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Fundamentals of Auditing and Assurance Services

Preface to auditing and other services

1. Auditing and Assurance Standards Council (AASC) is the successor of

a. Financial Reporting Standards Council (FRSC) c. Auditing Standards and Practices Council (ASPC)

b. Accounting Standards Council (ASC) d. International Accounting Standards Council (IASC)

2. Auditing and Assurance Standards Council (AASC) hasa. 14 members c. 16 members

b. 15 members d. 8 members

3. The term of office of each members of AASC is

a. 2 years, renewable c. 3 years, non-renewable

b. 4 years, non-renewable d. 3 years, renewable

4. Which of the following is not represented in the Auditing and Assurance Standards Council?

a. Board of Accountancy c. Commission on Audit

b. Bangko Sentral ng Pilipinas d. Securities and Exchange Commission

5. Which statement is incorrect regarding AASC?

a. The AASC shall be composed of 14 members plus a chairman

b. The chairman and members of the AASC shall be appointed by PRC upon the recommendation of BOA

c. The chairman and members of the AASC shall have a non-renewable term of 3 years

d. The chairman should have been or presently a senior practitioner in public accountancy

6. The pronouncements of the AASC on auditing standards, practices and procedures shall be in the form of the following, except

a. Philippine Standards on Auditing (PSAs) c. Philippine Auditing Practices Statements (PAPSs)

b. Philippine Financial Reporting Standards (PFRSs) d. Philippine Standard on Quality Controls (PSQCs)

7. Which statement is correct regarding the pronouncements of AASC?

a. The exposure period allowed for each exposure draft of auditing and other pronouncements to be considered by the organizations

and persons to whom it is sent for comment is generally 60 days.

b. Each final standard and statement shall be submitted to the PRC through the BOA for approval after which the pronouncements

become operative 6 months from publication in the official gazette.

c. Practice Statements will have the same authority as the Engagement Standards.

d. PSAs issued by AASC are not the only authoritative source of engagement standards for members of the accountancy profession in the

Philippines.

8. Which statement is incorrect regarding the pronouncements of AASC?

a. Engagement Standards contain basic principles and essential procedures (identified in bold type black lettering) together with

related guidance in the form of explanatory and other material.

b. The PSAs may also have application, as appropriate, to other related activities of auditors.

c. Engagement Standards need only be applied to material matters.

d. Practice Statements have the same authority as the Engagement Standards.

9. Which of the following is true of Practice Statements?

a. These statements are intended to replace standards

b. These statements are intended to have the authority of the standards

c. These statements are issued to provide practical assistance to auditors in implementing the standards

d. These are form of interpretation issued by the AASC

10. In exceptional circumstances, an auditor may judge it necessary to depart from a standard in order to more effectively achieve the

objective of an audit. When such situation arises, the auditor is not required to justify the departure.

Engagement standards need only be applied to material matters

a. False, False c. True, False

b. True, True d. False, True

PHILIPPINE FRAMEWORK FOR ASSURANCE ENGAGEMENTS

1. Which statement is correct regarding assurance engagements?

a. It is an engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended

users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.

b. All engagements performed by professional accountants are assurance engagements.

c. Whether a particular engagement is an assurance engagement will depend upon whether it exhibits all the following elements - a

three party relationship, a subject matter and a suitable criteria.

d. All of the above statements are correct

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2. Which of the following is incorrect regarding the three party relationship element of assurance engagement?

a. The intended user is generally the addressee of the professional accountants report.

b. The responsible party and the intended user will often be from separate organizations.

c. The responsible party may also be one of the intended users.

d. All of the above statements are correct

3. The subject matter of an assurance engagement may take many forms, including:

a b c dNonfinancial performance or condition Yes Yes Yes No

Behavior Yes Yes Yes Yes

Financial performance or condition Yes Yes No Yes

Physical characteristics Yes No No No

Systems and Processes Yes No Yes Yes

4. The characteristics for determining whether criteria are suitable include:

a b c d

Relevance Yes Yes Yes Yes

Reliability Yes Yes Yes Yes

Completeness Yes Yes No Yes

Neutrality Yes No No Yes

Comparability Yes Yes No No

Feedback value Yes No No No

5. Assurance services are best described as

a. Services designed for the improvement of operations, resulting in better outcomes.

b. Independent professional services that improve the quality of information, or its context, for decision makers.

c. The assembly of financial statements based on assumptions of a reasonable party.

d. Services designed to express an opinion on historical financial statements based on the results of an audit.

6. Assurance services least likely involve

a. Improving the quality of information for decision purposes.

b. Improving the quality of the decision model used.c. Improving the relevance of information.

d. Implementing a system that improves the processing of information.

7. The following are assurance engagements, except

a. Reasonable assurance engagement c. Limited assurance engagement

b. Other assurance engagements d. Tax services

8. Engagements frequently performed by professional accountants that are not assurance engagements include the following, except

a. Agreed upon procedures c. MAS

b. Reasonable assurance engagement d. Compilation of FS

FRAMEWORK OF PSA (PSA 120)1. The Framework of PSA (PSA 120) applies to

a. Taxation c. Agreed upon procedures

b. Consultancy d. Accounting advice

2. The objective of an agreed-upon procedures engagement

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 the 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 auditors attention that causes the auditor to believe that the financial statements are n ot 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.

3. Which statement is incorrect regarding audit, review and related services?

a. Related services comprise agreed-upon procedures and compilation.

b. Audits and reviews are designed to enable the auditor to provide reasonable assurance and limited assurance, respectively.

c. Engagement to undertake agreed-upon procedures is not intended to enable the auditor to express assurance.

d. In a consultancy engagement, the accountant is engaged to use accounting expertise as opposed to auditing expertise to collect,

classify and summarize financial information.

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4. It refers to the level of satisfaction as to the reliability of an assertion being made by one party for use by another party

a. confidence level c. reasonableness level

b. assurance level d. tolerable level