AUDITING THEORY c.

Sufficient competent evidential matter shall be

obtained through inspection, observation,
Fundamental of Auditing and Assurance Services inquiries and confirmations
d. The audit is to be adequately planned and
1. Unlike consulting services, assurance services assistants are to be properly supervised.
a. Report on the quality information 12. An audit designed to evaluate the efficiency and
b. Report on how to use information effectiveness of an organization or some part of thereof
c. Make recommendation to management would not come under the title of
d. Ate two-party contracts a. Compliance audit
2. An audit of financial statements is conducted to b. Management audit
determine if the c. Operational audit
a. Overall financial statements are stated in d. Performance audit
accordance with an applicable financial reporting 13. Internal auditing is considered to be part of an
framework organization’s
b. Client’s internal control in functioning as intended a. Control environments
c. Organization if operating efficiently and effectively b. External controls
d. Auditee is following specific procedures or rules set c. Accounting system
down by higher authority d. Internal control procedures
3. Non-assurance engagements include all of the 14. Operational auditing does not focus on
following, except a. Compliance
a. Compliance audit b. Efficiency
b. Agreed-upon procedure c. Economy
c. Preparation of tax returns where no conclusion is d. effectiveness
expressed 15. a requirement of the application of Philippine
d. Management consulting Standards on Auditing (PSA) is for the auditor
4. For assurance engagement regarding historical a. to undertake a proper study and evaluation of the
financial information, limited assurance engagements existing internal control
are called b. not to obtain clients and solicitation
a. Reviews c. to charged fees fairly and reasonably in relation to
b. Audit costs on engagements
c. Compilations d. To inspect all fixed assets acquired during the year
d. Examinations 16. Which of the following describes MOST completely how
5. When a CPA express an opinion on financial the profession defined independence?
statements, his or her responsibilities extend to a. Accepting responsibility to act professionally and
a. Whether the results of the client’s operating in accordance with the professional Code of
decisions are fairly presented in the financial Conduct
statements b. Performing an audit from the public’s point of view
b. The underlying wisdom of the client’s c. Avoiding the appearance of a significant interest
management decision in an audit client’s interest
c. Active participation in the implementation of the d. Resisting a client’s reluctance to reveal evidence.
advice given to the client 17. What particularly audit-related services provide NO
d. An ongoing responsibility for the client’s solvency assurance?
6. The subject matter of an assurance engagement can a. Agreed-upon procedure and compilation
take the following forms, EXCEPT engagements
a. Evaluation of capital investment proposal b. Review and compilation engagements
b. Historical or prospective financial statements c. Agreed-upon procedure and review engagement
c. Company’s internal control d. Audit and review engagement
d. Performance of an entity that could indicate 18.
efficiency and effectiveness
7. Which of the following criteria in unique to the auditor’s
attest function?
a. Independence
b. General competence
c. Due professional care
d. Familiarity with the particular industry of which the
auditor’s client is part
8. What are the three (3) most commonly sought
assurance services?
a. Audits, reviews and other assurance services
b. Audits, reviews and compilations
c. Audits, compilations and other assurance services
d. Reviews, compilations and other assurance
services
9. Which of the following attributes is more closely
associated with assurance services performed by a
CPA firm than with other lines of professional work?
a. Independence
b. Integrity
c. Competence
d. Keeping informed in current professional
developments
10. Internal auditing relates to:
a. Audit which serves the needs of management
b. Audit with performed by a professional practitioner
as an independent contractor
c. Audit with is incidentally concerned with the
detection and prevention of fraud
d. Audit wherein the auditor should be independent
of management both in fact and in mental
attitude
11. One of the government auditing standards which is
NOT observed by independent CPAs in the private
sector is:
a. A review shall be made of compliance with legal
and statutory requirements
b. An evaluation shall be made of the system of
internal control