The following are two independent statements.

(1) A CPA is a person who, after

obtaining the required education (BSA) passes an extensive examination (CPALE) and
is licensed by the country (PRC through BOA) to practice as a professional accountant.
(2) The most effective way to manage a risk is to manage it at the source.
● Both Statements are correct/true

The following are two independent statements. (1) Attest services occur when a
practitioner is engaged to issue a report on subject matter, or an assertion about a
subject matter, that is the responsibility of another party. (2) Auditing is a systematic
process implies that there should be a well-planned and thorough approach for
conducting an audit.
● Both Statements are correct/true

The following are two independent statements. (1) Audit risk is a concept that drives the
auditor’s thinking about planning the audit and then executing an audit. (2) Risk-based
audit approach is an audit approach that begins with an assessment of the types and
likelihood of misstatements in account balance and then adjusts the amount and type of
audit work, to the likelihood of material misstatements occurring in account balances.
● Both Statements are correct/true

The following are two independent statements. (1) Business risks are all about
uncertainties. (2) The most effective way to manage a risk is to manage it at the source.
● Both Statements are correct/true

The following are two independent statements. (1) Any person shall practice
accountancy in this country or use the title “CPA”. (2) A CPA is a person who, after
obtaining the required education (BSA) passes an extensive examination (CPALE) and
is licensed by the country (PRC through BOA) to practice as a professional accountant.
● Statement 2 is correct/true

The following are two independent statements. (1) Extending auditors’ activities to
assurance services allows reporting not only on the reliability and credibility of
information but also on the relevance and timeliness of the information. (2) Assurance
services are independent professional services that improve the quality of information or
its context for decision makers.
● Both Statements are correct/true

The following are two independent statements. (1) Compliance auditing is the
examination to detect a deter fraudulent activities. (2) Forensic auditors are employed
by corporations, government agencies, public accounting firms and specialized
consulting and investigative service firms.
● Both Statements are incorrect/false
The following are two independent statements. (1) The first step is identifying the risk
the organization faces. (2) It will be very difficult to manage risks if we do not know
which risk to manage or accept.
● Both Statements are correct/true

The following are two independent statements. (1) Auditing is a systematic process
implies that there should be a well-planned and thorough approach for conducting an
audit. (2) Several government agencies perform a significant number of audits which
includes COA and BIR.
● Both Statements are correct/true

The following are two independent statements. (1) Accountants of corporations are
within the scope of the practice of Public Accountancy. (2) A professional accountant is
an individual who holds a valid certificate issued by the Board of Accountancy, whether
he/she be in the public practice, industry, commerce, public sector or education.
● Statement 2 is correct/true

The following are two independent statements. (1) An independence of an auditor

relates to the objectivity of the application of professional judgment and due care by the
provider. (2) Auditors have a reputation of partiality and objectivity.
● Statement 1 is correct/true

The following are two independent statements. (1) A professional accountant is an

individual who holds a valid certificate issued by the Board of Accountancy, whether
he/she be in the public practice, industry, commerce, public sector or education. (2) A
CPA is a person who, after obtaining the required education (BSA) passes an extensive
examination (CPALE) and is licensed by the country (PRC through BOA) to practice as
a professional accountant.
● Both Statements are correct/true

The following are two independent statements. (1) BIR audits affect individuals as well
as businesses. (2) Forensic auditors are employed by corporations, government
agencies, public accounting firms and specialized consulting and investigative service
firms.
● Both Statements are correct/true

The following are two independent statements. (1) Forensic auditors are employed by
corporations, government agencies, public accounting firms and specialized consulting
and investigative service firms. (2) Several government agencies perform a significant
number of audits and is limited to COA.
 ● Statement 1 is correct/true

The following are two independent statements. (1) It will be very difficult to manage risks
if we do not know which risk to manage or accept. (2) The risk can be prioritized in
terms of their impact (significance) and likelihood (probability).
● Both Statements are correct/true

The following are two independent statements. (1) Several government agencies
perform a significant number of audits which includes COA and BIR. (2) Internal
auditing is an independent, objective assurance and consulting activity designed to add
value and improve organizations.
● Both Statements are correct/true

The following are two independent statements. (1) In account-based auditing, auditors
first obtain an understanding of control and assess control risk for particular types of
error and frauds in specific accounts and cycle. (2) The auditor’s standard report states:
“We conducted our audits in accordance with PFRS. Those standards require that we
comply with the ethical requirements & plan & perform the audit to obtain reasonable
assurance about whether the financial statements are free of material statements.”
● Statement 1 is correct/true

The following are two independent statements. (1) The auditor’s standard report states:
“We conducted our audits in accordance with PFRS. Those standards require that we
comply with the ethical requirements & plan & perform the audit to obtain reasonable
assurance about whether the financial statements are free of material statements.” (2)
Risk appetite is the level of risk that the organization is willing to take its value creation
activities, particularly in its investing activities.
● Statement 2 is correct/true

The following are two independent statements. (1) Making good decisions requires
quality information. (2) Assurance services are independent professional services that
improve the quality of information or its context for decision makers.
● Both Statements are correct/true

The following are two independent statements. (1) Risk appetite is the level of risk that
the organization is willing to take its value creation activities, particularly in its investing
activities. (2) The first step is identifying the risk the organization faces.
● Both Statements are correct/true
The following are two independent statements. (1) Compliance auditing is the
examination, audit and settlement in accordance with law and regulation. (2) BIR audits
affect individuals as well as businesses.
● Both Statements are correct/true

The following are two independent statements. (1) The practices of Public Accountancy
and Academe require accreditation from BOA. (2) Philippine Accountancy Act of 2004
or RA 9297 spells out the scope of practice of accountancy.
● Statement 1 is correct/true

The following are two independent statements. (1) Auditors have a reputation of
partiality and objectivity. (2) Attest services occur when a practitioner is engaged to
issue a report on subject matter, or an assertion about a subject matter, that is the
responsibility of another party.
● Statement 2 is correct/true

These are two independent statements. (1) Direct controls are controls that are precise
enough to address risks of material misstatement at the assertion level. Indirect controls
are controls that support direct controls. (2) Controls are always direct.
● Statement 1 is true

These are two independent statements: (1) The auditor must communicate with TCWG
about significant qualitative aspects of the entity’s accounting practices, including
accounting policies, accounting estimates and financial statement disclosures. (2) The
auditor shall communicate always in writing with those charged with governance
regarding auditor independence.
● Both statements are false

These are independent statements. Statement 1: An inspector in a monitoring process

of the quality control should be any person other than a member of the engagement and
the engagement quality control review teams. Statement 2: The firm shall establish
policies and procedures designed to maintain the objectivity of the engagement quality
control reviewer.
● Both statements are correct

These are independent statements. 1. The best way to address risks is to first identify
and assess them, as performed by the entity’s risk assessment process. 2. The auditor
shall determine whether internal control deficiencies have been identified.
● Both statements are true.

These are independent statements. 1. When company designs and implements internal
controls, cost of the control is not a valid consideration as long as potential benefits can
possibly be achieved. 2. Weakness in the tone at the top has been associated with most
financial frauds during the past decade.
● Both statements are true.

These are independent statements. 1. When preparing the audit plan, the auditor
should be guided by the results of the risk assessment and procedures performed to
gain and support the understanding of the entity. 2. In an audit engagement,
management has a primary responsibility for the financial statements and its internal
control, but not to provide the auditor with the information the auditor may need to
obtain evidence.
● Statement 1 is true.

These are two independent statements: (1) As a result of unexpected events, changes
in conditions, or the audit evidence obtained from the results of audit procedures, the
auditor may need to modify the overall audit strategy and audit plan and thereby the
resulting planned nature, timing and extent of further audit procedures, based on the
revised consideration of assessed risks. (2) In audits of small entities, the entire audit
may be conducted by a very small audit team.
● Both statements are true

These are two independent statements: (1) Controls may be designed to operate
individually or in combination to effectively prevent, or detect and correct,
misstatements. (2) Communicating significant deficiencies in writing to those charged
with governance reflects the importance of these matters, and assists those charged
with governance in fulfilling their oversight responsibilities.
● Both statements are true

These are two independent statements. (1) There is a relationship between the
percentage and the chosen benchmark, such that a percentage applied to profit before
tax from continuing operations will normally be higher than a percentage applied to total
revenue. (2) Where a public sector entity has custody of public assets, assets may be
an appropriate benchmark.
● Both statements are true

These are independent statements. 1. An auditor’s understanding of the entity, its

environment, and its internal control, serves as the foundation of effective audit. It
establishes the frame of reference within which the auditor plans and exercises
professional judgment. 2. Simply put, adequate planning helps the auditor perform an
effective audit – to reduce audit risk to an acceptable low level and obtain reasonable
assurance as a result.
● Both statements are true.

These are two independent statements: (1) Regardless of the timing of the written
communication of significant deficiencies, the auditor may communicate these always in
writing in the first instance to management and, when appropriate, to those charged
with governance to assist them in taking timely remedial action to minimize the risks of
material misstatement. (2) The level of detail at which to communicate significant
deficiencies is a matter of the auditor’s professional judgment in the circumstances.
● Statement 2 is true

These are independent statements. 1. Nevertheless, audit planning remains the

auditor’s responsibility. Discussing the nature of the timing of detailed audit procedures
with management may compromise the effectiveness of the audit by making the audit
too predictable. 2. The audit work performed by each assistant should be reviewed to
determine whether it was adequately performed and to evaluate whether the auditor’s
system of quality control has been maintained at a high level.
● Statement 1 is true.

These are two independent statements. (1) Performance materiality is set to reduce to
an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements in the financial statements exceeds materiality for the
financial statements as a whole. (2) The determination of performance materiality is a
simple mechanical calculation and involves the exercise of professional judgment.
● Statement 1 is true

[Statement 1]: Tests of controls directed toward the effectiveness of the design of an
internal control structure policy and procedure would normally include procedures such
as inquiry, inspection, observation, and re-performance. [Statement 2]: Tests of controls
directed toward the operating effectiveness of an internal control structure policy and
procedure would normally include procedures such as inquiry, inspection, and
observation.
● Both statements are incorrect

The following are two independent statements. (1) Risk-based audit approach is an
audit approach that begins with an assessment of the types and likelihood of
misstatements in account balance and then adjusts the amount and type of audit work,
to the likelihood of material misstatements occurring in account balances. (2) In
account-based auditing, auditors first obtain an understanding of control and assess
control risk for particular types of error and frauds in specific accounts and cycle.
● Both Statements are correct/true

These are independent statements. Statement 1: The primary responsibility for

designing, implementing and maintaining internal control and the tone of internal control
typically originates or rests with chief executive officer. Statement 2: The most important
type of productive measure for safeguarding asset is the use of physical precautions.
● Statement 2 is correct

These are independent statements. Statement 1: PSA 265 specifies which identified
deficiencies the auditor is required to communicate to those charged with governance
and management. Statement 2: PSA 315 assumes that there is always a risk of fraud
arising from management override of internal control. All controls are relevant to risk
assessment process.
 ● Statement 1 is correct

These are two independent statements. (1) Procedures may be mandated, through
formal documentation or other communication by management or those charged with
governance, or may result from behaviors that are not mandated but are rather
conditioned by the entity’s culture. (2) Policies are implemented through the actions of
personnel within the entity, or through the restraint of personnel from taking actions that
would conflict with such policies.
● Statements 1 and 2 are true

These are two independent statements: (1) The auditor shall evaluate whether the
two-way communication between the auditor and those charged with governance has
been adequate for the purpose of the audit. (2) The auditor is required to obtain an
understanding of internal control relevant to the audit when identifying and assessing
the risks of material misstatement.
● Both statements are true

These are two independent statements. (1) Risks to the integrity of information arise
from susceptibility to effective implementation of the entity’s information policies, which
are policies that define the information flows, records and reporting processes in the
entity’s information system. (2) Controls are always direct.
● Statements 1 and 2 are false

These are two independent statements: (1) Communication by the auditor does not
relieve management of this responsibility. (2) Law or regulation restrict the auditor’s
communication of certain matters with those charged with governance.
● Statement 1 is true

These are two independent statements: (1) The objective of the auditor in PSA 265 is to
communicate appropriately to those charged with governance and management
deficiencies in internal control that the auditor has identified during the audit and that, in
the auditor’s professional judgment, are of sufficient importance to merit their respective
attentions. (2) The auditor may identify deficiencies in internal control not only during
this risk assessment process but also at any other stage of the audit.
● Both statements are true

These are independent statements. 1. Audit planning includes the need to consider
prior to the auditor’s identification and assessment of the risk of material misstatements
through outright exclusion of experts as part of the audit team. 2. The communication
with management and those charged with governance helps the auditor coordinate
matters that need client assistance such as preparing audit schedules, arranging the
timing of procedures, etc.
● Statement 2 is true.

These are two independent statements: (1) Those charged with governance are those
responsibility for overseeing the strategic direction of the entity and obligations related
to the accountability of the entity. (2) Management are those with executive
responsibility for the conduct of the entity’s operations.
● Both statements are true

These are two independent statements: (1) The documentation of the overall audit
strategy is a record of the key decisions considered necessary to properly plan the audit
and to communicate significant matters to the audit team. (2) Documentation serves as
a record of the proper planning of the audit procedures that can be reviewed and
approved prior to their performance.
● Statement 2 is true

These are two independent statements. (1) In the case of very small entities, there may
not be many control activities that could be identified by the auditor, or the extent to
which their existence or operation have been documented by the entity may be limited.
(2) Tests of controls are performed only on those controls that the auditor has
determined are suitably designed to prevent, or detect and correct, a material
misstatement in an assertion.
● Both statements are true

These are independent statements. (1) Public sector auditors do not generally have
broad rights of access established by legislation. (2) A public sector auditor may also
obtain or ask the user entity to incorporate rights of access in any contractual
arrangements between the user entity and the service organization.
● Statement 2 is true

These are independent statements. 1. One of the reasons to evaluate the internal
control of an entity is to become a basis for planning an audit. 2. An audit team’s
responsibility would not include designing and implementing an effective internal control
structure to aid the management in maintaining the consistency in the application of
Financial Reporting Framework.
● Both statements are true

These are two independent statements. (1) When more persuasive audit evidence is
needed regarding the effectiveness of a control, it may be appropriate to adjust the
extent of testing of the control. (2) Tests of controls are performed only on those controls
that the auditor has determined are suitably designed to prevent, or detect and correct,
a material misstatement in an assertion.
● Statement 2 is true

These are independent statements. Statement 1: The fact that fraud is usually
concealed can make it very difficult to detect. Statement 2: Determining fraud is a
matter of applying professional skepticism.
● Both Statements are true
These are two independent statements. (1) The auditor shall design and perform further
audit procedures whose nature, timing, and extent are based on and are responsive to
the assessed risks of material misstatement at the assertion level. (2) Materiality for the
financial statements as a whole may need to be revised as a result of a change in
circumstances that occurred during the audit, new information, or a change in the
auditor’s understanding of the entity and its operations as a result of performing further
audit procedures.
● Both statements are true

These are independent statements. 1. The auditor shall, in planning an audit, first
establish the audit plan for the engagement and then develop an overall audit strategy.
2. Planning the audit involves discrete activities, thus, its nature and extent does not
vary according to the size and complexity of the entity.
● Both statements are false.

These are independent statements. (1) If reference to the work of a service auditor is
relevant to an understanding of a modification to the user auditor’s opinion, the user
auditor’s report shall indicate that such reference does diminish the user auditor’s
responsibility for that opinion. (2) The user auditor shall not refer to the work of a service
auditor in the user auditor’s report containing an unmodified opinion unless required by
law or regulation to do so.
● Statement 2 is true

These are independent statements. (1) Knowledge obtained through the user auditor’s
experience with the service organization, for example through experience with other
audit engagements, may also be helpful in obtaining an understanding of the nature of
the services provided by the service organization. (2) The user auditor shall not refer to
the work of a service auditor in the user auditor’s report containing an unmodified
opinion unless required by law or regulation to do so.
● Both statements are true

These are independent statements. (1) A user entity may use a service organization
such as one that processes transactions and maintains related accountability, or
records transactions and processes related data. (2) Knowledge obtained through the
user auditor’s experience with the service organization, for example through experience
with other audit engagements, may also be helpful in obtaining an understanding of the
nature of the services provided by the service organization.
● Both statements are true
These are independent statements. (1) Public sector auditors do not generally have
broad rights of access established by legislation. (2) Public sector auditors may also use
another auditor to perform tests of controls or substantive procedures in relation to
compliance with law, regulation or other authority.
● Statement 2 is true

These are two independent statements: (1) The documentation of the overall audit
strategy is a record of the key decisions considered necessary to properly plan the audit
and to communicate significant matters to the audit team. (2) The purpose and objective
of planning the audit are not the same whether the audit is an initial or recurring
engagement.
● Both statements are false

These are two independent statements. (1) The cumulative effect of material
uncorrected misstatements related to prior periods may have a material effect on the
current period’s financial statements. (2) There are different acceptable approaches to
the auditor’s evaluation of such uncorrected misstatements on the current period’s
financial statements.
● Statement 1 is true

These are two independent statements. (1) If, at the auditor’s request, management has
examined a class of transactions, account balance or disclosure and corrected
misstatements that were detected, the auditor shall not perform additional audit
procedures to determine whether misstatements remain. (2) It is not necessary that the
auditor shall request management to correct those misstatements.
● Both statements are false

These are independent statements. Statement 1: Weakness in the tone at the top has
been associated with most financial statement frauds during the past decades.
Statement 2: Internal control varies with entity’s size and complexity. In smaller entities
use simpler processes and procedures to achieve their objectives.
● Both Statements are true

These are two independent statements. (1) Audit evidence is necessary to support the
auditor’s opinion and report. (2) It is non-cumulative in nature and is primarily obtained
from audit procedures performed during the course of the audit.
● Statement 1 is true

These are two independent statements. (1) It is not necessary that the auditor shall
request management to correct those misstatements. (2) The auditor shall
communicate with those charged with governance uncorrected misstatements and the
effect that they, individually or in aggregate, may have on the opinion in the auditor’s
report, unless prohibited by law or regulation.
● Statement 2 is true

These are two independent statements. (1) Audit evidence obtained for purposes of
identifying litigation and claims that may give rise to a risk of material misstatement also
may provide audit evidence regarding other relevant considerations, such as valuation
or measurement, regarding litigation and claims. (2) PSA 500 establishes requirements
and provides guidance relevant to the auditor’s consideration of litigation and claims
requiring accounting estimates or related disclosures in the financial statements.
● Statement 1 is true

These are two independent statements. (1) The auditor is required to date the auditor’s
report no earlier than the date on which the auditor has obtained sufficient appropriate
audit evidence on which to base the auditor’s opinion on the financial statements in
accordance with PSA 500. (2) In certain circumstances, the auditor also may judge it
necessary to meet with the entity’s external legal counsel to discuss the likely outcome
of the litigation or claims.
● Statement 2 is true

These are two independent statements. (1) Analytical procedures also encompass the
investigation of identified fluctuations and relationships that are inconsistent with other
relevant information or deviate significantly from predicted amounts. (2) External
confirmation procedures frequently are not relevant when addressing assertions
associated with certain account balances and their elements.
● Statement 1 is true

These are two independent statements. (1) Audit evidence is necessary to support the
auditor’s recommendation and report. (2) Information that may be used as audit
evidence may have been prepared using the work of a management’s expert.
● Statement 2 is true

These are two independent statements. (1) Audit evidence from different sources or of a
different nature may often be relevant to the same assertion. (2) The relevance of
information to be used as audit evidence may be affected by the direction of testing.
● Both statements are true

These are two independent statements. (1) Most of the auditor’s work in forming the
auditor’s opinion consists of obtaining and evaluating audit evidence. (2) Audit
procedures to obtain audit evidence can include inspection, observation, confirmation,
recalculation, reperformance and analytical procedures, often in some combination, in
addition to inquiry.
● Both statements are true

These are two independent statements. (1) The auditor shall accumulate misstatements
identified during the audit, including those that are clearly trivial. (2) If, at the auditor’s
request, management has examined a class of transactions, account balance or
disclosure and corrected misstatements that were detected, the auditor shall not
perform additional audit procedures to determine whether misstatements remain.
● Both statements are false

These are two independent statements. (1) The auditor may obtain copies of cutoff
information, such as details of the movement of inventory, to assist the auditor in
performing audit procedures over the accounting for such movements at a cut-off date.
(2) Inspecting inventory when attending physical inventory counting assists the auditor
in ascertaining the existence of the inventory and in identifying, for example, obsolete,
damaged or ageing inventory.
● Statement 2 is true

These are two independent statements. (1) PSA 500 establishes requirements and
provides guidance relevant to the auditor’s consideration of litigation and claims
requiring accounting estimates or related disclosures in the financial statements. (2)
PSA 501 establishes requirements and provides guidance for performing external
confirmation procedures.
● Both statements are false

These are independent statements. (1) To obtain reasonable assurance, the auditor
shall obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably
low level and thereby enable the auditor to draw reasonable recommendations on which
to base the auditor’s conclusions. (2) The auditor shall exercise independence in
planning and performing an audit of financial statements.
● Statements 1 & 2 are false

These are two independent statements. (1) Audit evidence about the status of litigation
and claims up to the date of the auditor’s report may be obtained by inquiry of
management, including in-house legal counsel, responsible for dealing with the relevant
matters. In some instances, the auditor may need to obtain updated information from
the entity’s external legal counsel. (2) The auditor is required to date the auditor’s report
no earlier than the date on which the auditor has obtained sufficient appropriate audit
evidence on which to base the auditor’s opinion on the financial statements in
accordance with PSA 500.
● Statement 1 is true

These are two independent statements. (1) For practical reasons, the physical inventory
counting may be conducted at a date, or dates, other than the date of the financial
statements. (2) PSA 200 explained the matter of difficulty, time, or cost involved is not in
itself a valid basis for the auditor to omit an audit procedure for which there is no
alternative or to be satisfied with audit evidence that is less than persuasive.
● Both statements are true

These are two independent statements. (1) The auditor shall design and perform audit
procedures that are appropriate in the circumstances for the purpose of obtaining
sufficient appropriate audit evidence. (2) The auditor may designate an amount below
which misstatements would be clearly trivial and would not need to be accumulated
because the auditor expects that the accumulation of such amounts clearly would not
have a material effect on the financial statements.
● Both statements are true

These are independent statements. Statement 1: The primary responsibility for the
prevention and detection of fraud rests with both TCWG and management. Statement 2:
The auditor shall document communications about fraud made to management, TCWG,
regulators and others.
● Both Statements are true

These are two independent statements. (1) Controls are embedded within the
components of the entity’s system of internal control. (2) Policies are implemented
through the actions of personnel within the entity, or through the restraint of personnel
from taking actions that would conflict with such policies.
● Statements 1 and 2 are true

These are two independent statements. (1) the auditor may seek direct communication
with the entity’s external legal counsel through a letter of specific inquiry. (2) In certain
circumstances, the auditor also may judge it necessary to meet with the entity’s external
legal counsel to discuss the likely outcome of the litigation or claims.
● Statement 2 is true

These are independent statements. (1) Knowledge obtained through the user auditor’s
experience with the service organization, for example through experience with other
audit engagements, may also be helpful in obtaining an understanding of the nature of
the services provided by the service organization. (2) The user auditor shall not refer to
the work of a service auditor in the user auditor’s report containing an unmodified
opinion unless required by law or regulation to do so.
● Both statements are true

These are two independent statements. (1) When using information produced by the
entity, the auditor shall evaluate whether the information is sufficiently reliable for the
auditor’s purposes, including as necessary in the circumstances of obtaining audit
evidence about the accuracy and completeness of the information. (2) When using
information produced by the entity, the auditor shall evaluate whether the information is
sufficiently reliable for the auditor’s purposes, including as necessary in the
circumstances of evaluating whether the information is sufficiently precise and detailed
for the auditor’s purposes.
● Both statements are true

These are two independent statements. (1) The auditor shall design and perform audit
procedures that are appropriate in the circumstances for the purpose of obtaining
sufficient appropriate audit evidence. (2) When designing and performing audit
procedures, the auditor shall consider the relevance of the information to be used as
audit evidence.
● Statement 1 is true

These are independent statements. 1. The auditor may in a timely manner

communicate significant deficiencies & material weaknesses in internal control in writing
to management and TCWG. 2. The objective of the auditor is to communicate
appropriately to those charged with governance (TCWG) and management deficiencies
in internal control that the auditor has identified during the audit and that, in the auditor’s
professional judgment, are of sufficient importance to merit their respective attention.
● Statement 2 is true

These are two independent statements. (1) Recalculation may be performed manually
or electronically. (2) External confirmation procedures frequently are relevant when
addressing assertions associated with certain account balances and their elements.
● Both statements are true

These are two independent statements. (1) The auditor shall communicate with those
charged with governance uncorrected misstatements and the effect that they,
individually or in aggregate, may have on the opinion in the auditor’s report, unless
prohibited by law or regulation. (2) The auditor may request a written representation
from management and, where appropriate, those charged with governance whether
they believe the effects of uncorrected misstatements are immaterial, individually and in
aggregate, to the financial statements as a whole.
● Statement 1 is true

These are two independent statements. (1) Direct communication with the entity’s
external legal counsel assists the auditor in obtaining sufficient appropriate audit
evidence as to whether potentially material litigation and claims are known and
management’s estimates of the financial implications, including costs, are reasonable.
(2) A letter of specific inquiry requests the entity’s external legal counsel to inform the
auditor of any litigation and claims that the counsel is aware of, together with an
assessment of the outcome of the litigation and claims, and an estimate of the financial
implications, including costs involved.
● Statement 1 is true

These are two independent statements. (1) Audit evidence is necessary to support the
auditor’s opinion and report. (2) It is non-cumulative in nature and is primarily obtained
from audit procedures performed during the course of the audit.
● Statement 1 is true

The following are two independent statements. (1) A modification to the predecessor
auditor’s opinion may not be relevant and material to the opinion on the current period’s
financial statements. (2) The inability of the auditor to obtain sufficient appropriate audit
evidence regarding opening balances may result in one of the following modifications to
the opinion in the auditor’s report unless prohibited by law or regulation, an opinion
which is qualified or disclaimed, as appropriate, regarding the results of operations, and
cash flows, where relevant, and unmodified regarding financial position
● Both statements are correct/true

The following are two independent statements. (1) For non-current assets and
liabilities, some audit evidence about opening balances may be obtained as part of the
current period’s audit procedures. (2) For non-current assets and liabilities, such as
property plant and equipment, investments and long-term debt, some audit evidence
may be obtained by examining the accounting records and other information underlying
the opening balances.
● Statement 2 is true

The following are two independent statements. (1) It may be effective to use analytical
data prepared by management, provided the auditor is satisfied that such data is
properly prepared. (2) The suitability of a particular analytical procedure will depend
upon the auditor’s assessment of how effective it will be in detecting a misstatement
that, individually or when aggregated with other misstatements, may cause the financial
statements to be materially misstated.
● Both statements are true

The phrase “material uncertainty” is used in PAS 1 in discussing the uncertainties

related to events or conditions which may cast significant doubt on the entity’s ability to
continue as a going concern that should be disclosed in the financial statements.
● The statement is true

These are independent statements. (1) PSA 610 override laws or regulations that
govern an audit of financial statements.. (2) PSA 300 addresses how the knowledge
and experience of the internal audit function can inform the external auditor’s
understanding of the entity and its environment and identification and assessment of
risks of material misstatement.
● Both statements are false

These are independent statements. (1) An auditor’s expert may be either an auditor’s
internal expert or an auditor’s external expert. (2) If expertise in a field other than
accounting or auditing is necessary to obtain sufficient appropriate audit evidence, the
auditor shall determine whether to use the work of an auditor’s expert.
● Both statements are true

These are independent statements. (1) The entity must have a specific confidentiality
provisions be agreed with auditor’s external experts. (2) Subject to any agreement to
the contrary, auditor’s external experts’ working papers are their own and do form part
of the audit documentation.
● Statement 1 is true

These are independent statements. (1) PSA 210 requires the auditor to determine the
acceptability of the financial reporting framework applied in the preparation of the
financial statements. (2) PSA 700 deals with the form and content of the auditor’s
report.
● Both statements are true

These are independent statements. (1) Although written representations provide

necessary audit evidence, they do provide sufficient appropriate audit evidence on their
own about any of the matters with which they deal. (2) The auditor shall request written
representations from management or those with charged with governance with
appropriate responsibilities for the financial statements and knowledge of the matters
concerned..
 ● Both statements are false

These are independent statements. (1) The entity must have a specific confidentiality
provisions be agreed with auditor’s external experts. (2) Subject to any agreement to
the contrary, auditor’s external experts’ working papers are their own and do form part
of the audit documentation.
● Statement 1 is true

These are independent statements. Statement 1: Computer fraud is increased when

employees are not trained. Statement 2: One of the objectives of fraud investigation is
to identify, gather and protect information.
● Statement 1 is correct

The following are two independent statements. (1) Haphazard selection is not
appropriate when using statistical sampling. (2) When using systematic selection, the
auditor would need to determine that sampling units within the population are not
structured in such a way that the sampling interval corresponds with a particular pattern
in the population.
● Both Statements are correct/true

These are independent statements. (1) The auditor’s report shall state that the audit
was conducted in accordance with financial reporting framework. (2) The auditor’s
report shall state that the responsibility of the auditor is to express an opinion on the
financial statements based on the audit.
● Statement 2 is true

These are independent statements. (1) Effective two-way communication facilitates the
proper integration of the nature, timing and extent of the auditor’s expert’s procedures
with other work on the audit, and appropriate modification of the auditor’s expert’s
objectives during the course of the audit. (2) Agreement on the respective roles and
responsibilities of the auditor and the auditor’s expert may also include agreement about
access to, and retention of, each other’s working papers.
● Both statements are true

These are independent statements. (1) PSA 610 override laws or regulations that
govern an audit of financial statements.. (2) PSA 300 addresses how the knowledge
and experience of the internal audit function can inform the external auditor’s
understanding of the entity and its environment and identification and assessment of
risks of material misstatement..
● Both statements are false
These are independent statements. (1) The date of the written representations shall be
as near as practicable after the date of the auditor’s report on the financial statements.
(2) The written representations shall be in the form of a representation letter addressed
to the regulatory agencies.
● Both statements are false

These are independent statements. (1) The auditor’s report shall describe management
and TCWG’s responsibility for the preparation of the financial statements in the manner
in which that responsibility is described in the terms of the audit engagement. (2) The
auditor’s report shall include a section with the heading “Auditor’s Responsibility.”
● Statement 2 is true

These are independent statements. (1) “The auditor’s expert will have access to
sensitive or confidential entity information”. This has be set in writing. (2) The evaluation
of the significance of threats to objectivity and of whether there is a need for safeguards
may depend upon the role of the auditor’s expert and the significance of the expert’s
work in the context of the audit.
● Both statements are true

These are two independent statements. (1) Responses to inquiries may provide the
auditor with information not previously possessed or with corroborative audit evidence.
(2) Inquiry is used infrequently throughout the audit in addition to other audit
procedures.
● Statement 1 is true

These are independent statements. (1) PSA 610 requires the external auditor to use the
work of the internal audit function to modify the nature or timing, or reduce the extent, of
audit procedures to be performed directly by the external auditor; it remains a decision
of the external auditor in establishing the overall audit strategy. (2) In some jurisdictions,
the external auditor may be prohibited, or restricted to some extent, by law or regulation
from using the work of the internal audit function or using internal auditors to provide
direct assistance.
● Statement 2 is true

These are independent statements. (1) The auditor may need to fulfill additional legal
obligations even when the auditor has notified management to issue the financial
statements and management has agreed to this request. (2) In some jurisdictions,
management may be required by law, regulation or the financial reporting framework to
issue amended financial statements.
● Both statements are false
These are independent statements. (1) The auditor shall evaluate whether the financial
statements adequately refer to or describe the applicable financial reporting framework.
(2) The auditor shall form an opinion on whether the financial statements are prepared,
in all material respects, in accordance with PSAs.
● Statement 1 is true

These are two independent statements. (1) Materiality relates to the financial
statements on which the auditor is reporting. (2) Determining a percentage to be applied
to a chosen benchmark involves the exercise of professional judgment.
● Both statements are true

These are independent statements. (1) Depending upon the results of the auditor’s risk
assessment procedures, the auditor may consider it appropriate to obtain audit
evidence with testing the entity’s controls over related party relationships and
transactions. (2) If the auditor has assessed a significant risk of material misstatement
due to fraud as a result of the presence of a related party with dominant influence, the
auditor may, in addition to the general requirements of PSA 200.
● Both statements are false

These are independent statements. 1. PSA 265 deals with the auditor’s responsibility to
communicate appropriately and in a regular basis to those charged with governance
and management deficiencies in internal control that the auditor has identified in an
audit of financial statements. 2. The auditor considers internal control in order to design
audit procedures that are appropriate in the circumstances, and for the purpose of
expressing an opinion on the effectiveness of internal control.
● Both statements are false.

These are two independent statements. (1) Depending on the circumstances, the
auditor may judge it appropriate to examine related source documents, such as invoices
for legal expenses, as part of the auditor’s review of legal expense accounts. (2) A letter
of specific inquiry requests the entity’s external legal counsel to inform the auditor of any
litigation and claims that the counsel is aware of, together with an assessment of the
outcome of the litigation and claims, and an estimate of the financial implications,
including costs involved.
● Statement 1 is true

These are independent statements. (1) The auditor shall form an opinion on whether the
financial statements are prepared, in all material respects, in accordance with PSAs. (2)
In order to form that opinion, the auditor shall conclude as to whether the auditor has
obtained reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error.
● Statement 2 is true

These are independent statements. (1) The management and those charged with
governance shall evaluate management’s assessment of the entity’s ability to continue
as a going concern. (2) The auditor shall request management to extend its assessment
period to at least twelve months from that date, if management’s assessment of the
entity’s ability to continue as a going concern covers greater than twelve months from
the date of the financial statements.
● Both statements are false

These are independent statements. (1) Estimation uncertainty may exist even when the
valuation method and data are well defined. (2) Not all accounting estimates are subject
to a high degree of estimation uncertainty.
● Both statements are true

These are independent statements. (1) The external auditor has sole responsibility for
the audit opinion expressed, and that responsibility is not reduced by the external
auditor’s use of the work of the internal audit function or internal auditors to provide
direct assistance on the engagement. (2) PSA 300 addresses how the knowledge and
experience of the internal audit function can inform the external auditor’s understanding
of the entity and its environment and identification and assessment of risks of material
misstatement..
● Statement 1 is true

These are independent statements. (1) The auditor’s opinion covers the complete set of
financial statements as defined by the applicable financial reporting framework. (2)
When the auditor is aware that the audited FS will be included in a document that
contains other information, such as an annual report, the auditor may consider, if the
form of presentation allows, identifying the page numbers on which the audited financial
statements are presented.
● Both statements are true

These are independent statements. (1) The auditor shall refer to the work of an auditor’s
expert in an auditor’s report containing an unmodified opinion unless required by law or
regulation to do so. (2) The nature, timing and extent of the auditor’s procedures with
respect to the requirements in PSA 620 will vary depending on the circumstances.
● Statement 2 is true
The following are two independent statements. (1) Even a sophisticated predictive
model may be effective as an analytical procedure. (2) The use of widely recognized
trade ratios can often be used effectively in substantive analytical procedures to provide
evidence to support the reasonableness of recorded amounts.
● Statement 2 is correct/true

These are independent statements. (1) The auditor shall express an modified opinion
when the auditor concludes that the financial statements are prepared, in all material
respects, in accordance with the applicable financial reporting framework. (2) The
auditor shall form an opinion on whether the financial statements are prepared, in all
material respects, in accordance with PSAs.
● Both statements are false

The following are two independent statements. (1) The auditor is not expected to
investigate the nature and cause of any deviations or misstatements identified, and
evaluate their possible effect on the purpose of the audit procedure and on other areas
of the audit. (2) The auditor shall obtain this degree of certainty by performing additional
audit procedures to obtain sufficient appropriate audit evidence that the misstatement or
deviation does not affect the remainder of the population.
● Statement 2 is correct/true

The following are two independent statements. (1) Audit efficiency may be improved if
the auditor stratifies a population by dividing it into non-discrete sub-populations which
have an identifying characteristic. (2) A population may be stratified according to a
particular characteristic that indicates a higher risk of misstatement, for example, when
testing the allowance for doubtful accounts in the valuation of accounts receivable,
balances may be stratified by age.
● Statement 2 is correct/true

These are independent statements. (1) The nature, timing and extent of the further audit
procedures that the auditor may select to respond to the assessed risks of material
misstatement associated with related party relationships and transactions depend upon
the nature of those risks and the circumstances of the entity. (2) If the auditor has
assessed a significant risk of material misstatement due to fraud as a result of the
presence of a related party with dominant influence, the auditor may, in addition to the
general requirements of PSA 200.
● Statement 1 is true

These are independent statements. (1) The matter of difficulty, time, or cost involved is
in itself a valid basis for the auditor to omit an audit procedure for which there is no
alternative or to be satisfied with audit evidence that is less than persuasive. (2) The
auditor is expected to, and cannot, reduce audit risk to zero and cannot therefore obtain
absolute assurance that the financial statements are free from material misstatement
due to fraud or error.
● Statements 1 & 2 are false

These are two independent statements. (1) Procedures may be mandated, through
formal documentation or other communication by management or those charged with
governance, or may result from behaviors that are not mandated but are rather
conditioned by the entity’s culture. (2) Controls are always direct.
● Statement 1 is true

These are independent statements. (1) The nature, timing and extent of the further audit
procedures that the auditor may select to respond to the assessed risks of material
misstatement associated with related party relationships and transactions depend upon
the nature of those risks and the circumstances of the entity. (2) If the auditor has
assessed a significant risk of material misstatement due to fraud as a result of the
presence of a related party with dominant influence, the auditor may, in addition to the
general requirements of PSA 200.
● Statement 1 is true

These are independent statements. (1) PSA 610 requires the external auditor to use the
work of the internal audit function to modify the nature or timing, or reduce the extent, of
audit procedures to be performed directly by the external auditor; it remains a decision
of the external auditor in establishing the overall audit strategy. (2) In some jurisdictions,
the external auditor may be prohibited, or restricted to some extent, by law or regulation
from using the work of the internal audit function or using internal auditors to provide
direct assistance.
● Statement 2 is true

These are independent statements. (1) The auditor may also conduct the audit in
accordance with both PSAs and auditing standards of a specific jurisdiction or country.
(2) The public sector auditor’s responsibilities, however, may be affected by the audit
mandate, or by obligations on public sector entities arising from legislation, regulation,
ministerial directives, government policy requirements, or resolutions of the legislature,
which may encompass a broader scope than an audit of financial statements in
accordance with the PSAs.
● Statements 1 & 2 are true
The following are two independent statements. (1) It may be effective to use analytical
data prepared by management, provided the auditor is satisfied that such data is
properly prepared. (2) The suitability of a particular analytical procedure will depend
upon the auditor’s assessment of how effective it will be in detecting a misstatement
that, individually or when aggregated with other misstatements, may cause the financial
statements to be materially misstated.
● Both Statements are correct/true

These are independent statements. (1) If management does take the necessary steps
to ensure that anyone in receipt of the previously issued financial statements is
informed of the situation and does not amend the financial statements in circumstances
where the auditor believes they need to be amended, the auditor shall notify
management and, unless all of those charged with governance are involved in
managing the entity, those charged with governance, that the auditor will seek to
prevent future reliance on the auditor’s report. (2) Since audited financial statements
cannot be issued without an auditor’s report, the date that the audited financial
statements are issued must be at or later than the date of the auditor’s report, but must
also be at or later than the date the auditor’s report is provided to the entity.
● Both statements are false

These are independent statements. (1) The auditor may also conduct the audit in
accordance with both PSAs and auditing standards of a specific jurisdiction or country.
(2) The auditor is required to use the objectives to evaluate whether sufficient
appropriate audit evidence has been obtained in the context of the overall objectives of
the auditor.
● Statements 1 & 2 are true

The following are two independent statements. (1) The auditor may inquire of
management as to the availability and reliability of information needed to apply
substantive analytical procedures, and the results of any such analytical procedures
performed by the entity. (2) The auditor’s substantive procedures at the assertion level
may be tests of details, substantive analytical procedures, or a combination of both.
● Both Statements are correct/true

These are two independent statements. (1) The relevance of information to be used as
audit evidence may be affected by the direction of testing. (2) Responses to inquiries
may provide the auditor with information not previously possessed or with corroborative
audit evidence.
● Both statements are true
These are independent statements. (1) PSA 210 requires the auditor to determine the
acceptability of the financial reporting framework applied in the preparation of the
financial statements. (2) PSA 700 deals with the form and content of the auditor’s
report.
● Both statements are true

The following are two independent statements. (1) To draw a conclusion on the entire
population, the auditor will need to consider the risk of material misstatement in relation
to whatever other strata make up the entire population. (2) Projected misstatements for
each stratum are then combined when considering the possible effect of misstatements
on the total class of transactions or account balance.
● Both Statements are correct/true

These are independent statements. (1) The auditor is expected to, and cannot, reduce
audit risk to zero and cannot therefore obtain absolute assurance that the financial
statements are free from material misstatement due to fraud or error. (2) The PSAs do
ordinarily refer to inherent risk and control risk separately, but rather to a combined
assessment of the “risks of material misstatement.”
● Statements 1 & 2 are false

These are independent statements. (1) The auditor’s report shall include a section with
the heading “Auditor’s Responsibility.” (2) The auditor’s report shall state that the
responsibility of the auditor is to express an opinion on the financial statements based
on the audit.
● Both statements are true

These are independent statements. (1) The auditor shall plan and perform an audit with
professional skepticism recognizing that circumstances may exist that cause the
financial statements to be materially misstated. (2) The auditor shall exercise
professional judgment in planning and performing an audit of financial statements.
● Statements 1 & 2 are true

These are independent statements. (1) As individuals in the internal audit function are
not independent of the entity as is required of the external auditor when expressing an
opinion on financial statements. (2) The amount of judgment involved and the risk of
material misstatement are also relevant in determining the work that may be assigned to
internal auditors providing direct assistance.
● Both statements are true
The following are two independent statements. (1) The greater the amount of
misstatement the auditor expects to find in the population, the larger the sample size
needs to be in order to make a reasonable estimate of the actual amount of
misstatement in the population. (2) When a population can be appropriately stratified,
the aggregate of the sample sizes from the strata generally will be less than the sample
size that would have been required to attain a given level of sampling risk, had one
sample been drawn from the whole population.
● Both Statements are correct/true

These are two independent statements. (1) Although corroboration of evidence obtained
through inquiry is often of particular importance, in the case of inquiries about
management intent, the information available to support management’s intent may be
limited. (2) Responses to inquiries may provide the auditor with information not
previously possessed or with corroborative audit evidence.
● Both statements are true

These are independent statements. 1. Purchasing and payment cycle encompasses the
production of raw materials to finished products for sale. 2. An entity may have effective
purchasing system, but if the bookkeeper is incompetent, many errors could still occur.
● Statement 2 is true.

These are independent statements. (1) When the auditor believes that management, or
those charged with governance, have failed to take the necessary steps to prevent
reliance on the auditor’s report on financial statements previously issued by the entity
despite the auditor’s prior notification that the auditor will take action to seek to prevent
such reliance, the auditor’s course of action depends upon the auditor’s legal rights and
obligations. (2) In some jurisdictions, entities in the public sector can issue amended
financial statements by law or regulation.
● Statement 1 is true

These are independent statements. 1. For proper internal control, there should be
adequate separation of duties. However, the extent of separation of duties considered
‘adequate’ depends heavily on the size of the organization. 2. There is no sense or no
point understanding specific controls when pervasive or entity-level controls are
ineffective.
● Both statements are true.

The following are two independent statements. (1) The level of risk is the product of
both the impact (significance) and likelihood (probability). (2) The first step is identifying
the risk the organization faces.
 ● Both Statements are correct/true

These are independent statements. (1) The auditor shall omit the phrase that the
auditor’s consideration of internal control is not for the purpose of expressing an opinion
on the effectiveness of internal control, if he is required to do so. (2) An audit also
includes evaluating the appropriateness of the accounting policies used and the
reasonableness of accounting estimates made by management, as well as the overall
presentation of the financial statements.
● Both statements are true

These are two independent statements. (1) The auditor shall communicate with those
charged with governance uncorrected misstatements and the effect that they,
individually or in aggregate, may have on the opinion in the auditor’s report, unless
prohibited by law or regulation. (2) The auditor shall also communicate with those
charged with governance the effect of uncorrected misstatements related to prior
periods on the relevant classes of transactions, account balances or disclosures, and
the financial statements as a whole.
● Both statements are true

These are two independent statements. (1) Significance can be considered in the
context of quantitative factors only such as relative magnitude, the nature and effect on
the subject matter and the expressed interests of intended users or recipients. (2) When
the auditor expresses a qualified or adverse opinion, communicating other key audit
matters would still be not relevant to enhancing intended users’ understanding of the
audit, and therefore the requirements to determine key audit matters apply.
● Both statements are false

These are independent statements. (1) Estimation uncertainty may exist even when the
valuation method and data are well defined. (2) The presence of subjectivity gives rise
to the need for judgment by management and the susceptibility to unintentional or
intentional management bias.
● Both statements are true

The following are two independent statements. (1) Audit efficiency may be improved if
the auditor stratifies a population by dividing it into non-discrete sub-populations which
have an identifying characteristic. (2) The objective of stratification is to increase the
variability of items within each stratum and therefore allow sample size to be reduced
without increasing sampling risk.
● Both Statements are incorrect/false
These are independent statements. (1) The auditor shall evaluate whether sufficient
appropriate audit evidence has been obtained regarding, and shall conclude on, the
appropriateness of management’s use of the going concern basis of accounting in the
preparation of the financial statements. (2) The auditor shall request management to
extend its assessment period to at least twelve months from that date, if management’s
assessment of the entity’s ability to continue as a going concern covers greater than
twelve months from the date of the financial statements.
● Statement 1 is true

These are independent statements. (1) In general, misstatements, including omissions,

are considered to be material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the
financial statements. (2) Judgments about materiality are made in the light of
surrounding circumstances, and are affected by the auditor’s perception of the financial
information needs of users of the financial statements, and by the size or nature of a
misstatement, or a combination of both.
● Statements 1 & 2 are true

These are two independent statements. (1) When comparative financial statements are
presented, the auditor’s opinion shall refer to each period for which financial statements
are presented and on which an audit opinion is expressed. (2) If the prior period
financial statements are amended, and the predecessor auditor agrees to issue a new
auditor’s report on the amended financial statements of the prior period, the auditor
shall report only on the current period.
● Both statements are true

The following are two independent statements. (1) Audit evidence relevant to
management’s responses may be obtained by evaluating those responses taking into
account the auditor’s understanding of the entity and its environment, and with other
audit evidence obtained during the course of the audit. (2) The determination of the
suitability of particular substantive analytical procedures is influenced by the nature of
the assertion and the auditor’s assessment of the risk of material misstatement.
● Both Statements are correct/true

These are two independent statements. (1) The major procedures applied in a review
consist of reading the financial statements, inquiry as to accounting procedures, and
analytical procedures. (2) A compilation, in contrast to a review, consists of obtaining an
understanding of industry accounting principles and practices and reading the financial
statements.
● Both statements are true
These are two independent statements. (1) If the auditor is able to attend physical
inventory counting due to unforeseen circumstances, the auditor shall make or observe
some physical counts on an alternative date, and perform audit procedures on
intervening transactions. (2) If attendance at physical inventory counting is
impracticable, the auditor shall perform alternative audit procedures to obtain sufficient
appropriate audit evidence regarding the existence and condition of inventory.
● Statement 2 is true

The following are two independent statements. (1) Different types of analytical
procedures don’t provide different levels of assurance. (2) The determination of the
suitability of particular substantive analytical procedures is influenced by the nature of
the assertion and the auditor’s assessment of the risk of material misstatement.
● Statement 2 is correct/true

In the auditor’s report on an entity’s complete set of financial statements, the expression
of a disclaimer of opinion regarding the results of operations and cash flows, where
relevant, and an unmodified opinion regarding the financial position is permitted since
the disclaimer of opinion is being issued in respect of the results of operations and cash
flows only and not in respect of the financial statements as a whole in reference to PSA
510.
● True

PSA 706: Even when the modified opinion on the entity’s complete set of financial
statements, Emphasis of Matter paragraph or Other Matter paragraph does not relate to
the audited financial statement or the audited element, the auditor may still deem it
appropriate to refer to the modification in an Other Matter paragraph in an auditor’s
report on the financial statement or on the element because the auditor judges it to be
relevant to the users’ understanding of the audited financial statement or the audited
element or the related auditor’s report .
● True

These are independent statements. (1) The effects of complexity, subjectivity or other
inherent risk factors on the measurement of these monetary amounts affects their
susceptibility to misstatement. (2) all accounting estimates, the degree to which an
accounting estimate is subject to estimation uncertainty will vary substantially.
● Both statements are true

These are independent statements. (1) The component auditor is responsible for the
direction, supervision and performance of the group audit engagement in compliance
with professional standards and regulatory and legal requirements, and whether the
auditor’s report that is issued is appropriate in the circumstances. (2) Where component
auditors will perform work on the financial information of such components, the group
engagement partner shall evaluate whether the group engagement team will be able to
be involved in the work of those component auditors to the extent necessary to obtain
sufficient appropriate audit evidence.
● Statement 2 is true

These are two independent statements. (1) Inspection of individual inventory items is
not necessary to accompany the observation of inventory counting. (2) Inspecting an
executed contract may provide audit evidence relevant to the entity’s application of
accounting policies, such as revenue recognition.
● Statement 2 is true

These are independent statements. 1. The nature and extent of planning activities
depend on the key engagement team members’ previous experience with the entity. 2.
Philippine Standards on Auditing (PSA) 315 deals with the auditor’s responsibility to
plan an audit of financial statements.
● Statement 1 is true.

These are independent statements. (1) The practitioner should accept (or discontinue
where applicable) an assurance. (2) The practitioner should accept (or continue where
applicable) an assurance engagement only if, on the basis of a preliminary knowledge
of the engagement circumstances, nothing comes to the attention of the practitioner to
indicate that the requirements of the Code or of the PSAEs will not be satisfied.
● Statement 2 is true

These are independent statements. (1) If the auditor is required by law or regulation of a
specific jurisdiction to use a specific layout or wording of the auditor’s report, the
auditor’s report shall refer to PSAs only. (2) The auditor’s opinion covers the complete
set of financial statements as defined by the applicable financial reporting framework.
● Both statements are true

These are independent statements. (1) The auditor shall modify the opinion in the
auditor’s report in accordance with PSA 700. (2) The auditor’s report shall be in writing
or orally.
● Both statements are false

These are independent statements. (1) The practitioner should plan the engagement so
that it will be performed effectively. (2) A practitioner should consider the
appropriateness of a request, made before the completion of an assurance
engagement, to change the engagement to a non-assurance engagement or from a
reasonable assurance engagement to a limited assurance engagement, and should not
agree to a change without reasonable justification.
● Statements 1 and 2 are true

These are independent statements. (1) Whether the auditor has performed an audit in
accordance with PSAs is determined by the audit procedures performed in the
circumstances, the sufficiency and appropriateness of the audit evidence obtained as a
result thereof and the suitability of the auditor’s report based on an evaluation of that
evidence in light of the overall objectives of the auditor. (2) Appropriate planning assists
in making sufficient time and resources available for the conduct of the audit.
● Statements 1 & 2 are true

These are independent statements. (1) The degree of uncertainty associated with the
outcome of an event or condition increases significantly the further into the future an
event or condition or the outcome occurs. (2) The detailed requirements regarding
management’s responsibility to assess the entity’s ability to continue as a going concern
and related financial statement disclosures may also be set out in law or regulation.
● Both statements are true

These are two independent statements. (1) Accountant obtains limited assurance
through analytical procedures that there are no material modifications that should be
made to financial statements. (2) An accountant who is not independent may report on
a compilation service, but not on a review service or audit engagement.
● Both statements are true

These are independent statements. (1) The practitioner should accept (or continue
where applicable) an assurance engagement only if the practitioner is satisfied that
those persons who are to perform the engagement collectively possess the necessary
professional competencies. (2) The nature and extent of planning activities will vary with
the engagement circumstances, for example the size and complexity of the entity and
the practitioner’s previous experience with it.
● Statements 1 and 2 are true

The following are two independent statements. (1) The auditor shall evaluate the results
of the sample; and whether the use of audit sampling has provided a reasonable basis
for conclusions about the population that has been tested. (2) The auditor shall obtain
this degree of certainty by performing additional audit procedures to obtain sufficient
appropriate audit evidence that the misstatement or deviation does not affect the
remainder of the population.
 ● Both Statements are correct/true

These are independent statements. (1) An auditor’s point estimate or range may be
used to evaluate an accounting estimate directly or indirectly. (2) Not all accounting
estimates are subject to a high degree of estimation uncertainty.
● Both statements are true

These are independent statements. (1) The practitioner in PSAE 3000 should obtain an
understanding of the subject matter and other engagement circumstances, sufficient to
identify and assess the risks of the subject matter information being materially
misstated, and sufficient to design and perform further evidence-gathering procedures.
(2) The practitioner in PSAE 3000 ordinarily has a lesser depth of understanding than
the responsible party.
● Statements 1 and 2 are true

These are two independent statements. (1) Inspection of records and documents
provides audit evidence of varying degrees of reliability, depending on their nature and
source and, in the case of internal records and documents, on the effectiveness of the
controls over their production. (2) Inspecting an executed contract may provide audit
evidence relevant to the entity’s application of accounting policies, such as revenue
recognition.
● Both statements are true

These are independent statements. (1) The practitioner in PSAE 3000 should conclude
whether sufficient appropriate evidence has been obtained to support the conclusion
expressed in the assurance report. (2) The practitioner should document matters that
are significant in providing evidence that supports the assurance report and that the
engagement was performed in accordance with PSAEs.
● Statements 1 and 2 are true

These are independent statements. 1. The auditor’s understanding of the entity’s

internal control gives the auditor the insight of what risk of material misstatement could
be present in the entity’s financial statements. 2. Financial Statement audit is primarily
concerned with financial reporting objective.
● Both statements are true

These are two independent statements. (1) For practical reasons, the physical inventory
counting may be conducted at a date, or dates, other than the date of the financial
statements. (2) Observing the performance of management’s count procedures, for
example those relating to control over the movement of inventory before, during and
after the count, assists the auditor in obtaining audit evidence that management’s
instructions and count procedures are adequately designed and implemented.
● Both statements are true

These are independent statements. (1) The management and those charged with
governance shall evaluate management’s assessment of the entity’s ability to continue
as a going concern. (2) The auditor shall request management to extend its assessment
period to at least twelve months from that date, if management’s assessment of the
entity’s ability to continue as a going concern covers greater than twelve months from
the date of the financial statements.
● Both statements are false

These are independent statements. (1) Because of the inherent limitations of an audit,
there is an unavoidable risk that some material misstatements of the financial
statements may not be detected, even though the audit is properly planned and
performed in accordance with PSAs. (2) Appropriate planning assists in making
sufficient time and resources available for the conduct of the audit.
● Statements 1 & 2 are true

These are two independent statements. (1) The auditor should implement quality control
procedures that are applicable to the individual engagement. (2) The auditor should
plan and perform the review with an attitude of professional skepticism, recognizing that
circumstances may exist that cause the interim financial information to require a
material adjustment for it to be prepared, in all material respects, in accordance with the
applicable financial reporting framework.
● Both statements are true

These are independent statements. (1) The practitioner in PSAE 3000 should plan the
engagement so that it will be performed effectively. (2) Planning is not a discrete phase,
but rather a continual and iterative process throughout the review and audit.
● Statement 1 is true

These are independent statements. (1) the financial statements may be prepared in
accordance with two financial reporting frameworks, which are therefore both applicable
financial reporting frameworks. (2) The auditor’s report shall state whether the auditor
believes that the audit evidence the auditor has obtained is sufficient and appropriate to
provide a basis for the auditor’s conclusion.
● Statement 1 is true