Operations Auditing Quiz 1

1. In performing an assurance engagement, a practitioner typically Expresses a conclusion about an

assertion.

2. Assurance services differ from consulting services in that assurance services

I. Focus on providing advice.

Il. Involve monitoring of one party by another.

II only

3. Suitable criteria are required for reasonably consistent evaluation or measurement of the subject
matter of an assurance engagement. Which of the following characteristics is not necessary in
determining whether the criteria are suitable?

Sufficiency

4. Which of the following is the objective of a reasonable assurance engagement?

A reduction in assurance engagement risk to an acceptably low level in the circumstances of the
engagement as a basis for a positive form of expression of the practitioner's conclusion.

5. Which of the following best describes the concept of audit risk?

The risk that the auditor will provide an unmodified opinion on financial statements that are, in fact,
materially misstated.

6. The following statements relate to Philippines Framework for assurance engagements. Which is
incorrect?

- It describe the objective and elements of assurance engagements instead to provide either a
reasonable or limited assurance.

- It identifies engagements to which PSAs, PSREs, and PSAEs apply

- It provides a frame of reference for the AASC in its adoption of ISAs, ISREs, and ISAEs for application in
the Philippines.

- It establish standards or provides procedural requirements for the performance of assurance

engagement

7. How many separate parties are involved in an assurance engagement?

8. An assurance engagement should have which of the following elements?

Appropriate professional fee -No Suitable criteria-Yes

9. Which of the following statements is true concerning evidence in an assurance engagement?

- Sufficiency is the measure of the quantity of evidence

- Appropriateness is the measure of the quality of evidence, that is, its reliability and persuasiveness.

- The reliability of evidence is influenced not by its nature but by its source.

- Obtaining more evidence may compensate for its poor quality.

10. Which of the following standards are to be applied, as appropriate, in the audit of historical financial
information?

PSAs

11. Which of the following was created by the professional regulation commission (PRC) upon the
recommendation of the board of accountancy (BOA) to assist the BOA in the establishment and
promulgation of auditing standards in the Philippines?

AASC

12. Which of the following engagements is covered by the Framework for Assurance Engagements?

- Compliance audits

- Risk assessment service

- Business performance measurement.

- Information system reliability service.

13. Assurance engagement risk is the risk that the practitioner expresses an inappropriate conclusion
when the subject matter information is materially misstated.

14. In an assurance engagement, the outcome of the evaluation or measurement of a subject matter
against criteria is called Subject matter information.

15. After accepting an assurance engagement, a practitioner is not allowed to change the engagement
to non-assurance engagement, except when there is reasonable assurance engagement to a limited
assurance engagement, except when there is reasonable justification for the change. Which of the
following ordinarily will justify a request for a change in engagement?

I. A change in circumstance that affects the intended user’s requirements.

II. A misunderstanding concerning the nature of engagement

Both I & II
16. Which of the following statements concerning evidence is correct? Generally,

- Evidence in the form of documents and representations is less likely to be reliable than oral
representations.

- Evidence obtained directly by the practitioner is more likely to be reliable than that obtained from
the entity.

- Evidence that is generated internally is Jess reliable when the related controls imposed by the entity
are effective.

- Evidence from external sources is less reliable than that generated internally.

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

18. 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 Assertion-
based engagements.

19. Which of the following statements best describe assurance services?

Independent professional services that are intended to enhance the credibility of information to meet
the needs of an intended user

20. 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 Established criteria.

Operations Auditing Quiz 2

1. Potential employment with client is a self interest threat.

Former director, officer of a client as member of the assurance team is a self review threat.

Both statements are TRUE.

2. Acts for a client in a litigation or a dispute resolution is a self review threat.

Threat of litigation is advocacy threat.

Both statements are FALSE.

3. Jonah is currently the Auditor of M&M Company. M&M management ask Jonah if she could designed
the Company’s Accounting system and prepare the accounting manual but Jonah decline it and it was
valid. Sarah a CPA Lawyer, is currently the auditor of ABC Manufacturing Company. ABC receives an
assessment from the BIR for the year 2010. ABC asked Sarah to represent ABC as the legal counsel to
contest the said assessment. Sarah decline the new engagement.

Both statements are FALSE.

4. Self-review threat can arise when the fees received from a particular client form an important part of
his overall earnings. It is the threat that a financial or other interest will inappropriately influence the
professional accountant’s judgment or behaviour.”

Both statements are FALSE.

5. Direct financial interest or a material indirect financial interest is a self review threat. Threat of
replacement is an intimidation threat.

First statement is FALSE. Second statement is TRUE.

6. Loan or guarantee from the client or any director is a self review threat. Concerns about loosing the
engagement is a self interest threat.

First statement is FALSE. Second statement is TRUE.

7. Which in not a fundamental principle of the Code of Ethics?

Integrity Objectivity Confidentiality Conservatism

8. Which is not a pre-condition for an audit?

- Acceptable Financial Reporting Framework

- Management acknowledge and understand their responsibility in internal control

- Management acknowledge and understand their responsibility in unrestricted access to information

- Management acknowledge and understand their responsibility in those charged with governance

9. Close or immediate family relationship is a self interest threat. Former director, officer of a client as
member of the assurance team is an advocacy threat.

Both statements are FALSE.

10. Advocacy threat is that a professional accountant will be deterred from acting objectively because of
actual or perceived pressures, including attempts to exercise undue influence over the professional
accountant.

Self review is the threat that due to long or close relationship with a client or employer, a professional
accountant will be too sympathetic to their interests or too accepting of their work
First statement is TRUE. Second statement is FALSE.

Operations Auditing Quiz 4

1. Which of the following is a policy that must be established to comply with the quality control
engagement performance?

There is a sufficient direction, supervision, and review of work performed at all levels to provide
reasonable assurance that the work performed meets appropriate standards of quality.

2. A quality control policy that requires personnel in the firm to adhere to independence, integrity,
objectivity, confidentiality and professional behavior, relates to

Ethical requirements

3. Which of the following quality control policies and procedures does not relate to human resources
and assignment?

Emphasize independence of mental attitude in training programs and in supervision and review of the
audits..

Monitors the effectiveness of recruiting programs

Identify criteria which will be considered in evaluating individual performance and expected proficiency.

Identify on a timely basis the staffing requirements of specific audits.

4. Which of the following quality control procedures relates to engagement performance?

Direction

5. In pursuing the firm’s quality control objectives with respect to assigning personnel to engagements,
the auditors may use policies and procedures such as:

Requiring timely identification of the staffing requirements of specific engagements so that enough
qualified personnel can be made available.

6. The primary factor that should be considered in determining the extent of supervision needed by an
assistant is the assistant’s

Professional certification

7. Which of the following quality control objectives would be least important to the auditor?

Determination of Audit fee

8. The primary purpose of establishing quality control policies and procedures for deciding whether to
accept a new client is to
Minimize the likelihood of association with clients whose management lacks integrity

9. In compliance with the element of human resources, the firm should address issues relating to

Assignment of engagement teams

10. In connection with the element of assignment, a CPA firm’s system of quality control should
ordinarily establish procedures that

Require preparation of time budgets for audits to determine manpower requirements and to schedule
the audit work.