AUDITING THEORY FUNDAMENTALS OF ASSURANCE ENGAGEMENTS (Multiple Choice Questions)

1. These are independent professional services that improve the quality of

information for decision-making. a. Management consultancy b. Audit services c.
Assurance services d. Attestation services 2. Which of the following statements
best describes assurance services? a. Independent professional services designed to
express an opinion on the fairness of historical financial statements based on the
results of an audit. b. Services that requires the preparation of financial
statements or the collection, classification, and summarization of other financial
information. c. Independent professional services that are intended to enhance the
credibility of information to meet the needs of an intended user. d. Independent
professional services designed for the improvement of operations, resulting in
better outcomes. 3. Which of the following best describes the objective of an
assurance engagement? a. To compare the company's information and policies to those
of other entities. b. To improve the company's outcomes. c. To enhance the
credibility of information in order to improve the likelihood that the information
will meet the needs of an intended user. d. None of the above. 4. The degree of
certainty that the practitioner has attained and wishes to convey is: a. A
conveyance. b. An assertion. c. A declaration. d. An assurance. 5. What level of
assurance is provided by the auditor in an audit engagement? a. Positive level of
assurance b. High, but not absolute, level of assurance c. Moderate assurance d.
High level of assurance 6. The level of assurance provided by an audit of detecting
a material misstatement is referred to as: a. Positive assurance. b. High
assurance. c. Reasonable assurance. d. Negative assurance. 7. Of a. b. c. d. the
following, which is the broadest concept? Internal control audit. Audit of
financial statements. Attestation services. Assurance services.

8. In performing attestation services, a CPA will normally: a. Recommend uses for

information. b. Improve the quality of information, or its context, for decision
makers. c. Perform market analyses and cost estimates. d. States a conclusion about
a written assertion. 9. Which of the following is the single feature that most
clearly distinguishes auditing, attestation, and assurance: a. CPA's approach to
the service. b. Type of service. c. Scope of services. d. Training necessary to
perform the service. 10. Which of the following services provides the highest level
of assurance to third parties about a company's

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financial statements? a. Audit. b. Review. c. Compilation. d. Each of the above
provides the same level of assurance. 11. For assurance engagements regarding
historical financial information, reasonable assurance engagements are called: a.
Review engagements. b. Audit engagements. c. Compilation engagements. d. Agreed-
upon procedures engagements. 12. In some assurance engagements, the evaluation or
measurement of the subject matter is performed by the responsible party, and the
subject matter information is in the form of an assertion by the responsible party
that is made available to intended users. These engagements are called a. Recurring
engagements b. Non-assurance engagements c. Direct reporting engagements d.
Assertion-based engagements 13. The following are characteristics of "direct
reporting" assurance engagements, except a. The practitioner either directly
performs the evaluation or measurement of the subject matter or obtains a
representation from the responsible party that has performed the evaluation or
measurement. b. The subject matter information is in the form of an assertion by
the responsible party that is made available to the intended users. c. The
representation of the responsible party that has performed the evaluation or
measurement of the subject matter is not available to the intended users. d. The
subject matter information is provided to the intended users in the assurance
report. 14. What type of assurance engagement is involved when the practitioner
expresses a positive form of conclusion? a. Positive assurance engagement b.
Limited assurance engagement c. Reasonable assurance engagement d. Absolute
assurance engagement 15. What type of assurance engagement is involved when the
practitioner expresses a negative form of conclusion? a. Negative assurance
engagement b. Assertion-based assurance engagement c. Limited assurance engagement
d. Reasonable assurance engagement 16. Assurance engagements involve: a. Two
separate parties: a professional accountant and intended users. b. Two separate
parties: a professional accountant and a responsible party. c. Three separate
parties: a practitioner, a responsible party and intended users. d. Three separate
parties: a professional accountant, a responsible party, and intended users. 17.
Which of the following statements concerning the assurance engagement’s three party
relationships is incorrect? a. The responsible party and intended users may be from
different entities or the same entity. b. The term "practitioner" as used in the
Framework for Assurance Engagements is broader than the term "auditor" as used in
PSAs and PSREs. c. An entity's senior management (the responsible party) may engage
a practitioner to perform an assurance engagement on a particular aspect of the
entity's activities that is the immediate responsibility of a lower level of
management (the intended user). d. In an assertion-based engagement the responsible
party is responsible for the subject matter information (the assertion), and may be
responsible for the subject matter. 18. Which of the following statements
concerning the intended user of a professional accountant's report is incorrect? a.
The responsible party and the intended user may both be within the same
organization. b. The intended user should never be established by agreement between
the practitioner and the responsible party or those engaging or employing the
practitioner. c. In some circumstances, the intended user may be established by
law.

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d. The responsible party may also be one of the intended users. 19. Which of the
following is not one of the requirements before accepting an assurance engagement?
a. The practitioner should be competent and independent. b. The practitioner should
accept the engagement only if the subject matter is the responsibility of another
party c. The practitioner should accept the engagement only if the subject matter
is identifiable and in the form that can be subjected to evidence gathering
procedures. d. The responsible party and the intended user of assurance report
should be from different organizations. 20. The following statements relate to the
three parties involved in an assurance engagement. Which is correct? a. The
responsible party and the intended users should always be from different entities.
b. A practitioner should not accept an assurance engagement when the subject matter
of the engagement requires specialized skills and knowledge beyond those ordinarily
possessed by the practitioner. c. A responsible party is the person who is
responsible for the subject matter or the subject matter information. d. In all
assurance engagements, the responsible party is the engaging party, i.e., the party
that engages the practitioner 21. Suitable criteria are required for reasonably
consistent evaluation or measurement of the subject matter of an assurance
engagement. Which of the following statements concerning the characteristics of
suitable criteria is correct? a. Relevant criteria allow reasonably consistent
evaluation or measurement of the subject matter including, where relevant,
presentation and disclosure, when used in similar circumstances by similarly
qualified practitioners. b. Reliable criteria contribute to conclusions that are
clear, comprehensive, and not subject to significantly different interpretations.
c. Criteria are sufficiently complete when they contribute conclusions that are
clear, comprehensive, and not subject to different interpretations. d. Neutral
criteria contribute to conclusions that are free from bias. 22. 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.
General criteria c. Established criteria d. Specifically developed criteria 23.
Which of the following is not a characteristic of suitable criteria? a.
Completeness b. Comparability c. Neutrality d. Relevance 24. The criteria to be
used for a particular engagement can either be established or specifically
developed. Established criteria are those a. Designed for the purpose of the
engagement. b. Embodied in laws or regulations or issued by authorized or
recognized bodies of experts that follow a transparent due process. c. Made
available to the intended users. d. Not made available to the intended users. 25. A
practitioner should accept an assurance engagement only if a. The subject matter is
the responsibility of either the intended users or the practitioner. b. The subject
matter is in the form of financial information. c. The practitioner's conclusion is
to be contained in a written report. d. The criteria to be used are not available
to the intended users. 26. In an assurance engagement, this refers to the
information obtained by the practitioner in arriving at the conclusions on which
the conclusion is based. a. Generally accepted auditing standards b. Assertions c.
Criteria d. Evidence 27. Assurance engagement risk is the risk

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a. Of expressing an inappropriate conclusion when the subject matter information is
not materially misstated. b. That the practitioner expresses an inappropriate
conclusion when the subject matter information is materially misstated. c. Of
expressing an inappropriate conclusion when the subject matter information is
either materially misstated or not materially misstated. d. Through loss from
litigation, adverse publicity, or other events arising in connection with a subject
matter reported on. 28. The following are components of assurance engagement risk,
except a. Business risk b. Detection risk c. Inherent risk d. Control risk 29. The
predominant type of attestation service performed by CPAs is: a. Audit. b. Review.
c. Compilation. d. Management consulting. 30. Which of the following
characteristics is not considered necessary in determining whether the criteria are
suitable? a. Sufficiency b. Relevance c. Reliability d. Neutrality 31. The
assurance report is often addressed to the intended users which may be: a. The
party responsible for the subject matter. b. Established by agreement between the
professional accountant and the responsible party. c. Both A and B d. Neither A nor
B 32. When performing an assurance service, professional accountants use standards
or benchmarks to evaluate or measure the subject matter of an assurance engagement.
This is known as: a. PFRS. b. Assertion. c. Criteria. d. Conclusion. 33. Which of
the following services provides positive assurance through attestation? a. Tax
services b. Review c. Auditing d. Accounting services 34. The three commonly-sought
types of assurance services are: a. Audits, reviews, and compilations. b. Reviews,
compilations, and other assurance services. c. Audits, reviews, and other assurance
services. d. Audits, compilations, and other assurance services. 35. Positive
assurance is expressed through: a. Attestation b. Declaration c. Conclusion d.
Stating whether anything has come to the auditor's attention that indicates that
the financial statements are not presented fairly. 36. The subject matter of an
assurance engagement can take the following forms except a. The entity’s internal
control. b. Historical or prospective financial statements. c. Performance of an
entity that could indicate efficiency and effectiveness. d. Evaluation of a capital
investment proposal. 37. Which of the following statements best describes review
services?

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a. Review engagements focus on providing assurance on the internal controls of a
public company. b. Review engagements focus on providing assurance on the
assertions contained in the financial statements of a public company. c. Review
engagements focus on providing advice in a three-party contract. d. Review
engagements focus on providing limited assurance on financial statements of a
private company. 38. A review of a company's financial statements by a CPA firm: a.
Is similar in scope to an audit and adds similar credibility to the statements. b.
Is significantly less in scope than an audit and results in a report which provides
positive assurance, although not absolute assurance. c. Concludes with the issuance
of a report expressing the CPA's opinion as to the fairness of the financial
statements. d. Is designed to provide only moderate assurance. 39. The objective of
a review of financial statements is to: a. Express an opinion on the overall
financial statements. b. Carry out audit procedures agreed on with the client and
other users of report. c. State whether anything has come to the auditor's
attention that indicates that the financial statements are not presented fairly. d.
Assist the client in the preparation of the financial statements. 40. Which of the
following is incorrect regarding a compilation engagement? a. The CPA uses his
auditing expertise to collect, classify and summarize financial information. b. The
CPA should exercise due care. c. The engagement ordinarily entails reducing
detailed data to a manageable and understandable form. d. The procedures performed
do not enable the accountant to express any form of assurance. 41. The type of
assurance that is provided by the CPA on a compilation report is: a. Limited
assurance. b. No assurance. c. Low assurance. d. Negative assurance. 42. Which of
the following statements concerning compilation engagement is incorrect? a. In a
compilation engagement, the accountant is engaged to use accounting expertise as
opposed to auditing expertise to collect, classify, and summarize financial
information. b. A compilation engagement ordinarily entails reducing detailed data
to a manageable and understandable form without a requirement to test the
assertions underlying that information. c. Users of the compiled financial
information derive some benefit as a result of the accountant's involvement because
the service has been performed with due professional skill and care. d. The
procedures employed in a compilation engagement enable the accountant to express a
moderate level of assurance on the compiled financial information. 43. Assurance
services differ from consulting services in that they I. Focus on providing advice.
II. Involve monitoring of one party by another. a. I only. b. II only. c. Both I
and II. d. Neither I nor II. 44. For assurance engagements which are neither audits
nor reviews of historical financial information, the following standard applies: a.
PSAs b. PSREs c. PSAEs d. PSRSs 45. Unlike consulting services, in assurance
services: a. There is confirmation that financial statement assertions are
accurate. b. Misstated account balances are generally corrected by an independent
audit. c. Competing interests may exist between management and the users of
statements. d. Ineffective internal controls may exist. 46. The attest function:

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a. b. c. d.

Is an essential part of every engagement performed by a CPA. Includes the

preparation of a written report of the CPA's conclusion. Requires a complete review
of all transactions during the period under examination. Requires a review of a
sample of transactions during the period under examination.

47. Which of the following is an assurance service? a. Performance measurement b.

Systems design and installation c. Tax planning d. Personal financial planning 48.
Non-assurance engagements include all of the following services, except: a. Agreed-
upon procedures engagements. b. Compilations of financial or other information. c.
Examination of prospective financial information. d. Management and tax consulting.
49. Unlike consulting services, assurance services: a. Make recommendation to
management. b. Report on how to use information. c. Are two-party contracts. d.
Report on the quality of information. 50. Identify the correct statement. a. An
audit provides limited assurance by attesting to the fairness of the client's
assertions. b. A review provides positive assurance by attesting the reliability of
the client's assertions. c. Management consulting services provide attestation in
all cases. d. Accounting services do not provide attestation. 51. An attestation
engagement is one in which a CPA is engaged to: a. Assemble prospective financial
statements based on the assumptions of the entity's management without expressing
any assurance. b. Issue a written communication expressing a conclusion about the
reliability of a written assertion that is the responsibility of another party. c.
Provide tax advice or prepare a tax return based on financial information the CPA
has not audited or reviewed. d. Testify as an expert witness in accounting,
auditing or tax matters, given certain stipulated facts. 52. Assurance engagements
encompass the following types of services, except: a. Audit of historical financial
statements. b. Review engagements. c. Management consulting. d. Attestation
services. 53. A report on factual findings is the end product of the auditor when
performing: a. Audit. b. Review. c. Agreed-upon procedures. d. Compilation. 54.
What assurance is provided by the auditor in an agreed-upon procedures engagement?
a. No assurance. b. Low. c. Moderate. d. Reasonable. 55. The term "accountant" has
been used by Auditing and Assurance Standards Council to refer to a CPA in public
practice who is engaged to: a. Audit financial statements. b. Review financial
statements. c. Apply agreed-upon procedures. d. Compile financial statements. 56.
Which of the following best describes relationships among auditing, attest and
assurance services? a. Attest is a type of auditing service. b. Assurance is a type
of attest service. c. Auditing is a type of assurance service.

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d. Auditing and attest services represent two distinctly different types of
services. 57. When providing consulting services, the CPA acts primarily as a(n):
a. Independent practitioner. b. Expert on compliance with industry standards. c.
Objective advisor on the use of information. d. Confidential reviewer. 58. Which of
the following statements concerning consulting services is incorrect? a. The
performance of consulting services for audit clients does not, in and of itself,
impair the auditor's independence. b. Consulting services differ fundamentally from
the CPA's function of attesting to the assertions of other parties. c. Consulting
services ordinarily involve external reporting. d. Most CPAs, including those who
provide audit and tax services, also provide consulting services to their clients.
59. In an engagement to perform agreed-upon procedures, an auditor is engaged to:
a. Use accounting expertise as opposed to auditing expertise to collect, classify,
and summarize financial information. b. Provide a moderate level of assurance that
the information is free of material misstatement. c. Provide a high, but not
absolute, level of assurance that the information is free of material misstatement.
d. 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. 60. Compilation is an example of which one of the following types of
services? a. Auditing b. Accounting c. Consulting d. Review 61. Non-assurance
engagements include all of the following except a. Agreed-upon procedures. b.
Management consulting. c. Preparation of tax returns where no conclusion is
expressed. d. Compliance audit. 62. In performing an assurance engagement, a
professional accountant typically a. Provides management consulting advice. b.
Expresses a conclusion about an assertion. c. Supplies litigation support services.
d. Assesses control risk at a low level. 63. Which of the following is not an
assurance engagement? a. Information System Reliability Service b. Business
Performance Measurement c. Risk Assessment Service d. Management Consulting Service
64. Assurance engagements should exhibit the following elements except a. A subject
matter b. Suitable criteria c. Evidence d. Appropriate professional fees 65. Which
of the following forms may be the subject matter of assurance engagements? a.
Historical financial information b. Systems and processes c. Behavior d. All of the
above 66. Which of the following is not an element of assurance engagements? a.
Subject matter b. Evidence c. Engagement process d. Suitable criteria

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67. Engagement risk is influenced by the risks associated with the following except
a. Nature and form of the subject matter. b. Nature and form of the criteria
applied to the subject matter. c. Nature and extent of the process used to collect
and evaluate evidence. d. Unreasonably low professional fee. 68. Absolute assurance
is not attainable as a result of such factors as: a. The use of selective testing.
b. The inherent limitations of control systems. c. The use of judgment. d. All of
the above 69. A CPA should not submit unaudited financial statements of a non-
public entity to a client or others unless, as a minimum, the CPA complies with the
provisions applicable to a. Compilation engagements. b. Review engagements. c.
Assurance engagements. d. Audit engagements. 70. This tax service includes the
determination of the tax consequences of planned or potential transactions,
followed by making suggestions on the most desirable course of action such as to
legally minimize the tax liability while achieving the client’s objectives: a. Tax
shelter b. Tax evasion c. Tax compliance d. Tax planning 71. You own Dude, Inc.,
which manufactures wooden tables. You need to hire some accountants to prepare your
monthly financial statements. The preparation of your financial statements is
referred to as a(n): a. Audit. b. Compilation. c. Review. d. Special report. 72.
Distribution of a report is always restricted when: a. Negative assurance is given.
b. There is a positive expression of opinion. c. A review has been performed. d.
Agreed-upon procedures have been performed. 73. The need for assurance services
arises because: a. There is a consonance of interests of the preparer and the user
of the financial statements. b. There is a potential bias in providing information.
c. Economic transactions are less complex than they were a decade ago. d. Most
users today have access to the system that generates the financial statements they
use. 74. Assurance services involve which of the following? a. Relevance as well as
reliability. b. Nonfinancial information as well as traditional financial
statements. c. Electronic databases as well as printed reports. d. All of the
above. 75. Which of the following statements is true? a. The degree or level of
assurance that may be provided by the practitioner is inversely related to the
scope of procedures performed and their results. b. Assurance engagements do not
require independence. c. The term “auditor” is broader in scope compared to the
term “practitioner.” d. Assurance engagements performed by professional accountants
are intended to enhance the credibility of information. 76. Which of the following
statements is true? a. Professional standards prohibit CPAs from performing non-
assurance engagements. b. Absolute assurance is attainable owing to the fact that
much of the evidence available to the CPA is persuasive rather than conclusive. c.
The responsible party expresses a conclusion that provides a level of assurance as
to whether the subject matter conforms, in all material respects, with the
identified suitable criteria. d. The CPA’s conclusion provides a level of assurance
about the subject matter.

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77. Assurance engagement include the following, except a. An engagement conducted
to provide a high level of assurance that the subject matter conforms in all
material respects with identified suitable criteria. b. An engagement conducted to
provide a moderate level of assurance that the subject matter is plausible in the
circumstances. c. An engagement in accordance with the Philippine Standard on
Assurance Engagement(s). d. An engagement to perform agreed-upon procedures. 78.
The subject matter of an assurance engagement may include I. Historical or
prospective financial information II. Internal controls III. Compliance with
regulation a. I and II only b. I and III only c. II and III only d. I, II, and III
79. In assertion-based assurance engagements, the evaluation or measurement of the
subject matter against criteria is performed by the a. Intended users b.
Responsible party c. Practitioner d. AASC 80. Which of the following statements is
true concerning evidence in an assurance engagement? a. The reliability of evidence
is influenced not by its nature but by its source. b. Sufficiency is the measure of
the quantity of evidence. c. Obtaining more evidence may compensate for its poor
quality. d. Appropriateness is the measure of the quality of evidence, that is, its
reliability and persuasiveness. 81. An unqualified conclusion is not appropriate
for either reasonable or limited assurance engagement when: I. Circumstances
prevent the practitioner from obtaining evidence required to reduce assurance
engagement risk to the appropriate level. II. The responsible party or the engaging
party imposes a restriction that prevents the practitioner from obtaining evidence
required to reduce assurance engagement risk to the appropriate level. a. I only b.
II only c. Either I or II d. Neither I nor II 82. The following statements relate
to the performance of an assurance engagement other than an audit or review of
historical financial information covered by PSAs and PSREs. Which is incorrect? a.
The assurance report should be in writing and should contain a clear expression of
the practitioner's conclusion about the subject matter information. b. Those
persons who are to perform the engagement should collectively possess the necessary
professional competence. c. The practitioner is not allowed to use the work of
persons from other professional disciplines. d. The practitioner should consider
materiality and assurance engagement risk when planning and performing an assurance
engagement. 83. Reducing assurance engagement risk to zero is very rarely
attainable or cost beneficial as a result of the following factors, except a. The
use of selective testing. b. The fact that much of the evidence available to the
practitioner is persuasive rather than conclusive. c. The practitioner may not have
the required assurance knowledge and skills to gather and evaluate evidence. d. The
use of judgment in gathering and evaluating evidence and forming conclusions based
on that evidence. 84. Which of the following standards are to be applied, as
appropriate, in the audit of historical financial information? a. PSAEs b. PSREs c.
PSAs d. PSRSs

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85. Which of the following standards are to be applied to compilation engagements
and engagements to perform agreed-upon procedures to information? a. PSRSs b. PSAs
c. PSAEs d. PSREs 86. The Philippine Standards on Review Engagements (PSREs) are to
be applied in a. The audit of historical financial information. b. Assurance
engagements dealing with subject matters other than historical financial
information. c. The review of both historical and prospective financial
information. d. The review of historical financial information. 87. PSRE 2400
(Engagements to Review Financial Statements), as amended by the AASC in February
2008, applies to a. Reviews of any historical financial information of an audit
client. b. Reviews of historical financial or other information by a practitioner
other than the entity's auditor. c. Reviews of historical financial or other
information of an audit client. d. Reviews of any historical financial information
by a practitioner other than the entity's auditor. 88. The Philippine Standards on
Assurance Engagements (PSAEs) are to be applied in a. The audit or review of
historical financial information. b. Assurance engagements dealing with subject
matters other than historical financial information. c. Compilation engagements and
agreements to apply agreed-upon procedures to information. d. Assurance engagements
dealing with historical financial information. 89. The Philippine Standards on
Quality Control (PSQCs) are to be applied to a. All services that fall under the
AASC's engagement standards. b. Assurance engagements only. c. Review engagements
only. d. Compilation and review engagements only. 90. These statements are issued
by the AASC to provide interpretive guidance and practical assistance to auditors
in the implementation of PSAs and to promote good practice. a. PREPSs b. PAPSs c.
PAEPs d. PRSPSs 91. For the purpose of expressing negative assurance in the review
report, the practitioner should obtain sufficient appropriate evidence primarily
through a. Inquiry and confirmation b. Analytical procedures and substantive tests
of details of transactions and account balances c. Confirmation and tests of
controls d. Inquiry and analytical procedures 92. A practitioner's review of an
entity's financial statements does not provide assurance that he/she will become
aware of all significant matters that would be disclosed in an audit. However, if
the practitioner has become aware that information coming to his/her attention may
be materially misstated, the practitioner should a. Perform a complete audit and
issue a modified auditor's report. b. Withdraw immediately from the engagement. c.
Carry out additional or more extensive procedures as are necessary to achieve
limited assurance. d. Downgrade the engagement to a compilation and issue the
appropriate report. 93. The following statements relate to a review of financial
statements. Which is incorrect? a. The objective of a review of financial
statements is to enable a practitioner 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 practitioner's attention that causes the practitioner to believe
that the financial statements are not prepared, in all material respects, in
accordance with an identified financial reporting framework. b. A review ordinarily
involves an assessment of accounting and internal control systems, tests of
records, and of responses to inquiries by obtaining corroborating evidence through
inspection, observation, confirmation, and computation.

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c.

A review comprises inquiry and analytical procedures are designed to review the
reliability of an assertion that is the responsibility of one party for use by
another party. d. The level of assurance provided in a review report is less than
that given in an audit report. 94. The following statements relate to a review of
interim financial information performed by the entity's independent auditor. Which
is incorrect? a. A review of interim financial information does not provide a basis
for expressing an opinion whether the financial information is presented fairly, in
all material respects, in accordance with an applicable financial reporting
framework. b. Similar to a financial statement audit, a review of interim financial
information is designed to obtain reasonable assurance that the interim financial
information is free from material misstatement. c. In a review of interim financial
information, the auditor should have an understanding of the entity and its
environment, including its internal control, as it relates to the preparation of
both annual and interim financial information, sufficient to plan and conduct the
engagement. d. A review of interim financial information may bring significant
matters affecting the interim financial in formation to the auditor's attention,
but it does not provide all of the evidence that would be required in audit. 95.
When performing a compilation engagement, the accountant is required to a. Make
inquiries of management to assess the reliability and completeness of the
information provided. b. Assess internal controls. c. Verify matters and
explanations. d. Obtain a general knowledge of the business and operations of the
entity. 96. Each page of the financial information compiled by the accountant
should include the following reference, except a. "Unaudited" b. "Compiled,
Negative Assurance Expressed" c. "Compiled without Audit or Review" d. "Refer to
Compilation Report" 97. An auditor may accept an engagement to perform specified
procedures on the specific subject matter of specified elements, accounts, or items
of a financial statement if a. The report does not list the procedures performed.
b. The auditor is also the entity's continuing auditor. c. The financial statements
are prepared in accordance with a special purpose framework. d. Use of the report
is restricted. 98. An engagement to perform agreed-upon procedures may involve the
auditor in performing certain procedures concerning I. Individual items of
financial data. II. A single financial statement. III. A complete set of financial
statements. a. I and II only b. II and III only c. I and III only d. I, II, and III
99. The following contain basic principles, essential procedures and related
guidance, consistent with the concepts in the Framework, for the performance of
assurance engagements, except a. PSAs b. PSREs c. PSAEs d. PSRSs 100. a. b. c. d.
CPAs in public practice who perform assurance engagements are governed by the
following, except Framework for Assurance Engagements Philippine Standards on
Quality Control Code of Ethics for Professional Accountants in the Philippines
AASC's Engagement Standards (PSAs, PSREs, PSAEs, and PSRSs)

101. The Philippine Framework for Assurance Engagements a. Provides a frame of

reference for CPAs in public practice when performing audits, reviews, and
compilations of historical financial information. b. Contains basic principles,
essential procedures, and related guidance for the performance of assurance
engagements.

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c.

Establishes standards and provides procedural requirements for the performance of

assurance engagements. d. Defines and describes the elements and objectives of an
assurance engagement, and identifies engagements to which PSAs, PSREs, and PSAEs
apply. 102. a. b. c. d. 103. a. b. c. d. 104. a. b. c. d. 105. a. b. c. d. 106. a.
b. c. d. The procedures employed in doing compilation are: Designed to enable the
accountant to express a limited assurance Designed to enable the accountant to
express a negative assurance Not designed to enable the accountant to express any
form of assurance Less extensive than review procedures but more extensive than
agreed-upon procedures Which of the following procedures is normally performed in
connection with a compilation engagement? Inquire of management about subsequent
events Making inquiries of management concerning actions taken at board meeting
Applying analytical review procedures Collect, classify and summarize financial
information. An engagement to apply agreed-upon procedure engagement may be
accepted, provided The CPA has audited the financial statements of the client. The
CPA is independent with respect to the client. The distribution of the report will
be limited only to specified parties involved. The adequacy of the procedures to be
performed will be determined by the CPA. Pronouncements of Auditing and Assurance
Standards Council (AASC) do not cover Review engagement Compilation engagement
Consultancy Agreed-upon procedures engagement Which of the following is an example
of an assurance engagement? Management advisory services Reporting on financial
statements prepared using other comprehensive basis of accounting. compilation of
financial information preparation of tax returns

107. Which of the following statements about assurance engagements is not correct?
a. Assurance engagements are intended to enhance the credibility of information
about a subject matter by evaluating whether the subject matter conforms in all
material respects with suitable criteria. b. The subject matter of an assurance
engagement may take many forms such as data, systems and processes or behavior. c.
Not all engagements performed by professional accountants are assurance
engagements. d. The Philippine Standards on Assurance Engagements issued by AASC
describe the objectives and elements of assurance engagements to provide either a
high, moderate or low level of assurance. 108. Which of the following services
provides a moderate level of assurance about the client's financial statements? a.
Forecasts and projections b. Compliance with contractual agreement c. Review d.
Compilation 109. a. b. c. d. The form of attestation that provides the highest form
of assurance is a(n): Review. Assembly Compilation. Examination.

110. In an engagement to perform agreed-upon procedures, an auditor is engaged to:

a. 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. b. Use accounting expertise as opposed to auditing expertise to collect,
classify, and summarize financial information. c. Provide a moderate level of
assurance that the information is free of material misstatement. d. Provide a high,
but not absolute, level of assurance that the information is-free of material
misstatement. 111. The report on an agreed-upon procedures engagement should
contain:

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a. b. c. d.

A general description of the procedures performed. An expression of positive

assurance based on the specific procedures performed. A statement that the auditor
is independent of the entity. Identification of the purpose for which the agreed-
upon procedures were performed.

112. A report may be based upon applying agreed-upon procedures to specified

elements, accounts, or items of a financial statement. The users of the report
should participate in establishing the procedures to be performed. If the auditor
cannot discuss the procedures with all the parties who will receive the report,
he/she may: I. Discuss the procedures to be applied with appropriate
representatives of the parties involved. II. Review relevant correspondence from
the parties involved. III. Distribute a draft of the type of report that will be
issued to the parties involved. a. I and II only b. I and III only c. II and III
only d. I, II, and III 113. Which of the following statements concerning consulting
services is false? a. The performance of consulting services for audit clients does
not, in and of itself, impair the auditor's independence. b. Consulting services
differ fundamentally from the CPA's function of attesting to the assertions of
other parties. c. Consulting services ordinarily involve external reporting. d.
Most CPAs, including those who provide audit and tax services, also provide
consulting services to their clients. 114. a. b. c. d. The form of communication
with a client in a consulting services engagement should be Either written or oral.
Written, and a copy should be sent to management alone. Oral, with appropriate
documentation in working papers. Written, and copies should be sent to both
management and the board of directors.

115. Which of the following is the most appropriate action to be taken by a CPA who
has been asked to perform a consulting services engagement concerning the analysis
of a potential merger if he/she has little experience with the industry involved?
a. Accept the engagement but he/she should conduct research or consult with others
to obtain sufficient competence. b. Decline the engagement because he/she lacks
sufficient knowledge. c. Accept the engagement and issue a report that contains
his/her opinion on the achievability of the results of the merger. d. Accept the
engagement and perform it in accordance with Philippine Standards on Auditing
(PSAs). 116. a. b. c. d. The Philippine Standards on Auditing (PSA) require that a
report be issued whenever a CPA firm: Performs an audit. Is associated with
financial statements. Is engaged to perform any services of any nature. Performs
SEC regulated work.

117. A practitioner is associated with financial information when: I. The

practitioner attaches a report to that financial information. II. The practitioner
consents to the use of his/her name in a professional connection. a. I only. b. II
only. c. Either I or II. d. Neither I nor II. 118. If the auditor learns that an
entity is inappropriately using the auditor’s name in association with financial
information, he/she should: a. Remain silent. b. Require management to cease doing
so. c. Inform any known third party users of the inappropriate use of his/her name
in connection with the information. d. Seek legal advice if necessary.

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