ACCO 30043 Auditing and Assurance Principles

Session 2 Notes
Definition and Objective of an Assurance

Engagement
In an assurance engagement, a practitioner expresses a conclusion designed to enhance the
degree of confidence of the intended users other than the responsible party about the outcome of
the evaluation or measurement of a subject matter against criteria.

Hence, an assurance engagement is an independent professional service that improves the quality
(credibility) of information for
decision makers. Assurance services are very broad, and can be done by CPAs or by a variety of
other professionals.

Need for Unbiased Reporting and Independent Assurance

The demand for assurance services emanate from the following reasons:
• Potential bias in providing information
• Remoteness between a user and the organization or trading partner
• Complexity of the transactions, information or processing systems
• Investors need to manage their risk and thereby minimize financial surprises as
consequences to investors, and others, of relying on inaccurate information can be quite
significant. Assurance engagements reduce information risks of the subject matter.

Types of Assurance Engagements

1. As to level of assurance conveyed:
a. Reasonable assurance engagement. The objective is a reduction in assurance engagement risk
to an acceptably low level as the basis for a positive form of expression of the practitioner’s
conclusion. An example is audit of historical FSs.

b. Limited assurance engagement. The objective is a reduction in assurance engagement risk to a

level that is acceptable in the circumstances of the engagement, but where that risk is greater
than for a reasonable assurance engagement, as the
basis for a negative form of expression of the practitioner’s conclusion. An example is review of
historical FSs.

2. As to structure of engagement:
a. Assertion-based engagement. In this type of engagement, the evaluation or measurement of the
subject matter is performed by the responsible party, and the subject matter information is in the
form of assertion by the responsible party that is made available to the intended users.
Independent financial statements audit normally falls under this type.

b. Direct reporting engagement. In this type of engagements, 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 that is not available to
the intended users. The subject matter information is provided to the intended users in the
assurance report.

Elements of an Assurance Engagement

The five elements of an assurance engagement are:
a. A three party relationship involving a practitioner, a responsible party, and intended users;
b. An appropriate subject matter;
c. Suitable criteria;
d. Sufficient appropriate evidence; and
e. A written assurance report in the form appropriate to a reasonable assurance engagement or a
limited assurance engagement.

Three-party Relationship
Assurance engagements involve three separate parties:
1. Practitioner – the person, who performs the engagement, and is broader than the term
“auditor” which relates only to practitioners performing audit or review engagements
with respect to historical financial information.

2. Responsible party – is the person responsible for

a. Direct reporting engagement – subject matter; or
b. Assertion-based engagement – a subject matter information (the assertion), and may be the
subject matter. The responsible party may or may not be the party who engages the practitioner
(the engaging party).

3. Intended users – for whom the assurance report is prepared. The responsible party can
be one of the intended users, but not the only one.

Appropriate subject matter

The subject matter, and subject matter information, of an assurance engagement can take many
forms, such as:
a. Financial performance or conditions (for example, historical or prospective financial
statements)
b. Non-financial performance or conditions (for example, performance key indicators of
efficiency and effectiveness of an entity)
c. Physical characteristics (for example, capacity of a facility)
d. Systems and processes (for example, an entity’s internal control or IT system)
e. Behavior (for example, corporate governance, compliance with regulation, human resource
practices)

An appropriate subject matter is:

a. Identifiable, and capable of consistent evaluation or measurement against the identified
criteria; and
b. Such that the information about it can be subjected to procedures for gathering sufficient
appropriate evidence to support a reasonable assurance or limited assurance conclusion, as
appropriate.

Suitable criteria
Benchmarks used to evaluate or measure the subject matter.
Examples of formal criteria are the following:
• In the preparation of financial statements, the criteria may be Philippine Financial Reporting
Standards;
• When reporting on internal control, the criteria may be an established internal control
framework; and
• When reporting on compliance, the criteria may be the applicable law, regulation or contract.

Examples of less formal criteria are an internally developed code of conduct or an agreed level of
performance (such
as the number of times a particular committee is expected to meet in a year).

Suitable criteria are required for reasonably consistent evaluation or measurement of a subject
matter within the
context of professional judgment. Without the frame of reference provided by suitable criteria,
any conclusion is
open to individual interpretation and misunderstanding.

The criteria must have the following characteristics to be considered suitable:

a. Relevance – relevant criteria contribute to conclusions that assist decision- making by the
intended users.
b. Completeness – criteria are sufficiently complete when relevant factors that could affect the
conclusions in the context of the engagement circumstances are not omitted. Complete criteria
include, where relevant, benchmarks for presentation and disclosure.
c. Reliability – reliable 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.
d. Neutrality – neutral criteria contribute to conclusions that are free from bias.
e. Understandability – understandable criteria contribute to conclusions that are clear,
comprehensive, and not subject to significantly different interpretations.

The criteria need to be available to the intended users to allow them to understand how the
subject matter has been evaluated or measured

Sufficient appropriate evidence

Evidence is the information obtained by the practitioner in arriving at the conclusions on which
the opinion is based.
The practitioner plans and performs an assurance engagement with an attitude of professional
skepticism.

In addition, the practitioner recognizes the existence of assurance engagement risk (synonymous
to audit risk) – the risk that the practitioner expresses an inappropriate conclusion when the
subject matter information is materially misstated.

Written assurance report

The practitioner provides a written report containing a conclusion that conveys the assurance
obtained about the subject matter information.
The practitioner’s conclusion can be worded depending on the type of assurance engagement:
1. As to structure:
a. Assertion-based engagement, either:
i. In terms of the responsible party’s assertion (for example: “In our opinion the
responsible party’s assertion that internal control is effective, in all material respects,
based on XYZ criteria, is fairly stated”); or

ii. Directly in terms of the subject matter and the criteria (for example: “In our opinion
internal control is effective, in all material respects, based on XYZ criteria”).

b. Direct reporting engagement – directly in terms of the subject matter and the criteria.

2. As to level of assurance:
a. Reasonable assurance engagement - positive form, for example: “In our opinion internal
control is effective, in all material respects, based on XYZ criteria.”

b. Limited assurance engagement - negative form, for example, “Based on our work described in
this report, nothing has come to our attention that causes us to believe that internal control is not
effective, in all material respects, based on XYZ criteria.”
The conclusions above are examples of an “unqualified conclusion”. However, not all
conclusions are unqualified.

The following table summarizes conclusions other than unqualified depending on the results of
the engagement:

Engagement Results Significance Conclusion

Material Qualified
Practitioner unable to obtain sufficient appropriate
Material and
evidence
Pervasive Disclaimer
Material Qualified
Subject matter/subject matter information contains
Material and
material misstatement
Pervasive Adverse

Limitations of Assurance Engagements

The highest level of assurance that may be provided by the practitioner is reasonable assurance
(less than absolute) as a result of the following factors:
a. Use of selective testing;
b. Use of judgment;
c. Inherent limitations of internal control;
d. Persuasive evidence rather than conclusive; and
e. In certain cases, characteristics of the subject matter.
Non-assurance Engagements
Engagements are considered non-assurance engagements if they lack one or more of the five
elements of an assurance engagement.

Common examples of non-assurance engagements are:

a. Agreed-upon procedures engagement;
b. Compilations engagements;
c. Preparation of tax returns where no conclusion conveying assurance is expressed;
d. Consulting (or advisory) engagements such as management and tax consulting;
e. Engagements to testify in legal proceedings regarding accounting, auditing, taxation or other
matters; and
f. Engagements that include professional opinions not intended to be an assurance report.

Audit, Review and Related Services

Nature of service Audit Review Agreed-upon Compilation

To enable a To enable the
practitioner to state auditor carry
whether anything out
To enable the has come to the procedures of
auditor obtain practitioner’s an audit To enable the
reasonable attention that nature to accountant to
assurance about causes the which the use
whether the practitioner to auditor and accounting
financial believe that the the expertise, as
statements, as a financial entity and opposed to
whole, are free statements are any auditing
from material not prepared, in all appropriate expertise, to
misstatement, material respects, third parties collect,
whether due to in accordance with have agreed classify and
fraud or error, and the applicable and to report summarize
to express an financial reporting on factual financial
Objective opinion thereon framework findings. information.
Level of assurance Reasonable (High) Limited (Moderate) None None
Description
of procedures Identification
performed of
and factual information
Type of report Positive assurance Negative assurance findings compiled
Primarily, among Primarily inquiry As agreed Reading the
others, risks and analytical (Audit financial
Basic procedures assessment procedures nature) statements for
 procedures, tests of obvious
controls and misstatements
substantive
procedures
Not
Independence Required Required Required. Not Required.

1. Assurance services least likely involve

a. Improving the quality of information for decision purposes.
b. Improving the quality of the decision model used.
c. Improving the relevance of information.
d. Implementing a system that improves the processing of information.

2. The need for assurance services arises for all of the following reasons except;
a. Potential bias in providing information
b. Closeness between a user and the organization
c. Complexity of the processing systems
d. Remoteness between user and the organization

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

a b c d
Nonfinancial performance or condition Yes Yes Yes No
Behavior Yes Yes Yes Yes
Financial performance or condition Yes Yes No Yes
Physical characteristics Yes No No No
Systems and Processes Yes No Yes Yes

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

a b c d
Relevance Yes Yes Yes Yes
Reliability Yes Yes Yes Yes
Completeness Yes Yes No Yes
Neutrality Yes No No Yes
Comparability Yes Yes No No
Feedback value Yes No No No

5. 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?
 a. None c. Moderate
b. High d. Absolute

6. It is the risk that the practitioner expresses an inappropriate conclusion when the subject
matter information is materially misstated.

a. Business risk
b. Assurance engagement risk
c. Detection risk
d. Audit risk

7. Indicate the level of assurance provided by audit, review and related services (agreed-
upon procedures and compilation)
a. b. c. d.
Audit High High Low Reasonable
Review High Low Low Reasonable
Agreed-upon Procedures None None None Low
Compilation None None None None

8. The following are assurance engagements, except

a. Reasonable assurance engagement

b. Other assurance engagements
c. Review engagement
d. Tax services

9. Unlike consulting services, assurance services

a. Make recommendations to management

b. Report on how to use information
c. Report on the quality of information
d. Are two-party contracts

10. 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

11. 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.

12. 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.

13. 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.

14. 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

15. 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.

16. Of the following, which is the broadest concept?

a. Internal control audit.
b. Audit of financial statements.
c. Attestation services.
d. Assurance services.

17. 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.
 18. 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.

19. Which of the following services provides the highest level of assurance to third parties
about a company's financial statements?
a. Audit.
b. Review.
c. Compilation.
d. Each of the above provides the same level of assurance.

20. 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.

21. 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

22. 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.

23. 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

24. 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

25. 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.

26. 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.

27. 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.
d. The responsible party may also be one of the intended users.

28. 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.

29. 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

30. 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.

31. 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

32. Which of the following is not a characteristic of suitable criteria?

a. Completeness
b. Comparability
c. Neutrality
d. Relevance

33. 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.

34. 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.

35. 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

36. Assurance engagement risk is the risk

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 miss-tated or not materially misstated.
d. Through loss from litigation, adverse publicity, or other events arising in connection with a
subject matter reported on.

37. The following are components of assurance engagement risk, except

a. Business risk
b. Detection risk
c. Inherent risk
d. Control risk

38. The predominant type of attestation service performed by CPAs is:

a. Audit.
b. Review.
c. Compilation.
d. Management consulting.

39. Which of the following characteristics is not considered necessary in determining

whether the criteria are suitable?
a. Sufficiency
b. Relevance
c. Reliability
d. Neutrality

40. 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

41. 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.

42. Which of the following services provides positive assurance through attestation?
a. Tax services
b. Review
c. Auditing
d. Accounting services

43. 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.

44. 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.

45. 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.

46. Which of the following statements best describes review services?

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.

47. 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.

48. 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.

49. 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.

50. 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.

51. 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.

52. 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.

53. 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

54. 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.
 55. The attest function:
a. Is an essential part of every engagement performed by a CPA.
b. Includes the preparation of a written report of the CPA's conclusion.
c. Requires a complete review of all transactions during the period under examination.
d. Requires a review of a sample of transactions during the period under examination.

56. Which of the following is an assurance service?

a. Performance measurement
b. Systems design and installation
c. Tax planning
d. Personal financial planning

57. 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.

58. 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.

59. 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.

60. 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.

61. Assurance engagements encompass the following types of services, except:

a. Audit of historical financial statements.
b. Review engagements.
c. Management consulting.
d. Attestation services.
 62. A report on factual findings is the end product of the auditor when performing:
a. Audit.
b. Review.
c. Agreed-upon procedures.
d. Compilation.

63. What assurance is provided by the auditor in an agreed-upon procedures engagement?

a. No assurance.
b. Low.
c. Moderate.
d. Reasonable.

64. 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.

65. 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.
d. Auditing and attest services represent two distinctly different types of services.

66. 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.

67. 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.

68. 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.

69. Compilation is an example of which one of the following types of services?

a. Auditing
b. Accounting
c. Consulting
d. Review

70. 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.

71. 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.

72. 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

73. 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.

74. 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

75. 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

76. 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.

77. 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
ob-taining 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

78. 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 per-
forming an assurance engagement.

79. 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 evi-
dence.

80. 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