PSA CHALLENGE #5

NAME:_____________________________________________SCORE:______________

1. When there is a change from manual processing to CIS environment in an audit client, the
overall objective and scope of an audit:
a. Is modified. c. Is unchanged.
b. Is extended. d. Becomes unlimited.

2. Which of the following is the least affected by the use of computer?

a. The auditor’s design and performance of tests of controls.
b. The procedures followed by the auditor in obtaining a sufficient understanding of the
accounting and internal control.
c. The auditor’s objective of considering internal control.
d. The consideration of inherent risk and control risk through which the auditor arrives at the
risk assessment.

3. Which of the following procedures to be performed by the auditor least requires the auditor to
have specialized CIS skills in an audit?
a. Obtain a sufficient understanding of the accounting and internal control systems affected by
the CIS environment.
b. Determine the applicability of using statistical sampling instead of judgmental sampling.
c. Design and perform appropriate tests of controls and substantive procedures.
d. Determine the effect of the CIS environment on the assessment of overall risk and of risk at
the account balance and class of transaction level.

4. Which of the following CIS personal computer environment is a general control?

a. A regular reconciliation of record counts or has totals.
b. A system of authorization and documentation of modification of the systems and applications
software.
c. A system of transaction logs and batch balancing.
d. A practice of direct supervision.

5. Which of the following is least likely an advantage of using personal computers?

a. They are small enough to be transportable.
b. Their operating system software is equally comprehensive as those found in larger
computerized environments.
c. They are relatively inexpensive to acquire and maintain.
d. There is an ease of using personal computers.

6. Which of the following is not a type of installation of personal computers?

a. A workstation connected to a server.
b. a stand-alone workstation operated by a single user or a number of users at different times.
c. A workstation which is part of a local area network of personal computers.
d. A stand-alone workstation operated by a single user or a number of users simultaneously
using the same or different applications.

7. A computer program that attaches itself to a legitimate program or data file and users it as a
transport mechanism to reproduce itself without the knowledge of the user:
a. Trojan horse c. Hacker
b. Virus d. Backup

8. It refers to the plans made by the entity to obtain access to comparable hardware, software and
data in the event of their failure, loss or destruction.
a. Simulation. c. Documentation.
b. Backup. d. Parallel run.
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9. Which of the following is the least concern of the auditor when he intends to rely on internal
accounting controls that relate to stand-alone personal computers?
a. Segregation of duties and balancing controls.
b. Access to the personal computers and files.
c. A system of authorization before a transaction is executed.
d. Use of third-party software.

10. How does the stand-alone personal computer environment of the client entity affect the auditor’s
audit procedures?
a. The auditor often assumes that control risk is reasonably low.
b. Because of the advantage provided by the use of stand-alone personal computers, the
audit procedures are restricted to low level.
c. The auditor usually concentrates the audit efforts on substantive tests at or near the end of
the year.
d. To be cost effective, the auditor makes an extensive review of general CIS and CIS
application controls as basis of reducing the audit efforts to be performed on detailed testing of
balances and transaction classes.
11. Computer-assisted audit may include the use of:
A B C D
Client software YES YES NO NO
Auditor’s own software programs YES NO YES NO

12. Which of the following may not be a purpose of using computer-audit software?
a. Add transactions or balances in the data files for comparison with control account balances.
b. Select accounts or transactions for detailed testing.
c. To evaluate the collectibility of accounts receivable.
d. To examine data bases for unusual items.
13. When the client has a large number of transactions that are processed by stand-alone personal
computer, the auditor:
a. May do tests of controls which he intends to rely on, if appropriate, to reduce the assessed
control risk, and do audit work on the data at a preliminary date.
b. Understand the control environment and flow of transactions but must omit preliminary
audit tests.
c. May do tests of controls and if those controls can be relied on, do interim testing and omit
year end audit testing.
d. Usually omits the understanding of control environment because the stand-alone personal
computer environment is not reliable.
14. The establishment of a framework of overall control over the computer information systems
activities to provide a reasonable level of assurance that the overall objectives of internal control are
achieved
1. general controls in computer information systems
2. application controls in computer information systems
3. control environment in information systems
4. control procedures in information systems
15. In a computer system environment the GAAS most affected are the
a. general standards c. general and fieldwork standards
b. fieldwork and reporting standards d. entire GAAS standards

16. A company that executes transactions and maintains related accountability or records
transactions and processes related data is
a. related party c. service organization
b. external auditor d. expert

17. These represent information obtained by the auditor in arriving at the conclusions on which the
audit opinion is based
a. audit documentation c. audit assertions
b. audit evidence d. audit conclusions
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18. Generally, the auditor prefers external evidence to internal evidence. This is a measure of
a. Relevance c. analysis
b. Appropriateness d. evidence gathering

19. It refers to the correspondence of an evidence to a particular audit objective:

a. Competence or reliability. c. Persuasiveness.
b. Relevance. d. Corroboration.

20. A transaction or event is recorded at the properly amount and revenue or expense is allocated at the
proper period is a financial assertion of:
a. occurrence c. valuation
b. completeness d. measurement

21. The three major categories of documentary audit evidence are:

1. Documentary audit evidence created by third parties and held by the client entity
2. Documentary audit evidence created and held by third parties
3. Documentary audit evidence created and held by the client eneity
What is the order of their degree of reliability?
a. 1, 3, 2
b. 3, 1, 2
c. 2, 1, 3
d. 2, 3, 1

22. An audit schedule which is designed to show the activity in a general ledger account during the
period under audit, tying together the beginning and ending balances:
a. Analysis c. reconciliation
b. tests of transactions d. vouching

23. Confirmation is required for

A B C D
Accounts receivable Yes Yes No Yes
Cash Yes Yes No No
Inventory Yes No Yes No
Accounts payable Yes No Yes No

24. The negative request form of accounts receivable confirmation is useful particularly when the
Assessed level of control Number of small Consideration by the
Risk relating to receivable is balances is recipient is
a. Low Many Likely
b. Low Few Unlikely
c. High Few Likely
d. High Many Likely

25. According to PSA 500 (Audit Evidence), which of the following is incorrect of audit evidence?
a. Audit evidence may be obtained entirely from substantive procedures.
b. The appropriateness of the audit evidence is the measure of both the quality and quantity of
audit evidence.
c. Audit evidence is obtained form an appropriate mix of tests of control and substantive
procedures.
d. Substantive procedures mean tests performed to obtain audit evidence to detect material
misstatements in the financial statements.

26.Which of the following is an invalid statement about audit evidence?

a. Ordinarily, audit evidence regarding one assertion will compensate for failure to obtain
audit evidence regarding another assertion.
b. Ordinarily, audit evidence is obtained regarding each financial assertion.
c. The nature, timing and extent of substantive tests will vary depending on the assertions.
d. Audit tests can provide audit evidence about more than one assertion.
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27. The following statements are discussions about financial assertions and audit evidence. Which
of them is(are) correct?
II. When in substantial doubt as to a material financial statement assertion, the auditor likely
attempt to obtain sufficient appropriate audit evidence to remove such doubt.
III. Difficulty and cost involved is a valid basis for omitting a necessary procedure.
IV. In obtaining audit evidence, the auditor needs to consider the relationship between the cost of
obtaining it and its usefulness.

V. When there are inconsistent evidences provided by two different sources, the auditor may
need to modify his audit opinion.
a. II, III, IV c. II, IV
b. I, III d. I, III, IV

28. The detailed instruction for the collection of a type of audit evidence that is to be obtained at
some time during the audit:
a. Audit program. c. Audit technique.
b. Audit procedure. d. Working papers.

29. The following statements relate to audit evidence, except:

a. The competence of audit is likely improved by selecting a larger sample size or different
population items.
b. The evidence obtained from a source outside the client entity is more persuasive than that one
obtained from within.
c. When a client’s accounting and internal controls are effective, the evidence obtained is more
reliable.
d. The evidence obtained directly by the auditor through physical examination, computation,
observation, or confirmation is more competent than an information obtained indirectly.

30. What is meant by timeliness of audit evidence?

a. Evidence is more reliable for balance sheet accounts when it is obtained as close to the balance
sheet date as possible.
b. Evidence is more reliable for income statement accounts if the sample comes from part of the
period as close to balance sheet date as possible.
c. Tests of transactions should be performed close to balance sheet date.
d. Tests of account balances must be performed before the balance sheet date.

31. In which of the following would the judgment of the auditor be least critical?
a. Verification of the authenticity of the transfer certificate of title.
b. Determination of the material level.
c. Assessment of the management plans of action in order to improve cash flows.
d. Assessing the reasonableness of the estimates made by the management.

32. The auditor’s attendance to client’s physical inventory count would not enable him to
a. Physically inspect inventory items.
b. Review the accuracy of pricing the inventory items.
c. Observe compliance with the prescribed procedures for recording and controlling the results
of the count.
d. Provide evidence as to reliability of management’s procedures.

33. If, after performing procedures, the auditor is unable to obtain sufficient, appropriate evidence
concerning opening balances, the auditor may express modified opinion on financial statements
during and as of year end of the current period:
Income Statement Balance Sheet
Qualified Disclaimer Qualified Disclaimer
a. Yes Yes Yes Yes
b. Yes Yes No No
c. Yes No Yes No
d. No No Yes Yes
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34. Which of the following is not an auditor’s concern in obtaining sufficient appropriate audit
evidence for initial engagements?
a. opening balances do not contain misstatements that materially affect the current period’s
financial statements
b. the prior period’s closing balances have been correctly brought forward to the current period or
when appropriate, have been restated
c. appropriate accounting policies are consistently applied or changes to accounting policies have
been properly accounted for and adequately disclosed
d. opening balances have been audited by a competent auditor

35. The following considerations need to be observed by the auditor when he has to observe physical
inventory count or he has to perform alternative procedures:
A B C D
Inherent, control and detection risks
That are related to inventory YES YES NO NO
The timing of the count YES YES NO NO
A requirement for an expert NO YES YES YES
The nature of accounting and internal
control systems used regarding
inventory NO YES YES NO

36. Auditors try to identify predictable relationships when using analytical procedures. Relationships
involving transactions from which of the following accounts most likely would yield the highest
level of evidence?
a. Accounts payable c. Accounts receivable
b. Payroll expense d. Advertising expense

37. Which of the following best describes the primary purpose of audit procedures?
a. To detect errors or irregularities.
b. To comply with generally accepted accounting principles.
c. To gather corroborative evidence.
d. To verify the accuracy of account balances.

38. The following statements were made in a discussion of audit evidence by two independent
auditors. Which statement is untrue?
a. “I am seldom convinced beyond all doubt about all aspects of the financial statements being
audited.”
b. “I would not undertake that procedure because, at best, the results would only be persuasive and
I'm looking for convincing evidence.”
c. “I evaluate the degree of risk involved in deciding the kind of evidence I will gather.”
d. “I evaluate the usefulness of the evidence I can obtain against the cost to obtain it.”

39. Which of the following would not be a method used to conduct tests of controls?
a. Inquiry c. Confirmation
b. Walkthrough d. Observation

40. In which of the following would the judgment of the auditor be least critical?
a. Verification of the authenticity of the transfer certificate of title.
b. Determination of the material level.
c. Assessment of the management plans of action in order to improve cash flows.
d. Assessing the reasonableness of the estimates made by the management.

41. Which of the following is the least required of the audit working papers?
a. Confidentiality of information included in the working papers.
b. Safe custody of the working papers
c. Substitute for the entity’s accounting records
d. Retention for a period sufficient to meet the needs of the practice

42. Which of the following statements about working papers is incorrect?

a. Working papers are not permitted to be used as a reference source by the client.
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b. The auditor should document the understanding of the client’s internal control in order to plan the
audit.
c. Working papers are not be regarded as a substitute for the client’s accounting records.
d. When reporting on comparative financial statements, the independent auditor may not discard
working papers after two years.

43. As a result of tests of controls, an auditor assessed control risk too low and decreased substantive
testing. This assessment occurred because the true deviation rate in the population was
a. Less than the risk of assessing control risk too low, based on the auditor’s sample.
b. Less than the deviation rate in the auditor’s sample.
c. More than the risk of assessing control risk too low, based on the auditor’s sample.
d. More than the deviation rate in the auditor’s sample.

44. When designing audit procedures, the auditor should determine appropriate means of selecting items
for testing. The means available to the auditor are the following except:
a. Selecting all items
b. Selecting specific items identified by the auditor
c. Selecting specific items identified by the client
d. Audit sampling

45. Selecting all items for testing may least be appropriate for one of the following:
a. tests of controls
b. substantive tests
c. when population constitute of small number of large value items
d. when the repetitive nature of calculation makes 100% test more cost effective

46. Which of the following factors would least be considered by the auditor in selecting items for
examination
a. Items to test procedures c. High value or key items
b. Items to obtain information d. Items under a specific amount

47. A sample in which every possible combination of items in the population has an equal chance of
constituting the sample is
a. representative sample c. random sample
b. statistical sample d. judgment sample

48. A sample in which the characteristics in the sample are the same as those of the population is a (an)
a. representative sample c. random sample
b. statistical sample d. judgment sample

49. Sampling risk occurs when the auditor

a. uses an inappropriate audit procedure
b. fails to recognize exceptions
c. tests less than the entire population
d. identifies weaknesses in client’s internal control system

50. When the auditor goes through a population and selects items for the sample without regard to their
size, source or other distinguishing characteristics, this is called
a. block selection c. systematic selection
b. haphazard selection d. statistical selection

51. The risk that the auditor is willing to take of accepting a control as being effective when
it is not is
a. tolerable deviation rate c. estimated population deviation
rate
b. acceptable risk of overreliance d. finite correction factor

52. The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the:
a. Allowable risk of tolerable misstatement. c. Type I Error
b. Preliminary estimates of materiality levels. d. Type 2 Error
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53. The true deviation rate is
a. the number of deviations in the population divided by the sample size
b. the number of items in the population multiplied by the number of deviations in the
sample
c. the number of deviations in the sample divided by the sample size
d. the number of deviations in the population divided by the population size

54. An advantage of statistical sampling over nonstatistical sampling is that statistical

sampling helps an auditor to plan the
a. sample size c. nature and timing of test
b. sampling risk d. report to be issued

55. Difference estimation, ratio estimation, and mean-per-unit estimation are all techniques
that constitute the general class of methods called
a. attribute sampling c. block sampling
b. monetary unit sampling d. variables sampling

56. The method used to measure the estimated total error amount in a population when there is both a
recorded value and an audited value for each item in the sample is
a. difference estimation c. ratio estimation
b. mean-per-unit estimation d. monetary-unit sampling

57. If the size of the errors in the population is proportionate to the recorded value of the population
items, smaller sample sizes will be generated using
a. difference estimation c. ratio estimation
b. mean-per-unit estimation d. monetary unit sampling

58. The auditor is concerned with the audited value rather than the error amount of each item
in the sample when using
a. difference estimation c. ratio estimation
b. mean-per-unit estimation d. monetary-unit sampling

59. Which of the following is not a characteristic of probability-proportional-to-size sampling?

a. Using a sample selection technique in which the same account balance could be selected more
than once.
b. Selecting a random starting point and then sampling every nth peso unit.
c. Combining negative and positive peso error items
d. Defining the sampling unit as an individual peso and not as an individual account balance.

60. What is the relationship of the following factors to sample size when using sampling on tests of
controls?
a b c d
Expected Deviation Rate Inverse Direct Inverse Direct
Reliance on internal Inverse Inverse Direct Direct
control
Tolerable deviation rate Direct Inverse Direct Inverse
Population Size No Effect No Effect Direct No Effect

61. What is the relationship of the following factors to sample size when using sampling on substantive
tests?
a b c d
Reliance on other substantive Inverse Direct Inverse Direct
test
Overall assurance required Inverse Direct Direct Inverse
Tolerable Error Inverse Inverse Inverse Direct
Confidence Level Direct Inverse Direct Direct
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62. Identify as to whether sampling or nonsampling risk, following the same order:
a b c D
The auditor tests only Sampling Sampling Non-sampling Sampling
few samples
The auditor uses inappropriate Non-sampling Non-sampling Non-sampling Non-sampling
procedures
The auditor fails to Sampling Non-sampling Non-sampling Non-sampling
recognize error in
sample
The auditor haphazardly Sampling Sampling Non-sampling Non-sampling
chose the samples

63. This refers to the approximation of the amount of the item in the absence of a precise means of
measurement
a. Allocation c. Provision
b. Accounting Estimate d. Allowance

64. Which of the following statements is incorrect regarding audit of fair value measurements and
disclosures?
a. The auditor should obtain an understanding of the entity's process for determining fair
value measurements and disclosures and of the relevant control procedures sufficient to develop
an effective audit approach
b. Management is responsible for making the fair value measurements and disclosures
included in the financial statements while the auditor is responsible for ensuring that fair value
measurements are correct
c. The auditor should evaluate whether the fair value measurements and disclosures in the
financial statements are in accordance with GAAP in the Philippines
d. Where alternative methods for measuring fair value are available under GAAP in the
Philippines, or where the method of measurement is not prescribed, the auditor should evaluate
whether the method of measurement is appropriate in the circumstances under GAAP in the
Philippines

65. A representation letter issued by a client

a. is essential for the preparation of the audit program
b. is a substitute for testing
c. does not reduce the auditor’s responsibility
d. reduces the auditor’s responsibility only to the extent it is relied upon

66. When the external auditor intends to use specific work of internal auditing, the external
auditor should
a. evaluate and test that work to confirm the adequacy for external auditor’s purposes
b. reperform the procedures done by the internal auditors
c. place no reliance since internal auditors are not independent of management
d. ask management to attest to the independence of the internal auditors

67. In which of the following cases would an auditor not need the services of an expert?
a. The measurement of work completed and to be completed on contracts in progress
b. Legal opinions concerning interpretations of agreements, statutes and regulations
c. Valuations of certain types of assets like land and buildings
d. Evaluating the company’s internal control

68. When determining the need to use the work of an expert, the auditor would least likely
consider:
a. the materiality of the financial statement item being considered;
b. the risk of misstatement based on the nature and complexity of the matter being
considered
c. availability of the expert
d. the quantity and quality of other audit evidence available.
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69. If as a result of the work of the expert, the auditor decides to issue a modified auditor’s
report, the auditor should not
a. describe the work of the expert
b. refer and name the expert even without permission
c. describe the extent of the expert’s work
d. refer and name the expert only after obtaining permission from the expert

70. These represent information in the financial statements regarding distinguishable

components or industry and geographical aspects of an entity
a. related party information
b. segment information
c. confirmation
d. document accompanying financial statements

71. A matter whose outcome depends on future actions or events not under the direct control
of the entity but may affect the financial statements
a. Uncertainty c. subsequent event
b. accounting estimate d. projection

72. An auditor has a responsibility to evaluate the going concern status of an audit client for a (an)
a. Period of one year from the balance sheet date.
b. Period of one year from the date of the auditor’s report.
c. Period of two years from the balance sheet date
d. Indefinite period.
73. All the following may indicate substantial doubt as to an entity’s ability to continue as a going
concern except
a. Work stoppages c. Purchase of catastrophe insurance
b. Legal proceedings d. Operating losses
74. When audited financial statements are presented in a client’s document containing other information,
the auditor should
a. Perform inquiry and analytical procedures to ascertain whether the other information is
reasonable.
b. Add an explanatory paragraph to the auditor’s report without changing the opinion on the
financial statements.
c. Perform the appropriate substantive auditing procedures to corroborate the other information.
d. Read the other information to determine that it is consistent with the audited financial statements.
75. Audit report may be addressed to the:
Audited Entity Stockholder Chair of the Audit
Committee
a. No Yes No
b. Yes Yes No
c. Yes Yes Yes
d. Yes No Yes
76. Which of the following is not a basic element of an audit report?
a. opening paragraph c. opinion paragraph
b. scope paragraph d. starting and completion dates of the audit
77. Which of the following is not a basis of dating the audit report?
a. when the audit fee was collected
b. as of the completion date of the audit
c. as of any date earlier than the date on which the financial statements are signed of approved
by management
d. upon completion of fieldwork
78. Which of the following procedures is most likely relevant to obtain an information about events or
conditions that cast significant doubt on the entity’s ability to continue as a going concern beyond
the period assessed by management?
a. Inspection c. Inquiry
b. Observing d. Analysis
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79. If the auditor believes that the entity will not be able to continue as a going concern and the financial
statements are prepared on a going concern, the auditor’s report should include
a. Unqualified opinion with explanatory paragraph c. Adverse opinion
b. Qualified opinion d. Disclaimer of opinion
80. The management denied the auditor’s request that management has to extend its assessment of its
going concern ability. However, the auditor’s other procedures are sufficient to assess the
appropriateness of management use of the going concern assumption in the preparation of the
financial statements. The auditor should issue:
a. unqualified opinion c. adverse opinion
b. unqualified opinion with explanatory paragraph d. disclaimer of opinion
81. If comparative financial statements are presented and the present auditor has audited both
years, the auditor should:
a. reissue the report c. redate the report
b. dual date the report d. update the report
82. When financial statements of a prior period are presented on a comparative basis with
financial statements of the current period, the continuing auditor is responsible for
a. expressing dual dated report
b. updating the report on the previous financial statements only if there has been no change in
the opinion
c. updating the report on the previous financial statements only if the previous audit report was
qualified and the reasons for the qualification no longer exists
d. updating the report on the previous financial statements regardless of the opinion previously
expressed

83. The objective of the consistency standard is to provide assurance that

a. there are no variations in the format and presentation of financial statements
b. substantially different transactions and events are not accounted for on an identical basis
c. the auditor is consulted before material changes are made in the application of accounting
principles
d. the comparability of financial statements between periods is not materially affected by changes
in accounting principles without disclosure

84. A dual dated report contains the dates of a subsequent event and the date the
a. auditor completed fieldwork in the client’s office
b. financial statements were prepared
c. subsequent event was resolved
d. audit report was delivered

85. If the principal auditor decides to take responsibility for the work of other auditors, the
principal auditor should:
a. modify the opening paragraph
b. modify the opening and opinion paragraphs
c. modify all three paragraphs
d. issue a standard audit report

86. If an auditor wishes to emphasize a matter included in the financial statements by adding
an explanatory paragraph, the following paragraphs should also be modified
a. introductory paragraph c. opinion paragraph
b. scope paragraph d. none

87. Which of the following modifications of the standard auditor’s report does not require an
explanatory paragraph?
a. reference to other auditors c. scope limitation
b. inconsistency d. adverse opinion

88. When determining whether an exception is highly material, the extent to which the
exception affects different parts of the financial statements must be considered. This is referred to as
a. Materiality c. financial analysis
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b. Pervasiveness d. ratio analysis

89. The following circumstances result in a modified, but unqualified report, except:
a. inconsistent application of accounting principles
b. emphasis of a related party transaction that is disclosed in a footnote
c. Lack of disclosure of a restriction on payment of dividends
d. Other auditors perform work for which the principal auditor does not assume responsibility

90. According to PSA 710, how does a CPA issue his independent audit report when
comparative financial statements are issued by the client?
a. For comparative financial statements, the auditor’s report refers to each period that financial
statements are presented.
b. The auditor’s report only refers to the financial statements of the current period.
c. The auditor’s report refers to the financial statements of the current period and explicitly
refers to the financial statements of the prior period(s) as corresponding figures.
d. The auditor issues separate audit report for financial statements of different periods.

91. Special purpose auditor’s report is one issued in connection with the independent audit of
financial information other than the auditor’s report and may include the following, except:
a. compliance with contractual agreements
b. summarized financial statements
c. specified accounts, elements of accounts, or items in a financial statement
d. financial statements prepared in conformity with generally accepted accounting principles

92. Which of the following is a criteria least likely required of assurance engagements
a. a subject matter c. an engagement process
b. a two-party relationship d. a suitable criteria

93. Which of the following describes “high level of assurance”?

a. It refers to the professional accountant having obtained sufficient external and internal
appropriate evidence to be satisfied that the subject matter is plausible in the circumstances
b. It refers to the professional accountant having obtained evidence based on procedures agreed
upon between the practitioner and the intended users to be satisfied that findings be reported to
the intended users
c. It refers to the professional accountant having obtained sufficient appropriate evidence to
conclude that the subject matter conforms in all material respects with identified suitable criteria
d. it refers to the professional accountant having obtained sufficient evidence to conclude that
he has no knowledge of any required modifications to be made in the financial statements in
order for them to conform of prescribed criteria
94. Which of the following is least likely an objective of an assurance engagement?
a. The engagement is intended to prevent the issuance of materially misleading information
b. The engagement is intended to enhance the credibility of information about a subject matter
c. An assurance engagement is intended for a professional accountant to express a conclusion that
provides the intended uses with a level of assurance about the subject matter
d. The engagement is intended to provide a level of assurance to be issued by a professional
accountant about the information of being in conformity, in all material respects , with suitable
criteria
95. Which of the following is least likely a subject matter of an assurance engagement?
a. Data c. Compliance with regulations
b. Systems and processes d. Degree of loyalty of employees to their employer
96. Which of the following is least likely an objective of an assurance engagement?
a. The engagement is intended to prevent the issuance of materially misleading
information
b. The engagement is intended to enhance the credibility of information about a
subject matter
c. An assurance engagement is intended for a professional accountant to express a
conclusion that provides the intended uses with a level of assurance about the subject matter
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d. The engagement is intended to provide a level of assurance to be issued by a
professional accountant about the information of being in conformity, in all material respects ,
with suitable criteria
97. Which is incorrect of the intended user?
a. the intended user is the person or class of persons for whom the professional accountant prepares
the report for a specific use or purpose
b. The intended user is always limited to the addressee of the professional accountant’s report
c. The responsible party may also be one of the intended users
d. The intended user(s) may not be the addressee of the professional accountant’s report
98. The objective of a review of interim financial information of a public entity is to provide
an accountant with a basis for reporting whether
a. material modifications should be made to conform with GAAP
b. a reasonable basis exists for expressing an updated opinion regarding the financial statements
that were previously audited
c. condensed financial statements or pro forma financial information should be included in a
registration statement
d. the financial statements are presented fairly in accordance with GAAP
99. Which of the following is not a basis of the auditor in determining the specific nature,
timing and extent of review procedures?
a. Assessed level of control risk
b. The extent to which a particular item is affected by management judgment
c. The materiality of transactions and account balances
d. Any knowledge acquired by carrying out reviews of the financial statements for prior periods.
100. Which of the following is incorrect about agreed-upon procedures engagement?
a. An engagement to perform agreed-upon procedures may involve the auditor in
performing certain procedures concerning individual items of financial data.
b. Users of the agreed-upon procedures report assess for themselves the procedures and
findings reported by the auditor and draw their conclusion from the auditor’s work.
c. The auditor should be independent of the financial data or financial statements where
agreed procedures have to be applied.
d. The report is restricted to those parties that have agreed to the procedures to be
preformed.