Auditing Theory: C. Both I and II
Auditing Theory: C. Both I and II
Quizzer 6:
1. A firm should establish and maintain a system of quality control to
provide it with reasonable assurance that:
I. The firm and its personnel comply with professional standards
and applicable legal and regulatory requirements.
II. Reports issued by the firm or engagement partners are
appropriate in the circumstances.
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engagements are performed in accordance with professional standards
and regulatory and legal requirements, and that the firm or the
engagement partner issue reports that are appropriate in the
circumstances.
a. Ethical requirements
b. Engagement performance
c. Monitoring
d. Human resources
10. The firm shall obtain written confirmation of compliance with its
policies and procedures on independence from all firm personnel
required to be independent by relevant ethical requirements
a. At least annually
b. At least monthly
c. At least semi-annually
d. At the completion of each engagement.
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11. Which element of a system of quality control is addressed by the
establishment of policies and procedures designed to provide the firm
with reasonable assurance that it has sufficient personnel with the
competence, capabilities, and commitment to ethical principles?
a. Monitoring
b. Leadership responsibilities for quality within the firm
c. Human resources
d. Engagement performance
12. The firm shall establish policies and procedures designed to provide
it with reasonable assurance that the firm and its personnel comply
with relevant ethical requirements. The Code of Ethics for
Professional Accountants in the Philippines establishes the
fundamental principles of professional ethics which include the
following, except
a. Integrity
b. Objectivity
c. Relevance
d. Professional behavior
14. The nature, timing, and extent of an audit firm’s quality control
policies and procedures depend on
The Nature of Appropriate
The CPA Firm’s the CPA Firm’s Cost-Benefit
size Practice Considerations
a. Yes Yes No
b. Yes Yes Yes
c. No No No
d. Yes No Yes
15. An audit firm should implement quality control policies and procedures
designed to ensure that all audits are conducted in accordance with
PSAs or relevant national standards or practices. These policies and
procedures should be implemented
a. At the audit firm level only
b. On individual audits only
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c. Either at the audit firm level or on individual audits.
d. Both at the audit firm level and on individual audits.
a. I only
b. I and II only
c. II and III only
d. I, II, and III
19. The engagement partner should take responsibility for the direction,
supervision, and performance of the audit engagement in compliance
with professional standards and regulatory and legal requirements,
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and for the auditor’s report that is issued to be appropriate in the
circumstances. Supervision includes the following, except
a. Tracking the progress of the audit engagement.
b. Addressing significant issues arising during the audit engagement,
considering their significance, and modifying the planned approach
appropriately.
c. Informing the members of the engagement team of their
responsibilities.
d. Identifying matters for consultation or consideration by more
experienced engagement team members during the audit engagement.
20. Who should take responsibilities for the overall quality on each audit
engagement?
a. Engagement quality control reviewer
b. Engagement partner
c. Engagement team
d. CPA Firm
23. With regard to the integrity of a client, matters that the firm
considers include the following:
a. The identify and business reputation of the client’s principal
owners, key management, related parties and those charged with its
governance.
b. The nature of the client’s operations, including its business
practices.
c. Information concerning the attitude of the client’s principal
owners, key management and those charged with its governance
towards such matters as aggressive interpretation of accounting
standards and the internal control environment.
d. All of the answers.
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24. A CPA, while performing an audit, strives to achieve independence in
appearance in order to
a. Reduce risk and liability of the auditor.
b. Comply with requirements of the various regulators.
c. To achieve independent in fact.
d. Maintain public confidence in the profession.
25. A firm has obtained information that would have caused it to decline
an engagement had the information been available earlier. Actions
available to the auditor include the following, except:
a. Reporting the information and its implications to the person(s) who
appointed the CPA.
b. Withdraw from the engagement.
c. Withdraw from both the engagement and the client relationship.
d. Continue the engagement, since the Code of Ethics requires started
engagements to be finished regardless of subsequent developments
and information.
27. The familiarity threat that may be created by using the same senior
personnel on an assurance engagement over a long period of time and
the safeguards that might be appropriate to address such a threat.
Accordingly, safeguards may include:
a. Rotation of senior management
b. Engagement quality control review
c. Both a and b
d. Neither a nor b
29. A firm has obtained information that would have caused it to decline
an engagement had the information been available earlier.
a. Reporting the information and its implications to the person(s)
who appointed the CPA.
b. Withdraw from the engagement.
c. Withdraw from both the engagement and the client relationship.
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d. Continue the engagement, since the Code of Ethics requires started
engagements to be finished regardless of subsequent developments
and information.
30. The following methods are most likely to develop capabilities and
competence, except:
a. Professional education.
b. Continuing professional development, including training.
c. Work experience and coaching by less experienced staff.
d. Self-study modules on professional accounting and auditing
literature.
41. The firm would communicate the results of the monitoring of its
quality control system to engagement partners and other appropriate
individuals within the firm at least:
a. Every six months
b. Every twelve months
c. Every two years
d. Every three years
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