ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 42  October 2021 CPA Licensure Exam  Week No. 1

AUDITING (Auditing Theory) J. Ireneo  M. Ngina  F. Tugas  F. Yabut

AT-01: FUNDAMENTALS OF AUDITING & ASSURANCE SERVICES

1. 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 C. True, false
B. Both are false D. False, true

2. 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 C. True, false
B. Both are false D. False, true

3. Evaluate the following statements:

I. Audit engagements are non-assurance services.
II. Review engagements are non-assurance services.
A. Both are true C. True, false
B. Both are false D. False, true

4. 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 C. Audit engagement
B. Attestation engagement D. Management consulting engagement

5. Identify which is not an element of an assurance engagement:

I. Sufficient and appropriate evidence
II. Professional fees
A. Both
B. Neither
C. I only
D. II only

6. 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

7. 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

8. 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

9. Classify the following statements:

• Adherence to SEC regulations
• Report on an entity’s observance of the SEC regulations

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AT-01
Week 1: FUNDAMENTALS OF AUDITING & ASSURANCE SERVICES

A. Both are subject matters (SM)

B. Both are subject matter information (SMI)
C. SM, SMI
D. SMI, SM

10. 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 C. True, false
B. Both are false D. False, true

11. 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

12. 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 C. True, false
B. Both are false D. False, true

13. 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

14. 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

15. 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. Tests of controls.
C. Tests of records and responses to inquiries.
D. Inquiry and analytical procedures.

16. This is the risk that the practitioner expresses an inappropriate conclusion when the subject matter
information is materially misstated.
A. Audit risk C. Detection risk
B. Assurance engagement risk D. Practitioner’s risk

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