QUIZ 1 (ENGAGEMENT SERVICES)

1. An audit involves ascertaining the degree of correspondence between assertions and established
criteria in the case of financial statement audit, which of the following is not a valid criterion?
a. Accounting standard generally accepted in the Philippines.
b. International Accounting Standards.
c. Other authoritative financial reporting framework.
d. Philippine Standards on Auditing
2. According to PFRS, audit related services include.
a. Review and compilation b. Compilation and agreed-upon procedures
c. Compilation and assurance engagements
d. Agreed-upon procedures and review
3. Which of the following services provides moderate level of assurance?
a. Audit c. Agreed-upon procedures
b. Review d. Compilation
4. A report on factual findings is the end product of the auditor when performing
a. Examination c. Review
b. Audit d. Agreed-upon procedures
5. What level of assurance does an accountant give on compilation report?
a. None b. Low c. Moderate d. High
6. 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 user of report
c. Assist the client in the preparation of the financial statements
d. State whether, anything has come to the auditor’s attention that indicates that the financial
statements are not presented fairly
7. By providing a high level of assurance on audit reports on financial statements, the auditor
a. Guarantees the presentation of the financial statements.
b. Confirms the accuracy of the financial statements.
c. Assures the readers that fraudulent activity of the entity’ employees have been detected.
d. Enhances the credibility of the financial statements
8. The term “accountant’’ has been used by PSA to refer to a CPA in public practice who is engaged
to
a. Audit financial statements c. Apply agreed-upon procedures
b. Review financial statements d. Compile financial statements
9. Which of the following procedures would an accountant most likely perform in a compilation
engagement?
a. Collect, classify and summarized financial information.
b. Apply analytical procedures
c. Assess risk components
d. Compile financial statements
10. According to Philippine Standard on Auditing, the procedures employed in doing compilation are:
a. Designed to enable the accountant to express a limited assurance
b. Designed to enable the accountant to express a negative assurance
c. Not designed to enable the accountant to express any form of assurance
d. Less extensive than review procedures but more extensive than agreed upon procedures.
11. Engagement to apply agreed-upon procedures on certain accounts within a financial statement may
be accepted provided
a. The CPA has expressed opinion on the financial statement taken as a whole.
b. The CPA takes full responsibility for the adequacy of the procedures to be preformed.
c. The CPA provides only a limited assurance about the reliability of the financial statements.
d. The distribution of the report is limited only to specified parties involved because other
readers of the report might misinterpret the results.

12. What assurance does the CPA provide under the following engagements?
Audit Review Agreed-upon procedures Compilation
a. High Moderate None None
b. High Limited Low None
c. Moderate Moderate None None
d. Reasonable Negative None Low
13. The auditor’s satisfaction as to the reliability of an assertion being made by one party is called
a. Assurance b. Audit risk c. Precision d. Materiality
14. Which of the following procedures is not included in a review engagement?
a. Inquiries of management
b. Inquiries regarding subsequent events
c. Procedures designed to identify unusual fluctuations
d. A study and evaluation of internal control
15. Which of the following statement is not true about the reports provided by a CPA?
a. In the audit engagement, the auditor provides high level of assurance that the financial
information is free of material misstatement.
b. In a re view engagement, the CPA’s moderate assurance is expressed in the form of negative
assurance.
 c. For agree upon procedures the CPA, provides a report on factual findings and no assurance is
expressed.
d. In a compilation engagement no assurance is expressed and the users of financial information
do not derive any benefit from the CPA’s involvement.
16. Which of the following is incorrect about a compilation engagement?
a. The CPA uses his auditing expertise to collect classify end summarize financial information.
b. The engagement ordinarily entails reducing data to a manageable and understandable form.
c. The CPA should exercise due care.
d. The procedures performed do not the accountant to express any form of assurance.
17. An auditor is associated with the financial information when he:
Attaches report to the Consents to the use of his name in a
financial information professional connection
a. Yes No
b. Yes Yes
c. No Yes
d. No No
18. Performing inquiry and analytical review procedures is the preliminary basis for an auditor to issue
a. A compilation report c. A report on factual findings
b. A review report d. An audit report
19. The objective of an audit of financial statement is
a. To assist an entity in the preparation of financial statements
b. To express an opinion whether the financial statements are prepared in all material respects, in
accordance with or identified financial reporting framework
c. To enable an auditor to state whether on the basis of the procedures performed anything has come
to the auditors 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.
d. To guarantee that all material misstatements in the financial statements are detected.
20. Which of the following is not one of the general principles governing the audit of financial
statements?
a. The auditor should plan and perform the audit with an attitude of professional skepticism.
b. The auditor should obtain sufficient appropriate evidence primarily through inquiry and
analytical procedures to be able to draw conclusions.
c. The auditor should conduct the audit in accordance with PSA.
d. The auditor should comply with the Philippine Code of Professional Ethics.
21. The best statement of the response of the auditor with respect to audited financial statement is:
a. The audit of the financial statement relieves management of its responsibilities.
b. The auditor is confined to his expression of opinion about the audited financial statements.
c. The responsibility over the financial statements rests with the management and the auditor
assumes responsibility with respect to the notes of financial statements.
d. The auditor is responsible only to his qualified opinion but not for any other type of opinion.
22. Ethical principles governing audit of financial statements do not include:
a. independence c. technical standards
b. competence and due care d. professional responsiveness
23. Which of the following statements about independent financial statement audit is incorrect?
a. The term “scope of the audit” refers to audit procedures deemed necessary in the
circumstances to achieve the objective of the audit.
b. The auditor’s opinion enhances the credibility of the financial statements.
c. The phrase Used to express the auditor’s opinion is “present fairly, in all material respects”.
d. The risk that the auditor misstatement is eliminated when the auditor complies with PSA.
24. Which of the following statements about independent financial statement audit is correct?
a. The work undertaken y the auditor is permeated by judgment.
b. An audit is designed to provide absolute assurance that the financial statements taken as a
whole are free from material misstatement.
c. The procedures require to conduct an audit in accordance with PSA should be determined by
the client who engaged the services of the auditor.
d. The auditor’s opinion is an assurance as to the effectiveness and efficiency with which
management has conducted the affairs of the entity.
25. Which of the following is one of the limitations of an audit?
a. The possibility that management may prevent the auditor from performing the necessary audit
procedures.
b. The likelihood that he auditor may not be able to detect material misstatement in the financial
statement because the auditor was engaged only after the client’s year end.
c. The fact that most audit evidence supporting the financial statements is persuasive rather than
conclusive in nature.
d. The risk that the auditor may not possess the training and proficiency required by the
engagement.

26. According to PSA 200 the specific procedures deemed necessary in the circumstances to achieve
the objective of the audit are referred to as the
a. substantive test c. scope of the audit
b. audit objectives d. audit technique
27. Which of the following statements’ does not properly describe a limitation of an audit?
a. Many audit conclusions are made on the basis of examining a sample of evidence
b. The work undertaken by the auditor is permeated by judgment.
 c. Fatigue and human weaknesses can cause auditors to overlook pertinent evidence.
d. Many financial statement assertions cannot be audited.
28. Which of the following is not one of the imitations of an audit?
a. the use of testing
b. error in the application of judgment
c. inherent limitation of internal control
d. scope limitations imposed by the entity
29. Which of the following is incorrect about responsibility for financial statements?
a. Management is responsible for fair presentation of the financial statements.
b. Auditor is responsible for expressing an opinion on the financial statements.
c. Audit of financial statements does not reduce management’s responsibility
d. Fair present of financial statements is an implicit part of the auditor’s responsibility.
30. Before performing any audit procedures. The auditor and the client should agree on the
Type of opinion Specific procedures Terms of the
to be expressed to performed engagement
a. yes no yes
b. no yes yes
c. no no yes
d. yes yes Yes