Podcast
Questions and Answers
Which agency is responsible for the registration of corporations and partnerships and ensuring compliance with various laws?
Which agency is responsible for the registration of corporations and partnerships and ensuring compliance with various laws?
- Securities and Exchange Commission (SEC) (correct)
- Bureau of Internal Revenue (BIR)
- Philippine Stock Exchange (PSE)
- Bangko Sentral ng Pilipinas (BSP)
Which of the following is NOT a function of the Bangko Sentral ng Pilipinas (BSP)?
Which of the following is NOT a function of the Bangko Sentral ng Pilipinas (BSP)?
- Control public transportation regulations (correct)
- Determine the exchange rate policy of the Philippines
- Recommend measures to improve the efficiency of government operations
- Supervise banks and non-bank institutions
Which of the following is NOT one of the principal duties of the Commission on Audit (COA)?
Which of the following is NOT one of the principal duties of the Commission on Audit (COA)?
- Promulgate financial literacy programs for the public (correct)
- Submit an annual report to the president and congress
- Keep the general accounts of the government
- Maintain accounting and auditing rules
In the context of assurance engagements, which statement is incorrect?
In the context of assurance engagements, which statement is incorrect?
What is a primary purpose of an assurance engagement by a professional accountant?
What is a primary purpose of an assurance engagement by a professional accountant?
Which of the following accurately describes an assurance engagement?
Which of the following accurately describes an assurance engagement?
The responsibilities of the Securities and Exchange Commission (SEC) do NOT include which of the following?
The responsibilities of the Securities and Exchange Commission (SEC) do NOT include which of the following?
Which aspect is essential to an assurance engagement's effectiveness?
Which aspect is essential to an assurance engagement's effectiveness?
What conclusion does an auditor reach when unable to obtain sufficient appropriate audit evidence, but suspects the effects of undetected misstatements could be material but not pervasive?
What conclusion does an auditor reach when unable to obtain sufficient appropriate audit evidence, but suspects the effects of undetected misstatements could be material but not pervasive?
Which of the following is least likely to assist in adequately planning an audit of financial statements?
Which of the following is least likely to assist in adequately planning an audit of financial statements?
Which statement is NOT included in the 'Basis for Opinion' section of an auditor's report?
Which statement is NOT included in the 'Basis for Opinion' section of an auditor's report?
In a practitioner’s review of interim financial information, which activity is least likely to be performed?
In a practitioner’s review of interim financial information, which activity is least likely to be performed?
What type of opinion does an auditor provide when they conclude that misstatements are both material and pervasive?
What type of opinion does an auditor provide when they conclude that misstatements are both material and pervasive?
Which component is necessary to include in the 'Basis for Opinion' section regarding auditor independence?
Which component is necessary to include in the 'Basis for Opinion' section regarding auditor independence?
What does the auditor do when they encounter significant uncertainty about the financial statements?
What does the auditor do when they encounter significant uncertainty about the financial statements?
Which action is typical when the auditor seeks to understand the internal controls during the audit process?
Which action is typical when the auditor seeks to understand the internal controls during the audit process?
What must an auditor determine regarding prior period closing balances?
What must an auditor determine regarding prior period closing balances?
What is the primary purpose of a management representation letter?
What is the primary purpose of a management representation letter?
When an auditor wants to keep the overall audit risk level consistent with the planned audit risk level and changes the assessed level of control risk, what action should be taken?
When an auditor wants to keep the overall audit risk level consistent with the planned audit risk level and changes the assessed level of control risk, what action should be taken?
In what context is a summary of findings rather than assurance most likely to be found?
In what context is a summary of findings rather than assurance most likely to be found?
What type of opinion should an auditor express when misstatements are material but not pervasive?
What type of opinion should an auditor express when misstatements are material but not pervasive?
What does an assurance report typically provide to a licensor regarding royalties?
What does an assurance report typically provide to a licensor regarding royalties?
Which of the following actions is not typically involved in performing an audit regarding opening balances?
Which of the following actions is not typically involved in performing an audit regarding opening balances?
When an auditor decides to increase control risk, which of the following must happen to maintain the same overall level of audit risk?
When an auditor decides to increase control risk, which of the following must happen to maintain the same overall level of audit risk?
Who is considered the intended user in an assurance engagement?
Who is considered the intended user in an assurance engagement?
What does appropriate direction for assistants involve?
What does appropriate direction for assistants involve?
Which condition during an audit is most likely to increase the auditor’s assessment of fraud risk?
Which condition during an audit is most likely to increase the auditor’s assessment of fraud risk?
Before reducing control risk below maximum, what assurance must an auditor obtain?
Before reducing control risk below maximum, what assurance must an auditor obtain?
Which of the following actions may constitute fraud?
Which of the following actions may constitute fraud?
What does PSA 500 define as an expert?
What does PSA 500 define as an expert?
Which of the following is NOT involved in fraud according to the outlined definitions?
Which of the following is NOT involved in fraud according to the outlined definitions?
What should an auditor primarily look for to obtain assurance that effective controls are in place?
What should an auditor primarily look for to obtain assurance that effective controls are in place?
What is NOT a purpose of analytical procedures according to PSA 520?
What is NOT a purpose of analytical procedures according to PSA 520?
Which statement about the auditor’s use of an expert is FALSE?
Which statement about the auditor’s use of an expert is FALSE?
The primary goal of an operational audit is to assess what?
The primary goal of an operational audit is to assess what?
In the context of a financial statement audit, what does audit risk represent?
In the context of a financial statement audit, what does audit risk represent?
Which of the following is a characteristic of analytical procedures?
Which of the following is a characteristic of analytical procedures?
Statement 2 about the auditor’s use of an expert indicates what action must be taken when expert results are inconsistent?
Statement 2 about the auditor’s use of an expert indicates what action must be taken when expert results are inconsistent?
What does an operational audit NOT assess?
What does an operational audit NOT assess?
During which stage of the audit are analytical procedures usually applied?
During which stage of the audit are analytical procedures usually applied?
Study Notes
###Â Audit and Assurance
- Audit is the process of examining financial records to ensure they are accurate and comply with accounting standards.
- Assurance is the process of providing a level of confidence about the reliability of information.
- Auditors can provide different levels of assurance depending on the type of engagement, such as auditing, review, and Agreed-upon Procedures reports.
- Compilation reports are the least likely to include a summary of findings rather than assurance.
- Management representation letters aim to clarify management’s responsibility for financial statements and reduce the possibility of misunderstandings.
- Control risk is the risk that a misstatement that could occur will not be prevented or detected by internal controls.
- Detection risk refers to the risk that the auditor's procedures will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements.
- Substantive testing are procedures designed to detect material misstatements at the assertion level.
- Materiality is the magnitude of a misstatement that, individually or in the aggregate, could reasonably be expected to influence the decisions of users.
- Inherent risk is the susceptibility of an assertion about a financial statement item to a misstatement, before considering any related controls.
Auditor's Opinion
- Unmodified opinion is issued when the auditor concludes that the financial statements are free from material misstatement.
- Qualified opinion is issued when the auditor concludes that the financial statements are materially misstated, but these misstatements are not pervasive.
- Adverse opinion is issued when the auditor concludes that the financial statements are materially misstated and the misstatements are pervasive throughout the financial statements.
- Disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence to form an opinion on the financial statements.
- The Basis for Opinion section of the auditor’s report should include a statement about the auditor’s independence and ethical responsibilities.
Other Audit Activities
- Operational Audits assess the efficiency and effectiveness of management's operations.
- Review Engagements are less comprehensive than audits but provide a level of assurance.
- Agreed-Upon Procedures involve the performance of specific procedures agreed upon by the auditor and the client.
- Analytical Procedures include the analysis of significant ratios and trends, and are used for planning, substantive testing, and overall review of financial statements.
Financial Statement Audit
- Audit Risk is the risk that the auditor unknowingly fails to modify an opinion on materially misstated financial statements.
- Fraud and Error are both potential threats to the accuracy of financial statements.
- Fraud is intentional, while error is unintentional.
- Internal Controls
- Experts - During audits, expert's work should be carefully assessed.
Government Agencies
- The Bangko Sentral ng Pilipinas (BSP) regulates banks and non-bank institutions, and determines the exchange rate policy.
- The Securities and Exchange Commission (SEC) is responsible for registering corporations and partnerships.
- The Commission on Audit (COA) is responsible for auditing government agencies.
- The Bureau of Internal Revenue (BIR) is responsible for collecting taxes.
- The Philippine Stock Exchange (PSE) is a stock exchange where companies can list their shares for trading.
Ethical Considerations
- Independence is a fundamental principle of auditing and is necessary for the auditor to provide objective assurance.
- Due professional care requires auditors to plan and perform audits with professional skepticism and professional judgment.
- Professional skepticism is a questioning mind and a critical assessment of audit evidence obtained.
- Professional judgment is the application of relevant training, knowledge, and experience.
- Delegation is an important part of auditing but auditors must ensure that assistants are appropriately directed and supervised.
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Description
This quiz covers fundamental concepts of audit and assurance, including definitions and the roles of auditors. You'll learn about different levels of assurance, control risk, and detection risk, plus the importance of management representation letters.
