Public Accounting and Auditing Standards Quiz

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Questions and Answers

What is the term used to describe the statement where a reviewer indicates no modifications are needed for financial statements to conform with GAAP?

Negative assurance

Positive assurance (correct)

Negligent performance

Reasonable assurance

Which method is primarily used to obtain sufficient appropriate evidence for negative assurance in a review report?

Analytical procedures and inquiries

Inquiry and confirmation (correct)

Confirmation and tests of controls

Direct observation and sampling

What is a key benefit of an independent audit for financial statements?

Confirms management's financial representation

Assures that no fraudulent activities exist

Guarantees the accuracy of all financial data

Lends credibility to the financial statements (correct)

What is the main purpose of an audit of financial statements?

Obtain an absolute level of assurance Signup and view all the answers

In assessing the correspondence between assertions and established criteria, which of the following is not a valid criterion?

United States Financial Reporting Standards Signup and view all the answers

What does reasonable assurance indicate in the context of an audit?

A high level of certainty without complete assurance Signup and view all the answers

Which of the following statements regarding an independent audit is incorrect?

It guarantees that all financial data presented is error-free. Signup and view all the answers

What is the limitation of the term 'negative assurance' in the context of financial audits?

It signifies that no guarantee can be made about the financial statements. Signup and view all the answers

What should a CPA do regarding disclosure in legal proceedings?

Disclosure should be made only if there is legal or professional duty. Signup and view all the answers

Who appoints the Chairman and members of the Board of Accountancy?

President of the Republic of the Philippines. Signup and view all the answers

How long do members of the Professional Regulatory Board of Accountancy serve?

Three years, not subject to reappointment. Signup and view all the answers

Which of the following is NOT a requirement of professional behavior for a CPA?

Impose penalties on other CPAs for misconduct. Signup and view all the answers

What does the principle of professional behavior require of a CPA?

Refrain from conduct that can discredit the profession. Signup and view all the answers

Which of the following is a fundamental principle for CPAs regarding the use of information?

Maintain confidentiality and not misuse client information. Signup and view all the answers

Which of the following powers does the Board of Accountancy NOT have?

Impose criminal penalties on CPAs. Signup and view all the answers

What is the sectoral organization for CPAs in Public Practice?

Philippine Institute of Certified Public Accountants. Signup and view all the answers

What is the minimum general average needed to pass the CPA Board exams in the Philippines?

Sixty-five percent (65%) Signup and view all the answers

In the event a candidate scores seventy-five percent (75%) in most subjects but has one subject scored at 64%, how is that candidate classified?

Conditioned candidate Signup and view all the answers

What type of professional service is characterized by independent assessments of financial statements to enhance decision-making quality?

Audit services Signup and view all the answers

Which of the following is NOT a requirement for a candidate to be considered a successful passer of the CPA Board exams?

Passing in all subjects Signup and view all the answers

What certificate is issued to an individual to signify compliance with all legal and procedural requirements for practice?

Certificate of registration Signup and view all the answers

What determines if an audit is performed by CPAs on a fee basis for multiple clients?

Financial statement audits Signup and view all the answers

Which of the following statements correctly reflects the role of the independent auditor?

Lending credibility to financial statements Signup and view all the answers

What is a critical grade requirement for a candidate to validate their passing in CPA Board exams?

No grades lower than sixty-five percent (65%) in any subject Signup and view all the answers

Which of the following services is not typically associated with public accounting?

Write-up work for one client Signup and view all the answers

An audit committee is required to consist of members who are:

Independent directors Signup and view all the answers

The phrase 'an attitude of professional skepticism' primarily refers to:

The auditor's expectation to find evidence to support management's claims Signup and view all the answers

Which of the following best describes the purpose of generally accepted auditing standards?

Guidelines for establishing audit quality Signup and view all the answers

Which one of the following processes is included in the auditing process?

Evaluation process and reporting process Signup and view all the answers

In terms of auditing standards, how do auditing standards differ from auditing procedures?

Standards define audit objectives while procedures detail specific tasks to achieve them Signup and view all the answers

What is the primary regulatory body associated with the audit process?

Philippine Institute of Certified Public Accountants (PICPA) Signup and view all the answers

Which of the following statements about the audit process is accurate?

Documenting processes is an integral part of the audit. Signup and view all the answers

What is the main purpose of designing audits as stated in the content?

To provide reasonable assurance of detecting errors and frauds Signup and view all the answers

Which of the following accurately defines the term 'audit risk'?

The risk that the auditor’s work leads to a wrong conclusion about misstatements Signup and view all the answers

In terms of materiality, which statement is correct?

Materiality depends on the nature of transactions involved Signup and view all the answers

What is the maximum term length for a person serving on the Board of Accountancy?

Twelve years Signup and view all the answers

Which condition must an individual meet to be a member of the Board of Accountancy?

Must not have a criminal record Signup and view all the answers

What is the reporting timeframe for the BOA to submit candidates' ratings to the PRC after an examination?

5 days Signup and view all the answers

Which of the following is NOT a risk type mentioned in the context of financial statement reliability?

Operational risk Signup and view all the answers

What restriction applies to a member of the Board of Accountancy regarding reappointment?

Can only serve two successive complete terms Signup and view all the answers

Study Notes

Evidence in Financial Statements

Evidence provides persuasive rather than conclusive assurance regarding the fair presentation of financial statements according to GAAP.

Services of Public Accounting

Services outside public accounting include write-up work for a single client.
Auditing standards encompass the policies governing audit conduct, distinct from specific audit procedures.

Audit Committee and Corporate Governance

An audit committee must consist of outside directors, ensuring independence from company management.

Auditor's Expectations

Auditors confirm that evidence supports management representations, not automatically assuming their accuracy, reflecting professional skepticism.

Audit Process Regulation

The audit process is regulated, requiring CPAs to perform specific documentation and evaluation processes.

Assurance Levels

Assurance can be either positive (indicating awareness of no material modifications needed) or negative, providing a range of reliability concerning financial statements.

Audit Objective

The primary purpose of an audit is to ascertain that financial statements are free from material misstatement, allowing for informed governance.

Professional Behavior of CPAs

CPAs must maintain integrity, competence, and diligence, avoiding conflicts of interest and ensuring objectivity to protect the profession's reputation.

Disclosure Regulations

CPAs must disclose pertinent information when required by law or professional obligation but may not disclose without consent unless legally mandated.

Board of Accountancy Terms

Board members serve three-year terms, with certain limits on consecutive service to ensure rotation and fresh perspectives in governance.

Certification and Board Exams

Candidates pass the CPA Board exams by achieving a minimum average score, with specific requirements on individual subject performances.

Role of Independent Auditors

Independent auditors enhance the credibility of financial statements through structured evaluations and reporting in adherence to established auditing standards.

Risk Considerations in Auditing

Auditors face detection risk, which entails the possibility of not identifying existing material misstatements in financial statements during audits.

Concept of Materiality

Materiality in auditing is a professional judgment based on the transaction's nature, impacting the assessment of financial accuracy and stakeholders' decisions.

Reporting and Ratings

The Board of Accountancy must submit examination ratings to the PRC within a specified number of days post-examination to maintain transparency and accountability.

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Description

Test your knowledge on the principles of public accounting and the various auditing standards. This quiz covers topics such as evidence evaluation, the attest function, and compliance with GAAP. Challenge yourself to see how well you understand these critical aspects of financial reporting.