FAR EASTERN UNIVERSITY

INSTITUTEOF ACCOUNTS, BUSINESS AND FINANCE

Department of Accountancy &Internal Auditing

ASSURANCE PRINCIPLES
LONG QUIZ 6 – Quality Control Review (Post-test)

Name Date
(Family Name) (First Name) (Middle Name) Section
Professor Day/Time
Stud. No. Score
Room Rating

ANSWER SHEET
1. D 16. D 31. B 46. False
2. A 17. D 32. B 47. False
3. C 18. D 33. A 48. True
4. D 19. B 34. D 49. True
5. D 20. C 35. A 50. False
6. D 21. C 36. A
7. D 22. C 37. C
8. D 23. C 38. B
9. B 24. C 39. B
10. C 25. C 40. B
11. C 26. B 41. B
12. A 27. D 42. A
13. C 28. C 43. C
14. D 29. C 44. A
15. C 30. A 45. False

MULTIPLE CHOICE QUESTIONS b. It established standards and provides

Instructions: Choose the correct answer among the guidance on quality control procedures for
given choices. Write the letter of your choice that assurance engagements.
corresponds to your answer on the Answer Sheet for c. It established standards and provides
this part of the examination. Use CAPITAL LETTER. guidance on quality control procedures for
Use only BLACK INK. There will be no credit for not assurance and non-assurance engagements.
following instructions. d. It established standards and provides
guidance on quality control procedures for
1. The following statements are about Philippines preparation of financial statements.
Standards on Quality Control (PSCQ)
3. The system of quality control is designed to
Statement 1: provide the firm with reasonable assurance that
To establish basic principles and essential
procedures and to provide guidance regarding a Statement 1:
firm’s responsibilities for its system of quality The firm and its personnel comply with
control for audits and reviews of historical professional standards and regulatory and legal
information, and for other assurance and related requirements.
services engagements. (Correct - PSQC NO. 1,
par 1) Statement 2:
The reports issued by the firm or engagement
Statement 2: partners are appropriate in the circumstances.
This PSQC is to be read in conjunction with Parts
A and B of the Code of Ethics for Professional a. Only Statement 1
Accountants in the Philippines (the Philippine b. Only Statement 2
Code). (Correct - PSQC NO. 1, par 1) c. Both statements 1 and 2
d. Neither statements 1 nor 2
State whether the foregoing statements are true or
false. 4. For PSQC purposes, firms refer to
a. A sole practitioner
a. Both statements are false b. Professional partnership of CPAs
b. Both statements are true c. Other entity of professional accountants
c. Statement 1 is true, Statement 2 is false. d. All of the given choices
d. Statement 1 is false; Statement 2 is true.
5. Which of the following is not the responsibility of
2. The Revised PSA 220 establishes which of the engagement partner?
following?
a. It established standards and provides I. The engagement and its performance.
guidance on quality control procedures for II. The report issued in behalf of the firm.
audits of historical financial information.
a. I only
b. II only

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 c. Both I and II d. Based on PRC and BOA rulings.
d. Neither I nor II
13. Who assumes the ultimate responsibility for the
6. Which of the following is not the requirement for firm’s system of quality control?
the engagement partner? a. All firm’s personnel
b. Engagement management partner
I. Appropriate authority from a professional c. Managing board of partners
body. d. Clients
II. Appropriate authority from a legal or
regulatory body. 14. The promotion of a quality-oriented internal culture
depends on what characteristics of actions and
a. I only messages from all levels of the firm’s
b. II only management?
c. Both I and II a. Clear
d. Neither I nor II b. Consistent
c. Frequent
7. Which of the following must be included in the d. All of the given choices
system of quality control?
a. Compliance policies with professional 15. What is the emphasis of the firm’s quality control
standards. policies and procedures?
b. Policies regarding issuance of appropriate
reports. I. Perform works that complies with professional
c. Procedures necessary to implement and standards and regulatory and legal
monitor with those policies. requirements.
d. All of the given choices II. Issue reports that are appropriate in the
circumstances.
8. To which the Philippines Standards on Quality
Control number 1 does not apply? a. I only
a. To all assurance services being performed by b. II only
individual firms. c. Both I and II
b. To all non-assurance services being d. Neither I nor II
performed by individual firms.
c. To all assurance and non-assurance services 16. How the firm’s quality control be communicated to
being performed by individual firms. all personnel concerned?
d. Not among the given choices a. Informal dialogue
b. Newsletters
9. Which of the following is not an element of a c. Training seminar
system of quality control? d. All of the given choices
a. Relevant ethical requirements
b. Building relationship with clients 17. Any person or persons assigned for operational
c. Human resources responsibility of the firm’s quality control system by
d. Engagement performance the firm’s chief executive officer or managing
board of partners should have which of the
10. Which of the following is incorrect about system following to assume that responsibility?
of quality control? a. Sufficient experience and ability
b. Appropriate experience and ability
Statement 1: c. The necessary authority
It should be documented. d. All of the give choices

Statement 2: 18. This enables the responsible person or persons to

It should be communicated to the firm’s personnel. identify and understand quality control issues, and
to develop appropriate policies and procedures.
a. Statement 1 only a. Sufficient experience and ability
b. Statement 2 only b. Appropriate experience and ability
c. Neither statement 1 nor statement 2 c. The necessary authority
d. Both statement 1 and statement 2 d. Sufficient and appropriate experience and
ability
11. What is expected of every individual within a
professional accountant’s firm? 19. The firm’s quality control regarding independence
requires establishments of policies and
I. Quality of audit procedures that will identify and evaluate
II. Compliance with quality control policies circumstances and relationship that create
and procedures a. Familiarity threats
b. Threats to independence
a. I only c. Risks in professional judgment
b. II only d. Fraud in preparing financial statements
c. Both I and II
d. Neither I nor II 20. Which of the following is incorrect about
familiarity threat?
12. What type of internal culture must be promoted by a. An example is threat to independence
its leaders within the firm? b. Applicable to firm’s directors, officers and
a. Based on recognition that quality is essential employees.
in performing engagements. c. Occurring by virtue of a close relationship with
b. Based on personal belief of managing board both an assurance and non-assurance client.
of partners.
c. Based on Philippine Standards on Auditing.

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 d. A firm or a member of the assurance
engagement team becomes too sympathetic
to the client’s interest.
21. Which is not an appropriate action regarding
threats to independence that will reduce the
threats to an acceptable level?
a. Application of safeguards
b. Withdrawal from engagement
c. Charging of higher professional fees
d. All of the above
22. Which is a safeguard regarding familiarity threat
according to 2004 Code of Ethics?
a. Comply with the decision of client’s
management.
b. Withdrawal from engagement
c. Rotation of the engagement partner every five
years
d. All of the given choices
23. All of the following are the considerations
regarding firm’s capability and competence in
accepting or continuing professional services to
clients, except:
a. Knowledge of firm’s personnel regarding
client’s industry or subject matter.
b. Experience with relevant regulatory or
reporting requirements.
c. Availability of experts at all times.
d. Ability to complete the engagement within the
reporting deadline.
24. Which of the following will not be considered in
determining client’s integrity?
a. Business reputation
b. Nature of client’s operations
c. Appropriate limitations in the scope of work
d. Reason for the proposed appointment of the
firm and non-reappointment of the previous
firm.
25. Which of the following is not to be included in
policies and procedures on auditor’s withdrawal?
a. Discussion of appropriate action that the firm
might take based on relevant facts and
circumstances.
b. The reason for withdrawal from the
engagement or both from the engagement
and the client relationship.
c. Mandatory reporting of the withdrawal from
the engagement or both from the engagement
and the client relationship to regulatory
authorities regardless of reasons.
d. Documentation of significant issues,
consultations, conclusions and the basis for
conclusions.
26. Which of the following is not considered regarding
assignment of engagement teams?
a. An understanding of professional standards
and regulatory and legal requirements.
b. Appropriate technical knowledge, excluding
knowledge of relevant information
technology.
c. Knowledge of relevant industries in which the
client operate.
d. Ability to apply professional judgment.
27. Which of the following is not included in
supervision during engagement performance?
a. Tracking the progress of the engagement.
b. Considering the capabilities and competence
of individual members of the engagement
team.
c. Addressing significant issues arising during
the engagement, considering their
significance and modifying the planned
approach appropriately.
d. Identifying matters for consultation or
consideration by less experienced
engagement team members during the
engagement.
28. All of the following are considered by engagement
work reviewers, except:
a. Significant matters have been raised for
further consideration.
b. Appropriate consultations have taken place
and the resulting conclusions have been
documented and implemented.
c. There is no need to revise the nature, timing
and extent of work performed.
d. The evidence obtained is sufficient and
appropriate to support the report.
29. Which of the following statements is false
regarding consultations during engagement
performance?
a. It helps to promote quality.
b. It improves the application of professional
judgement.
c. It includes discussion, at all professional level,
to resolve a difficult or contentious matters.
d. It uses appropriate research resources as
well as the collective experience and
technical expertise of the firm.
30. Which of the following statement is incorrect
about consultation during performance
engagement when there are differences in opinion
regarding engagement team and those
consulted?
a. Identify the differences in opinion at the last
stage of the performance engagement.
b. Document the resolution of the differences
and the implementation of the conclusions
reached.
c. The report should not be issued until the
matter is resolved.
d. All of these choices
31. An engagement quality control review is required
for the audits of financial statements of
a. All clients
b. Listed entities
c. All partnership and corporate clients
d. All corporate clients, whether stock or non-
stock corporation.
32. All of the following are the matters considered
during an engagement quality control review.
Which of the following is incorrect?
a. The engagement team’s evaluation of the
firm’s independence in relation to the specific
engagement.
b. Significant risks identified after the
engagement and the responses to those
risks.
c. Judgments made, particularly with respect to
materiality and significant risks.
d. Whether appropriate consultation has taken
place on matters involving differences of
opinion or other difficult or contentious
matters, and the conclusions arising from
those consultations.
33. To maintain the objectivity of the engagement
quality control reviewer, which of the following
must not be practiced by the firm?
a. He is selected by the engaging partners.
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 b. He does not otherwise participate in the
engagement during the period of review;
c. He does not make decisions for the
engagement team; and
d. He is not subject to other considerations that
would threaten the reviewer’s objectivity.
34. Which of the following is not an example of control
over engagement documentation?
a. There must be an appropriate back-up
routines for electronic engagement
documentation.
b. There must be procedures in engagement
documentation distribution to team members.
c. There must be procedures for access and
distribution of stored hard copy engagement
documentation.
d. None among the given choices
35. Engagements selected for inspection include at
least how many engagements for each
engagement partner over an inspection cycle?
a. One
b. Five
c. Ten
d. No minimum number provided by PSCQ No.
1 b. Any time even there is difference in opinion
36. Consultation is usually undertaken for:
a. Difficult or contentious matter
b. Matters for which there is readily available
support
c. Matters for which judgment of the
engagement leader is deemed sufficient.
d. Straightforward matters involving accounting
and auditing.
37. Which of the following is performed before an audit
report is issued?
a. Inspection
b. Monitoring
c. Engagement Quality Control Review
d. Documentation
38. Which of the following is a hot review under the
Audit Quality Control?
a. Monitoring
b. Engagement Quality Control Review
c. Documentation
d. Inspection
39. Inspection is applicable to
a. Ongoing audit projects
b. Completed audit projects
c. Ongoing and completed audit projects
d. Consultation from experts
40. Inspection is included in
a. Engagement Performance Review
b. Monitoring
c. Quality Review by PICPA
d. Documentation
41. Inspection is classified as
a. Hot review
b. Cold review
c. Both hot and cold review
d. Neither hot nor cold review
42. Juan, an expert from another auditing firm, is
consulted by the audit team of Mario during the
audit of ABC Company. Which of the following is
correct?
a. The audit engagement team includes Juan in
accordance with PSCQC 1.
b. The audit engagement team excludes Juan in
accordance with PSQC 1.
c. The audit engagement team may include
Juan at the option of Mario in accordance with
PSQC 1.
d. The audit engagement team may include
Juan if he will give his consent.
43. Maria, the audit supervisor of Engagement Audit
Team 2. She was consulted by Engagement Audit
Team 1 under the supervision of Ana. Which of the
following is correct?
a. Maria can be the Engagement Quality Control
Reviewer of Engagement Audit Team 1.
b. Maria can be the Inspector of Engagement
Audit Team 1.
c. Ana can be the Engagement Quality Control
Reviewer of Engagement Audit Team 2.
d. Ana is not allowed to be the Inspector of
Engagement Audit Team 2.
44. The engagement partner and the engagement
quality control reviewer differs in opinion. When
the audit report can be issued by the concerned
Engagement Audit Team?
a. After the difference in opinion is settled.
provided the necessary audit procedures are
already performed by the audit team.
c. At the option of the engagement quality
control reviewer.
d. At the option of the engagement partner.
45. The engagement partner may not consult with the
engagement quality control reviewer during the
engagement.
a. True
b. False
Explanation:
The engagement partner may consult with the
engagement quality control reviewer.
46. An engagement quality control review is required
for all audits of financial statements.
a. True
b. False
Explanation:
An engagement quality control review is required
for all audits of listed entities.
47. Audit working papers are generally the property of
the company whose records were audited.
a. True
b. False
Explanation:
Audit working papers are the property of the
auditor.
48. Audit working papers include working papers
prepared and submitted by the client.
a. True
b. False
49. Review responsibilities are determined on the
basis that more experienced engagement team
members, including engagement partner, review
the work performed by less experienced team
members.
a. True
b. False
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50. The firm’s audit managers, assumed ultimate
responsibility for the firm’s system of quality
control.
a. True
b. False

Explanation:
The firm’s partners assumes ultimate
responsibility in the firm’s system of quality control.