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___12. The following are characteristics of direct reporting assurance engagements, except
a. The subject matter information is in the form of an assertion by the responsible party that is made available to the intended
users.
b. The subject matter information is provided to the intended users in the assurance report.
c. The practitioner either directly performs the evaluation or measurement of the subject matter or obtains a representation from
the responsible party that has performed the evaluation or measurement.
d. The representation of the responsible party that has performed the evaluation or measurement of the subject matter is not
available to the intended users.
___13. Which of the following pertains to assurance engagement risk?
a. The risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially
misstated.
b. The risk of expressing an inappropriate conclusion when the subject matter information is not materially misstated.
c. The risk that a misstatement could occur will not be prevented, or detected or corrected on a timely basis by related internal
controls.
d. The risk that the practitioner will not detect a material misstatement that exists.
___13. For the purpose of expressing negative assurance in the review report, the practitioner should obtain sufficient appropriate
evidence primarily through
a. Inquiry and confirmation
b. Analytical procedures and substantive tests of details of transactions and account balances
c. Confirmation and tests of controls
d. Inquiry and analytical procedures
___14. Which of the following statements concerning a review of financial statements engagement is incorrect?
a. The objective of a review of financial statements is to enable a practitioner to state whether anything has come to the
practitioners attention that causes the practitioner to believe that the financial statements are not prepared in accordance with
an identified financial reporting framework.
b. A review comprises inquiry and analytical procedures which are designed to review the reliability of an assertion that is the
responsibility of one party for use by another party.
c. A review ordinarily involves an assessment of accounting and internal control systems.
d. The level of assurance provided in a review report is less than that given in an audit report.
___15. Which of the following statements concerning compilation engagement is incorrect?
a. In a compilation engagement, the accountant is engaged to use accounting expertise as opposed to auditing expertise to
collect, classify, and summarize financial information.
b. The procedures employed in a compilation engagement enable the accountant to express a moderate level of assurance on
the compiled financial information.
c. Users of the compiled financial information derive some benefit as a result of the accountants involvement because the
service has been performed with due professional skill and care.
d. A compilation engagement ordinarily entails reducing detailed data to a manageable and understandable form to test
assertions underlying the information.
___16. An accountant who performs a compilation engagement
a. Should read the compiled information and consider whether it appears to be appropriate in form and free from obvious
material misstatements.
b. Should use his/her auditing expertise in testing the assertions underlying the compiled financial information.
c. Include in his/her report a listing of the specific procedures performed.
d. Need not obtain an acknowledgment from management of its responsibility for the appropriate presentation of the financial
information.
___17. In an engagement to perform agreed-upon procedures, an auditor is engaged to
a. Carry out those procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed
and to report on factual findings.
b. Use accounting expertise as opposed to auditing expertise to collect, classify and summarize financial information.
c. Provide a moderate level of assurance that the information is free of material misstatement.
d. Provide a high, but not absolute, level of assurance that the information is free of material misstatement.
___18. The report on agreed-upon procedures engagement should contain
a. Identification of the purpose for which the agreed-upon procedures were performed.
b. An expression of positive assurance based on the specific procedures performed.
c. A statement that the auditor is independent of the entity.
d. A general description of the procedures performed.
___19. Which of the following statements is correct with respect to an auditors report expressing an opinion on a specific element of a
financial statement?
a. The auditor who expressed an adverse opinion on the financial statements as a whole can never express an unmodified
opinion on a specific element in these financial statements.
b. The materiality determined for a specific element of a financial statement may be lower than the materiality determined for the
entitys complete set of financial statements.
c. Such a report can only be issued if the auditor is also engaged to audit the entire set of financial statements.
d. The attention devoted to the specific element is usually less than it would be if the financial statements as a whole were
audited.
___20. An auditor may express an opinion on an entitys accounts receivable balance even if the auditor has disclaimed an opinion on
the financial statements taken as a whole provide the
a. Report on the accounts receivable is presented separately from the disclaimer of opinion on the financial statements.
b. Auditor also reports on the current asset portion of the entitys financial position.
c. Use of the report on the accounts receivable is restricted.
d. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial statements.
___21. An auditor may report on summary financial statements that are derived from complete audited financial statements if the
a. Auditor indicates whether the information in the summary financial statements is consistent with the audited financial
statements from which it was derived.
b. Summary financial statements are distributed only to management and the board of directors.
c. Auditor describes the additional review procedures performed on the summary financial statements.
d. Summary financial statements are presented in comparative form with the prior years summarized financial statements.
___22. In the auditors report on summary financial statements that are derived from an entitys audited financial statements, a CPA
should indicate that the
a. CPA has audited and expressed an opinion on the complete financial statements.
b. CPA has expresses limited assurance that the financial statements are presented in accordance with PFRS.
c. Summary financial statements are not fairly presented in all material respects.
d. Summary financial statements are prepared in accordance with special purpose financial reporting framework.
___23. Which of the following procedures should a practitioner perform during an engagement to review an entitys financial
statements?
a. Examining cash disbursements in the subsequent period for unrecorded liabilities.
b. Sending bank confirmation letters to the entitys financial institutions.
c. Obtaining a client representation letter from the members of management.
d. Communicating material internal control weaknesses during the assessment of control risk.
___24. Which of the following procedures is a practitioner least likely to perform during a review engagement?
a. Comparing the financial statements with anticipated results in budget and forecasts.
b. Studying the relationships of financial statement elements expected to conform to predictable patters,
c. Inquiring of management about actions taken at the board of directors meetings.
d. Observing the safeguards over access to and use of assets and records.
___25. During an engagement to review the financial statements of an entity, a practitioner becomes aware of a material departure from
PFRS. If the practitioner decides to modify the review report because management will not revise the financial statements, the
practitioner should
a. Express negative assurance on accounting principles not conforming with PFRS.
b. Express positive assurance on accounting principles conforming with PFRS.
c. Express a qualified opinion.
d. Express a qualification of the negative assurance provided or give an adverse statement that the financial statements are not
presented fairly, in all material respects, in accordance with PFRS.
___26. If these has been a significant limitation on the practitioners review of an entitys financial statements, the practitioner should
describe the limitation and
a. Express a qualification of the negative assurance.
b. Provide no assurance at all.
c. Either A or B.
d. Neither A nor B.
___27. Which of the following procedures ordinarily should be applied when an independent auditor conducts a review of interim
financial information of an entity?
a. Verify changes in key account balances.
b. Perform cut-off tests for cash receipts and disbursements.
c. Read the minutes of the board of directors meetings.
d. Inspect the open purchase order file.
___28. The following procedures are ordinarily performed in an engagement to review interim financial information, except
a. Tests of the accounting records through inspection, observation or confirmation.
b. Obtaining an understanding of the entity and its environment, including its internal control, as it relates to the preparation of
both annual and interim financial information.
c. Inquiring of members of management responsible for financial and accounting matters.
d. Communicating with other auditors who are performing a review of the interim financial information of the reporting entitys
significant components.
___29. An auditor may accept an engagement to perform specified procedures on the specific subject matter of specified elements,
accounts, or items of a financial statement if
a. The report does not list the procedures performed.
b. The financial statements are prepared in accordance with a special purpose framework.
c. Use of the report is restricted.
d. The auditor is also the entitys continuing auditor.
___30. When performing a compilation engagement, the accountant is required to
a. Assess the internal controls and accounting systems.
b. Make inquiries of management to assess the reliability and completeness of the information provided.
c. Verify matters and explanations.
d.
___31. Each page of the financial information compiled by the accountant should include the following reference, except
a. Unaudited.
b. Complied without audit or review
c. Refer to compilation report
d. Compiled, negative assurance expressed
___32. When compiling an entitys financial statements, an accountant would be least likely to
a. Obtain an acknowledgment from management of its responsibility for the financial statements.
b. Perform analytical procedures designed to identify relationships that appear to be unusual.
c. Plan the work.
d. Read the compiled financial statements and consider whether they appear to include adequate disclosure.
___33. Which of the following should not be included in an accountants report based upon the compilation of an entitys financial
statements?
a. A statement that a compilation of the companys financial statements was made in accordance with PSRS applicable to
compilation engagements.
b. A statement that management is responsible for the financial statements.
c. A statement that the accountant has not audited or reviewed the statements.
d. A statement that the accountant does not express an opinion but provides only negative assurance on the statements.
___34. An examination of a financial forecast is a professional service that involves
a. Assuming responsibility to update management on key events for one year after the reports date.
b. Compiling or assembling a financial forecast that is based on managements assumptions.
c. Limiting the distribution of the accountants report to management and the board of directors.
d. Evaluating the preparation of a financial forecast and the support underlying managements assumptions.
___35. When the examination of prospective financial information is affected by conditions that preclude application of one or more
procedures necessary in the circumstances, the auditor should withdraw from the engagement or
a. Disclaim the opinion
b. Express an adverse opinion
c. Express a qualified opinion
d. Issue an unmodified opinion
___36. The report on an examination of prospective financial information should include
a. A statement that the accountant is responsible for the prospective financial information, including the assumptions on which it
is based.
b. A statement of positive assurance as to whether the assumptions provide a reasonable basis for the prospective financial
information.
c. Appropriate caveats concerning the achievability of the results indicated by the prospective financial information.
d. A statement that the examination was conduced in accordance with PSA.
___37. Which of the following statements concerning an examination of prospective financial information is incorrect?
a. The auditor should consider the period of time covered by the financial information.
b. The auditor should obtain a sufficient level of knowledge of the business to be able to evaluate whether all significant
assumptions required for the preparation of the prospective financial information have been identified.
c. The auditor need not obtain written representations from management.
d. The auditor should consider the extent to which reliance on the entitys historical financial information is justified.
___38. When the accountant believes that the presentation and disclosure of the prospective financial information is not adequate, the
auditor should
a. Express a qualified or adverse opinion
b. Withdraw from the engagement
c. Either A or B
d. Neither A nor B
___39. In performing a compilation of financial statements of an entity, the accountant decides that modification of the report is not
adequate to indicate deficiencies in the financial statements taken as a whole, and the client is not willing to correct the deficiencies.
The accountant should therefore
a. Express an adverse audit opinion
b. Express a qualification of the negative assurance
c. Withdraw from the engagement
d. Perform a review of the financial statements
___40. Which of the following is least likely to be included in an agreed-upon procedures engagement report?
a. Identification of the purpose for which the agreed upon procedures were performed.
b. A summary of procedures performed.
c. Limited assurance on the information presented.
d. Use of the report is restricted.
SOLUTION
1. D
2. C
3. B
4. A
5. A
6. D
7. D
8. B
9. D
10. B
11. A
12. A
13. D
14. C
15. B
16. A
17. A
18. A
19. B
20. A
21. A
22. A
23. C
24. D
25. D
26. C
27. C
28. A
29. C
30. D
31. D
32. B
33. D
34. D
35. A
36. C
37. C
38. C
39. C
40. C