Our Lady of Fatima University

ACCTG 16

SET 3

1)The degree of certainty that the practitioner has attained and wishes to convey is:

1. 1. A conveyance.
   2. An assertion.
   3. A declaration.
   4. An assurance.

2. The level of assurance provided by an audit of detecting a material misstatement is referred to as:
   1. Positive assurance.
   2. High assurance.
   3. Reasonable assurance.
   4. Negative assurance.

3. Of the following, which is the broadest concept?
   1. Internal control audit.
   2. Audit of financial statements.
   3. Attestation services.
   4. Assurance services.

4. In performing attestation services, a CPA will normally:
   1. Recommend uses for information.
   2. Improve the quality of information, or its context, for decision makers.
   3. Perform       market        analyses         and       cost estimates.
   4. States a conclusion about a written assertion.

5. Which of the following is not one of the requirements before accepting an assurance engagement?
   1. The practitioner should  be  competent and independent.
   2. The responsible party and the intended user of assurance report should be from different organizations.
   3. The practitioner should accept the engagement only if the subject matter is the responsibility of another party
   4. 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.

6. The following statements relate to the three parties involved in  an  assurance engagement. Which is correct?
   1. The responsible party and the intended users should always be from different entities.
   2. 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.
   3. A responsible party is the  person who is responsible for the subject matter or the subject matter information.
   4. In all assurance engagements, the responsible party is the engaging party, i.e., the party that engages the practitioner

7. The assurance report is often addressed to the intended users which may be:
   1. The party responsible for the subject matter.
   2. Established by agreement between the professional accountant and the responsible party.
   3. Both A and B
   4. Neither A nor B

8. 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:
   1. PFRS.
   2. Assertion.
   3. Criteria.
   4. Conclusion.

9. Which of the following services provides positive assurance through attestation?
   1. Tax services
   2. Review
   3. Auditing
   4. Accounting services

10. Positive assurance is expressed through:
    1. Attestation
    2. Declaration

1. 3. Conclusion
   4. Stating whether anything has  come  to the auditor's attention that indicates that the financial statements are  not presented fairly.

11. Which of the following statements best describes review services?
    1. Review engagements focus on providing assurance on the internal controls of a public company.
    2. Review engagements focus on providing assurance on the assertions contained in the financial statements of a public company.
    3. Review engagements focus on providing advice in a three-party contract.
    4. Review engagements focus on providing limited assurance on financial statements of a private company.

1. 1. A    review    of    a    company's financial statements by a CPA firm:
      1. Is similar in scope to an audit and adds similar credibility to the statements.
      2. Is significantly less in scope than an audit and results in a report which provides positive assurance, although not absolute assurance.
      3. Concludes with the issuance of a report expressing the CPA's opinion as to the fairness of the financial statements.
      4. Is designed to provide only moderate assurance.

13. The objective of a review of financial statements is to:
    1. Express an opinion on  the  overall financial statements.
    2. Carry out audit procedures agreed  on with the client and other users of report.
    3. State whether anything has come to the auditor's attention that indicates that the financial statements are not presented fairly.
    4. Assist the client in the preparation of the financial statements.

14. When providing consulting services, the CPA acts primarily as a(n):
    1. Independent practitioner.
    2.     Expert on compliance with industry standards.

1. 3. Objective advisor on the use of information.
   4. Confidential reviewer.

15. Which of the  following  statements concerning consulting services is incorrect?
    1. The performance of consulting  services for audit clients does not, in and of itself, impair the auditor's independence.
    2. Consulting services differ fundamentally from the CPA's function of  attesting  to the assertions of other parties.
    3. Consulting  services  ordinarily involve external reporting.
    4. Most CPAs, including those who provide audit and tax services, also provide consulting services to their clients.

16. In an engagement to perform agreed-upon procedures, an auditor is engaged to:
    1. Use accounting expertise as opposed to auditing expertise to collect, classify, and summarize financial information.
    2. Provide a moderate level of  assurance that the information is free of material misstatement.
    3. Provide a high, but not absolute, level of assurance that the information is free of material misstatement.
    4. 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.

17. Assurance engagements should exhibit the following elements except
    1. A subject matter
    2. Suitable criteria
    3. Evidence
    4. Appropriate professional fees

18. Which of the following is not an element of assurance engagements?
    1. Subject matter
    2. Evidence
    3. Engagement process
    4. Suitable criteria

19. Assurance services involve which of the following?
    1. Relevance as well as reliability.
    2. Nonfinancial         information        as      well       as traditional financial statements.

1. 3. Electronic databases as well as printed reports.
   4. All of the above.

20. Assurance engagement include the following, except
    1. An engagement conducted to provide a high level of assurance that the subject matter conforms in all material respects with identified suitable criteria.
    2. An engagement conducted to provide a moderate level of assurance that the subject matter is plausible in the circumstances.
    3. An engagement in accordance with the Philippine Standard on Assurance Engagement(s).
    4. An engagement to perform agreed- upon procedures.

21. The      subject      matter      of     an      assurance engagement may include

1. Historical or prospective financial information
2. Internal controls
3. Compliance with regulation
   1. I and II only
   2. I and III only
   3. II and III only
   4. I, II, and III

22. In assertion-based assurance engagements, the evaluation or measurement of  the subject matter against criteria is performed by the
    1. Intended users
    2. Responsible party
    3. Practitioner
    4. AASC

23. Which of the following statements is true concerning evidence in an assurance engagement?
    1. The reliability of evidence is influenced not by its nature but by its source.
    2. Sufficiency is the measure of the quantity of evidence.
    3. Obtaining more  evidence  may compensate for its poor quality.
    4. Appropriateness is the measure of the quality of evidence, that is, its reliability and persuasiveness.

24. An unqualified conclusion is not appropriate

for either reasonable or limited assurance engagement when:

1. Circumstances prevent the practitioner from obtaining evidence required to reduce assurance engagement risk to  the appropriate level.
2. 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.
   1. I only
   2. II only
   3. Either I or II
   4. Neither I nor II

25. Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of the following factors, except
    1. The use of selective testing.
    2. The fact that much of the evidence available to the practitioner is persuasive rather than conclusive.
    3. The practitioner may not have the required assurance knowledge and skills to gather and evaluate evidence.
    4. The use of judgment in gathering and evaluating evidence and forming conclusions based on that evidence.

26. Which of the following standards are to be applied, as appropriate, in the audit of historical financial information?
    1. PSAEs
    2. PSREs
    3. PSAs
    4. PSRSs

27. Which of the following standards are to be applied to compilation engagements and engagements to perform agreed-upon procedures to information?
    1. PSRSs
    2. PSAs
    3. PSAEs
    4. PSREs

28. The Philippine Standards on Review Engagements (PSREs) are to be applied in
    1. The audit of historical financial information.

1. 2. Assurance engagements dealing with subject matters other than historical financial information.
   3. The review of both historical and prospective financial information.
   4. The review of historical financial information.

29. PSRE 2400 (Engagements to Review Financial Statements), as amended by the AASC in February 2008, applies to
    1. Reviews of any historical financial information of an audit client.
    2. Reviews of historical financial or other information by a practitioner other than the entity's auditor.
    3. Reviews of historical financial or other information of an audit client.
    4. Reviews of any historical financial information by a practitioner other than the entity's auditor.

30. When  performing  a  compilation engagement, the accountant is required to
    1. Make inquiries of management to assess the reliability and completeness of the information provided.
    2. Assess internal controls.
    3. Verify matters and explanations.
    4. Obtain a general knowledge of the business and operations of the entity.

31. Each page of the financial information compiled by the accountant should include the following reference, except
    1. "Unaudited"
    2. "Compiled,            Negative            Assurance Expressed"
    3. "Compiled without Audit or Review"
    4. "Refer to Compilation Report"

32. 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
    1. The report does not list the procedures performed.
    2. The auditor is also the entity's continuing auditor.
    3. The financial statements are prepared in accordance with a special purpose framework.
    4. Use of the report is restricte

33. An engagement to perform agreed-upon procedures may involve the auditor in performing certain procedures concerning

1. Individual items of financial data.
2. A single financial statement.
3. A complete set of financial statements.

1. I and II only
2. II and III only
3. I and III only
4. I, II, and III

34. The following contain basic principles, essential procedures and related guidance, consistent with the concepts in the Framework, for the performance  of assurance engagements, except
    1. PSAs
    2. PSREs
    3. PSAEs
    4. PSRSs

35. CPAs in public practice who perform assurance engagements are governed  by the following, except
    1. Framework for Assurance Engagements
    2. Philippine Standards on Quality Control
    3. Code of Ethics for Professional Accountants in the Philippines
    4. AASC's Engagement Standards (PSAs, PSREs, PSAEs, and PSRSs)

36. The Philippine Framework for Assurance Engagements
    1. Provides a frame of reference for CPAs in public practice when performing audits, reviews, and compilations of historical financial information.
    2. Contains basic principles, essential procedures, and related guidance for the performance of assurance engagements.
    3. Establishes standards and provides procedural requirements for the performance of assurance engagements.
    4. Defines and describes the elements and objectives of an assurance engagement, and identifies engagements to which PSAs, PSREs, and PSAEs apply.

37. The procedures employed in doing compilation are:
    1. Designed to enable the accountant to express a limited assurance

1. 2. Designed to enable the accountant to express a negative assurance
   3. Not designed to enable the accountant to express any form of assurance
   4. Less extensive than review procedures but more extensive than agreed-upon procedures

38. Which of the following  procedures  is normally performed in connection with a compilation engagement?
    1. Inquire of management about subsequent events
    2. Making inquiries of management concerning actions taken at board meeting
    3. Applying analytical review procedures
    4. Collect, classify and summarize financial information.

39. An engagement to apply agreed-upon procedure engagement may be accepted, provided
    1. The CPA has audited the financial statements of the client.
    2. The CPA is independent with respect to the client.
    3. The distribution of the report will be limited only to specified parties involved.
    4. The adequacy of the procedures to be performed will be determined by the CPA.

40. Pronouncements of Auditing and Assurance Standards Council (AASC) do not cover
    1. Review engagement
    2. Compilation engagement
    3. Consultancy
    4. Agreed-upon procedures engagement

41. What is the most likely course of action that will be taken by an auditor in assessing management integrity?
    1. Tour the client premises.
    2. Research the prospective client’s related parties.
    3. Research the background and histories of officers
    4. Review the minutes of the board of directors

42. Which of the following is an example of an assurance engagement?

1. 1. Management advisory services
   2. Reporting on financial statements prepared using other comprehensive basis of accounting.
   3. compilation of financial information
   4. preparation of tax returns

43. Which of the following services provides a moderate level of assurance about  the client's financial statements?
    1. Forecasts and projections
    2. Compliance with contractual agreement
    3. Review
    4. Compilation

44. When an independent auditor is approached to perform an audit for the first time, he/she should make inquiries of the predecessor auditor. Inquiries are necessary because the predecessor may be able to provide the successor with information that will  assist the successor in determining whether
    1. A certain amount of audit fee will be acceptable to the client.
    2. An unqualified opinion may be issued.
    3. The audit documentation by the predecessor auditor can be utilized.
    4. The engagement proposal should be accepte

45. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's
    1. Evaluation of all matters of continuing accounting significance.
    2. Understanding as to the reasons for the change of auditors.
    3. Awareness of the consistency in the application of GAAP between periods.
    4. Opinion of any subsequent events occurring since the predecessor's audit report was issued.

46. Before accepting an engagement to audit a new client, a CPA is required to obtain
    1. An    understanding     of    the    prospective client’s industry and business.
    2. The prospective client’s signature to the engagement letter.
    3. A      preliminary         understanding          of      the prospective client’s control environment.

1. 4. The prospective client’s consent to make inquiries of the predecessor auditor, if any.

47. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding
    1. Disagreements the predecessor had with the client concerning auditing procedures               and accounting principles.
    2. The predecessor’s evaluation  of matters of continuing accounting significance.
    3. The degree of cooperation  the predecessor received concerning the inquiry of the client’s lawyer.
    4. The predecessor’s assessments of inherent risk and judgments about materiality.

48. Which of the following factors would most likely cause a CPA to decide not to accept a new audit engagement?
    1. The CPA’s lack of understanding of the prospective client’s internal auditor’s computer-assisted audit techniques.
    2. Management’s disregard of its responsibility to maintain an adequate               internal                                          control environment.
    3. The CPA’s inability to determine whether related-party transactions were consummated on terms equivalent to arm’s-length transactions.
    4. Management’s refusal to permit the CPA to perform substantive tests before the year-end.

49. The following are fundamental  principles that are mostly applied when performing procedures on acceptance of new clients except:
    1. Confidentiality.
    2. Professional competence.
    3. Independence.
    4. Professional competence and due care.

50. Before continuing the client relationship, the auditor should perform the following except:
    1. Communicate with the predecessor auditor.
    2. Evaluate client in case of change of client’s business.

1. 3. Evaluate client’s integrity.
   4. Evaluate financial condition of the client.

1. 1. A successor auditor most likely would make specific inquiries of the predecessor auditor regarding
      1. Specialized accounting principles of the client's industry.
      2. Disagreements with management as to auditing procedures.
      3. The competency of the client's internal audit staff.
      4. The      uncertainty        inherent       in     applying sampling procedures.

52. Which of the following will an auditor least likely discuss with the former auditors of a potential client prior to acceptance?
    1. Disagreements           with          management regarding accounting principles
    2. Integrity of management
    3. Fees charged for services
    4. Reasons for changing audit firms

53. Prior to the acceptance of an audit engagement with a client who has terminated the services of the predecessor auditor, the CPA should
    1. Accept the engagement without contacting the predecessor auditor since the CPA can include audit procedures to verify the reason given by the client for the termination.
    2. Contact the predecessor auditor without advising the prospective client  and request a complete report of the circumstance leading to the termination with the understanding that all information disclosed will be kept confidential.
    3. Advise the client of the intention to contact the predecessor auditor and request permission for the contact.
    4. Not communicate with the predecessor auditor because this would in effect be asking the auditor to violate the confidential relationship between auditor and client.

54. Auditing standards require a  successor auditor to communicate  with  the predecessor auditor. The Code  of Professional Conduct requires confidentiality; therefore, the client's permission must be

obtained before the communication can be made by

1. 1. The predecessor auditor.
   2. The successor auditor.
   3. Both the successor and predecessor auditor.
   4. Neither, since this is one of  the exceptions to confidentiality in the Code of Professional Conduct.

55. Which of the following is not done during the client selection and retention phase of planning?
    1. Obtain and review financial information
    2. Consider the need for special skills
    3. Ensure that the firm has sufficient resources to  complete  the  engagement in a timely manner.
    4. Obtain an understanding of internal controls

56. Which of the following factors most likely would influence an auditor’s determination of the auditability of an entity’s financial statements?
    1. The       complexity          of       the       accounting system.
    2. The            existence             of           related-party transactions.
    3. The      adequacy        of     the      accounting records.
    4. The operating effectiveness of control procedures.

57. Prior to beginning fieldwork on a new audit engagement in which a CPA does not possess industry expertise, the CPA should
    1. Obtain knowledge of matters that relate to the nature of the entity's business and industry.
    2. Reduce audit risk by lowering the preliminary levels of materiality.
    3. Engage financial experts who are familiar with the nature of the industry.
    4. Design special substantive tests to compensate for the lack of industry expertise.

58. The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the
    1. Timing of inventory observation procedures to be performed.

1. 2. Evidence to be gathered to provide a sufficient basis for the auditor's opinion.
   3. Procedures to be undertaken to discover litigation, claims, and assessments.
   4. Pending legal matters to be included in the inquiry of the client's attorney.

1. 1. A        written     understanding between the auditor and the client concerning   the auditor's responsibility for the discovery of illegal acts is usually set forth in a(an)
      1. Letter of audit inquiry.
      2. Client representation letter.
      3. Management letter.
      4. Engagement letter.

60. The scope and nature of an auditor's contractual obligation to a client is ordinarily set forth in the
    1. Opinion        paragraph         of      the      auditor’s report.
    2. Management letter.
    3. Engagement letter.
    4. Scope paragraph of the auditor’s report.

61. The primary reason an engagement letter is obtained by audit firms prior to starting the work is that
    1. It provides an insurance policy for companies entering into the agreement.
    2. It clarifies the responsibilities of management and those of the auditor.
    3. It communicates the type of opinion that will be rendered on the engagement
    4. It defines the firm's policies and procedures regarding new clients.

62. An engagement letter should be written before the start of an audit because
    1. It specifies the client's responsibility for preparing schedules and making the records available to the auditor.
    2. It may limit the auditor's legal liability by specifying the auditor's responsibilities.
    3. It specifies the basis for billing the audit for the upcoming year.
    4. All of the above

63. Which of the following matters is generally included in an auditor’s engagement letter?
    1. Management’s responsibility for the entity’s compliance with laws and regulations.

1. 2. The factors to be considered in setting preliminary judgments about materiality.
   3. Management’s          vicarious          liability         for illegal acts committed by its employees.
   4. The auditor’s responsibility to search for significant internal control deficiencies.

64. Which of the following is not included in the engagement letter?
    1. Objectives of the engagement
    2. Management's responsibilities
    3. A clear explanation of the services to be performed on the engagement
    4. Representations that the financial statements were prepared in accordance with generally accepted accounting principles

65. After an auditor had been engaged  to perform the first audit for a nonpublic entity, the client requested to change the engagement to a review. In which of the following situations would there be a reasonable basis to comply with the client's request?
    1. Management refused to sign the client representation letter.
    2. The client's bank required an audit before committing to a loan, but the client subsequently acquired alternative financing.
    3. The auditor was prohibited by the client from corresponding with the client's legal counsel.
    4. The auditing procedures  were substantially complete and the auditor determined that an unqualified opinion was warranted, but there was a disagreement concerning the audit fee.

66. Which of the following statements  would least likely appear in an  auditor’s engagement letter?
    1. Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket expenses.
    2. During the course of our audit we may observe opportunities for economy in, or improved controls over, your operations.
    3. After performing our preliminary analytical procedures we will discuss with you the other procedures we consider necessary to complete the engagement.

1. 4. Our engagement is subject to  the  risk that material misstatements or fraud, if they exist, will not be detected.

67. Arrangements concerning which of the following are least likely to be included in engagement letter?
    1. Internal auditors
    2. Predecessor auditor
    3. Stockholders
    4. Appraisers

68. When an auditor believes that an understanding with the client has not been established, he or she should ordinarily
    1. Perform        the        audit        with        increased professional skepticism.
    2. Decline to accept or perform the audit.
    3. Review the client’s financial reports.
    4. Obtain information about the client’s business and the industry where it operates.

69. Select the proper reply as to the allowable form of the understanding with a client when an audit is being performed.
    1. While preferably written, it may be oral; but in all cases it should be documented in the working papers.
    2. While preferably written, it may be oral, in which case it need not be documented in the working papers.
    3. The understanding may be in any form, such as oral or written.
    4. The understanding must be obtained in written form and included in the working papers.

70. In auditing the financial statements of Star Corp., Land discovered information leading Land to believe that Star’s prior year’s financial statements, which were audited by Tell, require substantial revisions. Under these circumstances, Land should
    1. Notify Star’s audit committee and stockholders that the prior  year’s financial statements cannot be relied on.
    2. Request Star to reissue the prior year’s financial statements with the appropriate revisions.
    3. Notify Tell about the information and make inquiries about the integrity of Star’s management.

1. 4. Request Star to arrange a meeting among the three parties to resolve the matter.

71. Orange Corp. has a few large accounts receivable that total P2,000,000. Yellow Corp. has a large number of small accounts receivable that also total P2,000,000. The importance of an error in any one account is, therefore, greater for Orange Corp. than for Yellow Corp. This is an example of the auditor's concept of:
    1. Materiality.
    2. Reasonable assurance.
    3. Comparative analysis
    4. Relative risk.

72. The relationship between materiality and audit risk is:
    1. Indeterminable
    2. Direct.
    3. Inverse.
    4. Materiality        and       audit       risk       have       no relationship

73. An auditor should design a written audit program so that:
    1. All material transactions will be selected for substantive testing.
    2. Substantive tests prior to the balance sheet date will be minimized.
    3. The audit procedures selected will achieve specific audit objectives.
    4. Each account balance will be  tested under either tests of controls or tests of transactions.

74. Audit programs are modified to suit the circumstances on  particular  engagements. A complete audit program  for  an engagement generally should be developed
    1. Prior to beginning the actual audit work.
    2. After the auditor has completed an evaluation of the existing internal accounting control.
    3. After reviewing the client's accounting records and procedures.
    4. When the audit engagement letter is prepared.

75. Which of the following is not a potential effect of an auditor's decision that a lower acceptable audit risk is appropriate?
    1. More evidence is required.

1. 2. Less evidence is required.
   3. Special care is required in assigning experienced staff.
   4. Review of the working papers by personnel who were not assigned to the engagement.

76. To obtain an understanding of a continuing client’s business in planning an audit, an auditor most likely would
    1. Read specialized industry journals.
    2. Review prior year working papers and the permanent file for the client.
    3. Reevaluate the client’s internal control environment.
    4. Perform tests of details of transactions and balances.

77. The management responsibility  to  detect and prevent fraud and error is accomplished by
    1. Having       an      annual       audit      of     financial statements.
    2. Implementing adequate quality control system.
    3. Implementing adequate accounting and internal control system.
    4. Issuing a representation letter to the auditor.

78. Which of the following statements best describes the auditor's responsibility  to detect material errors and fraud?
    1. The auditor is responsible for the failure to detect material errors and frauds only when such failure results from the misapplication of generally accepted accounting principles.
    2. The auditor is responsible for the failure to detect material errors and frauds only when the auditor fails to confirm receivables or observe inventories.
    3. The audit should be designed to provide reasonable assurance that material errors and fraud are detected.
    4. Extended auditing procedures  are required to detect unrecorded transactions even if there is no evidence that material errors and frauds may exist.

79. Which of the following procedures would an auditor be most likely to perform in planning a financial statement audit?
    1. Reviewing investment transactions of the audit period to determine  whether related parties were created.
    2. Performing analytical procedures to identify areas that may represent specific risks.
    3. Obtaining a written representation letter from the client to emphasize management's responsibilities.
    4. Reading the minutes of stockholder and director meetings to  discover  whether any unusual transactions have occurred.

1. 1. A  CPA  is  conducting  the  first  audit   of  a client’s financial statements.  The CPA hopes to reduce the  audit  work  by consulting  with  the  predecessor  auditor and    reviewing     the    predecessor's working papers. This procedure is
      1. Acceptable if the CPA refers in the audit report to reliance upon the predecessor auditor's work.
      2. Required if the CPA is to render an unqualified opinion.
      3. Unacceptable because the CPA should bring an independent viewpoint to a new engagement.
      4. Acceptable if the client and the predecessor auditor agree to it.

81. PSA 315 requires that the auditor should obtain an understanding of relevant industry, regulatory and other external factors including the applicable financial reporting framework. Which of the following is not among the items that relate to industry conditions?
    1. Energy, supply and cost
    2. Inflation and currency revaluation
    3. Market and competition
    4. Cyclical or seasonal activity

82. The risk of material financial statement misstatement may be greater when the following conditions exist except
    1. When there is greater management intervention to specify the accounting treatment.
    2. When there is sufficient personnel with appropriate accounting and financial reporting skills.

1. 3. When there is greater  manual intervention for data collection and processing.
   4. Complex calculations or accounting principles is involved.

83. The following are assurance engagements except
    1. Tax consulting
    2. Financial statements audit
    3. Review of financial statements
    4. Information system reliability services

84. Engagements frequently performed by professional accountants that are not assurance engagements  include  the following except
    1. Compilation
    2. Agreed-upon procedures.
    3. Compliance audit
    4. Management consulting.

85. When the professional accountant has obtained sufficient appropriate evidence to conclude that the subject matter conforms in all material respects with identified suitable criteria, he or she can provide what level of assurance?
    1. None
    2. High
    3. Absolute
    4. Moderate

86. The Framework of PSA applies to
    1. Taxation
    2. Consultancy
    3. Accounting advice
    4. Compilation

87. Which of the following procedures ordinarily performed during an audit are  also performed in review?
    1. Assessment of accounting and internal control systems
    2. Test of controls
    3. Tests of records and of responses to inquiries
    4. Inquiry and analytical procedures

88. Which statement is incorrect regarding the pronouncements of AASC?
    1. The PSAs and Interpretations may also have application, as appropriate, to other related activities of auditors.

1. 2. PSAs contain basic  principles  and essential procedures (identified in bold type black lettering) together  with related guidance in the form of explanatory and other material.
   3. PSAs need only be applied to material matters.
   4. The Interpretations have the same authority as the PAPSs.

89. The amount of audit fees depend largely on the
    1. Size and capitalization of the company under audit.
    2. Amount of profit for the year.
    3. Availability of cash.
    4. Volume of audit work and degree of competence and responsibilities involve

90. In determining audit fees, an auditor may take into account each of the following except
    1. Volume and intricacy of work involved.
    2. Number and cost of manhours needed.
    3. Degree of responsibility assumed.
    4. Size and amount of capital of client.

91. Under this method of billing a client, the external auditors charges on the  basis  of time       spent       by       principals/partners, supervisors, seniors and juniors at predetermined rates agreed upon with the client
    1. Maximum fee basis
    2. Flat sum basis
    3. Retainer basis
    4. Per diem basis

92. Which of the following will impair the independence of a CPA in public practice?
    1. He has his name and address listed on a one-page section of the telephone book.
    2. He obtained a loan  from  a bank under the normal lending  procedures,  terms and requirements of that bank.
    3. He holds one share of the client's capital stock.
    4. He failed to disclose a client's departure from GAAP.

93. When CPAs are able to maintain an independence attitude in fulfilling their

responsibility,            it        is        referred         to        as independence in

1. 1. Fact.
   2. Appearance.
   3. Conduct.
   4. Total.

94. When the users of financial statements have confidence in the independence of the CPA, it is referred to as in independence in
    1. Fact.
    2. Appearance.
    3. Conduct.
    4. Total.

95. Which of the following statements is incorrect?
    1. CPAs lose their independence if they acquire any direct financial interest in a client.
    2. CPAs lose their independence  if  they have a material direct financial interest in a client.
    3. CPAs lose their independence if they acquire any indirect financial interest in a client.
    4. CPAs lose their independence if they acquire a material indirect financial interest in a client.

96. Which of the following statements is not a distinction between independent  auditing and internal auditing?
    1. Independent auditors represent  third party users external to  the  auditee entity, whereas internal auditors report directly to management.
    2. Internal auditors are employees of the auditee, whereas independent auditors are independent contractors.
    3. The internal auditor's span of coverage goes beyond financial auditing to encompass operational and performance auditing.
    4. Although independent auditors strive for both validity and relevance of evidence, internal auditors are concerned almost exclusively with validity.

97. Which of the following is a correct qualification of the Chairman and Two Commissioners of the Commission on Audit?
    1. A citizen of the Philippines.