Free Auditing and Assurance Training Fundamentals Questions and Answers — Questions and Answers
Question 1: In most cases, an auditor should notify the client if they think an understanding has not yet been reached.
- Modify the scope of the audit to reflect an increased risk of material misstatement due to fraud
- Assess the control risk at the maximum level and perform a primarily substantive audit
- Decline to accept or perform the audit (Correct answer)
- Perform the audit with increased professional skepticism
Correct answer: Decline to accept or perform the audit
If an auditor believes that an understanding with the client has not been established, the auditor should ordinarily decline to accept or perform the audit engagement. Establishing an understanding with the client is a crucial step in the audit process, as it helps define the responsibilities and expectations of both the auditor and the client.
Question 2: Which statement of Philippine Auditing Practices Statements (PAPS) is true?
- These statements are intended to have the authority of PSAs.
- These are issued to resolve issues relating to PSAs
- These statements are forms of interpretations issued by AASC
- These statements are issued to provide practical assistance to auditors in implementing PSAs or to promote good practice. (Correct answer)
Correct answer: These statements are issued to provide practical assistance to auditors in implementing PSAs or to promote good practice.
The statement "These statements are issued to provide practical assistance to auditors in implementing PSAs or to promote good practice" is correct about Philippine Auditing Practices Statements (PAPS).
Question 3: Reviewing financial statements has the following goals:
- State whether anything has come to the auditor’s attention that indicates that the financial statements are not presented fairly (Correct answer)
- Assist the client in the preparation of the financial statements
- Carry out audit procedures agreed on with the client and other users of report
- Express an opinion on the overall financial statements
Correct answer: State whether anything has come to the auditor’s attention that indicates that the financial statements are not presented fairly
The objective of a review of financial statements is to state whether anything has come to the auditor's attention that indicates that the financial statements are not presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
Question 4: The most frequent reason for conducting an audit of historical financial statements is to check if the
- None of these choices (Correct answer)
- Organization is operating efficiently and effectively
- Entity is following specific procedures or rules set down by some higher authority
- Management team is fulfilling its fiduciary responsibilities to shareholders
Correct answer: None of these choices
The dominant reason for auditing historical financial statements is the conflict of interest and information gap between absentee owners and the management that runs the company, which creates demand for an independent party to verify that the reported figures are reliable. Operational efficiency is the goal of an operational audit, rule-following is the goal of a compliance audit, and 'fiduciary responsibility' is too narrow to capture this core stewardship-verification purpose, so none of the listed choices is the best answer.
Question 5: If an auditor has the following opinions, they are not required to follow a particular PSA requirement:
- Any of the given three choices is correct (Correct answer)
- The amount is insignificant
- The requirement of the PSA is impractical to perform
- The requirement of the PSA is impossible to perform
Correct answer: Any of the given three choices is correct
PSA (Philippine Standards on Auditing) requirements are generally mandatory, but departure is justified when the amount involved is insignificant, when the procedure is impractical to perform, or when it is impossible to perform. Since all three are recognized grounds for not following a requirement, the correct answer is that any of the three choices applies.
Question 6: Which of the following claims regarding consulting services is untrue?
- Most CPAs, including those who provide audit and tax services, also provide consulting services to their clients
- Consulting services differ fundamentally from the CPA’s function of attesting to the assertions of other parties.
- Consulting services ordinarily involve external reporting (Correct answer)
- The performance of consulting services for audit clients does not, in and of itself, impair the auditor’s independence
Correct answer: Consulting services ordinarily involve external reporting
Consulting services are advisory and directed internally toward improving a client's operations, so they do not ordinarily involve external reporting—that statement is the untrue one. The other claims are accurate: most CPAs offer consulting alongside audit and tax work, consulting differs fundamentally from the attest function, and performing consulting for an audit client does not by itself impair independence.
Question 7: Auditing procedures are different from auditing standards in that procedures concern:
- Audit judgements
- Measures of performance
- Acts to be performed (Correct answer)
- Audit principles
Correct answer: Acts to be performed
he statement "Consulting services ordinarily involve external reporting" is false. <br> <br> Consulting services typically do not involve external reporting. Consulting engagements focus on providing advice, expertise, and recommendations to assist clients in improving their business operations, resolving specific problems, or implementing new initiatives. The scope and nature of consulting services can vary widely and may include areas such as strategy development, process improvement, technology implementation, risk management, and organizational change.
Free Auditing and Assurance Training Fundamentals Questions and Answers
In most cases, an auditor should notify the client if they think an understanding has not yet been reached.