1.

The framework for assurance engagements identifies engagement to which the following standards apply,
except,
A. Philippine Standards on Auditing (PSAs)
B. Philippine Standards on Review Engagements (PSREs)
C. Philippine Standards on Assurance Engagements (PSAEs)
D. Philippine Standards on Related Services (PSRSs)
2. Which is correct concerning the framework for assurance engagements?
A. It provides a frame of reference against which audit engagements are evaluated
B. It establishes specific guidelines and procedural requirements for the performance of assurance engagements
C. It provides a frame of reference for accountants in public practice when performing assurance
engagements
D. It is intended for reference of public accountants only
3. Evaluate the following statements:
I. Assurance services help information users make decisions based on more credible information.
II. Assurance services can enhance the usefulness of information.
A. Both are true
B. True, false
C. Both are false
D. False, true
4. Evaluate the following statements:
I. Philippine Standards on Related Services is applicable to non-assurance services.
II. Non-assurance services lack one or more element(s) of an assurance engagement.
A. Both are true
B. True, false
C. Both are false
D. False, true
5. Evaluate the following statements:
I. Audit engagements are non-assurance services.
II. Review engagements are non-assurance services.
A. Both are true
B. True, false
C. Both are false
D. False, true
6. Which is an engagement in which 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?
A. Assurance engagement
B. Audit engagement
C. Attestation engagement
D. Management consulting engagement
7. Evaluate the following statements:
I. The preparation of tax returns where no conclusion conveying assurance is expressed is non- assurance
services.
II. Consulting engagements are assurance services.
A. Both are true
B. True, false
C. Both are false
D. False, true
8. Identify which is an element of an assurance engagement:
I. Sufficient and appropriate evidence
II. Professional fees
A. Both
B. Neither
C. I only
D. II onlly
9. Classify the following parties relevant to an assurance engagement:
 Management of an audit client
 Auditor
A. Both are responsible parties
B. Both are intended users
C. Responsible party, practitioner
D. Intended user, practitioner
10. Classify the following potential subject matters in an assurance engagement:
• Cash flows of an entity
• Effectiveness of an online payment system
A. Both are financial
B. Both are systems and processes
C. Financial, systems and processes
D. Systems and processes, financial
11. Classify the following statements:
• Zero customer complaints and product recall.
• Performance of an entity
A. Both are subject matters (SM)
B. Both are subject matter information (SMI)
C. SM, SMI
D. SMI, SM
12. Classify the following statements:
• Adherence to SEC regulations
• Report on an entity’s observance of the SEC regulations
A. Both are subject matters (SM)
B. Both are subject matter information (SMI)
C. SM, SMI
D. SMI, SM
13. Evaluate the following statements:
• Evidential matters are benchmarks used to evaluate or measure the subject matter including, where
relevant, benchmarks for presentation and disclosure.
• Criteria refer to the information obtained by the practitioner in arriving at the conclusions on which the
conclusion is based.
A. Both are true
B. True, false
C. Both are false
D. False, true
14. A criterion that is relevant
A. Contributes to conclusions that assist decision-making by the intended users.
B. Is 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. Allows 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. Contributes to conclusions that are clear, comprehensive, and not subject to significantly different
interpretations
15. Evaluate the possibility of obtaining the following levels of assurance:
I. Absolute II. Reasonable III. Limited
A. All are possible
B. All are impossible
C. Only I is possible
D. Only I is impossible
16. Evaluate the following reasons why a perfect level of assurance is not possible:
• The use of selective testing
• Much of the evidence available to the practitioner is conclusive rather than persuasive.
A. Both are true
B. True, false
C. Both are false
D. False, true
17. Classify the following statements as to the level of assurance:
I. The aim is a reduction in assurance engagement risk to an acceptably low level in the circumstances of the
engagement as the basis for a positive form of expression of the practitioner’s conclusion.
II. The aim 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.
A. Limited, Absolute
B. Reasonable, Limited
C. Limited, Reasonable
D. Absolute, Limited
18. Classify the following statements as to the form of the conclusion related to the assurance given:
I. In our opinion internal control is effective, in all material respects, based on XYZ criteria.
II. 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.
A. Negative, Positive
B. Reasonable, Limited
C. Limited, Reasonable
D. Positive, Negative
19. Which of the following procedures ordinarily performed during an audit are also performed in a review
engagement?
A. Assessment of accounting and internal control systems.
B. As if doing something (AIDS)
C. Tests of records and responses to inquiries.
D. Inquiry and analytical procedures.
20. This is the risk that the practitioner expresses an inappropriate conclusion when the subject matter
information is materially misstated.
A. Audit risk
B. Detection risk
C. Assurance engagement risk
D. Practitioner’s risk
21. Which of the following is true about non-assurance services?
A. Audit engagements are non-assurance services
B. Review engagements are non-assurance services
C. Non-assurance services lack one or more element(s) of an assurance engagement
D. All of the above are true about non-assurance services
22. 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. Carry out those procedures of an audit to which the auditor and the entity and any appropriate third parties
have agreed and to report on factual findings.
D. Provide a high, but not absolute level of assurance that the information is free of material
misstatement.

23. Which of the following statements is true?

A. Having accepted an assurance engagement, a practitioner may not change that engagement to a non-
assurance engagement anytime the client requests for such change.
B. Under no circumstance can a practitioner who has accepted an assurance engagement may change that
engagement to a non-assurance engagement, or from a reasonable assurance engagement to a limited
assurance engagement even with reasonable justification.
C. Having accepted an assurance engagement, a practitioner may not change that engagement to a non-
assurance engagement without reasonable justification.
D. Having accepted an assurance engagement, a practitioner may change that engagement to a non-
assurance engagement without reasonable justification and disregards evidence obtained prior to the
change.
24. Which of the following statements refers to the definition of auditing?
A. A service activity which function is to provide quantitative information primarily financial in nature about
economic entities that is intended to be useful in making economic decisions.
B. The art of recording, classifying and summarizing in a significant manner and in terms of money,
transactions and events which are in part at least of a financial character and interpreting the results
thereof.
C. The process of identifying, measuring and communicating economic information to permit informed
judgment and decisions by users of the information.
 D. A systematic process of objectively obtaining and evaluating evidence regarding assertions about
economic actions and events to ascertain the degree of correspondence between these assertions and
established criteria and communicating the results thereof.

25. Evaluate the following statements:

S1. Audit is a branch of accounting
S2. Audit typically provides guarantee that financial data are fairly presented.
A. All statements are true
B. All statements are false
C. Only S1 is true
D. Only S2 is true

26. Classify which relates more to accounting than auditing:

I. Recording of financial transactions, culminating in the preparation of the financial statements.
II. Evaluation of evidence supporting an assertion.
A. Both
B. Neither
C. I only
D. II only
27. Classify the following statements related to the underlying theories behind the necessity for audit services:
I. Managers generally have more information about the financial position and operations of the entity
compared to other stakeholders Assurance services can enhance the usefulness of information.
II. In theory, the will and wishes of the shareholders should be operationalized by management but problems
exist with respect to goal congruence.
A. Both are related to the agency theory
B. Both are related to the information asymmetry theory
C. Agency theory, information asymmetry
D. Information asymmetry, agency theory
28. Which best describes the representations by management, explicit or otherwise, that are embodied in the financial
statements, as used by the auditor to consider the different types of potential misstatements that may occur.
A. Financial statement assertions
B. Notes to the financial statements
C. Audit evidence
D. Disclosure requirements

29. Which is a type of audit is performed to determine whether an entity’s financial statements are fairly presented
in accordance with an identified financial reporting framework.
A. Financial statement audit
B. Compliance audit
C. Operational audit
D. Internal audit

30. The results the auditor’s is communicated work through the medium of the:
A. Audit engagement letter.
B. Management letter.
C. Audit report.
D. Notes to the financial statements.

31. Financial statements need to be prepared in accordance with one, or a combination of:
A. PFRS
B. Other authoritative basis
C. IFRS
D. All of the answers.

32. Evaluate the following statements related to the purpose of audit engagements:
I. Provide government agencies, such as BIR with basis for assessments.
II. To prove accuracy and reliability of financial statements.
III. Enhance the degree of confidence of intended users of the financial statements.
IV. To obtain reasonable assurance about whether the financial statements are free from material
misstatements, due to fraud and error.
A. All statements are true
B. All statements are false
C. Only I and II are true
D. Only III and IV are true

33. Classify the following types of audits:

  This type of audit involves a review of an organization’s procedures to determine whether the organization has
adhered to specific procedures, rules or regulations set down by some higher authority
.
 This type of audit involves a review of an organization’s procedures and methods for the purpose of evaluating
efficiency and effectiveness of operations, identifying areas for improvement, and making recommendations to
improve performance.

A. Both are operations audit

B. Both are compliance audits
C. perations, Compliance
D. Compliance, operations
34. Which is/are overall responsibilities of the internal audit function?
I. Serve as an independent assurance and consulting activity designed to add value and improve the
company's operations.
II. Assess the company's methods for safeguarding its assets and, as appropriate, verify the existence of
the assets.
A. Both C. I only
B. Neither D. II only

35. Which internal audit activity directly contributes to the improvement of the organization’s governance process
I. Evaluating the effectiveness of internal controls over financial reporting
II. Evaluating the design of ethics-related activities
A. Both C. I only
B. Neither D. II only

36. Classify BEST the following reporting structures (ultimate) related to the external and internal auditor:
 Shareholders or members who are outside of the organization’s governance structure.
 Board of directors and senior management, when appropriate, who are within the organization’s
governance structure.
A. Both pertain to internal auditors
B. Both pertain to external auditors
C. Internal, external
D. External, internal

37. Classify the following types of audits:

 This is an independent appraisal activity established within an entity as a service to the entity.
 This type of audit goes beyond the usual financial statement audit, to include audits of compliance with
laws and regulations, operations of governmental entities, and the proper disbursement and management
of public funds.
A. Both are operations audit
B. Both are government audits
C. Operations, government
D. Government, operations

38. To provide for the greatest degree of independence in performing internal auditing functions, an internal
auditor most likely should report to
A. Board of Directors. c. Corporate Controller.
B. Vice-President for Finance. d. Corporate Stockholders.

39. An operating committee of a company's board of directors that is in-charge of overseeing financial
reporting and disclosure.
A. Governance c. Control environment
B. Audit committee d. Management

40. Evaluate the following statements:

I. The primary audience for the written report issued by the internal auditor at the completion of an audit
should be the external auditors when they intend to rely on the internal auditor’s work.
II. In a broad sense, society benefits from internal auditing because the internal auditor promotes the efficient
and effective use of resources.
A. All statements are true C. Only I is true
B. All statements are false D. Only II is true

41. This type of activity is a subset of internal audit that attempts to measure the effectiveness with which an
organizational unit is administered.
A. Economy and efficiency audit C. Financial audit
B. Management audit D. Compliance audit
42. In government auditing, the three elements of expanded scope auditing are:
A. Goal analysis, audit of operations, audit of systems.
B. Financial and compliance, economy and efficiency, program results.
C. Pre-audit, post-audit, internal audit.
D. National government audit, local government audit, corporation audit.

43. An audit designed to determine the extent to which the desired results of an activity established by the
legislative or other authorizing body are being achieved.
A. Economy audit C. Efficiency audit
B. Program results audit D. Financial-related audit