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ACC 3016Practice Examination in Auditing Theory
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ACC 3016Practice Examination in Auditing Theory
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ACC 3016Practice Examination in Auditing Theory1. What is an assurance engagement?
a. Assurance engagement enables the auditor to express an opinion whether the financial statements are
prepared, in all material respects, in accordance with an identified financial reporting framework.
b. Assurance engagement enables an auditor to state whether, on the basis of procedures which do not provide
all the evidence that would be required in an audit, anything has come to the auditor's attention that causes
the auditor to believe that the financial statements are not prepared, in all material respects, in accordance
with an identified financial reporting framework.
c. Assurance engagement carries 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.
d. Assurance engagement means 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.
2. Which of the following is not element of assurance engagement?
a. A third-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.
3. In an assurance engagement, the responsible party and the intended users
a. Are from different entities c. May be (a) or (b)
b. Are from the same entities d. Neither (a) or (b)
4. In an assurance engagement, the person or class of persons for whom the professional accountant prepares
the report for a specific use of purpose is the
a. Intended user c. Management
b. Responsible party d. Client
5. An assurance engagement should have which of the following elements?
Subject Matter Criteria
a. Yes No
b. No Yes
c. Yes Yes
d. No No
6. The subject matter of an assurance engagement may include
Financial Information Internal Controls Compliance with Regulation
a. Yes Yes Yes
b. No No No
c. Yes No Yes
d. No Yes No
7. When performing an assurance service, professional accountants use standards or benchmarks to evaluate or
measure the subject matter of an assurance engagement. These are referred to in the framework as
a. Criteria c. Conditions
b. Norms d. Gauges
,8. The following are characteristics of suitable criteria, except:
a. Relevance c. Neutrality
b. Reliability d. Understanding
9. An assurance engagement should have the following elements?
Sufficient Appropriate Assurance Report,
Evidence which can be oral
a. Yes No
b. No Yes
c. Yes Yes
d. No No
10. The auditor’s report should be titled, and the title should include the word
a. Standard c. Audit
b. Opinion d. Independent
11. The main purpose of implementing quality control policies and procedures is
a. To comply with regulatory agency
b. To provide reasonable assurance that audit will be conducted in accordance with PSA
c. To have a favorable peer review
d. To standardize the policies and procedures of the audit firm
12. The objectives of the quality control policies to be adopted by the audit firm will ordinarily incorporate
Skills and competence Monitoring Professional Requirements
a. Yes Yes Yes
b. No No No
c. Yes No Yes
d. No Yes No
13. Which of the following is an element of a CPA firm’s quality control system that should be considered in
establishing its quality control policies and procedures?
a. Complying with laws and regulations c. Human resources
b. Using statistical sampling d. Considering audit risk and materiality
14. Which of the following is one of the elements of a CPA firm’s quality control system?
a. Complying with laws and regulations c. Delegation
b. Using statistical sampling techniques d. Considering audit risk and materiality
15. Ethical principles governing audit of financial statements do not include
a. Independence c. Technical standards
b. Competence and due care d. Professional responsiveness
16. In planning an audit, the auditor should consider the presence of fraud risk factors relating to misstatements
arising from (1) fraudulent financial reporting and (2) misappropriation of assets. In which of the following
situations would the auditor most likely presume that a high risk of defalcation exists?
a. ABC Company is a multinational company that does business in various countries in the Asia-Pacific rim.
b. DEF Company does business with related parties.
c. GHI Company has a cashier who also handles accounting and authorization functions.
d. MNO Company is in an industry where the rate of change is very slow.
17. Which of the following is an example of fraud?
, d. Misinterpretation of facts that existed when financial statements were prepared
18. The major reason an independent auditor gather evidence is to
a. Detect fraud
b. Form an opinion on the financial statements
c. Evaluate management
d. Evaluate internal controls
19. In working with the bank reconciliation and the bank cutoff statement, the auditor finds that a prior check was
not on the reconciliation as an outstanding check. This may be an indication of
a. Window dressing c. Kiting
b. Lapping d. An attempt to conceal a cash shortage
20. Which is the appropriate timing of substantive test if the risk of material misstatement is low for an assertion?
a. All testing must be done for yearend balances
b. Interim testing and yearend update
c. No testing must be done
d. Either a, b, or c
Philippine Accountancy Act of 2004 and its implementing Rules and Regulations, Continuing Professional
Development Act of 2016 and its implementing Rules and Regulations, Rule 68 of the Securities Regulation
Code, SEC Memorandum Circular No. 1, Series of 2018 and SEC Memorandum Circular No. 21, Series of 2016
21. Republic Act 9298 is known as the
a. Revised Accountancy Law
b. Code of Ethics for Professional Accountants
c. Philippine Accountancy Act of 2004
d. Philippine Accountancy Law of 2004
22. Which of the following is not an objective of the Philippine Accountancy Act of 2004?
I. The standardization and regulation of accounting education
II. The examination for registration of certified public accountants
III. The supervision, control, and regulation of the practice of accountancy in the Philippines
IV. The development and improvement of accounting standards that will be generally accepted in the
Philippines
V. Integration of Accountancy Profession
a. I, II, and IV c. IV and V
b. II, III, IV, and V d. I, II, III, IV, and V
23. The practice in Accountancy includes
I. Practice in public accountancy
II. Practice in education/academe
III. Practice in the government
IV. Practice in commerce and industry
a. I, II, and IV c. I, II, and III
b. II, III, and IV d. I, II, III, and IV
24. A CPA is in public accounting practice when he/she
a. Represents his/her employer before the government agencies on tax and other matters related to
accounting
b. Holding out himself/herself as one skilled in the knowledge, science and practice of accounting, and as a
qualified person to render professional services as a certified public accountant
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