CPAR Auditing Theory Review

Questions and Answers

Which of the following is not a postulate of auditing?

Economic assertions can be verified

No long-term conflict exists between the auditor and the management of the enterprise under audit

An audit has a benefit only to the owners (correct)

The auditor acts exclusively as an auditor

In all cases, audit reports must

Be signed by the individual who performed the audit procedures (correct)

Certify the accuracy of the quantitative information which was audited

Communicate the auditor’s findings to the general public

Inform readers of the degree of correspondence between the quantifiable information and the established criteria (correct)

The auditor communicates the results of his or her work through the medium of the

Audit report (correct)

Financial statements

Management letter

Engagement letter

As used in auditing, which of the following statements best describes 'assertions'?

Assertions are the representations of management as to the fairness of the financial statements Signup and view all the answers

The expertise that distinguishes auditors from accountants is in the

Accumulation and interpretation of evidence Signup and view all the answers

The framework for auditing and related services as addressed by PSA excludes

Tax services Signup and view all the answers

It refers to the level of auditor’s satisfaction as to the reliability of an assertion being made by one party for use by another party.

Assurance level Signup and view all the answers

Indicate the level of assurance provided by audit and related services.

Audit: High; Review: Moderate; Agreed-upon procedures: None; Compilation: None Signup and view all the answers

Which of the following is true of the report based on agreed-upon procedures?

The report is restricted to those parties who have agreed to the procedures to be performed Signup and view all the answers

Study Notes

Overview of Auditing

Fundamental beliefs, known as "postulates," underpin auditing theory.
Audit reports must communicate the degree of correspondence between quantitative information and established criteria.
Audit results are conveyed through audit reports.

Assertions in Auditing

Assertions refer to management's representations regarding the fairness of financial statements.
They relate to the reliability of information presented in audit processes.

Skills of Auditors

Auditors differentiate from accountants through their expertise in the accumulation and interpretation of evidence.
Education requirements for auditors typically exceed a Bachelor’s degree.

Framework of Auditing Services

The Framework for auditing, as per PSA, excludes tax services but includes reviews and compilations.
Assurance levels vary across different audit types including audit, review, agreed-upon procedures, and compilation.

Levels of Assurance

Audits provide high assurance, while reviews provide moderate assurance.
Agreed-upon procedures offer limited assurance, and compilations provide no assurance.

Agreed-upon Procedures Report

Reports based on agreed-upon procedures are for specific parties and should not suggest revisions to financial statements unless necessary.
The CPA’s role in these reports focuses on limited assurance regarding the reasonableness of the assertions provided.

Objectives of Review Engagements

Review engagements have specific objectives that distinguish them from audits and other assurance services.

Description

Review key theories and concepts in auditing and assurance, focusing on specialized industries. This quiz is tailored for students at the Pontifical and Royal University of Santo Tomas, enhancing your understanding of essential auditing practices.