Audtheory Quizzes Compilation PDF

QUIZ 1 1. The objective of a review of financial statements is to a. State whether anything has come to the auditor’s attention that indicates that the financial statements are not presented fairly. b. Assist the client in the preparation of the financial statements...

QUIZ 1 1. The objective of a review of financial statements is to a. State whether anything has come to the auditor’s attention that indicates that the financial statements are not presented fairly. b. Assist the client in the preparation of the financial statements c. Express an opinion on the overall financial statements d. Carry out audit procedures agreed on with the client and other users of report 2. If the CPA has reason to believe that the information subject to review may be materially misstated, the CPA should a. Express a qualified negative assurance b. Withdraw from the engagement c. Express an adverse opinion d. Carry out additional or more extensive procedures 3. If there had been a material scope limitation on a review engagement, the CPA may a. Express either qualified opinion or disclaim an opinion on the financial statements b. Issue an audit report that contains an unqualified opinion about the financial statements c. Not provide any assurance on the financial statements d. Issue the unqualified review report 4. Which of the following generalizations is incorrect about the reliability of evidence gathered by practitioners? a. Evidence obtained indirectly by the practitioner is more likely reliable than that obtained directly. b. Evidence from external sources is more reliable than that generated internally. c. Evidence generated internally is more reliable when subject to appropriate controls within the entity d. Evidence in the form of documents and written representation is more likely to be reliable 5. Which of the following is incorrect about a compilation engagement? a. The procedures performed do not enable the accountant to express any form of assurance b. The engagement ordinarily entails reducing detailed data to manageable and understandable form. c. The CPA should exercise due care d. The CPA uses his auditing expertise to collect, classify and summarize financial information. 6. Which of the following services provides a moderate level of assurance about the client’s financial statements? a. Compliance with contractual agreement b. Forecasts and projections c. Compilation d. Review 7. Which of the following best describes “related services”? a. Assurance and audit engagements b. Audit and Review of financial statements c. Review, compilation and agreed-upon procedures engagements d. Compilation and agreed-upon procedures engagements 8. The engagement to apply agreed-upon procedure engagement may be accepted, provided a. The CPA has audited the financial statements of the client b. The adequacy of the procedures to be performed will be determined by the CPA c. The distribution of the report will be limited only to specified parties involved. d. The CPA is independent will respect to the client. 9. What level of assurance does an accountant give on compilation report? a. Moderate b. High c. Low d. None 10. The statement that nothing came to our attention which would indicate that these statements are not fairly presented expresses which of the following?  a. Negative assurance b. Negative confirmation c. Piecemeal opinion d. Disclaimer of opinion 11. Which of the following ethical principles does not apply to an agreed-upon procedure engagement? a. Professional behavior b. Independence c. Confidentiality d. Professional competence and due care 12. When providing limited assurance that nothing came to the CPA’s attention that would indicate that the financial statements are not in accordance with financial reporting standards, the CPA should: a. Obtain corroborative evidence to support management’s responses to inquiries. b. Test the accounting records that identify inconsistencies with the prior year’s financial statements c. Develop an audit program d. Understand the accounting principles of in the industry in which the business entity operates 13. The auditor’s satisfaction as to the reliability of an assertion being made by one party is called audit risk. False- Assurance 14. Audit of financial statements provides reasonable level of assurance. True 15. An accountant would most likely perform procedures such as collecting, classifying and summarizing financial information under a review engagement. False- Compilation 16. A report on factual findings is the end product of the auditor when performing agreed-upon procedures. True QUIZ 2 1. The auditor communicates the results of his or her work through management letter. False- audit report 2. The client’s management has the primary responsibility for the fairness on the representations made in the financial statements. True 3. Internal auditing is the most commonly performed type of auditing by CPAs on a contractual basis. False- External 4. The subject matter of any audit consists of assertions. True 5. Operational audit uses laws and regulations as its criteria. False- Compliance Audit 6. An audit that involves obtaining and evaluating evidence about the efficiency and effectiveness of an entity’s operating activities in relation to specified objectives is a(n): a. Operational audit b. Financial statement audit c. External audit d. Compliance audit 7. Which of the following is not among the conditions that give rise to a demand by external users for independent audits of financial statements? a. Potential conflict of interest between users and prepares of statements b. Consequence of making decisions c. Complexity of making economic decisions d. Remoteness of users 8. Which of the following statements does not properly describe a limitation of an audit? a. Many audit conclusions are made on the basis of examining a sample evidence b. Many financial statement assertions cannot be audited c. Fatigue can cause auditors to overlook pertinent evidence d. Some evidence supporting peso representation in the financial statements must be obtained by oral or written representation of management  9. Most of the independent auditor’s work in formulating an opinion on financial statements consists of: a. Examining cash transactions b. Comparing recorded accountability with assets c. Studying and evaluating internal control d. Obtaining and examining evidential matter 10. The criteria for evaluating quantitative information vary. For example, in the case of an independent audit of financial statements by CPA firms, the criteria are usually the: a. Regulations of the Securities and Exchange Commission b. National Internal Revenue Code c. Philippines Standards on Auditing d. Philippine Financial Reporting Standards 11. Which of the following is not one of the limitations of an audit? a. Human error b. The use of testing c. Limitations imposed by client d. Nature of evidence that the auditor obtains 12. By providing high level of assurance on audit reports on financial statements, the auditor a. Guarantees the fair presentation of the financial statements b. Assures the readers that fraudulent activities of employees have been detected c. Enhances the credibility of the financial statements d. Confirms the accuracy of the financial statements 13. An audit involves ascertaining the degree of correspondence between assertions and established criteria. In the case of an audit financial statements, which of the following would not be a valid criterion? a. International Accounting Standards b. Philippine Standards on Auditing c. Philippine Accounting Standards d. Philippine Financial Reporting Standards 14. Which of the following statements does not properly describe an element of theoretical framework on auditing? a. The data to be audited can be verified b. An audit benefits the public c. Auditors act on behalf of the management d. Short-term conflicts may exist between managers who prepare the data and auditors who examine the data 15. Internal auditing is an independent appraisal function established within an organization to examine and evaluate its activities. To that end, internal auditing provides assistance to a. Stockholders b. Management and the board of directors c. External auditors d. Government QUIZ 3 1. The generally accepted auditing standards that requires “Adequate technical training and proficiency” is normally interpreted as requiring the auditor to have: a. Worked for an entity similar to the entity being audited b. Formal education in auditing and accounting c. A graduate degree in a business field d. Independence in mental attitude 2. The fourth generally accepted auditing standard of reporting requires an auditor to render a report whenever an auditor’s name is associated with financial statements. The overall purpose of the fourth standard of reporting is to require that reports a. Express whether the accounting principles used in preparing the financial statements have been applied consistently in the period under examination. b. State that the examination of financial statements has been conducted in accordance with generally accepted auditing standards. c. Indicate the character of the auditor’s examination and the degree of responsibility assumed by the auditor. d. Imply that the auditor is independent in mind as well as in appearance with respect to the financial statements under examination. 3. Which of the following statements most accurately captures the intent of the standards of field of work? a. Field work standards are primarily concerned with personal attributes necessary during the conduct of the audit b. Field work standards provide extensive guidance regarding the conduct of an audit c. Field work standards are primarily concerned with the conduct of substantive testing as opposed to testing of internal controls d. Field of work standards are primarily directed to the auditor’s planning, understanding of internal control, and evidence accumulation 4. Which of the following describes what is meant by generally accepted auditing standards? a. Audit objectives generally determined on audit engagements b. Acts to be performed by the auditor c. Measures of the quality of the auditor’s performance d. Procedures to be used to gather evidence to support financial statements 5. The Philippine Standards on Auditing (PSA) can be described as a. Defining the minimum standards of performance of an auditor b. Providing very specific guidance about the specific activities an auditor must perform on each engagement c. Providing assurance that an auditor will not issue the wrong kind of opinion d. Similar to Philippine Financial Reporting Standards 6. In compliance with the element of human resources, the firm should address issues relating to a. Engagement performance b. Consultation c. Assignment of engagement teams d. Differences of opinion 7. Which of the following is not an essential component of quality control? a. Policies and procedures to ensure that the work performed by firm personnel meet applicable professional standards b. Policies and procedures to ensure that the firm personnel are actively engaged in marketing strategies c. Policies to ensure that personnel maintain their independence in fact and in appearance d. Policies that ensure that monitoring activities are effectively applied 8. The generally accepted standards of reporting encompass all of the following except: a. Conformity of financial statements with GAAP b. Consistent application of accounting principle c. Consideration of an entity’s internal control d. Informative disclosures 9. The general standards of the generally accepted auditing standards include a requirement that a. The fieldwork to be adequately planned  b. Due professional care be exercised by the auditor c. The auditor’s report to state whether the financial statements are presented in conformity with GAAP d. The auditor to obtain sufficient, competent evidential matter 10. Which of the following quality control objectives would be least important to the auditor? a. Engagement performance b. Determination of audit fee c. Human resources d. Independence 11. A firm of independent auditors must establish and follow quality control policies and procedures because of these standards a. Include formal filing of records of such policies and procedures to a regulatory agency b. Are required by the SEC for auditors of all firms c. Give reasonable assurance that the firm as a whole will comply with professional standards d. Are necessary to meet increasing requirements of auditor’s liability as insurers 12. Quality control policies and procedures should provide the firm reasonable assurance that the policies and procedures relating to the other elements of quality control are being effectively applied. This statement defines quality control element of a. Monitoring b. Planning c. Independence, integrity and objectivity d. Assignment 13. A body created by the Board to conduct an oversight of the quality of audit of financial statements by reviewing the firm’s quality control is known as Quality Review Committee. True 14. Independence is the primary factor that should be considered in determining the extent of supervision needed by an assistant. False- Competence 15. The quality control reviewer is responsible for the audit engagement and its performance and for the auditor’s report that is issued in behalf of the firm. False- Engagement partner 16. Direction involves monitoring the progress of the audit. False- Supervision QUIZ 4 1. The term use to refer to acts of omission or commission by the entity being audited, either intentional or unintentional, which are contrary to the prevailing laws and regulation is a. Fraud b. Noncompliance c. Misappropriation d. Defalcation 2. The auditor's best defense when material misstatements are not uncovered is to have conducted the audit: a. In a timely manner. b. Only after an adequate investigation of the management team. c. In accordance with auditing standards. d. As effectively as reasonably possible. 3. The term "error" refers to unintentional misrepresentation of financial information. Examples of errors are when I. Transactions without substance have been recorded. II. The effects of the transactions have been omitted from the records. III. Assets have been misappropriated. IV. Records and documents have been manipulated and falsified. a. all of the statements are false b. all of the above statements are true  c. only statements I and Il are true d. only statements Ill and IV are true 4. Which of the following conditions or events increases the risk of error or fraud? a. Management is dominated by several individuals. b. The entity does not correct internal weaknesses that it knows about. c. There is a significantly low turnover of senior accounting personnel. d. There are frequent changes of auditors or legal counsel. 5. If an auditor believes that material errors or fraud exist, the auditor should a. Consider whether fraud or errors were the result of employee's failure to comply with specific controls. b. Make the investigation necessary to determine whether errors or fraud have in fact occurred. c. Consider the implications and discuss the matter with appropriate levels of management. d. Request that management investigate whether errors or fraud have in fact occurred. 6. In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is: a. Greater for employee fraud because of the larger number of employees in the organization. b. Greater for employee fraud because of the higher crime rate among blue collar workers. c. Greater for management fraud because of management's ability to override existing internal controls. d. Greater for management fraud because managers are inherently more deceptive than employees. 7. Which of the following best describes what is meant by the term "fraud risk factors? a. Factor that indicates internal control weaknesses. b. Factor whose presence requires modification of planned audit procedures. c. Factor whose presence indicates that the risk of fraud is high. d. Factor whose presence often has been observed in circumstances where frauds has occurred. 8. Which of the following statements best describes an auditor's responsibility to detect errors and fraud? a. An auditor should assess the risk that errors and fraud may cause the financial statements to contain material misstatements and should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements. b. An auditor is responsible to detect material errors, but has no responsibility to detect material fraud that are concealed through employee collusion or management override of the internal control structure. c. An auditor has no responsibility to detect errors and fraud unless analytical procedures or tests of transactions identify conditions causing a reasonably prudent auditor to suspect that the financial statements were materially misstated. d. An auditor has no responsibility to detect errors and fraud because an auditor is not an insurer and an audit does not constitute a guarantee. 9. Which of the following statements is/are false? l. It is usually easier for the auditor to uncover errors than fraud. (T) ll. Usually, the auditor does not design procedures to uncover fraud or errors. a. Both statements b. Il only c. Neither statement d. I only 10. Which of the following would be least likely to suggest to an auditor that the client's financial statements are materially misstated? a. Differences are reflected in the customer's confirmation replies. b. There are numerous delays in preparing timely internal financial reports. c. Management does not correct internal control structure weaknesses that it knows about. d. There have been two new controllers this year. 11. Which of the following conditions identified during fieldwork of an audit is most likely to affect the auditor's assessment of the risk of misstatement due to fraud? a. Computer generated documents. b. Missing documents. c. Checks for significant amounts outstanding at year end. d. Year-end adjusting journal entries. 12. Which of the following is most likely to be a response to the auditor's assessment that the risk of material misstatement due to fraud for the existence of inventory is high? a. Request that inventory counts at the various locations be counted on different dates so as to allow the same auditor to be present at every count, b. Observe test counts of inventory at certain locations on an unannounced basis. c. Request that inventories be counted prior to year-end. d. Perform analytical procedures rather than taking test counts. 13. Fraudulent financial reporting is most likely to be committed by whom? a. Line employees of the company. b. The company's auditors. c. Outside members of the company's board of directors. d. Company management. 14. Which of the following is an "error" as distinguished from "fraud"? a. Embezzlement of company's fund b. Window dressing c. Clerical mistakes in the process of transactions d. Lapping 15. An auditor who discovers that client has not complied with laws and regulations that has a material effect on the financial statements most likely would withdraw from the engagement if a. The noncompliance was a violation of GAAP b. The auditor has already assessed control risk at the maximum level. c. The noncompliance was committed last year when financial statements were not audited. d. The client does not make remedial action that the auditor considers necessary. 16. The responsibility for the detection and prevention of errors, fraud and noncompliance with laws and regulations rests with a. auditor b. client management c. internal auditor d. client's legal counsel e. 17. Which statements is/are true? l. The likelihood of detecting fraud is ordinarily higher than that of detecting error. (F) Il. The auditor is not and cannot be held responsible for the prevention of fraud and error. (T) Ill. The responsibility for the prevention and detection of fraud and error rests with the management. (T) a. Il and Ill only b. I and Ill only c. All statements are true. d. I and Il only e. 18. The auditor would ordinarily expect to find evidence to support management representations and not assume that they are necessarily correct. This is an example of: a. unprofessional behavior b. an attitude of professional skepticism. c. a rule in the code of Professional Conduct.  d. due diligence. 19. The following statements relate to the auditor's responsibility for the detection of errors and fraud. Identify the incorrect statements. I. The subsequent discovery of material misstatement of the financial information resulting from fraud or error does, in itself, indicate that the auditor failed to follow the basic principles and essential procedures of an audit. (F) II. Due to the inherent limitations of the audit, there is possibility that material misstatements in the financial statements may not be detected. (T) a. Both statements are false b. Both statements are true c. Il only d. I only 20. The management responsibility to detect and prevent fraud and error is accomplished by a. Implementing adequate quality control system. b. Implementing adequate accounting and internal control system. c. Having an annual audit of financial statements. d. Issuing a representation letter to the auditor. CHAPTER 4 QUIZ 1. Before accepting an engagement to audit a new client, a CPA is required to obtain a. A representation letter from the prospective client b. A preliminary understanding of the prospective client’s industry and business c. An understanding of the prospective client’s control environment d. The prospective client’s signature to the engagement letter 2. Which of the following is the correct order of steps in the audit process? A. Obtain client’s written representation (5) B. Develop an overall strategy for the expected conduct and scope of the audit (2) C. Perform test of controls (3) D. Prepare engagement letter (1) E. Perform substantive process (4) D,B,C,E,A a. D,B,E,A,C b. D,B,A,E,C c. D,A,B,E,C d. D,B,C,A,E 3. Which of the following assertions does not relate to classes of transactions and events for the period? a. Completeness b. Accuracy c. Valuation d. Cut-off 4. An engagement letter would not normally include: a. Expectation of receiving a representation letter from engagement b. Billing arrangement c. Arrangement concerning client’s assistance d. Details of the procedure that will be performed 5. An incoming auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor’s a. Working paper b. Engagement letter c. Both engagement letter and working paper d. Neither engagement letter nor working paper 6. Hill, a CPA has been retained to audit the financial statements of Monday Co. Monday’s predecessors auditor was Post, CPA, who has been notified by Monday that Post’s service have been terminated. Under these circumstances, which party should initiate the communication between Hill and Post? a. Post, the predecessor auditor b. The chairman of Monday’s board of directors c. Hill, the incoming auditor d. Monday’s controller or CFO 7. Which of the following is not normally performed in the preplanning or pre-engagement phase? a. Preparing an engagement letter b. Making a preliminary estimate of materiality c. Deciding whether to accept or reject an audit engagement d. Inquiring from the predecessor auditor 8. The management assertion being tested when you assess the reasonableness of the balance in the allowance for doubtful accounts is completeness. False- valuation and allocation 9. Which of the following would be least likely to be included in the auditor’s engagement letter? a. Extent of his responsibilities to his client b. Forms of the report c. Type of opinion to be issued d. Objectives and scope of the audit 10. When the auditor of parent entity is also the auditor of its subsidiary, branch or division (component), which of the following factors would least likely the auditor’s decision to send separate letter to a component of a parent entity? a. Legal requirements b. Geographical location of the component c. Degree of ownership by parent d. Degree of independence of component’s management 11. Before accepting an audit engagement, an incoming auditor should make specific inquiries of the predecessor auditor regarding the predecessor’s a. Opinion of any subsequent events occurring since the predecessor’s audit report was issued b. Evaluation of all matters of continuing accounting significance c. Understanding as the reasons for the change of auditors d. Awareness of the consistency in the application of GAAP between periods 12. Before performing any audit procedures, the auditor and the client should agree on the a. Terms of the engagement b. Type of opinion to be expressed c. Both the type of opinion to be expressed and terms of the engagement d. Neither the type of opinion to be expressed nor terms of the engagement 13. The management’s assertion being tested when you recompute the cash discounts taken by the client is accuracy. True 14. Occurrence relates to whether amounts included exist. False- Existence 15. Which of the following statements is not true? a. Transaction-related audit objectives are applied to classes of transactions b. Balance-related audit objectives are applied to both beginning and ending balances in the balance sheet accounts c. Balance-related audit objectives are applied to the ending balance in balance sheet accounts d. Balance-related audit objectives are applied to account balances 16. The use of an engagement letter is the best method of documenting I. The required communication of significant deficiencies in internal control structure II. Notification of any changes in the original arrangements of the audit. III. The description of any letters or reports that the auditor expects to issue. IV. Significantly lower materiality levels than those used in the prior audit.  a. I and IV b. I and II c. II and III d. III and IV 17. Audit procedures designed to test the effectiveness of control policies and procedures is called substantive tests. False- Tests of controls 18. Management letter serves as the written contract between the auditor and the client. False- (Engagement Letter) 19. Which of the following assertions does not related to balances at period end? a. Existence b. Rights and obligations c. Valuation or allocation d. Occurrence 20. Management assertion are a. Provided to the auditor in the Assertions Letter, but are not disclosed on the financial statements b. Stated as the footnotes to the financial statements c. Explicitly expressed representations about the financial statements d. Implied or expressed representations about the accounts in the financial statements LONG QUIZ 1. A prospective financial statement that presents an entity's expected financial position, results of operations and cash flows is a a. financial budget b. financial projection c. proforma financial information d. financial forecast 2. An auditor, while performing an audit, strives to achieve the appearance of independence in order to a. comply with the generally accepted standards of fieldwork. b. maintain public confidence in the profession. c. become independent in fact. d. reduce risk and liability. 3. Which of the following procedures is not included in a review engagement of a non-public entity? a. a study and evaluation of internal control b. inquiries regarding subsequent events c. procedures designed to identify unusual fluctuations d. inquiries of management 4. How is the responsibility of the practitioner affected by an involvement of an expert in an assurance engagement? a. The auditor should have an understanding of the aspect of the subject matter for which the expert has been used, sufficient to enable to the practitioner to accept responsibility for the conclusion on subject matter being expressed. b. The practitioner should divide the responsibility between him and the expert. c. The practitioner should always refer to the work of the expert in his report. d. The practitioner should first obtain a level of knowledge of the business, sufficient to at least equal the expertise of the expert, so that he can review the results of the work of the expert. 5. Which of the following is one of the limitations of an audit? a. Inadequacy of the accounting records b. Nature of evidence obtained c. Scope limitations imposed by the entity d. Confidentiality of information 6. An independent audit is important to readers of financial statements because it a. Objectively examines and reports on management's financial statements. b. Measures and communicates the financial data included in financial statements. c. Provides a measure of management's stewardship function. d. Reports on the accuracy of information in the financial statements. 7. Which of the following types of audits are most similar? a. Internal audits and independent financial statement audits. b. Operational audits and compliance audits. c. Independent financial statement audits and operational audits. d. Compliance audits and independent financial statement audits. 8. The audit of the financial statements of a corporation is being conducted by an external auditor. The external auditor is expected to a. examine all evidence supporting the corporations financial statements. b. certify the correctness of the corporation's financial statements. c. express an opinion as to the fairness of the corporation's financial statements. d. express an opinion as to the attractiveness of the corporation for investment purposes. 9. An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n): a. audit of financial statements.  b. operational audit. c. production audit. d. compliance audit. 10. Which of the following statements about independent financial statement audit is correct? a. An audit is designed to provide limited assurance that the financial statements taken as a whole are free from material misstatement. b. The auditor's opinion is not an assurance as to the future viability of the entity as well as the effectiveness and efficiency with which management has conducted the affairs of the entity. c. The procedures required to conduct an audit in accordance with PSAs should be determined by the client who engaged the services of the auditor. d. The audit of financial statements relieves management of its responsibilities for the financial statements. 11. It involves a study or appraisal by the Board or its duly authorized representatives, of the quality of audit of financial statements through an evaluation of the quality control measures instituted by the CPA firm to ascertain compliance with ethical and technical standards of public practice. a. External audit b. Peer review c. Quality review d. Compliance audit 12. Professional skepticism dictates that when management makes a statement to the auditors, the auditors should a. disregard the statement because such a statement will be overhauled by external evidence. b. corroborate the evidence with other supporting documentation whenever possible c. ask the client management to put it in a form of board resolution. d. accept the statement at its face value because the management has no reason to put itself in a shameful misrepresentation. 13. The standards to be applied to compilation engagements are the a. PSAEs b. PSRSs c. PSREs d. PSAs 14. The objective of the ordinary audit of financial statements is the expression of an opinion on: a. the accuracy of the annual report. b. the balance sheet and income statement. c. the fairness of the financial statements. d. the accuracy of the financial statements. 15. If an accountant is not independent, he may issue a a. review report. b. comfort letter. c. qualified opinion. d. compilation report. 16. An audit of historical financial statements is most often performed to determine whether the: a. none of these choices. b. organization is operating efficiently and effectively. c. entity is following specific procedures or rules set down by some higher authority. d. management team is fulfilling its fiduciary responsibilities to shareholders. 17. The understanding between the client and the auditor as to the degree of responsibility to be assumed by each is normally set forth in a(n): a. Comfort letter. b. Management letter c. Representation letter. d. Engagement letter 18. The auditor communicates the results of his or her work through the medium of the a. management letter. b. financial statements. c. engagement letter. d. audit report. 19. In compliance with the element of human resources, the firm should address issues relating to a. consultation b. assignment of engagement teams c. engagement performance d. differences of opinion 20. When compiling financial information, the accountant ordinarily is required to a. Verify any explanations. b. Obtain a general knowledge of the business and operations of the entity. c. Verify any matters. d. Make any inquiries of management to assess the reliability and completeness of the information provided. 21. Which of the following has the primary responsibility for the fairness of the representations made in the financial statements? a. Board of Accountancy b. Audit committee c. Client's management d. Independent auditor 22. The need for independent audits of financial statements can be attributed to all of the following conditions except: a. consequence b. validity c. remoteness d. complexity of subject matter 23. Which of the following is a major difference between a review and an audit of the financial statements? a. The level of knowledge of professional standards needed to perform the procedures. b. The scope of the procedures performed and the assurance provided. c. The type of company involved in reviews may only be publicly held. d. The type of accounting used in review are typically non GAAP accounting while audits are based upon GAAP accounting. 24. If an accountant in a review engagement becomes aware of material misstatements, the accountant should try to agree appropriate amendments with the entity. If such amendments are not made and the financial information is considered to be misleading, the accountant should a. qualify the negative assurance or give an adverse statement. b. do nothing. c. withdraw from engagement d. issue a qualified or adverse opinion. 25. The procedures employed in doing compilation are: a. designed to enable the accountant to express a limited assurance. b. designed to enable the accountant to express a negative assurance. c. not designed to enable the accountant to express any form of assurance. d. less extensive than review procedures but more extensive than agreed-upon procedures. 26. In not less than three sentences, answer the following question: What do you think would be the effect of the current pandemic situation in the company's financial statements? 27. An accountant should perform analytical procedures in an engagement to do l. Audit ll. Compilation Ill. Review a. I and Il only  b. Il and Ill only c. l, Il and Ill d. I and III only 28. If an accountant in a compilation engagement becomes aware of material misstatements, the accountant should try to agree appropriate amendments with the entity. If such amendments are not made and the financial information is considered to be misleading, the accountant should a. qualify the negative assurance or give an adverse statement. b. do nothing. c. withdraw from engagement d. issue a qualified or adverse opinion. 29. Negative assurance may be expressed when a practitioner is requested to report agreed upon procedures to specified a. elements of a financial statement b. neither elements or accounts of a financial statement c. accounts of a financial statement d. either elements and accounts of a financial statement 30. The reason an independent auditor gathers evidence is to a. evaluate management. b. form an opinion on the financial statements. c. evaluate internal controls. d. detect fraud. 31. Providing quantitative information that management and others can use to make decisions is the function of: a. management information systems. b. accounting. c. auditing. d. finance. 32. An operational audit is designed to a. Assess the presentation of management's financial statements in accordance with generally accepted accounting principles. b. Determine whether management has complied with applicable laws and regulations. c. Assess the efficiency and effectiveness of management's operating procedures. d. Determine whether the audit committee of the board of directors is effectively discharging its responsibility to oversee management's operations. 33. Ultimately, the decision about whether or not an auditor is independent must be made by the a. Auditor. b. Client. c. Public. d. Audit committee. 34. Which of the following is not one of the elements of an assurance engagement? a. sufficient appropriate evidence b. a subject matter c. suitable criteria d. an opinion about whether the subject matter conform, in all material respects, with identified criteria 35. The statement, "We are not aware of any material modification that should be made to the financial statements in order for them to be in conformity with GAAP" is an example of a. reasonable assurance b. positive assurance c. negative opinion d. negative assurance 36. According to professional standards, analytical procedures are least likely to be applied to:  a. tests disclosures about reportable operating segments. b. compile financial statements. c. plan an audit and assist in the final review. d. review of financial statements or interim financial information. 37. A practitioner may accept an agreed-upon procedures engagement to calculate the rate of return on a specified investment and verify that the percentage agrees with the percentage in an identified schedule provided that a. The practitioner’s report does not enumerate the procedures performed b. The practitioner accepts responsibility for the sufficiency of the procedures c. The practitioner is also the entity’s continuing auditor d. Use of the practitioner’s report is restricted 38. Independent auditing can be described as a a. professional activity that attests to the fair presentations of financial statements b. subset of accounting c. regulatory activity that prevents the issuance of improper financial information. d. professional activity that measures and communicates financial accounting data 39. The use of negative assurance in audit reports on financial statement is a. a violation of the professional standards b. encouraged by PICPA. c. a help in clarifying the degree of responsibility being assumed by the auditor. d. properly located in the opinion paragraph of the unqualified report. 40. Which of the following services provides the lowest level of assurance on a financial statement? a. An audit b. Neither service provides assurance on financial statements. c. A review d. Each service provides the same level of assurance on financial statements. 41. What is the general character of the three generally accepted auditing standards classified as standard of field work? a. The competence of persons performing the audit. b. The need to maintain an independence in mental attitude in all matters relating to the audit. c. Criteria for the content of the auditor's report on financial statements and related footnote disclosures. d. The criteria of audit planning and evidence gathering. 42. An independent audit aids in the communication of economic data because the audit a. Assures the readers of financial statements that any fraudulent activity has been corrected. b. Confirms the accuracy of management's financial representations. c. Guarantees that financial data are fairly presented. d. Lends credibility to the financial statements 43. Auditing is based on the assumption that financial data are verifiable. Data are verifiable when two or more qualified individuals, a. working independently, each reach essentially similar conclusions. b. working together, can prove, beyond doubt, the accuracy of the data. c. working independently, can prove, beyond reasonable doubt, the truthfulness of the data. d. working together, can agree upon the accuracy of the data. 44. The person responsible for the audit engagement and its performance and for the auditor's report that is issued in behalf of the firm is the a. engagement partner b. quality control reviewer c. client's management d. those charged with governance 45. If requested to perform a review engagement for a non-public entity for which the accountant has direct immaterial financial interest, the accountant is a. Not independent and therefore, may not be associated with the financial statements. b. Not independent and therefore, may not issue a review report. c. Independent because the financial interest is immaterial. d. Not independent and therefore, may issue a review report but, not an auditor's opinion.