposed upon them by law
24) Which of the following refers to the core values to retain advantage of CPA in the global economy?
Integration and collaboration
Anticipating and serving evolving needs
Commitment to excellence
Pride in the profession
25) The Accounting Profession requires CPAs to possess core values in order to
*
Maintain the unique character and value in adopting changes in global economies
Develop a financial model signifying control in management environment
Promote adherence to legitimate and ethical practices
Design cost-benefit analysis for governing decisions
26) Which of the following situation illustrates an information risk?
The construction engineer reported the actual cost of the building constructed
The auditor confirmed inventory valuation used is consistently applied
The bank statement reported the actual cash balance of the business
The business incurred net loss but reported a net profit
27) Changes in accounting standards and accounting related information have brought about
globalization of Accounting & Auditing. Among these changes is:
Areas in off-the-job training
Demographic Shifts
Pre-certification and life-long learning
Increased Risk Reporting
28) A characteristic of ideal profession achieved thru formal college-level education in academic
environment
Systematic Theory
Integrity
Leadership skill
Community sanction
29) One of the five different areas that the professional accountant’s mindset needs to embrace is:
Integration and Collaboration
Leadership Skills and Problem-solving skills
Lifelong learning and commitment to excellence
Investor and wide stockholders focus
30) An audit enhances the quality of financial statements and management’s report thru—
Full support of a free-market economy
Attachment of an auditor’s opinion
Carrying out the duties imposed upon regulatory agencies
Reduction of information risks.
What element of an assurance engagement does “Bureau of Internal Revenue” belong?

*
Evidence
Subject matter
Intended users
Criteria
What element of an assurance engagement does a “Pharmacist” belong?

*
Practitioner
Assurance report
Criteria
Responsible party
The Philippine Standards on Review Engagements (PSREs) are to be applied in--
*
The audit of historical financial information

Related services
Review of any historical financial information
Assurance engagements
In performing attestation services, a CPA will normally:

*
Recommend how to use the information

Improve the quality of information for better use of decision makers
State a conclusion about a written assertion
Perform market analyses and cost estimates
For assurance engagements on historical financial information, reasonable assurance

engagements are called--
*
Examinations
Reviews
Compilations
Audits
What element of an assurance engagement does “Investment Property” belong?

*
Subject matter or evidence

Assurance report or criteria
Evidence or assurance report
Subject matter or responsible party
What element of an assurance engagement does “Ordinary Stockholders” belong?

*
Assurance report
Intended users
Practitioner
Evidence
Subject matter information is the outcome of the evaluation or measurement of--

*
Subject matter against assurance report

Subject matter against systems and processes
Subject matter against evidence
Subject matter against PFRS
The broad range of assurance engagement includes all, but which of the following?
*
Health Care Performance Measurement

Tax services without opinion expressed
Information System Reliability Service
Independent audit of financial historical information
Which of the following procedures would an accountant perform in a compilation

engagement?
*
examine the accounting records

collect, summarize financial data
Assess, evaluate evidence
compare assertions against criteria
Which of the following is least likely a subject matter of an assurance engagement?

*
Compliance with regulations

Payroll system
Data
Degree of loyalty of employees to the employer
The concept of reasonable assurance is provided for in which one of the following
engagements--
*
Audit
Agreed upon procedures
Compilation
Review
The concept of limited assurance is provided for in which of the following

engagements?
*
Audit
Review
Agreed-upon procedures
Compilation
In an assurance engagement, the responsible party and the intended users--

*
Should be from different entities

May be from the same entity or different entities
Should be from the same entity
Are both responsible for procedures to be performed in the engagement
What element of an assurance engagement does “Prepaid Insurance” belong?

*
Intended users
Evidence
Assurance Report
Subject matter
What element of an assurance engagement does “Civil Engineers” belong?

*
Practitioner
Criteria
Responsible Party
Assurance report
Which of the following is not an element of an assurance engagement?

*
Suitable criteria
A subject matter
a conclusion
a two-party relationship
How many separate parties are involved in an assurance engagement?

*
Seven
Four
Five
Three
Which of the following is not an assurance engagement?

*
An independent examination of financial statement

Tax planning
A review
The Philippine standard to be applied in the performance of an agreed-upon

procedures is--
*
Philippine Standard on Assurance Engagement

Philippine Standard on Auditing
Philippine Standard on Related Services
Philippine Standard on Review Engagement
The statement that “nothing came to our attention which would indicate that these
statements are not fairly presented” expresses which of the following?
*
Negative confirmation
Disclaimer of opinion
Piecemeal opinion
Negative assurance
What element of an assurance engagement does “New Conceptual Framework”

belong?
*
Evidence
Criteria
Responsible party
Subject matter
Which of the following types of assurance engagements would provide a positive
conclusion?
*
Tax planning
A review
An independent examination of financial statement
To provide such an assurance in an engagement the auditor will perform the following,
except--
*
Express a conclusion
assess evidence collected
conduct procedures & gather evidences
Identify & record transactions
The outcome of the evaluation or measurement of the subject matter against criteria is
known as--
*
Subject matter information

Tax compliance
Professional skepticism
Expectation gap
A type of assurance engagement which involves the practitioner to express a positive

form of conclusion is--
*
Limited assurance engagement

Reasonable assurance engagement
Direct assurance engagement
Positive assurance engagement
Which of the following best describes the attest process?
*
Assisting management to attain its successful operations

Filing tax return and related supplemental information
Proving the accuracy of the books and records
Gathering sufficient evidence about specific assertions
What element of an assurance engagement does a “Telephone, Water, and Utility bills”
belong?
*
Responsible party
Evidence or subject matter
Practitioner
Assurance report or criteria
What element of an assurance engagement does a “Lunch break” belong?

*
Practitioner
Assurance report
Evidence
Subject matter
An auditor’s satisfaction as to the reliability of an assertion being made by one party is

called--
*
Conclusion
Evidence
Assurance
Report
Which following procedures is normally performed in connection with compilation

services?
*
Inquire management about subsequent events

Apply professional skepticism on audit process
Make inquiries of management with actions taken at board meeting
Assemble financial information
*
Preparation of tax returns that use estimates

Audit of financial statements
Comprehensive audit
Review of interim historical financial statements
The predominant type of attestation service performed by CPAs--

*
Audit
Mystery shopping
Management consulting
Assurance services involves all of the following except:

*
Implementing a system that improves the processing of information

Improving the quality of the decision model
Improving the quality of information for decision purposes
Improving the relevance of information
What element of an assurance engagement does “suppliers” belong?

*
Practitioner
Intended users
Assurance report
Criteria
In an assertion-based assurance, the person responsible for the assertion is--

*
The practitioner
The responsible party
Intended user
The BOA
What element of an assurance engagement does an “Auditor’s Adverse Opinion”

belong?
*
Practitioner
Evidence
Criteria
Assurance report
Neutral criteria contribute to conclusions that are--

*
Subject to different interpretations

Clear and comprehensive
Useful for decision making
Free from bias
Which of the following is not a key attribute that is essential to perform an assurance
engagement?
*
Subject matter knowledge

Accounting skills
Independence
Established criteria or standards
What element of an assurance engagement does “Lenders & Creditors” belong?

*
Criteria
Subject matter
Evidence
Intended Users
The criteria for evaluating quantitative information vary. In the case of an independent
audit of financial statements by CPA firms, the criteria are usually the—
*
Philippine Standards on Auditing

National Internal Revenue Code
Regulation of the Securities and Exchange Commission
Philippine Financial reporting Standards
The overall objective of internal auditing is to—

*
Attest to the efficiency with which resources are employed

Assist members of the organization in the effective discharge of their responsibilities
Ascertain that controls are costs justified
Provide assurance that financial data have been accurately recorded
Financial statement users often receive unreliable financial information from

companies. Which of the following is not a common reason for this?
*
Complex business transactions

Large amount of data
Lack of firsthand knowledge about the business
Remoteness of information
The auditor’s opinion—

*
Certifies the correctness of the financial statements

Enhances the credibility of the financial statements
Is an assurance as to the efficiency conducted by management but not effectiveness
Is an assurance as to the future viability of the entity
The audit definition implies examining the bases for the assertions and judiciously
evaluating the results without bias or prejudice either for or against the individual
making the representations.
What element in the Auditing definition is being referred to?

*
Degree of correspondence
Communicating the results
Established criteria
Objectively obtains and evaluates evidence
To provide an assurance service in an engagement, the auditor will not perform this
activity:
*
Express an opinion
Conduct procedures & gather evidences
Post transactions to subsidiary ledgers
Evaluate evidence gathered
Which of the following type of audit is performed mostly by CPAs on contractual

basis--
*
BSP bank audit

External auditing
Internal auditing
Government auditing
Which of the following terms does not belong?

*
Financial Audit
Internal Audit
External Audit
Independent Audit
Which of the following is not a responsibility of the management regarding financial

statements?
*
form an opinion on the financial statements

provide access to all records to the auditor
Design of internal control of the entity
Preparation of financial statements
The term that describes the role of persons entrusted with the supervision, control and
direction of an entity is—
*
Governance
Administration
Management
Government
The auditor’s judgment concerning the overall fairness of the presentation of financial
position, financial performance, and changes in financial position is applied within the
framework of--
*
Philippine Financial Reporting Standards

Internal Control
Information systems control
Philippine Standards of Auditing
A typical objective of a management audit is to determine whether an entity’s—

*
Adherence with applicable government regulations is in place

Specific operating units are functioning efficiently and effectively
Operational information is in accordance with PFRS
Financial statements present fairly the results of operation
To maximize independence, the director of internal auditing should report to the--

*
Audit committee
Director of Information System
Controller
Chief Financial Officer
To operate effectively, an internal auditor must be independent of--

*
The employer-employee relationship which exists for other employees in the organization
All of these choices
The line functions of the organization
The entity
Performance Auditing is primarily oriented toward--

*
The accuracy of data reflected in management’s financial records

The verification that a company’s financial statements are fairly presented
Future improvements to accomplish the goals of management
Past activities provided by existing internal control
Primary responsibility for the assertions in financial statement rests with the—
*
Audit partner assigned to the engagement

Staff auditor who drafts the statements
Senior auditor in charge of field work
Client’s management
Broadly defined, the subject matter of any audit consists of--

*
Financial data derived from sales operations

Explicit and implicit representations of management
Economic data based on its industrial environment
The complete sets of financial statements
Most of the independent auditor’s work in formulating an opinion on financial

statements consists of--
*
Examining cash transactions

Studying and evaluating internal control
Comparing recorded accountability of existing assets
Obtaining and examining evidential matter.
Why does a company choose to have an independent auditor report on its financial
statements?
*
Independent auditors guarantee the accuracy of the financial statements

Independent auditors will always detect management fraud
An independent audit is designed to search for deficiencies in the company’s internal controls
The company’s preparing the statements may have vested interest in reporting certain results
The subject matter of any audit consists of—

*
Financial statements
Suitable criteria
Assertions about economic actions and events
professional ethics
Auditing is a systematic process, the concept of which implies structured, organized

and--
*
has been put together in an organized and deliberate way

arranged in a systematic way, especially on a large scale
sensible as characterized by clear, sound reasoning via rules of formal argument
arrange so that activities can be found or used easily and quickly
The following will ultimately benefit directly from a credible and reliable financial
statement as a result of an objective independent audit, except:
*
The entity’s management

Information technology infrastructure
Creditors, Prospective Investors, Employees
The revenue tax procedures
Professional skepticism requires that an auditor assume that management is—

*
Offering reasonable assurance of honest

Honest, in the absence of fraud risk factors
Neither honest nor dishonest
Dishonest until completion of audit tests
The auditor communicates the results of examination through the medium of the--
*
Management assertions
Audit report
Compilation report
Professional behavior
Under PSA 260 and the SEC Code of Corporate Governance, the term “Those Charged
with Governance” refers to--
*
Forensic Auditors
BIR examiners
Internal Auditors
Corporate Board of Directors
An independent audit consists of the following related activities, which among these is
not?
*
Methodical evaluation of evidence and assertions

Communication of findings achieved through a written report
Objective examination of financial statements
Evaluate if financial statements are prepared in conformity with the PSA
The independent audit is important to readers of financial statement because it--

*
Measure and communicates financial and business data included in financial statements
Determines the future stewardship of the management of the company being audited
Reports on the accuracy of all information in the financial statements
Involves the objective audit of and reporting in management-prepared statements
Which of the following is not one of the general principles governing the audit of
financial statements?
*
The auditor should obtain sufficient appropriate audit evidence to reduce audit risk
The auditor should perform the audit with an attitude of professional skepticism
The auditor should comply with relevant ethical requirements
The auditor should gather conclusive evidence to prove accuracy of assertions
Which of the following situation does not appropriately describe a limitation of an

audit?
*
Conclusions are made on the basis of testing a sample of evidence

Management can hide a material transaction affecting business operation
Transactions in financial statements lack supporting documents
The auditor might misinterpret the evidence obtained
An audit is primarily for the benefit of:

*
Other types of auditors

The information providers
Those charged with governance
The public and stakeholders
Which of the following is one of the scopes of an independent audit?

*
Preparation of financial statements by the auditor using the PFRS

By inquiry, observation, inspection, the auditor tests the existence assertions
Submit the agreed report as conclusion of the engagement
Auditor will provide resolutions for the improvement of client’s management
Inherent limitations in an audit arise from the following factors, except--

*
Most audit evidence is persuasive rather than conclusive

Use of sampling method
Use of testing
Incompetence of an auditor
To provide for greatest degree of independence in performing internal auditing

functions, an internal auditor most likely should report to--
*
Corporate Controller
Corporate Stockholders
Those charged with Governance
Vice President for Finance
An examination of part of an organization’s procedures and methods for the purpose of

evaluating efficiency and effectiveness is what type of audit?
*
Financial statement audit

Compliance audit
Government audit
Performance audit
As guidance for measuring the quality of the performance of an auditor, the auditor
should refer to:
*

Philippine Financial Reporting Standard
Generally Accepted Accounting Principles
International Financial Reporting Interpretation Committee
Management of a company is responsible for--

*
Applying the Ethics for professional accountants

Preparing the financial statements
Hiring the auditor
Independence and obtaining evidence
The concept of reasonable assurance indicates that the auditor is—

*
Not responsible for the fairness of the financial statements

Not an insurer of correctness of the financial statements
Responsible only for issuing an opinion on the financial statements
Responsible for finding all anomalies committee
While performing audit services for their clients, CPAs have a duty to provide a level of
care which is-
*
Superior
Greater than average
Free from judgment error
Reasonable
Information risk refers to the risk that--

*
The auditor may express an unqualified opinion on financial statements that are materially
stated
The client entity may not be able to remain in business
Errors and frauds would not be detected by the auditor’s procedures
The client’s financial statements may be materially false and misleading
What activity below is not a function or objective of the internal audit?

*
Ascertain compliance on policies & procedures

Investigate fraudulent actions
Recommend operating improvements
Form an opinion on the financial statement
The responsibility for the prevention and detection of non-compliance of laws and
regulation rests with--
*
Management
The auditor’s lawyer
The auditor
The client’s lawyer
What audit document below is not included in reporting?

*
Overall responses
Engagement letter
Audit findings
Evidences
The audit process is divided into three phases which can be performed by the auditor
in this particular order--
*
Post-Audit responsibilities → Test of Control → Pre-engagement activities

Audit Planning → Issuance of Audit report → Pre-engagement activities
Issuance of audit report → study of internal control → completing the audit
Substantive Testing → Audit Planning → Post-Audit responsibilities
Which type of risk below can be avoided by careful selection and retention of client?
*
Engagement risk
Business risk
Financial reporting risk
Audit risk
Which item below is performed by the auditor in a risk-based audit approach?

*
Detail examination of the environment

Assurance services on information technology
Mastery of a particular intellectual skill
Evaluation of auditor’s legal responsibilities
Which type of risk below can be affected by business volatility, economic climate, or
geographical location--
*
Business risk
Engagement risk
Audit risk
The phrase free of material misstatement is intended to inform users that the auditor’s
responsibility is--
*
Limited to material financial information

To guarantee fairness of material information
Open to material and immaterial information
To detect material misstatements i engagements
The auditor’s best defense when material misstatements are not uncovered is to have
conducted the audit—
*
In accordance with auditing standards

As effectively as reasonably as possible
In a timely manner
Only after an adequate investigation of the management team
What item below is an example of non-routine transaction for an entity engaged in

merchandising?
*
Hiring of purchasing consultants

Production of advertising materials through its computers
Large exposure in foreign currency dealings
Night delivery of sold items to customers
Which item below is not one of risk-based audit approach?

*
Process & control failure possibilities

Strategy development process identification
Modification of the auditor’s opinion
When the auditor declared: We conducted our audits in accordance with the PSA, it
means that the auditor--
*
Observed full compliance to all the standards

Made selective compliance to all the standards
made partial compliance to all the standards
performed the audit on the average output
The phrase reasonable assurance is intended to inform the users that auditors--
*
Provide assurance even on immaterial amounts

Were limited in their access of client’s records
Do not guarantee fairness of financial statements
Limit responsibilities to material amounts only
Which of the following activities is not part of the activities within the audit opinion
formulation process?
*
The auditor identifies and assess risks of material misstatements and then responds to those
identified risks
The auditor develops a common understanding of the audit engagement with the client
The auditor determines the appropriate non-audit consulting services to provide to the client
The auditor determines the appropriate audit opinion to issue
The economic risk that a public practitioner is exposed to simply because it is

associated with a client with a bad reputation is—
*

Audit risk
Engagement risk
Business risk
A concept used to express uncertainty about events that could have material effect on
the organization--
*
Risk-based audit
Risk response
Risk
Audit risk model
An auditor has to evaluate matters that requires judgment or management intervention

that may result in material misstatement such as—
*
Cash flow management

Income tax payment
Inventory warehousing
Depreciation expense
Which among the causes of misstatements is difficult for the auditor to uncover?
*
Incorrect accounting estimates

Clerical errors
Perpetrated fraud
Misapplication of accounting policies
The process of using a company's resources in the most efficient way possible is
called—
*
Routine transactions
Effective management
Resource management
Risk management
What audit objective below is not included in risk response?

*
Develop appropriate responses to assesses risk of material misstatement

Reduce risk to an acceptably low level
Audit planning
Gathering of evidence
The audit process is divided into three phases which can be performed by the auditor
in this particular order--
*
Reporting, risk assessment, risk response

Risk assessment, reporting, risk response
Reporting, risk response, risk assessment
Risk response, risk assessment, reporting
What audit activities below is included in risk assessment?

*
Decision to accept new client

Update of overall strategy
Forming an opinion
Evaluating audit evidence
Which of the following could be classified as an error?

*
Intentional omission of the recording of a transaction to benefit third parties

Preparation of records by employees to cover a fraudulent scheme
Misinterpretation by management of facts that existed in preparation of financial statements
Misappropriation of assets for the benefit of management
The risk that relates directly to the recording of transactions and the presentation of
financial data in the financial statement is—
*
Business risk
Engagement risk
Audit risk
In verifying client’s strategy, the presence of this item assures investors that the
business will operate continuously or for indefinite periods.
*
Internal control system

Specific goals and objectives
Fewer material misstatement
Long-range plan
A risk resulting from significant conditions adversely affecting ability to achieve goals
and strategies--
*
Business risk
Engagement risk
liquidity risk
financial reporting risk
The phrase free of material misstatement is intended to inform users that the auditor’s
responsibility is--
*

to detect material misstatements in engagements
open to material and immaterial information
The auditor should perform risk response, risk assessment, and reporting in the audit
process with:
*
Selective compliance of standards of the PSA

Full compliance of standards of the PSA
Partial compliance of standards of the PSA
Average compliance to standards of the PSA
The responsibility for the detection and prevention of material misstatements in the
financial statement rests with the—
*
Client’s legal counsel

External auditor
Client management and those charged with governance
Internal auditor
Which of the following statements is true?

*
Usually, the auditor does not design procedures to uncover fraud or errors
It is usually easier for the auditor to uncover fraud than errors
It is usually equally difficult for the auditor to uncover errors or fraud
It is usually easier for the auditor to uncover errors than fraud
The audit strategy should involve identifying the objective and scope of the audit thru:
*
Location of the components of the entity

Coordination of woks of experts
Proper review and monitoring of team’s activities
Analytical procedures
QUIZ NO. 1
A CPA should possess leadership skill as its core competency thru
A characteristic of ideal profession achieved thru formal college-level education in academic

environment
Integrity
Systematic Theory
Leadership skill
Community sanction
A free-market economy can exist and further strengthened thru sharing of:

Financial data reflective of the economic conditions of both assets and obligations
Income statement that can evaluate and guide business operations
The practice of accountancy includes the following except:

Practice in industry
Which of the following refers to the core values to retain advantage of CPA in the global
economy?
A core value that requires CPAs to maintain impartiality and free of personal bias and conflict of
interest

Objectivity
The Accounting Profession requires CPAs to possess core values in order to

These are unique combination of human skills, knowledge and technology providing values and
results to CPAs
core proposition
Core competencies
Core values
core objectivity
A characteristic of ideal profession based on member’s expertise in the systematic theory
Knowledge is continued and further developed in the practice of the profession

Prevention of abuse, malpractice, & monopoly thru governance and rules of law
the professional determines what is good or bad for the client
The professional accountant is responsible to the community for his actions
Which of the following is not included among the core values of a CPA?

Proficiency with high level of expertise and knowledge
A person becomes a Certified Public Accountant by:

Which of the following refers to the core competencies to sustain advantage for a CPA?
Support minorities, women, and young CPAs in the workplace

Increase visibility in multiple areas of business and society
Effective exchange of meaningful information using appropriate skills
Evaluate new services to offer globally and locally
Changes in accounting standards and accounting related information have brought about
globalization of Accounting & Auditing. Among these changes is:

Demographic Shifts
As a core value, a CPA attains competence by:

A mindset that a professional accountant should embrace includes professionalism and ethical
behavior which involve:

The characteristic of an ideal profession which limits membership or inclusion is known as
Community sanction
Regulation code
A culture
One of several factors that create a demand for an independent external audit is
*
Which of the following situation illustrates an information risk?

The auditor confirmed inventory valuation used is consistently applied
The objective of financial statement audit is to determine

Information risk is evidently reduced to the minimum
In developing capabilities and competencies in education as required, a CPA may include as a

development activity:
Who among the following CPA belongs to the public sector?

One of the five different areas that the professional accountant’s mindset needs to embrace is:

An audit enhances the quality of financial statements and management’s report thru—

Technology is one of 10 insights to 2025 CPA Horizon. Which following details refers to such
insight?
*
Vigilant in ensuring data is captured and managed properly
The characteristic in an ideal profession that prevents abuse of monopoly and to discipline
members is
A culture
Community sanction
Regulation code
Systematic theory
To acquire the required capabilities and competence, a CPA in public practice is bound by:

These are the essentials and enduring beliefs of the CPA profession which it upholds over time
Core values
Core objectivity
Core competencies
Core integrity
Which of the following is not included among the core competencies of a CPA?
Meeting the ever-changing needs globally

Building alliances and collaboration to provide solutions to complex problems
Expertise in analysis and business acumen to provide guidance to clients
Influencing, inspiring, motivating others to achieve excellence
Demographic shift is one of 10 insights to 2025 CPA Horizon. Which following refers to such
insight?

Business, institutions and individuals must maintain records of the financial condition and
progress of the business in order to

QUIZ NO. 2
Which of the following can be called an assurance service?
Tax planning
Performance measurement
Systems design and installation
Tax compliance
\The item “Legal Opinion” would be an example to what element of an assurance engagement?
Subject matter
Assurance report
Evidence
Criteria
What element of an assurance engagement does “News articles” belong?
Assurance report
Evidence
Criteria
Intended users
Which example below can best illustrate the assurance engagement element of “responsible
party”?
Capacity of software system

Cost accounting division
Credit extension procedures
Payroll system
Non-assurance engagement includes all of the following except--
Compilation
Examination of tax returns
Preparation of tax returns
Management advisory services
The item “Bill of Lading” would be an example to what element of an assurance engagement?
Evidence
Criteria
Assurance report
Responsible party
Assurance engagements are covered by the following standards except--
Philippine Standards for Assurance Engagement

Philippine Standards on Review Engagement
Philippine Standards on Related Services
The item “Board of Regents” would be an example to what element of an assurance

engagement?
Interested user and responsible party

Responsible party and assurance report
Subject matter and practitioner
Practitioner and interested user
In assertion-based assurance engagement, who performs the evaluation or measurement of the

subject matter against a specific criterion?
Practitioner
Board of Accountancy
Intended users
Responsible party
Which example below can best illustrate the assurance engagement element of “subject
matter”?
Accounting Department
Internal Control system
Employees’ Handbook
Labor Union
The objective of a reasonable assurance engagement is a reduction in assurance engagement

risk—
To a level acceptable as a basis for an adverse form of expression in the conclusion

To an acceptably low level as a basis for a positive form of expression in the conclusion
To a very low level as a basis for an absolutely magnificent expression in the conclusion
To a level acceptable as a basis for a negative form of expression in the conclusion
Which of the following may not be an appropriate example of the subject matter of an assurance
engagement?
Sufficient volume of conclusion
Specifications documents
Key indicators of efficiency and effectiveness
Disclosures represented in financial statements
Which of the following standards are to be applied in the audit of historical financial statements?
Philippine Standards on Review Engagement

Philippine Standards on Assurance Engagement
Philippine Standards on Related Services
A practitioner plans and conducts the assurance engagement to obtain evidence in an effective
manner to meet the objective of the engagement. Which following matters need not be a
concern of the practitioner in planning the engagement?
Personnel and expertise requirement

Engagement objective
Criteria to be used
Services of other experts or professionals.
Assurance engagements should not have this type of element—
Policies, procedures, and schedule of payment of practitioners’ fees.

Class of persons who receive the assurance report
Data obtained as bases of the assurance conclusion
Objects of assurance engagements
Which of the following is broader in scope and concept than the other?
Review engagement
Auditing services
Attestation services
Operational Audit
In an agreed-upon procedures, the auditor does not provide an opinion on the reliability of the
financial data. In this case, what type of assurance is provided by the auditor in this procedure?
Reasonable
Moderate
No assurance
Absolute
Which of the following is not a non-assurance engagement?
Limited examination of financial statement

Management consultant
Accounting and bookkeeping
Which of the following characteristics need not be exhibited in determining the suitability of a
criteria in an assurance engagement?
Clearly communicated in the assurance report

Free from bias
Assistive in decision-making
Contributory to a clear, comprehensive conclusion
The item “year-end adjusting entries” would be an example to what element of an assurance
engagement?
Three-party relationship
Assurance report
Criteria
Evidence
Which of the following engagements does not require compliance with independence
requirements?
Attestation
Review
Compilation
Audit of financial statements
The item “capacity of computer system hardware” would be an example to what element of an
assurance engagement?
Responsible party
Assurance report
Subject matter
Criteria
Which example below can best illustrate the assurance engagement element of “criteria”?
Auditor’s Unqualified Report

Lenders and creditors
Chief Financial Officer
Philippine Standard on Related Services
Which of the following best describes “related services”?
Independent Financial Statement Audit and consultation

Review, Tax Services, and agreed-upon procedures engagements
Limited assurance or reasonable assurance engagement
Tax services and agreed-upon procedures
Which of the following best describes the attest process?
Provides conclusions that increases acceptability of financial data

Application of Philippine Standard on Related Services to the engagement
Provides services that includes manual or computerized accounting system
Determines tax consequences of planned transactions
Which example below can best illustrate the assurance engagement element of “Intended
Users”?
Certified Public Accountant

Systems and Behavior
Warehouse building facilities
Metrobank, Land Bank, PNB, BDO
The item “Insurance Commission” would be an example to what element of an assurance

engagement?
Interested user
Practitioner
None among these options for selection
Responsible party
Which of the following statements is true concerning evidence in an assurance engagement?
The reliability of evidence is influenced not by its nature but by its source
Obtaining more evidence may compensate for its poor quality
Appropriateness is the measure of the quality of evidence, its reliability and persuasiveness
Sufficiency is the measure of the quantity of evidence
If the assertion is given by the responsible party to the intended users and then practitioner is
asked to affirm such assertions of the responsible party, this form of assurance is—
Direct reporting engagement

Reasonable assurance
Limited assurance
Assertion-based reporting
Reports on agreed-upon procedures are intended to be distributed—
Only to investors and creditors

To stockholders and board of directors only
Only to the parties that determined the procedures to be performed by the accountant
Publicly
When the practitioner expresses an inappropriate conclusion when the subject matter
information is materially misstated is known as—
Assurance services
Assurance engagement risk
Assurance report
Assurance engagement
A compilation engagement:
Practitioner gathers evidence to express an opinion on fairness of financial data
Is not an assurance engagement
Practitioner verifies the accuracy of the assertion provided by management
Involves submission of review conclusion on the preparation of financial data
What is the established difference between assurance engagement and non-assurance
engagement?
Practitioner’s planning phase

Practitioner’s opinion
Practitioner’s report
Practitioner’s fee
Which of the following pertains to the reliability of audit evidence?
The expertise level of the auditor who obtained the evidence

Dependent whether the client uses a manual or computerized accounting system
The volume of evidence obtained
The independence of the source of evidence
Eldercare Plus
Assurance Services on Information Technology
CPA Web Trust
Information Technology System Services
Neutral criteria contribute to conclusions that are--
Clear and understandable

Boosting decision-makers in formulating conclusions
Publicly communicated to intended users
Free from bias
The statement that “nothing came to our attention which would indicate that these statements
are not fairly presented” expresses which of the following?
Positive confirmation
Negative confirmation
Qualified opinion
Negative conclusion
The following are the elements of an assurance engagement except—

Lone party relationship involving the intended users
Sufficient appropriate evidence
Assertions by management
Assurance report
The item “Nuclear Engineer” would be an example to what element of an assurance

engagement?
Practitioner
Subject matter
Evidence
Assurance report
The review of a company’s financial statement by a practitioner—
Is substantially less in scope of procedures than an audit

Is of similar scope as an audit and adds similar credibility to the statements
Culminates in issuance of a report expressing the practitioner’s positive conclusion
Requires detailed analysis of the major accounts
QUIZ NO 3
In comparison to the external auditor, an internal auditor is more likely to be concerned with—
Government accounting
Internal control
Operational auditing
Internal administrative control
Who are the users of an audited financial statements?
The public in making investment decisions

Those charged with governance as basis of declaring dividends
Different groups for different purposes
Regulatory agencies to verify information relevant to their mandated functions
A management assertion which states: transactions and events that should have been
recorded, and all related disclosures that should have been included in the financial statements
have been extensively included.
Completeness
Classification
Occurrence
Cut-off
What item below can be classified under classes of transactions?
Balance Sheet
Notes & Disclosures
Statement of Changes in Equity
Statement of Comprehensive Income
In the audit opinion formulation process, which flow of processes below would be the most
logical sequence to be applied in the audit engagement?
Risk Assessment → Risk Response

Risk Response → Risk Assessment → Reporting
Reporting → Risk Assessment → Risk Response
Risk Assessment → Reporting → Risk Response
A typical objective of a management audit is to determine whether an entity’s—

Compliance to governmental regulatory requirements
Financial statements present fairly the results of operations
Internal control system is adequately operating as designed
An element in the definition of auditing that requires an auditor to examine the assertions
judiciously and evaluate the results without bias.
Objectively obtains and evaluates evidence
What account below can be classified under account balances?

Administrative expenses
Distribution Cost
Goods in Process
Financing Charges
An element in the definition of auditing which identifies the subject matter that are the
representations made by the individuals or entity.
Communicating the results to interested users

Systematic process
Established Criteria
Assertions about economic and events
To operate effectively, an internal auditor must be independent of—
Board of Accountancy
Audit Committee of those charged with governance
The different operating units to be audited
None among these options provided
Under PSA 260 and the SEC Code of Corporate Governance, Corporate Board of Directors are
termed as:
Chief Executive Officer

Stakeholders
Internal Auditors
Those Charged with Governance
An element in the definition of auditing that describes: auditing is natural or sensible science
characterized by or capable of clear, sound reasoning according to the rules of logic or formal
argument.

Systematic Process
A competent and independent person
Which of the following situation does not appropriately describe a limitation of an audit?

The difference between what the public expects to get from the audited financial statements and
what the public is actually getting is known as—
Audit risk
Inherent limitation of an audit
Expectation gap
Information risk
The responsibility of providing the auditors with information and documents relevant to the
financial statements and internal controls during the engagement rests with—
The technology through media platforms

The audit team members
The management
The internal auditors
Which of the following is not one of the general principles governing the audit of financial
statements?
The auditor should exercise professional judgement in performing an audit

The auditor should use testing or sampling methods to complete audit tasks
Which of the following types of audit use policies and procedures as its criteria?
Management audit
Compliance audit
compilation
Forensic audit
Which of the following statements does not properly describe a limitation of an audit?
The work undertaken by the auditor is based throughout by judgment

Many audit conclusions are based on examination of a sample of evidence
Items in the financial statements do not have supporting evidence
Independent auditors of financial statements perform audits that reduce and control—
The complexity of financial statements

The business risks faced by the investors
The evidences to be gathered in the audit engagement
The information risks faced by investors
An audit designed to detect non-compliance of administrative policies and procedures would be

referred to as—
*
A compliance audit
A management audit
A financial statement audit
An operational audit
The expertise that distinguishes auditors from accountants is in the—
Possession of education to qualify for the board exam

Capability to interpret financial reporting framework
Mastery of the PFRS
Accumulation and interpretation of evidence
What account below can be classified under classes of transactions?
Prepaid Interest Expense

Accrued Taxes Payable
Accumulated Depreciation- Equipment
Freight-In
As provided in the definition of Auditing, auditor must evaluate evidence against criteria to:
Relate application of technical skills to professional judgment

emphasize the responsibilities of management correlated to assertions
evaluate the validity as to closeness of assertion to established criteria
eliminate potential conflict between management and investors
Which of the following best describes the reason why an independent auditor reports on
financial statement?
Independent auditors would most likely detect fraud committed by management

A poorly designed internal control system may be in existence
Contradicting interests exist between users and providers of information
Independent auditors would successfully discover errors and correct them
Which among the following statements concerning professional skepticism is false?
Professional skepticism is questioning contradictory audit evidence obtained

Professional skepticism is vital to the critical assessment of audit evidence
Professional skepticism must the applied in the entire course of audit engagement
Professional skepticism eliminates risks of gathering insufficient evidences
Reasonable assurance can only be issued in independent audit engagement because—

The auditor could only rely on whatever assertion management will provide
The auditor should conduct the audit in accordance with the PSA
The auditor obtains sufficient appropriate audit evidence to reduce audit risk
When performing a compliance audit of a government office, auditors are concerned with
whether the entity--
is following laws and regulations

follows proper public relations with the public
is applying the PFRS
is achieving its objective
The concept of reasonable assurance indicates that the auditor is--

Responsible for uncovering all anomalies committed against the entity
Not an insurer of the accuracy of the financial statements
Only responsible for the opinion issued on the financial statements
The best way to reduce information risk is to have--
All of the choices provided

The user to verify every detail of the information
Audited financial statements provided
The provider to share information risk with the user
An inherent limitation in an audit pertains to the persuasiveness and not on the conclusiveness
of an evidence gathered because:
Data are not hard facts to prove or disprove accuracy of assertions

Data are based from witnesses to the misstatement
Data gathered are not substantiated by CCTV cameras
Data gathered are based on economic judgment provided by management
Which among the following is not a responsibility of the entity’s management?
Designing and implementing internal control system

Providing the auditors with information relevant to the financial statements
Designing and implementing the accounting system
Preparing and presenting financial statements in accordance with PSA
Consigned Goods
Patents
Sales Returns & Allowances
Warranty Liability
Which of the following is an assertion about account balances?
Preparation
Cut-off
Occurrence
Accuracy, Valuation and Allocation
Which of the following is an assertion about classes of transactions?
Presentation
Existence
Preparation
Rights and Obligation
Taxes & Licenses

Bad Debts Expense
Deferred Interest earnings
Depreciation expense- equipment
Which of the following is an objective underlying an audit conducted in accordance with the
PSA?
The auditor expresses and opinion whether the financial statements are in accordance
with an identified financial reporting framework
The audit report expresses an opinion whether the financial statements are free of frauds and
errors
Auditors are responsible for the preparation and presentation of the financial statements
The audit provides absolute assurance the client’s business is viable at least for a year
A management assertion which states: Assets, liabilities, and equity interests have been
recorded in the proper accounts.
Accuracy
Presentation
Classifications
Existence
When the auditor expresses an opinion on financial statements, their responsibilities extend
to—
The results of client’s business decisions are fairly presented in the financial statements
Active participation in the application of solutions given to their client
Appreciating the mitigating programs in reducing business risks
An ongoing involvement for their client’s solvency
Upon presentation of the Financial Statements to the intended users and the auditor, what
would be the main task that the auditor has to perform?
Collect sufficient appropriate evidence to examine if assertions are correct

Provide solutions to the observed risks in the financial statements
Submit a prospective engagement actions and plans for approval by the management
Coordinate with the internal audit regarding the type of opinion to be submitted
If a CPA is engaged to examine transactions of a government agency whether disbursements

under the Cash Transfer Program of the DSWD followed the intent of Congress, the type of
audit to be performed is—
Audit of financial statement

Consulting services
Compliance audit
Operational audit
QUIZ 4
merchandising?
Cash collection of a written-off account

Payment of expense through post dated checks
Investments in long term serial bonds
Provision of sales discount
Which of the following situations refers to misstatement as an error?
Defalcation of cash
Misposting an expense payment as credit instead on the debit side
Overpricing of office supplies purchased
Failure to pay income tax
Which among the causes of misstatements is difficult for the management to comply?
Non-compliance to laws and regulations

Clerical errors
The process of using a company's resources in the most efficient way possible is called—
Resource management
Risk management
Which following actions is not considered as non-compliance with laws and regulations that
results in misstatement?
Shoplifting
All of these choices are non-compliance that results in misstatement
Misdeclaration of income tax
Tax evasion
Which following statement is not an important consideration in integrating the concepts of

materiality and risk in the conduct of a risk-based audit?
Competition for clients among audit firms is high

Testing or sampling is not an absolute assurance that financial statements are free of material
misstatements
Auditors should understand expectations of financial reporting to minimize lawsuits that the
users may bring forth
All clients are worth accepting
Of the four component of risks, what types of risk are applicable to the audit client?
Business risk and Audit risk

Engagement risk and audit risk
Financial reporting risk and business risk
Audit risk and Financial Reporting risk
What is key activity or cluster of activities which must be performed in an exemplary manner to
ensure a firm's continued competitiveness because it adds primary value to an output?
Client’s strategy
Key processes
Core business process
Resource management
An auditor has to evaluate matters that requires judgment or management intervention that may
result in material misstatement such as—
Cash equivalent
Investments in equity securities
Derivatives designated as hedging instruments
Inventory estimation through gross profit method
Benefit attained in audit planning--
Establishment of audit budget

Determination of audit fee
Elimination of unnecessary procedures
Development of internal control system
The risk caused by material increase of foreign currency rate requiring more dollar for the
business to pay its import liabilities.
Business risk
Engagement risk
Audit risk
The responsibility for the prevention and detection of non-compliance of laws and regulation
rests with--
The auditor
Management
What audit activity below is included in risk response?
Audit planning
Preliminary engagement activities
Acceptance of new client
Design of overall audit procedures
In applying risk-based audit approach, auditors have to understand whether financial statements
are fairly presented thru—
Selective focus on the risks to the entity’s operations

Mitigation of the identified risk of material misstatements by the audit team
Examining the strategies and business processes of the entity
Which of the following statement is not correct about the limitation of the audit risk model?
Audit technology is not so fully developed

Audit risk is judgmentally determined
Sale to a business to third party is a routine transaction
Inherent risk is difficult to formally assess
What is the term that describes the degree of confidence in the processes leading up to and
including an authentication?
Level of assurance
Opinion
Risk response
Audit report
The phrase free of material misstatements is intended to inform the users that—
The auditor has complied with all the ethical requirements

It is quite difficult to asses level of risks on management assertions
It is impractical for auditors to provide assurance on immaterial amounts
The audit process is primarily an evidence-gathering process
Audit risk can be avoided by an auditor by--
Proper preparation and reporting of financial statements

Accepting all clients applying for the auditor’s services
Avoiding accepting clients with doubtful reputation
Maintaining existing audit clients and no more.
The goal of auditors in applying risk-based audit approach is—
To resolve all identified risks of material misstatements for the management

To enhance the degree of confidence of intended users in the financial statements
To provide management with acceptable responses in mitigating the risks
To develop the concept of mitigating the misstatements found in financial data
What audit objective below is included in reporting?
Assessment of audit plan

Reduce audit risk
Development of overall audit strategy
Forming an opinion
A risk caused by the inability of the client to pay the auditor the audit fee—
Audit risk
Business risk
Engagement risk
The audit process is divided into three phases which can be performed by the auditor in this
particular order--

The auditor should perform risk-based audit process with:

Full application of standards of the PSA
In verifying client’s strategy, the presence of this item assures investors that the business will
operate continuously or for indefinite periods.

Long-range plan
What are the fundamental concepts vital in the planning and development of an audit approach?
Core Business Process and Resource Management

Business Risk and Audit Risk
Materiality and Risk
Fraud and Error
What audit activities below is not included in risk assessment?
Reduce audit risk to an acceptably low level

Audit of old client
Assess risk of material misstatement
Audit planning
The phrase reasonable assurance is intended to inform the users that the auditor—
Had updated the audit plan that links to the audit strategy
Cannot possibly expect to detect all material misstatements
Had developed the schedule of payments for the audit fees
Had designed the overall responses and further audit procedures
The technique used in risk-based audit approach focuses on analyzing different types of risks—
that could obtain an understanding of the business processes

that could describe sets of structured activities by an entity
that could design and implement an appropriate set of policies
that could lead fraud or error contained in the financial statements
The responsibility for the detection and prevention of material misstatements in the financial
statement rests with the—

Internal auditor
External auditor

Misjudgment on accounting estimates
QUIZ NO. 1
A characteristic of ideal profession based on member’s expertise in the systematic theory*
Community sanction
A Culture
Regulations Code
The characteristic of an ideal profession which limits membership or inclusion is known as*
A culture
Community sanction
Regulation code

development activity:*
A mindset that a professional accountant should embrace includes professionalism and ethical behavior
which involve:*

Business, institutions and individuals must maintain records of the financial condition and progress of
the business in order to*
Lifelong learning is one of 10 insights to 2025 CPA Horizon. Which following details refers to such
insight?*
Demonstrate superior technical proficiency
The practice of accountancy includes the following except:*
Practice in commerce
A free-market economy can exist and further strengthened thru sharing of:*
Income statement that can evaluate and guide management operations
Financial data reflective of correct economic conditions of assets and liabilities
An audit enhances the quality of financial statements and management’s report thru—*
Which of the following refers to the core values to retain advantage of CPA in the global economy?*
As a core value, a CPA attains competence by:*

Who among the following CPA belongs to the public sector?*
The characteristic in an ideal profession that prevents abuse of monopoly and to discipline members is*
Regulation code
A culture
Systematic theory
Community sanction
Changes in accounting standards and accounting related information have brought about globalization of
Accounting & Auditing. Among these changes is:*
Demographic Shifts
To acquire the required capabilities and competence, a CPA in public practice is bound by:*
Demographic shift is one of 10 insights to 2025 CPA Horizon. Which following refers to such insight?*
The objective of financial statement audit is to determine*
If information risk is evidently reduced to the minimum
A core value that requires CPAs to maintain impartiality and free of personal bias and conflict of interest*
Objectivity
These are unique combination of human skills, knowledge and technology providing values and results
to CPAs*
Core competencies
Core values
Core proposition
Core objectivity
Which of the following situation illustrates an information risk?*
The auditor confirmed FIFO method of inventory valuation used consistently
One of several factors that create a demand for an independent external audit is*
A CPA should possess leadership skill as its core competency thru*
Which of the following is not included among the core competencies of a CPA?*
Synthesizing intelligence to insights
Integration & collaboration
Leadership skills

environment*
Systematic Theory
Integrity
Community sanction
Leadership skill
These are the essentials and enduring beliefs of the CPA profession which it upholds over time.*
Core objectivity
Core integrity
Core values
Core competencies
Which of the following refers to the core competencies to sustain advantage for a CPA?*
Value proposition
Demographic shift
Market permission
Communication skills
A person becomes a Certified Public Accountant by:*
The Accounting Profession requires CPAs to possess core values in order to*

One of the five different areas that the professional accountant’s mindset needs to embrace is:*
Which of the following is not included among the core values of a CPA?*
Competence
Leadership skills
QUIZ NO. 2
For assurance engagements on historical financial information, a limited assurance engagement is

called:*
Reviews
Compilations
Tax services
Which following services a practitioner, who is not independent, may provide?*
Reviews but not financial statement audits
Reviews but not compilations
Attestation, but not auditing

Compilations but not reviews
What element of an assurance engagement does a “Preferred Stockholders” belong?*
Criteria
Practitioner
Intended users
Assurance report
Which of the following best describes “related services”? *
Review, compilation and agreed-upon procedures engagements
Audit and Review of financial statements
Assurance and audit engagements
Compilation and agreed-upon procedures engagements
What element of an assurance engagement does “Auditor’s Unqualified Opinion” belong?*
Assurance report
Criteria
Practitioner
Intended User
What element of an assurance engagement does “Sales journal” belong?*
Criteria
Subject matter
Evidence
Assurance report
A type of attestation service performed by CPAs:*
Management consulting advisory service
Agreed-upon procedures engagement
Tax services without opinion
Review of historical financial information
Which of the following results in a conclusion that represents positive assurance?*
Agreed-upon procedure engagement
Review
Audit examination
Compilation
Which of the following best describes “related services”?*
Assurance and Audit engagements
Audit and Review of financial statements
Review, Compilation and agreed-upon procedures engagements
Compilation and agreed-upon procedures engagements
Which of the following best describes the objective of an assurance engagement?*
Compare business data and policies with other entities
Enhance the credibility of information to meet the needs of intended users
Assist in preparing the company’s financial statements
Improve the company’s outcomes
The broad range of assurance engagement includes all, but which of the following?*
Annual Environment audit
Agreed-upon procedures engagement
Assurance services on Information Technology
Mystery shopping
An assurance services may include which of the following?*
Examination of the efficiency of governmental operations
All of given choices
Attesting to financial statements
Evaluation of a division’s performance for management
What element of an assurance engagement does “Statement of Cash Flow” belong?*
Criteria
Assurance report
Evidence
Subject matter
What element of an assurance engagement does “International Accounting Standards” belong?*
Practitioner
Evidence
Assurance report
Criteria
Assurance engagements should exhibit the following elements except--*
Appropriate professional fees
A subject matter
An engagement process
Suitable criteria
Which of the following best describes relationships among auditing, attest and assurance services?*
Attest is a type of auditing service
Auditing is a type of assurance service
Assurance is a type of attest service
Auditing and attest services are different types of services
What element of an assurance engagement does “Bank reconciliation statement” belong?*
Assurance report
Criteria
Evidence
Practitioner
Which of the following feature separates an assurance service from a non-assurance engagement?*
Report with a subject matter
Report without conclusion
Report with a conclusion
Report with a negative opinion
The broad range of assurance engagement includes all, but which of the following?
*
Health Care Performance Measurement
Independent audit of financial historical information
Tax services without opinion expressed
Information System Reliability Service
The applicable standard to be used in performing agreed-upon procedures is--*
Philippine Standards for Related Services
Philippine Standards for Review Engagements
Philippine Framework for Assurance Services
Which of the following is not an assurance engagement?*
Financial statement audits
Compilation
Reviews of prospective financial statements
Information reliability services
The attest function--*
Requires a review of a sample of transactions in the period of examination
Includes the preparation of a written report about the CPA’s conclusion
Is an essential part of every engagement performed by a CPA
Requires a complete review of all transactions in the period of examination
It refers to a practitioner’s written conclusion report about the reliability of another’s assertion.*
Assurance
Review
Attestation
Audit
What element of an assurance engagement does “Accounts Receivable” belong?*
Intended user
Evidence
Assurance report
Subject matter
Which of the following is a key attribute that is essential to perform an assurance engagement?*
Accounting skills
Payment scheme of the practitioner
Degree of loyalty of employees to the employer
Independence
Which of the following is not a key attribute that is essential to perform an assurance engagement?*
Established criteria or standards
Accounting skills
Independence
Subject matter knowledge
Which of the following statements best describes assurance services?*

Services designed for improvement of operations.
Services designed to express an opinion on the fairness of financial data
The preparation, collection, classification, of other financial information
Independent professional services intended to enhance reliability of data
Which of the following is an incorrect phrase?*
Auditing subjectively obtains and evaluates evidence
Auditing is a systematic process
Auditing communicates results to intended users
Auditing evaluates evidence regarding assertions
What element of an assurance engagement does a “Proof of Cash” belong?*
Criteria
Practitioner
Evidence
Intended users
For assurance engagements on historical financial information, Limited assurance engagements are
called--*
Reviews
Audits
Tax services
What type of assurance is provided by a practitioner when he/she performs a compilation agreement?*
Limited assurance
No assurance
Negative assurance
Positive assurance
A practitioner should accept an assurance engagement only if--*
The practitioner’s conclusion is to be in a contained in a written report
The subject matter in the form of financial information
The criteria to bused are not available to the intended users
The subject matter is the responsibility of the intended users or practitioner
What element of an assurance engagement does “Environmentalists” belong?*
Intended user or practitioner
Practitioner or responsible party
Responsible party and intended user
Responsible party and practitioner
The review of a company’s financial statements by a CPA firm:*
Is of similar scope as an audit and adds credibility to the statements
Concludes in issuance of report expressing the CPA’s positive opinion
Is substantially less in scope of procedures than an audit
Requires detailed analysis of the major accounts
What element of an assurance engagement does “Corporate Board Resolutions” belong?*
Subject matter
Evidence
Criteria
Practitioner
Which of the following best describes the attest process?*
Providing advisory services based on experience and knowledge skill
Assisting management to attain its objectives
Evaluating evidence preparatory for the conclusive report
Assembling data for tax returns
What element of an assurance engagement does “Cost accountant” belong?*
Practitioner and responsible party
Practitioner
Intended user or practitioner
Intended user or responsible party
In an assurance engagement, the responsible party and the practitioner--*
Should be from the same entity
Should be the same party, but not only one
May possibly be the same party
Should never be the same party
Independent professional services that are provided on financial or other information that improve the
quality of decision making are known as:*
Financial auditing
Assurance services
Attestation services
Internal auditing
What element of an assurance engagement does a “Pharmacologist” belong?*
Intended user
Practitioner
Criteria
Evidence
QUIZ NO. 3:
The following will ultimately benefit directly from a credible and reliable financial statement as a result
of an objective independent audit, except:*
The revenue tax procedures
Creditors, Prospective Investors, Employees
Information technology infrastructure
The primary responsibility for the adequacy of notes and disclosures in the financial statement rests with
the:*
Audit team assigned to the engagement
Staff auditor who drafts the statement and notes
Client management
Senior auditor in charge of field work

Inherent limitations in an audit arise from the following factors, except--*
Incompetence of an auditor
Most audit evidence is persuasive rather than conclusive
Use of sampling method
Use of testing
Which of the following type of audit is performed mostly by CPAs on contractual basis--*
External auditing
Government auditing
Internal auditing
BSP bank audit
The concept of reasonable assurance indicates that the auditor is—*
Not an insurer of correctness of the financial statements
Responsible for finding all anomalies committee
Responsible only for issuing an opinion on the financial statements
The term that describes the role of persons entrusted with the supervision, control and direction of an
entity is—*
Management
Government
Administration
Governance
Which of the following is one of the limitations of an audit?*
Inadequacy of the accounting records
Scope limitations imposed by the entity
Confidentiality of information
Nature of evidence obtained
The auditor’s judgment concerning the overall fairness of the presentation of financial position, financial
performance, and changes in financial position is applied within the framework of--*
Philippine Financial Reporting Standards
Information systems control
Internal Control
Philippine Standards of Auditing
To provide an assurance service in an engagement, the auditor will not perform this activity:*
Post transactions to subsidiary ledgers
Conduct procedures & gather evidences
Express an opinion
Evaluate evidence gathered
Which of the following is not a similarity between external and internal audits?*
Both auditors must be competent
Both auditors must be independent of the company
Both auditors consider risk and materiality in deciding extent of tests.
Both auditors follow a similar methodology in performing their audits

Which of the following situation does not appropriately describe a limitation of an audit?*
Professional skepticism requires that an auditor assume that management is—*
Honest, in the absence of fraud risk factors
Offering reasonable assurance of honest
Dishonest until completion of audit tests
Neither honest nor dishonest
Information risk refers to the risk that--*
The client’s financial statements may be materially false and misleading
The auditor may express an unqualified opinion on financial statements that are materially stated
Errors and frauds would not be detected by the auditor’s procedures
The client entity may not be able to remain in business
The auditor’s opinion—*
Is an assurance as to the efficiency conducted by management but not effectiveness
Is an assurance as to the future viability of the entity
Enhances the credibility of the financial statements
Certifies the correctness of the financial statements
Which of the following is a cause of information risk?*

independence of the practitioner
High level of assurance provided by the auditor
Complicated transaction entered into by the entity
Transparency of the provider of the data
Which of the following terms does not belong?*
Independent Audit
Internal Audit
Financial Audit
External Audit
Operational audit refers to the study of business operations for the purpose of making recommendations
for which of the following?*
Compliance with rules and regulations
Attesting to the fairness of the financial statements
All of the given choices
Economic and efficient use of resources
An audit involves ascertaining the degree of correspondence between assertions and established
criteria. Which of the following standards would be a valid criterion?*
Regulations of the Securities and Exchange Commission
International Standard on Auditing
The auditor communicates the results of examination through the medium of the-- *
Audit report
Professional behavior
Management assertions
Compilation report
Which of the following is not one of the limitations of an audit?*
Nature of evidence obtained
Limitations imposed by client
Human error
The use of testing
Management of a company is responsible for--*
Applying the Ethics for professional accountants
Independence and obtaining evidence
Hiring the auditor
Preparing the financial statements
Performance Auditing is primarily oriented toward--*
Future improvements to accomplish the goals of management
Past activities provided by existing internal control
The accuracy of data reflected in management’s financial records
The verification that a company’s financial statements are fairly presented
Which of the following statements about independent financial statement audit is correct?*
The audit is designed to provide limited assurance that the financial statements are free from material
misstatements
The auditor’s opinion is not an assurance as to the future viability of the business with which
management has conducted the affairs of the entity
The procedures required to conduct an audit should be determined by the client who engaged the
services of the auditor
The audit of financial statements relieves management of its responsibilities for the financial statements
Which of the following is one of the scopes of an independent audit?*
Preparation of financial statements by the auditor using the PFRS
Auditor will provide resolutions for the improvement of client’s management
By inquiry, observation, inspection, the auditor tests the existence assertions
Submit the agreed report as conclusion of the engagement
Which of the following is not one of the general principles governing the audit of financial statements?*
The auditor should gather conclusive evidence to prove accuracy of assertions
The auditor should obtain sufficient appropriate audit evidence to reduce audit risk
Internal auditor’s independence is enhanced when they report to—*
The head of the controller division
The audit committee of the board of directors
The President of the corporation
The external auditors
To provide for greatest degree of independence in performing internal auditing functions, an internal
auditor most likely should report to-- *
Corporate Stockholders
Corporate Controller
Those charged with Governance
Vice President for Finance
Auditing is a systematic process, the concept of which implies structured, organized and--*
arrange so that activities can be found or used easily and quickly
sensible as characterized by clear, sound reasoning via rules of formal argument
arranged in a systematic way, especially on a large scale
has been put together in an organized and deliberate way
Which of the following is not a responsibility of the management regarding financial statements? *
form an opinion on the financial statements
Preparation of financial statements
provide access to all records to the auditor
Design of internal control of the entity
While performing audit services for their clients, CPAs have a duty to provide a level of care which is-*
Reasonable
Superior
Free from judgment error
Greater than average
Broadly defined, the subject matter of any audit consists of--*
Economic data based on its industrial environment
Financial data derived from sales operations
The complete sets of financial statements

Explicit and implicit representations of management
From the definition of the American Accounting Association, Auditing is a systematic process because:*
standards against which the assertion are judged respectively
Auditing consists of a series of sequential steps that include information testing system
the auditor’s opinion is an assurance as to the future viability of the entity
the primary objective of an independent audit is to express an opinion
A typical objective of a management audit is to determine whether an entity’s—*
Operational information is in accordance with PFRS
Financial statements present fairly the results of operation
Adherence with applicable government regulations is in place
Most of the independent auditor’s work in formulating an opinion on financial statements consists of--*
Examining cash transactions
Comparing recorded accountability of existing assets
Obtaining and examining evidential matter.
Studying and evaluating internal control
As guidance for measuring the quality of the performance of an auditor, the auditor should refer to:*
Generally Accepted Accounting Principles
International Financial Reporting Interpretation Committee

The Internal Audit Department of ABC Corporation is routinely conducting an audit of the company. The
internal auditor of ABC Corporation is not expected to--*
perform independent appraisal of activities within the organization
provide an opinion on the fairness of financial statement assertions
review accounting operations of ANC Corporation
evaluate financial and other operations as a basis for service to management
To operate effectively, an internal auditor must be independent of--*
The employer-employee relationship which exists for other employees in the organization
The line functions of the organization
The entity
All of these choices
An audit is primarily for the benefit of:*
Other types of auditors
The public and stakeholders
Those charged with governance
The information providers
Under PSA 260 and the SEC Code of Corporate Governance, the term “Those Charged with Governance”
refers to--
Internal Auditors
Corporate Board of Directors
Forensic Auditors
BIR examiners
An independent audit consists of the following related activities, which among these is not?*
Objective examination of financial statements
Evaluate if financial statements are prepared in conformity with the PSA
Communication of findings achieved through a written report
Methodical evaluation of evidence and assertions
QUIZ NO. 4:
What audit activities below is not included in risk assessment?*
Application of ethical requirements
Audit planning
Continuance of audit
Evidence evaluation
What audit objective below is included in risk response?*
Reduce audit risk
Forming an opinion
Additional audit work opinion
Develop overall audit strategy
The phrase free of material misstatement is intended to inform users that the auditor’s responsibility is-*
To detect material misstatements i engagements

Open to material and immaterial information
What item below is an example of non-routine transaction for an entity engaged in merchandising?*
Large volume of purchased items in anticipation of peak season
Sale to a subsidiary company for 85% discount
Large volume of consignment sales
Purchase of luxury items offered for sale
Which among the causes of misstatements is difficult for the auditor to uncover?*
Clerical errors
Perpetrated fraud
Which item below is not one of risk-based audit approach?*
Strategy development process identification
Modification of the auditor’s opinion
Process & control failure possibilities
The responsibility for the prevention and detection of non-compliance of laws and regulation rests
with--*
The auditor
Management
The phrase free of material misstatement is intended to inform users that the auditor’s responsibility is--
to detect material misstatements in engagements
open to material and immaterial information
In verifying client’s strategy, the presence of this item assures investors that the business will operate
continuously or for indefinite periods.*
Long-range plan
Which type of risk below can be affected by business volatility, economic climate, or geographical
location--*
Business risk
Audit risk
Engagement risk
A risk resulting from significant conditions adversely affecting ability to achieve goals and strategies--*
Engagement risk
financial reporting risk

Business risk
liquidity risk
The auditor should perform risk response, risk assessment, and reporting in the audit process with:*
Full compliance of standards of the PSA
The risk that relates directly to the recording of transactions and the presentation of financial data in the
financial statement is—*
Engagement risk
Business risk
Audit risk
The audit process is divided into three phases which can be performed by the auditor in this particular
order--*
The audit strategy should involve identifying the objective and scope of the audit thru:*
Analytical procedures
Proper review and monitoring of team’s activities
Coordination of woks of experts

Which of the following could be classified as an error?*
An auditor has to evaluate matters that requires management judgment or intervention that may result
in material misstatement such as—*
External independent financial statement audit
Outsourcing of accounting services
Redemption of long-term bonds
Bad debts estimation
The economic risk that a public practitioner is exposed to simply because it is associated with a client
with a bad reputation is—*
Audit risk
Business risk
Engagement risk
The auditor’s best defense when material misstatements are not uncovered is to have conducted the
audit—*
As effectively as reasonably as possible
In accordance with auditing standards
In a timely manner
Only after an adequate investigation of the management team
Which of the following statements is true?*
It is usually easier for the auditor to uncover errors than fraud
It is usually easier for the auditor to uncover fraud than errors
Usually, the auditor does not design procedures to uncover fraud or errors
It is usually equally difficult for the auditor to uncover errors or fraud
Which item below is performed by the auditor in a risk-based audit approach?*
Evaluation of auditor’s legal responsibilities
Mastery of a particular intellectual skill
Assurance services on information technology
The responsibility for the detection and prevention of material misstatements in the financial statement
rests with the—*
External auditor
Internal auditor
The phrase reasonable assurance is intended to inform the users that auditors--*
Limit responsibilities to material amounts only
Do not guarantee fairness of financial statements

Provide assurance even on immaterial amounts
Were limited in their access of client’s records
A concept used to express uncertainty about events that could have material effect on the
organization--*
Risk-based audit
Risk response
Risk
Audit risk model
What audit document below is included in reporting?*
Audit opinion
Assertion level
Materiality
Audit findings
When the auditor declared: We conducted our audits in accordance with the PSA, it means that the
auditor--*
performed the audit on the average output
Made selective compliance to all the standards
made partial compliance to all the standards
Observed full compliance to all the standards
Which of the following activities is not part of the activities within the audit opinion formulation
process?*
The auditor determines the appropriate non-audit consulting services to provide to the client
The auditor determines the appropriate audit opinion to issue

The auditor identifies and assess risks of material misstatements and then responds to those identified
risks
The auditor develops a common understanding of the audit engagement with the client
The process of using a company's resources in the most efficient way possible is called—*
Resource management
Risk management
Which type of risk below can be avoided by careful selection and retention of client?*
Business risk
Audit risk
Engagement risk
Correct answer
Engagement risk
The audit process is divided into three phases which can be performed by the auditor in this particular
order--*
Reporting, risk response, risk assessment
Risk response, risk assessment, reporting
Risk assessment, reporting, risk response
Reporting, risk assessment, risk response

Quiz 1
Leadership skills
These are the essentials and enduring beliefs of the CPA profession which it upholds over time.*
Core values
economy?*


environment*
Systematic Theory


*

Community sanction
interest*
Objectivity
members is*
Regulation code
Lifelong learning is one of 10 insights to 2025 CPA Horizon. Which following details refers to
such insight?*

One of the five different areas that the professional accountant’s mindset needs to embrace is:*
progress of the business in order to*

behavior which involve:*
results to CPAs*
Core competencies
globalization of Accounting & Auditing. Among these changes is:*
insight?*
Quiz 2.
The Philippine Standard on Assurance Engagement (PSAEs) are to be applied in—
Assurance engagements dealing with subject matters other than historical financial information
The item “New products introduced by suppliers” would be examples to what element of an
Subject matter
Which of the following is not one of major categories of practitioner’s assurance services?
*
Compilation engagement
Which of the following is responsible for an entity’s financial statements?
*

*
Five party relationship among the practitioners
Three individuals or sections are involved in what element of an assurance engagement?

*
Party relationships
Which is not true of the intended user?

*
They have to accept the assertions provided by the responsible party
Which of the following forms may the subject matter of an assurance engagement take?
*
Procedures applied to specific activities to achieve a specific result
Which of the following is a non-assurance engagement?

*
Preparation and Presentation of Financial Statement
What does and auditor provide with regard to management assertion made in an Assurance
engagement?
*
Satisfaction as to reliability of the assertions
The item “PLDT telephone bills” would be examples to what element of an assurance
engagement?
evidence
An assurance engagement that provides a high level of assurance that the financial statements
present fairly the financial position of the business.
*
Independent financial statement audit

*
When related controls are effective

Which of the following is not a key attribute that is essential to perform an assurance service?
*
Accounting skills
Which one of the following is not a part of the attestation process?

*
Posting of transaction entries to the subsidiary ledgers
The audit of a company’s financial statement by a practitioner—

*
Is wider in scope of procedures than a review engagement
These are independent professional services that improve the quality of information, its
context, for decision makers.
*
Assurance services
Which of the following standards are to be applied in the audit of subject matters other than
historical information?
*

*
Tax compliance and agreed-upon procedures
Which examples below can best illustrate the assurance engagement element of
“Practitioner”?
*
Pharmacist, Doctor of Medicine, HRM
Which of the following is broader in scope and concept than the others?
Assurance services
The item “Labor and Employment Unrest” would be an example to what element of an
*
Subject matter
The independent auditor lends credibility to client’s financial statement by--

*
Attaching an auditor’s opinion to the client’s financial statements
Which is responsible for determining the nature, timing, extent of procedures in a compilation
engagement?
*
Responsible Party but not the Practitioner
Which is incorrect concerning evidence as an element of an assurance engagement?

*
The volume of evidence can compensate for its poor quality
Which example below can best illustrate the assurance engagement element of “suitable
criteria”?
*
National Internal Revenue Code
Which example below can best illustrate the assurance engagement element of “Intended
Users”?
*
Employees

*
What sets the difference between an Assurance engagement and a non-assurance

engagement?
The assurance report with an opinion
Which of the following characteristics need to be exhibited in determining the suitability of a

criteria in an assurance engagement?
*
Includes relevant factors that may affect the conclusions of an engagement situation
Which of the following is not an example of an assurance service?

*
Preparation of tax returns for corporations
Which examples below can best illustrate the assurance engagement element of “Criteria”?
*
Corporate Board Resolutions
Which of the following engagement standards are to be applied in the audit of historical
*
Philippine Standards on Auditing (PSA)
A summary of findings rather than assurance is most likely to be issued on which engagement?
*
Compilation
The item “Preference Stockholders ” would be an example to what element of an assurance

engagement?
*
Responsible patty

*
Policies and procedures about the preparation and presentation of financial data
Which of the following engagements requires compliance with independence requirements?
Review
“Subject matter information” as used in the Framework to Assurance Engagement shall mean—
*
Outcome of the evaluation or measurement of a subject matter against criteria
Which examples below can best illustrate the assurance engagement element of “Evidence”?
*
Sales Journal
The statement that “In our opinion, the accompanying financial statements present fairly the
financial position of ……..” expresses which of the following?
*
Positive form of confirmation
Quiz 3
An audit designed to provide reasonable assurance of detecting violations of specific provisions

of contracts or grant agreements would be—
*
A Compliance Audit
Which among the possible solutions to reduce information risks is most acceptable to investors?
*
Have the financial statements examined by an auditor
Following items are advantages and practical benefits of an independent audit to Client or
Management, except--
*
Provides legal community an independent basis in administering estates and trust
Which of the following is not among the characteristics of auditing?

*
It includes communication of the results to the PICPA

What account item can be classified under account balances?
*
Balance Sheets
Which following statement is true regarding inherent limitations of an audit?
*
There is an unavoidable risk that some material misstatements may not be detected due to these
limitations in an audit
*
Finished Goods Inventory
An element in the definition of auditing that establishes the benchmarks against which the
assertion or representations are judged.
*

*
Net Purchases
Financial statement users often receive unreliable financial information from companies. Which
of the following is not a common reason for this?
*
Large amount of data

An element in the definition of auditing that identifies individuals who use (rely on) the
auditor’s findings.
*
Interested users
Upon completion of a typical audit, the auditor has—

*
High level of assurance that all material errors and irregularities have been found
Which following statements is not true in types of an auditor?
*
Internal Auditor work under permanent status, while external auditors are on contractual basis
Which of the following statements about independent financial statement audit is incorrect?
*
All these options are correct about independent financial statements audit
A management assertion which states: Amount and other data relating to recorded transactions
and events have been recorded and related disclosures have been appropriately measured and
described.
*
Accuracy
A management assertion which states: Transactions and events have been recorded in the
correct accounting period.
*
Cut0ff
Which of the following statements about independent financial statement audit is correct?
*

*
Presentation
The term “efficiency” in performance auditing refers to—

*
Using resources to maximize output for a given input
An independent audit aids in the communication of economic data because the audit—
*
Lends credibility to the financial statements
Under PSA 260 and the SEC Code of Corporate Governance, Corporate Board of Directors will be
referred as—
*

Professional skepticism dictates that when management makes a statement to the auditor, the
auditor shall--
*
Verify before accepting such statement

Which following statements is not true about the general principles regarding independent
audit?
*
Compliance with relevant professional ethics is voluntary
Most of the independent auditor’s work in formulating an opinion on financial statements

consists of—
*
Gathering and evaluating evidential matter

*
Income from royalties
Which of the following is a responsibility of the management regarding financial statements?

*
provide all records to the auditor necessary in evidence gathering
Which of the following is an assertion about Classes of transaction?

*
Cut-off
The following items are the possible causes of remoteness of information users from
information providers, except—
*
Improvement in capturing financial data due to development in technology
Expectation gap is the difference between--

*
What the public expects from the auditor and what the public will actually get
The independent audit is important to readers of financial statements because it—
*
Involves the objective examination and reporting of management prepared statements
What is the proper organizational role of internal auditing?

*
To serve as an independent, objective assurance that adds value to operations

A typical objective of an operational audit is to determine whether an entity’s—
*
An element in the definition of auditing that is often referred to as attestation. The final stage in
the audit process is the audit report which is the communication of the finding to users.
*

In the audit opinion formulation process, which flow of processes below would be the most
logical sequence to be applied in the audit engagement?
*
Information risks faced by investors

As provided in the definition of Auditing, auditor must evaluate evidence against criteria to:
*
determine the validity as to closeness of assertion to established criteria
An audit involves ascertaining the degree of correspondence between assertions and

established criteria. Which of the following standards would not be a valid criterion in--
*
The level of Assurance provided by on an audit report is--

*
High, but not absolute
The primary purpose of an independent audit of financial statements is to—

*
Provide users with unbiased opinion about the fairness of assertions in the financial statements
*
Advances to subsidiaries
QUIZ 4
*
When the auditor declared: We conducted our audits in accordance with the PSA, it means that
the auditor--
*
performed full compliance to all the standards
What audit activity below is not included in reporting?

*
Planning the audit

The process of using a company's resources in the most efficient way possible is called—
*
Resource management
Risk-based Audit approach requires that risky areas of a business must be identified by the
auditors for the following reasons, except—
*
competition for clients among audit firms is high

The audit process is divided into three phases which can be performed by the auditor in this
particular order--
*

An auditor has to evaluate matters that requires judgment or management intervention that
may result in material misstatement such as—
*
Subsequent measurement of financial assets @ amortized cost
An activity or set of activities that will accomplish a specific organizational goal and have
maximum impact on the success of an organization.
*
Key processes
Which of the following statements is correct about error?

*
It is unintentional misstatement in financial statements
What audit documentation below is included in risk assessment?

*
Assessment of risk of material misstatement at assertion level

*
Coordinates the work to be performed by other experts and practitioners
The responsibility for the prevention and detection of non-compliance of laws and regulation
rests with--
Management
The risk caused by financial loss because management is not honest and prevents the continuity
of the audit process.
*
Engagement risk
These activities deliver results that are directed towards specific and measurable goals which
ensure business organization to remain competitive.
*
Key processes, objectives, and inputs
Auditors must focus on the risks to the entity’s operation and ensure controls are in place—
To mitigate or compensate for those risks
Labor unrest is what type of risk?

*
Business risk
Of the four component of risks, what types of risk are applicable to the auditor?
*
In verifying client’s strategy, the presence of this item assures investors that the business will
operate continuously or for indefinite periods.
*
Long-range plan
In applying risk-based approach, auditors direct their attention to those--

*
key risk areas of financial statements that may contain errors or noncompliance

*

Which following statement is not an important consideration in integrating the concepts of
materiality and risk in the conduct of a risk-based audit?
*

Audit risk can be avoided by an auditor through—
*
Setting audit risk at an acceptably low level
What audit activity below is not included in risk response?

*
Audit evaluation
What are the fundamental concepts vital in the planning and development of an audit
approach?
*

Which of the following act is not considered as non-compliance with laws and regulations--
*
All of these choices are considered non-compliance of laws and regulations
*
The phrase reasonable assurance is intended to inform the users that--

*
There are some risks that the financial statements are not fairly stated

merchandising?
*
Presence of BIR auditors verifying tax payments
The purpose of obtaining reasonable assurance while applying risk-based audit approach is
attained thru—
*
Expression of an opinion by the auditor

*
The auditor’s responsibility is limited to material financial information

QUIZ 1

environment*
Systematic Theory
These are the essentials and enduring beliefs of the CPA profession which it upholds over
time.*
Core values

behavior which involve:*

insight?*

results to CPAs*
Core competencies
interest*
Objectivity
progress of the business in order to*
members is*
Regulation code
One of the five different areas that the professional accountant’s mindset needs to embrace
is:*

economy?*
Leadership skills

Community sanction
globalization of Accounting & Auditing. Among these changes is:*
Lifelong learning is one of 10 insights to 2025 CPA Horizon. Which following details refers to
such insight?*
QUIZ 2
What does and auditor provide with regard to management assertion made in an
Assurance engagement?
Satisfaction as to reliability of the assertions
An assurance engagement that provides a high level of assurance that the financial
statements present fairly the financial position of the business.
*
Independent financial statement audit
Which of the following characteristics need to be exhibited in determining the suitability
of a criteria in an assurance engagement?
Includes relevant factors that may affect the conclusions of an engagement situation
The objective of a compilation engagement is for the CPA to—

collect, classify, summarize financial information
The item “Labor Laws” would be examples to what element of an assurance

engagement?
Criteria
Which example below can best illustrate the assurance engagement element of
“Subject Matter”?
Manufacturing Process
What level of assurance does a CPA give on an advisory report?

None
Which of the following engagement standards are to be applied in the audit of historical
Philippine Standards on Auditing (PSA)
Which of the following is responsible for an entity’s financial statements?

Which of the following is broader in scope and concept than the others?
Assurance services

Tax compliance and agreed-upon procedures
The item “Customers’ Complaints” would be examples to what element of an assurance

engagement?
Subject matter
Which is not true of the intended user?

They have to accept the assertions provided by the responsible party

When related controls are effective
Which of the following is not an example of an assurance service?

Preparation of tax returns for corporations
Which of the following forms may the subject matter of an assurance engagement take?
Procedures applied to specific activities to achieve a specific result
The item “Electrical Engineer” would be examples to what element of an assurance

engagement?
Practitioner
The Philippine Standard on Assurance Engagement (PSAEs) are to be applied in--

Assurance engagements dealing with subject matters other than historical financial information
The item “Plant Facilities” would be examples to what element of an assurance

engagement?
Evidence
Which of the following is a non-assurance engagement?

Preparation and Presentation of Financial Statement
The item “Chief Financial Officer” would be examples to what element of an assurance
engagement?
Responsible Party
A summary of findings rather than assurance is most likely to be issued on which

engagement?
Compilation
The item “Philippine Standard on Review Engagement” would be examples to what

element of an assurance engagement?
Criteria
Which of the following engagements requires compliance with independence

requirements?
Review
Which of the following is not a key attribute that is essential to perform an assurance
service?
Accounting skills
A report on the factual findings is the type of report that the practitioner submits when
performing—
Agreed-upon engagement
Which is responsible for determining the nature, timing, extent of procedures in a
compilation engagement?
Responsible Party but not the Practitioner
When a CPA engages in tax planning, the task would entail—

Determination of tax risks on planned activities to minimize tax liabilities

Which of the following standards are to be applied in the audit of subject matters other
than historical information?
The item “Capital Expenditure Budget” would be examples to what element of an

Subject matter
The audit of a company’s financial statement by a practitioner—

Is wider in scope of procedures than a review engagement
These are independent professional services that improve the quality of information, its context,
for decision makers.
Assurance services
Which one of the following is not a part of the attestation process?

Posting of transaction entries to the subsidiary ledgers

Policies and procedures about the preparation and presentation of financial data
A practitioner may accept and engagement to perform agreed-upon procedures on the

specific subject matter of specified elements, or items of a financial statement if—
Issuance and use of the report is restricted
The statement that “In our opinion, the accompanying financial statements present fairly
the financial position of ……..” expresses which of the following?
Positive form of confirmation

Five party relationship among the practitioners
What sets the difference between an Assurance engagement and a non-assurance
engagement?
The assurance report with an opinion
The item “Corporate Building Supervisor” would be examples to what element of an

Responsible party
QUIZ 3
A typical objective of an operational audit is for the auditor to—

Make the recommendations for improving performance
A management assertion which states: All transactions and events have been properly
authorized.
Authorization
Which following statements is not true in types of an auditor?

Internal Auditor work under permanent status, while external auditors are on contractual basis
Which of the following is a responsibility of the management regarding financial

statements?
provide all records to the auditor necessary in evidence gathering
Expectation gap is the difference between--

What the public expects from the auditor and what the public will actually get
An element in the definition of auditing requiring the examiner must be qualified to

understand the criteria used and the competence to know how and what evidence to
accumulate to reach the proper conclusion.
Competent, independent person
What account below can be classified under classes of transactions*

Freight-Out
Under PSA 260 and the SEC Code of Corporate Governance, Corporate Board of
Directors will be referred as—
Which of the following statements about independent financial statement audit is

incorrect?
All these options are correct about independent financial statements audit
An element in the definition of auditing that refers to the closeness that an assertion can
be identified with established criteria.
In the audit opinion formulation process, which flow of processes below would be the
most logical sequence to be applied in the audit engagement?

Rights and Obligations
Which of the following is an assertion about classes of transaction?

Occurrence
What item below can be classified under account balances?

Statement of Financial Position
Professional skepticism dictates that when management makes a statement to the

auditor, the auditor shall--
Verify before accepting such statement
A management assertion which states: Transactions and events that have been
recorded or disclosed have occurred, and such transactions pertain to the entity.
Occurrence

*
Advances to suppliers
An independent audit aids in the communication of economic data because the audit—
Lends credibility to the financial statements
Which of the following is not a cause of information risk?

Separation of authorities and functions
An audit involves ascertaining the degree of correspondence between assertions and
established criteria. Which of the following standards would not be a valid criterion in--
Most of the independent auditor’s work in formulating an opinion on financial statements

consists of—
Gathering and evaluating evidential matter
Which of the following is not among the characteristics of auditing?

It includes communication of the results to the PICPA
Information risks faced by investors
The independent audit is important to readers of financial statements because it—

Involves the objective examination and reporting of management prepared statements

Purchase Discount
The purpose of an audit of financial statements is to—

Enhance the degree of confidence of intended users in the financial statements
The following items are the possible causes of remoteness of information users from
information providers, except—
Improvement in capturing financial data due to development in technology
Which of the following statements about independent financial statement audit is

correct?
The term “efficiency” in performance auditing refers to—

Using resources to maximize output for a given input
Which following statements is not true about the general principles regarding
independent audit?
Compliance with relevant professional ethics is voluntary
Which among the possible solutions to reduce information risks is most acceptable to
investors?
Have the financial statements examined by an auditor
Upon completion of a typical audit, the auditor has—
High level of assurance that all material errors and irregularities have been found
Which following statement is true regarding inherent limitations of an audit?

There is an unavoidable risk that some material misstatements may not be detected due to
these limitations in an audit
As provided in the definition of Auditing, auditor must evaluate evidence against criteria
to:
determine the validity as to closeness of assertion to established criteria
An audit designed to provide reasonable assurance of detecting violations of specific

provisions of contracts or grant agreements would be—
A Compliance Audit
An element in the definition of auditing that identifies the standards against which the
assertion or representations are judged.

Investment Properties
What is the proper organizational role of internal auditing?

To serve as an independent, objective assurance that adds value to operations
Following items are advantages and practical benefits of an independent audit to Client
or Management, except--
Provides legal community an independent basis in administering estates and trust
The level of Assurance provided by on an audit report is--

High, but not absolute
QUIZ 4
In verifying client’s strategy, the presence of this item assures investors that the
business will operate continuously or for indefinite periods.
Long-range plan
The risk caused by financial loss because management is not honest and prevents the
continuity of the audit process.
Engagement risk
In applying risk-based approach, auditors direct their attention to those--
key risk areas of financial statements that may contain errors or noncompliance
The process of using a company's resources in the most efficient way possible is
called—
Resource management
The audit process is divided into three phases which can be performed by the auditor in
this particular order--
What are the fundamental concepts vital in the planning and development of an audit
approach?
Risk-based Audit approach requires that risky areas of a business must be identified by
the auditors for the following reasons, except—
competition for clients among audit firms is high
When the auditor declared: We conducted our audits in accordance with the PSA, it
means that the auditor--
performed full compliance to all the standards
Which of the following statements is correct about error?

It is unintentional misstatement in financial statements
The auditor’s responsibility is limited to material financial information
Auditors must focus on the risks to the entity’s operation and ensure controls are in
place—
To mitigate or compensate for those risks
An activity or set of activities that will accomplish a specific organizational goal and have
maximum impact on the success of an organization.
Key processes
Which of the following act is not considered as non-compliance with laws and
regulations--
All of these choices are considered non-compliance of laws and regulations

Audit risk can be avoided by an auditor through—

Setting audit risk at an acceptably low level
The responsibility for the prevention and detection of non-compliance of laws and
regulation rests with--
Management
What audit activity below is not included in reporting?

Planning the audit
These activities deliver results that are directed towards specific and measurable goals
which ensure business organization to remain competitive.
Key processes, objectives, and inputs
What audit documentation below is included in risk assessment?

Assessment of risk of material misstatement at assertion level
Labor unrest is what type of risk?

Business risk
What audit activity below is not included in risk response?

Audit evaluation
The purpose of obtaining reasonable assurance while applying risk-based audit

approach is attained thru—
Expression of an opinion by the auditor
Which following statement is not an important consideration in integrating the concepts

of materiality and risk in the conduct of a risk-based audit?
An auditor has to evaluate matters that requires judgment or management intervention

that may result in material misstatement such as—
*
Subsequent measurement of financial assets @ amortized cost
merchandising?
Presence of BIR auditors verifying tax payments

Coordinates the work to be performed by other experts and practitioners
The phrase reasonable assurance is intended to inform the users that--

There are some risks that the financial statements are not fairly stated
Of the four component of risks, what types of risk are applicable to the auditor?

Auditing Block 2 3 4 5 6 QUIZZES

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AUDITING BLOCK 2, 5, 6 QUIZZES

1) The characteristic of an ideal profession which limits membership or inclusion is known as

The desire to maintain the status of the accounting profession as elite

To apply the core values and core competencies of an accountant

The increased of amount capital involved and number of potential investors

The need of reliable and credible financial information

3) A characteristic of ideal profession based on member’s expertise in the systematic theory

Knowledge is continued and further developed in the practice of the profession

The professional accountant is responsible to the community for his actions

the professional determines what is good or bad for the client

Practice in public accountancy

Practice in government where the CPA is a senator

Relevance in the global market

Increased risk reporting

7) A CPA should possess leadership skill as its core competency thru

Identifying strategic directions to meet the needs of clients

Inspiring and motivating others to achieve excellence

Performing analysis and applying business acumen for decision making

Staying current with standards and trends

Vigilant in ensuring data is captured and managed properly

Expanding marketability to global acceptance

Increase visibility in multiple business areas

Professional and accounting standards and reporting requirements

Core competencies and Core values

Objectives and scopes formulated within the framework of the profession

Statistical management data developed within the organization

10) As a core value, a CPA attains competence by:

Skillful resolution over challenging ambiguities and complexities

Engaging in lifelong learning on developments in the profession

Building strategic collaboration of multidisciplinary solutions

Demonstrating technical proficiency thru superior expertise and knowledge

Honesty and holding to rigorous standards of professional ethics

Inspiring and motivating others to achieve excellence

Proficiency with high level of expertise and knowledge

Continually pursue new and broad skills and knowledge

Serve as a strong basis for credit and borrowing

Gather evidences in providing high level of assurance on the financial reports

Prove that financial statements were not carelessly prepared

Reduce, if not eliminate, information risk

14) The objective of financial statement audit is to determine

If the reports prepared by management conform to the required contract provisions.

Whether the company’s use of its resources is valid

Any reservation about management’s internal control system

Applying professional skills and judgment to ambiguous and imperfect situations

Presenting more current information to be disclosed in the financial reports

Upholding the Code of Ethics with emphasis on ethical behavior

Acting as navigator supporting the needs of governing bodies and management

Influencing, inspiring, motivating others to achieve excellence

Meeting the ever-changing needs globally

Expertise in analysis and business acumen to provide guidance to clients

Building alliances and collaboration to provide solutions to complex problems

Emerging specialization to enhance expertise

Leverage strengths to expand market values

More time spending values to clients

Appropriate Research Program

Accounting standards and reporting requirements

Regulatory and professional ethics

20) A person becomes a Certified Public Accountant by:

Attending a prestigious CPA review school

Passing the CPALE after obtaining the BSA college degree