2nd Term, SY 2019-2020
Quiz on Auditing and Assurance Principles
Read and analyze each item. Shade the letter of the
correct answer on the provided answer sheet.
1. A basic objective of a CPA firm is to provide
professional services that conform with
professional standards. Reasonable assurance
of achieving this basic objective is provided
through
A. A system of peer review.
B. Continuing professional education.
C. A system of quality controls.
D. Compliance with generally accepted
reporting standards.
2. The firm is to be staffed by personnel who have
attained and maintained the technical standards
and professional competence required to enable
them to fulfill their responsibilities with due care
is the objective of what quality control policy?
A. Professional Requirements
B. Skills and Competence
C. Assignment
D. Delegation
3. In pursuing its quality control objectives with
respect to assigning personnel to engagements,
a public accounting firm may use policies and
procedures such as
A. Rotating employees from assignment to
assignment on a random basis to aid in the
staff training effort.
B. Requiring timely identification of the staffing
requirements of specific engagements so
that enough qualified personnel can be
made available.
C. Allowing staff to select the assignments of
their choice to promote better client
relationships.
D. Assigning a number of employees to each
engagement in excess of the number
required so as not to overburden the staff
and interfere with the quality of the audit
work performed.
4. Which of the following is not likely a quality
control procedure on consultation?
A. Identifies areas and specialized situations
where consultation is required and
encourage personnel to consult with or in
use authoritative sources on other complex
matters.
B. Designates individuals as specialists to
serve as authoritative sources and define
their authority in consultative situations.
C. Assigns an appropriate person or persons to
be responsible for assigning personnel to
audits.
D. Specifies the extent of documentation to be
provided for the result of consultation in
those areas and specialized situations
where consultation is required.
5. Which of the following quality control procedures
is a monitoring activity?
A. Evaluates the firm’s independence and its
ability to serve the prospective client.
B. Reviews and tests compliance with the
firm’s general quality control policies and
procedures.
C. Designates individuals as specialists to
serve as authoritative sources and define
their authority in consultative situations.
D. Monitors continuing professional education
programs and maintain appropriate records,
both on a firm and an individual audit
engagement basis.
6. Which of the following objectives are generally
components of a firm’s quality control?
A. Professional requirements
B. Skills and competence
C. Assignment
D. Inspection
E. Consultation
F. Due Professional care
G. Monitoring
H. Delegation
A. A, B, C, D, E, F C. A, B, C, E, G, H
B. A, B, C, F, E, G D. B, C, G, F, H
7. Which of the following is not an element of
professional requirements as prescribed by
Quality Control Policies for an audit firm?
A. Independence
B. Integrity
C. Confidentiality
D. Prudence
8. Which of the following is an element of “directing
an audit assistant” objective?
A. Identifying in advance the staffing requirements
of a particular audit engagement.
B. Informing assistants of their responsibilities and
the objectives of the procedures they are to
perform.
C. Resolving any differences in professional
judgment between audit personnel.
D. Resolution of differences in audit findings.
9. It involves informing assistants of their
responsibilities and the objectives of the
procedures they have to perform:
A. Supervision
B. Monitoring
C. Directing
D. Consultation
10. Which one of the following relates to delegation
objective of quality control?
A. The firms create a group that provides
technical training to audit staff.
B. There is to be a sufficient direction,
supervision, and review of work at all levels to
provide reasonable assurance that the work
performed meets appropriate standards of
quality.
C. Assignment of work to the more qualified
personnel.
D. Whenever necessary, consultation within or
outside the firm is to occur with those who have
appropriate expertise.
11. Generally Accepted Auditing Standards (GAAS)
and Philippine Standards on Auditing (PSA)
should be looked upon by practitioners as:
A. Ideals to work towards, but which are not
achievable
B. Maximum standards which denote excellent
work.
 2nd Term, SY 2019-2020
Quiz on Auditing and Assurance Principles
C. Minimum standards of performance which
must be achieved on each audit engagement.
D. Benchmark to be used on all audits, reviews,
and compilations.
12. Which of the following best describes what is
meant by Generally Accepted Auditing
Standards?
A. Pronouncements issued by the Auditing
Standards and Practices Council.
B. Procedure to be used to gather evidence to
support financial statements.
C. Rules acknowledged by the accounting
profession because of their universal
compliance.
D. Measures of the quality of the auditor’s
performance.
13. An auditor need not abide by an auditing
standard if the auditor believes that
A. The amount is immaterial
B. The requirement of the standard is
impractical to perform
C. The requirement of the standard is
impossible to perform
D. Any of the three above is correct.
14. The Audit Standard which requires “adequate
technical training and proficiency” is normally
interpreted as requiring the auditor to have
A. Formal education in auditing and accounting
B. Adequate practical experience for the work
being performed
C. Continuing professional education
D. All of the above
15. Competence as a certified public accountant
includes all of the following except
A. Having the technical qualifications to
perform an engagement.
B. Possessing the ability to supervise and
evaluate the quality of staff work.
C. Warranting the infallibility of the work
performed.
D. Consulting others if additional technical
Information is needed.
16. The standard of due audit care requires the
auditor to
A. Apply judgment in a conscientious manner,
carefully weighing the relevant factors
before reaching a decision.
B. Ensure that the financial statements are free
from error.
C. Make perfect judgment decisions in all
cases.
D. Possess skills clearly above the average for
the profession.
17. Which of the following relate to skills and
competence as an objective of quality control
policies?
A. Advancement
B. Hiring
C. Professional development
D. All of these
18. A CPA should comply with applicable generally
accepted auditing standards on every
engagement
A. Without exception
B. Except in examinations that result in a
qualified report
C. Except in engagements where the CPA is
associated with unaudited financial
statements.
D. Except in examinations of interim financial
statements.
19. Which of the following is mandatory if the auditor
is to comply with generally accepted auditing
standards?
A. Possession by the auditor of adequate
technical training.
B. Use of analytical review on audit
engagements.
C. Use of statistical sampling whenever
feasible on an audit engagement.
D. Confirmation by the auditor of material
accounts receivable balances.
20. An auditor who accepts an audit engagement
and does not possess the industry expertise of
the business entity, should
A. Engage financial experts familiar with the
nature of the business entity.
B. Obtain knowledge of matters that relate to
the nature of the entity's business.
C. Refer a substantial portion of the audit to
another CPA who will act as the principal
auditor.
D. First inform management that an
unqualified opinion cannot be issued.
21. A CPA, while performing an audit, strives to
achieve independence in appearance in order to
A. Reduce risk and liability.
B. Comply with the generally accepted
standards of field work
C. Become independent in fact.
D. Maintain public confidence in the
profession.
22. The third general standards states that due care
is to be exercised in the performance of the
examination. This standard should be
interpreted to mean that a CPA who undertakes
an engagement assumes a duty to perform.
A. With reasonable diligence and without fault
or error.
B. As a professional who will assume
responsibility for losses consequent upon
error of judgment.
C. To the satisfaction of the client and third
parties who may rely upon it.
D. As a professional possessing the degree of
skill commonly possessed by others in the
field.
23. The primary responsibility for the prevention and
detection of fraud and error rests with
A. The auditor.
B. Those charged with governance.
C. The management of an entity.
D. Both b and c.
24. When planning and performing audit procedures
and evaluating and reporting the results thereof,
the auditor should
 2nd Term, SY 2019-2020
Quiz on Auditing and Assurance Principles
A. Search for errors that would have a
material effect and for fraud that would
have either material or immaterial effect
on the financial statements.
B. Consider the risk of misstatements in the
financial statements resulting from fraud or
error.
C. Search for fraud that would have a
material effect and for errors that would
have either material or immaterial effect
on the financial statements.
D. Consider the risk of material
misstatements in the financial statements
resulting from fraud or error.
25. The following are examples of error, except
A. A mistake in gathering or processing data
from which financial statements are
prepared.
B. An incorrect accounting estimate arising
from oversight or misinterpretation of
facts.
C. A mistake in the application of accounting
principles relating to measurement,
recognition, classification, presentation, or
disclosure.
D. Misrepresentation in the financial
statements of events, transactions or other
significant information.
26. The types of intentional misstatements that are
relevant to the auditor’s consideration of fraud
include
I. Misstatements resulting from fraudulent
financial reporting
II. Misstatements resulting from misappropriation
of assets
A. I and II
B. I only
C. II only
D. Neither I nor II
27. Fraudulent financial reporting involves
intentional misstatements or omissions of
amounts or disclosures in financial statements to
deceive financial statement users. Fraudulent
financial reporting least likely involve
A. Deception such as manipulation,
falsification, or alteration of accounting
records or supporting documents from
which the financial statements are
prepared.
B. Misrepresentation in or intentional
omission from the financial statements of
events, transactions or other significant
information.
C. Intentional misapplication of accounting
principles relating to measurement,
recognition, classification, presentation, or
disclosure.
D. Embezzling receipts, stealing physical or
intangible assets, or causing an entity to
pay for goods and services not received.
28. The risk of not detecting a material misstatement
resulting from fraud is higher than the risk of not
detecting a material misstatement resulting from
error because
A. The effect of fraudulent act is likely
omitted in the accounting records.
B. Fraud is ordinarily accompanied by acts
specifically designed to conceal its
existence.
C. Fraud is always a result of connivance
between or among employees.
D. The auditor is responsible to detect errors
but not fraud.
29. In comparing management fraud with employee
fraud, the auditor’s risk of failing to discover the
fraud is
A. Greater for employee fraud because of the
higher crime rate among blue collar workers.
B. Greater for management fraud because of
management’s ability to override existing
internal controls.
C. Greater for employee fraud because of the
larger number of employees in the
organization.
D. Greater for management fraud because
managers are inherently smarter than
employees.
30. When planning the audit, which of the following
is least likely a purpose of the auditor’s inquiries
of management?
A. To obtain an understanding of
management’s assessment of the risk that
the financial statements may be materially
misstated as a result of fraud.
B. To obtain knowledge of management’s
understanding regarding the accounting and
internal control systems in place to prevent
and detect error.
C. To determine whether management has
discovered any material errors.
D. To determine extent of authentication of
documentation.
31. Which of the following best describes what is
meant by the term “fraud risk factor”?
A. Factors whose presence indicates that the
risk of fraud is high.
B. Factors whose presence often has been
observed in circumstances where frauds
have occurred.
C. Factors whose presence requires
modifications of planned audit procedures.
D. Reportable conditions identified during an
audit.
32. Which of the following is least likely a category
of fraud risk factors that relate to misstatements
resulting from fraudulent financial reporting?
A. Management’s characteristics and influence
over the control environment.
B. Industry conditions.
C. Operating characteristics and financial
stability.
D. Susceptibility of assets to misappropriation.
33. Fraud risk factors relating to management’s
characteristics and influence over the control
environment
A. Pertain to management’s abilities,
pressures, style, and attitude relating to
internal control and the financial reporting
process.
B. Involve the economic and regulatory
environment in which the entity operates.
 2nd Term, SY 2019-2020
Quiz on Auditing and Assurance Principles

C. Pertain to the nature and complexity of the
entity and its transactions, the entity’s
financial condition, and its profitability.
D. Involve the lack of controls designed to
prevent or detect misappropriation of
assets.
34. The auditor should document
A. Fraud risk factors identified as being
present during the auditor’s assessment
process.
B. The auditor’s response to fraud risk
factors identified.
C. Both a and b.
D. Neither a nor b.
35. When an auditor becomes aware of a possible
illegal act by a client, the auditor should obtain
an understanding of the nature of the act to
A. Increase the assessed level of control risk.
B. Recommend remedial actions to the audit
committee.
C. Evaluate the effect on the financial
statements.
D. Determine the reliability of management’s
representations.
36. An auditor who finds that the client has
committed an illegal act would be most likely to
withdraw from the engagement when the
A. Illegal act affects auditor’s ability to rely on
management representations.
B. Illegal act has material financial statement
implications.
C. Illegal act has received widespread
publicity.
D. Auditor cannot reasonably estimate the
effect of the illegal act on the financial
statements.
A. The auditor should communicate audit
matters of governance interest upon
completion of the engagement.
B. The auditor’s communications with those
charged with governance may be made
orally or in writing.
C. When audit matters of governance interest
are communicated orally, the auditor
documents in the working papers the
matters communicated and any responses
to those matters.
D. Ordinarily, the auditor initially discusses
audit matters of governance interest with
management, except where those matters
relate to questions of management
competence or integrity.
40. An auditor’s overall objective in a financial
statement audit is to
A. Determine that all individual accounts and
footnotes are fairly presented.
B. Employ the audit risk model.
C. Express an opinion on the fair
presentation of the financial statements in
accordance with generally accepted
accounting principles.
D. Detect all errors and fraud.

37. Which of the following is incorrect about the

auditor’s responsibility of evaluating
noncompliance by the entity to laws and
regulations?
A. An audit cannot be expected to detect
noncompliance with all laws and
regulations.
B. Noncompliance refers to acts of omission
or commission by the entity being audited
which are contrary to prevailing laws or
regulations.
C. Noncompliance includes personal
misconduct of entity management or
employers though they are unrelated to
the entity’s business activities.
D. Detection of noncompliance, regardless of
materiality, requires considerations of the
implications for the integrity of
management or employees.

38. The role of persons entrusted with the

supervision, control and direction of an entity
A. Governance
B. Board of directors
C. Government
D. Management

39. Which statement is incorrect regarding the

auditor’s communications of audit matters with those
charged with governance?