SECOND MONTHLY QUIZ

1. Which of the following is not included in the broad category of assurance services?
A. operational audit
B. reporting on internal control
C. accounting or review services
D. evaluation of the client's risk management framework

2. Which of the following engagements do not require independence?

I. Agreed-upon procedures
II. Compilation
III. Audit
IV. Review
A. I and II
B. I and IV
C. I, II and IV
D. I, II, III and IV

3. The party responsible for assumptions identified in the preparation of prospective financial statements is usually
A. A third-party lending institution
B. The client's management
C. The reporting accountant
D. The client's independent auditor

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4. Which of the following services may a CPA perform in carrying out a consulting service for a client?
I. Analysis of the client's accounting system.
II. Review of the client's prepared business plan.

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III. Preparation of information for obtaining financing.
A. I and II only
B. I and III only
C. II and III only

5.
D. I, II, and III

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Which of the following is incorrect regarding the practitioner?
A. The term practitioner is broader than the term auditor.
B. The practitioner is governed by ethical requirements (i.e. professional competence) regarding the conduct
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of the engagements.
C. The practitioner must be independent to the responsible party but not necessarily to the intended users.
D. The practitioner is responsible for determining the nature, timing or extent of procedures required by the
engagement.
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6. Criteria that are embodied in laws or regulations, or issued by authorized or recognized bodies of experts that follow
a transparent due process are called
A. Suitable criteria
B. Established criteria
C. Specifically developed criteria
D. General criteria
C

7. What assurance is provided by the auditor in an agreed-upon procedures engagement?

A. Absolute
B. Reasonable
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C. Moderate
D. No assurance

8. Each page of the financial information compiled by the accountant should include the following reference, except
A. “Unaudited”
B. “Compiled without Audit or Review”
C. “Refer to Compilation Report”
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D. “Compiled, Negative Assurance Expressed”

9. Which of the following procedures is not included in a review engagement on a nonpublic entity?
A. Inquiries of management.
B. Inquiries regarding events subsequent to the balance sheet date.
C. Any procedures designed to identify relationships among data that appear to be unusual.
D. A study and evaluation of internal control structure.

10. Which is incorrect?

A. Consistent evidence obtained from various sources or of different nature is more reliable
B. It is generally more difficult to obtain assurance about subject matter information at a point in time than
about subject matter information covering a period of time.
C. When it is cost prohibitive or difficult to obtain an evidence, the auditor may shift to obtain from other
alternatives.
D. The practitioner considers the between cost of obtaining the evidence and the usefulness of the
information.

11. The objective of a review of financial statements

A. Is to enable the auditor to express an opinion whether the financial statements are prepared, in all material
respects, in accordance with an identified financial reporting framework.
B. Is to enable an auditor to state whether, on the basis of procedures which do not provide all the evidence
 that would be required in an audit, anything has come to the auditor's attention that causes the auditor to
believe that the financial statements are not prepared, in all material respects, in accordance with an
identified financial reporting framework.
C. Is to carry out those procedures of an audit nature to which the auditor and the entity and any appropriate
third parties have agreed and to report on factual findings.
D. Is to use accounting expertise as opposed to auditing expertise to collect, classify and summarize financial
information.

12. Which of the following is/are true?

Statement 1: Financial statements audit are assurance services
Statement 2: Review of historical financial statements are assurance services
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

13. Which of the following is/are true?

Statement 1: Responsible parties and intended users may be from the same entity.
Statement 2: Responsible parties and intended users may be from the different entities.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

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14. Which of the following is/are true?
Statement 1: An appropriate subject matter is one that is identifiable.

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Statement 2: A subjective matter may be historical or prospective.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

15. Which of the following is/are true? ev

Statement 1: Audit is an assurance engagement while review is not.
Statement 2: More procedures are performed by a practitioner in a review than in an audit.
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A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
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16. Which of the following items will an internal auditor is likely to be more concerned with than the external auditor?
A. Internal administrative procedures
B. The efficiency of operations
C. Cost accounting procedures
D. Internal control
C

17. What is the primary difference between financial reporting risk and audit risk?
A. Risks of being sued by third parties
B. Responsibilities of the respective parties involved
C. The application of accounting principles
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D. Demands of users of financial statements

18. An auditor should not issue a report on

A. Quarterly financial information
B. Management performance
C. Internal control
D. The achievability of forecasts
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19. The need for independent audits of financial statements can be attributed to all of the following conditions except
A. Remoteness
B. Consequence
C. Validity
D. Complexity of subject matter

20. The need for assurance services arises for all of the following reason except
A. Potential bias in providing information
B. Closeness between a user and the organization
C. Complexity of the processing systems
D. Remoteness between a user and the organization

21. Which one of the following is not a key attribute needed to perform assurance?
A. Accounting skills
B. Subject matter knowledge
C. Independence
D. Established criteria or standards

22. One reason that an auditor only obtains reasonable, and not absolute, assurance that financial statements are free
from material misstatement is
 A. Comprehensive basis reporting
B. Professional skepticism
C. Material misstatements
D. Employee collusion

23. What is a difference between the amount, classification, presentation, or disclosure of a reported financial statement
item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with
the applicable financial reporting framework
A. Misstatement
B. Fraud
C. Error
D. Noncompliance

24. Operational audit is primarily oriented toward

A. Future improvements to accomplish the goals of management.
B. The accuracy of data reflected in management's financial records,
C. The verification that a company's financial statements are fairly presented.
D. Past protection provided by existing internal control.

25. Internal auditors review the adequacy of the company's internal control system primarily to
A. Help determine the nature, timing, and extent of tests necessary to achieve audit objectives.
B. Determine whether the internal control system provides reasonable assurance that the company's objectives
and goals are met efficiently and economically.

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C. Ensure that material weaknesses in the system of internal control are corrected.
D. Determine whether the internal control system ensures that financial statements are fairly presented.

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26. Operational audits generally have been conducted by internal and COA auditors, but may be performed by certified
public accountants. A primary purpose of an operational audit is to provide
A. A measure of management performance in meeting organizational goals.
B. The results of internal examinations of financial and accounting matters to a company's top-level management.

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C. Aid to the independent auditor, who is conducting the examination of the financial statements.
D. A means of assurance that internal accounting controls are functioning as planned.

27. Which one of the following best describes the attest process?
A. Proving the accuracy of the books and records
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B. Gathering evidence about specific and known assertions.
C. Assisting management in the successful operations of the company.
D. Assembling and filing tax returns and related supplemental information.
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28. All are the relevant assertions for income statement accounts and related disclosures, except:
A. Occurrence
B. Measurement
C. Valuation
D. Presentation and Disclosure

29. In testing for cut-off, the objective is to determine

C

A. Whether all of the current period’s transactions are recorded

B. That no transactions from the prior period are included in the current period’s balances
C. That no transactions of the current period have been delayed and recorded in the future period.
D. Whether transactions are recorded in the proper period.
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30. Which of the following is the correct order of steps in the audit process?
I. Perform tests of control
II. Develop an overall strategy for the expected conduct and scope of audit
III. Obtain client’s written representation
IV. Prepare engagement letter
V. Perform substantive tests
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A. IV, I, II, V, III

B. IV, II, I, V, III
C. IV, II, III, I, V
D. IV, II, V, I, III

31. Arrangements concerning with which of the following are least likely to be included in the engagement letter?
A. Fees and billing
B. A predecessor auditor
C. CPA investment in client securities
D. Other services to be provided in addition to audit

32. An auditor's engagement letter most likely would include a statement that:
A. Lists potential significant deficiencies discovered during the prior year's audit.
B. Explains the analytical procedures that the auditor expects to apply.
C. Describes the auditor's responsibility to evaluate going concern issues.
D. Limits the auditor's responsibility to detect errors and fraud.

33. Which of the following procedures should be performed by the auditor prior to starting an initial audit?
I. Perform procedures regarding the acceptance of the client relationship and the specific audit engagement.
II. Communicate with the previous auditor, where there has been a change of auditors, in compliance with relevant
ethical requirements.
 A. I only
B. II only
C. Both I and II
D. Neither I nor II

34. Which of the following activities should be performed by the auditor at the beginning of the current audit
engagement?
I. Perform procedures regarding the continuance of the client relationship and the specific audit engagement.
II. Evaluate compliance with the requirements of the Code of Ethics for Professional Accountants in the Philippines,
including independence.
III. Establish an understanding of the terms of the engagement.
A. I and II only
B. II and III only
C. I and III only
D. I, II, and III

35. Which of the following activities shall not be included in preplanning an audit?
A. Understanding the client’s reason for obtaining an audit
B. Investigating the client’s background
C. Determining the likelihood of issuing an unqualified audit opinion on the client’s financial statements
D. Communicating with the prospective client’s prior auditor to inquire about any disagreements with the client

36. In developing the overall audit strategy, the focus of the engagement team’s efforts is considered. Which of the

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following is not appropriately classified as a factor affecting the focus of the team’s efforts?
A. The financial reporting framework on which the financial information to be audited has been prepared, including
any need for reconciliation to another reporting framework.

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B. Setting materiality for planning purposes.
C. Audit areas where there is a higher risk of material misstatement.
D. Volume of transactions, which may determine whether it is more efficient for the auditor to rely on internal
control.

37. Audit plans should be designed so that

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A. Most of the required procedures can be performed as interim work.
B. The auditor can make constructive suggestions to management.
C. The audit evidence gathered supports the auditor’s conclusion.
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D. Inherent risk is assessed at a sufficiently low level.

38. The objective of performing analytical procedures in planning an audit engagement is to identify the existence of:
A. Unusual transactions and events
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B. Illegal acts that went undetected because of internal control weaknesses

C. Related party transactions
D. Recorded transactions that were not properly authorized

39. Which of the following procedures would an auditor most likely perform in planning an audit of financial statements?
A. Inquiring of the client’s legal counsel concerning pending litigation.
B. Comparing the financial statements to anticipated results.
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C. Examining computer generated exception reports to verify the effectiveness of internal controls.
D. Searching for unauthorized transactions that may aid in detecting unrecorded liabilities.

40. An auditor compares expenses as a percent of sales to expectations. This is an example of

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A. Ratio analysis
B. Crease analysis
C. Trend analysis
D. Vertical analysis

END OF QUIZ
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