Accntng 402 Module 1 MCQ
Accntng 402 Module 1 MCQ
Personnel issues that must be addressed by the system of quality control include the following, EXCEPT
2. The normal retention period for audit engagement documentation is no shorter than from the date of the
audit report
a. Five years
b. Four years
c. Two years
d. Six years
3. A partner, other person in the firm, suitably qualified external person, or a team made up of such individuals,
with sufficient and appropriate experience and authority to objectively evaluate, before the report issued, the
significant judgments the engagement team made and the conclusions they reached in formulating the report
c. Personnel
d. Engagement partner
4. Regarding the assignment of engagement teams, which of the following statements is INCORRECT?
a. The firm should also assign appropriate staff with the necessary capabilities, competence and time to
perform engagements in accordance with professional standards and regulatory and legal requirements, and to
enable the firm or engagement partners to issue reports that are appropriate in the circumstances
b. The firm should assign responsibility for each engagement to the senior manager
c. Policies and procedures include systems to monitor the workload and availability of engagement partners
so as enable these individuals to have a sufficient time to adequately discharge their responsibilities
d. The identity and role of the engagement partner should be communicated to key members of client
management and those charged with governance
5. Where the engagement quality control reviewer makes recommendations that the engagement partner does
not accept and the matter is not resolved to the reviewer’s satisfaction, the report
d. Is not issued until the matter is resolved by following the firm’s procedures for dealing with differences of
opinion
6. Where internal technical and training resources are unavailable, the firm
b. Must obtain, within two years, the necessary internal technical and training re-sources
c. Cannot adequately provide for the professional development needs of its members
b. Matters for which the judgment of the engagement leader is deemed sufficient
8. Which of the following best describes the word “personnel” in the context of PSQC No.1?
a. This refers to professionals, other than partners, including any experts the firm employs
c. This refers to any individual with authority to bind the firm with respect to the performance of a
professional services engagement
b. Any of these
d. Other firms
10. 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
b. Continue the engagement, since the Code of Ethics requires started engagements to be finished regardless
to subsequent developments and information
c .Reporting the information and its implications to the person(s) who appointed the CPA
11. By obtaining confirmation and taking appropriate action on information indicating noncompliance, the firm
demonstrates the importance that it attaches to independence and makes the issue current for, and visible
to, its personnel. Written confirmation
12. The firms policies and procedures emphasize the fundamental principles, which are reinforced in particular by
a. All of these
13. An engagement quality control review for audits of financial statements of listed entities includes considering
the following, except
a. The engagement team’s evaluation of the firm’s independence in relation to the specific engagement
b. Significant risks identified during the engagement and the responses to those risks
c. Whether working papers selected for review reflect the work performed in relation to the significant
judgments and support significant management assertions
14. The firm should communicate the results of the monitoring of its quality control system to engagement
partners and other appropriate individuals within the firm at least every
a. Six months
b. Three years
c. Twelve months
d. Two years
a. Managers
b. Partners
c. Audit associates
d. Senior associates
16. This is a review that provides an objective evaluation of the significant judgements made by the engagement
team and the conclusions reached in formulating by the report
d. Peer review
17. The firm’s business strategy is subject to the overriding requirement for the firm to achieve quality in all the
engagements that the firm performs. Accordingly, the firm (select the exception)
a. Designs policies and procedures addressing performance evaluation, compensation, and promotion to
demonstrate the firm’s overriding commitment to quality
b. Devotes sufficient resources for the development, documentation and support of its quality control policies
and procedures
c. Assigns its management responsibilities so that commercial considerations may override the quality of work
performed
18. The engagement quality control reviewer (choose the INCORRECT one)
c. Is not subject to other considerations that would threaten the reviewer’s objectivity
d. Does not otherwise participate in the engagement during the period of review
19. Which of the following methods are least likely to develop capabilities and competence?
c. Professional education
21. The inspection of a selection of completed engagements is ordinarily performed on a cyclical basis.
Engagements selected for inspection include at least
a. One engagement for each engagement partner over an inspection cycle of 3 years
22. The following statements pertain to quality control reviewers. Which statement is correct?
a. The engagement partner may consult the engagement quality control reviewer during the engagement
d. Where the nature and extent of the consultations become significant, care is taken by both the
engagement team and the reviewer to maintain the reviewer’s integrity
b. The work performed supports the conclusions reached and is appropriately documented
c. Consultation with experts has been made for all phases of the engagement
24. In considering whether the firm has the capabilities, competence, time and resources to undertake a new
engagement from a new or an existing client, the firm reviews the specific requirements of the engagement
and existing partner and staff profiles at all relevant levels. Matters the firm considers include the following,
EXCEPT
a. Whether the firm is able to complete the engagement within the reporting deadline
b. Whether firm personnel have experience with relevant regulatory or reporting requirements, or the ability
to gain the necessary skills and knowledge effectively
c. Whether the client is aggressively concerned with maintaining the firm’s fees as low as possible
25. In relation to completed engagements, these are procedures designed to provide evidence of compliance by
engagement teams with the firm’s quality control policies and procedures
a. Monitoring
c. Inspection
d. Quality Control
26. The firm should obtain written confirmation of compliance with its policies and procedures on independence
from all firm personnel required to be independent by the Code of Ethics
a. Monthly
b. Annually
c. Every 3 years
d. Quarterly
27. What aspects are most important in determining the eligibility of engagement quality control reviewer?
a. All of these
28. Monitoring of the firm’s system of quality control is performed by competent individuals and cover
(i)appropriateness of the design of quality controls; and (2)Effectiveness of the operation of quality controls.
a. Yes, yes
b. Yes, no
c. No, yes
d. No, no
a. Audit, reviews
a. An engagement quality control review is always conducted at the end of the engagement
b. The extent of the review depends on the complexity of the engagement and the risk that the report might
not be appropriate in the circumstances
c. The review does not reduce the responsibilities of the engagement partner
d. An engagement quality control review ordinarily involves discussion with the engagement partner, a review
of the financial statements or other subject matter information and the report, and, in particular, consideration of
whether the report is appropriate
32. All personnel performing an engagement, excluding experts contracted by the firm in connection with that
engagement
a. Professionals
b. Personnel
c. Staff
d. Engagement team
33. In the case of an audit, final engagement files should be completely assem-bled not more than ___ days after
the date of the audit report
a. 5
b. 30
c. 60
d. 10
34. An inspection cycle ordinarily spans no more than
a. Four Years
b. One Year
c. Three Years
d. Two Years
35. Ethical requirements to which the engagement team and engagement quality control reviewer are subject,
which ordinarily comprise Parts A and B of the Code of Ethics, together with national requirements that are
more restrictive
b. Fundamental principles
36. A process comprising an ongoing consideration and evaluation of the firm’s system of quality control, including
a periodic inspection of a selection of completed engagements, designed to enable the firm to obtain
reasonable assurance that its system of quality control is operating effectively
a. Monitoring
c. Quality review
d. Inspection
37. With regard to the integrity of a client, matters that the firm considers include the following
b. 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. For all types of audits, regardless of the subject matter of the engagement
a. Systematic, repetitive or other significant deficiencies that require prompt corrective action
b. Instances that so not necessarily indicate an insufficiency in the quality control system
c. Both a and b
d. Neither a nor b
40. Through its policies and procedures, the firm seeks to establish consistency in the quality of engagement
performance. This is often accomplished through (select the INCORRECT ITEM)
41. The firm should establish policies and procedures requiring appropriate documentation to provide evidence of
the operation of each element of its system of quality control. How such matters are documented is based on
c. PSQC No. 1
d. PSA 220
42. The following are the fundamental principles of professional ethics, EXCEPT
b. Independence
c. Objectivity
d. Integrity
43. Information on matters regarding integrity of the client may come from
b. Inquiry of other firm personnel or third parties such as (bankers, legal counsel and industry peers)
d. All of these
44. Original paper documentation may be scanned and stored electronically for practical reasons. After scanning,
the original paper document
a. Shall be considered for retention or disposal depending on legal or regulatory requirements and other
factors
b. None of these
45. Review responsibilities are determined on the basis that _____ experienced team members review the work
of _______ experienced team members
a. More, less
b. More, more
c. Less, more
d. Less, less
46. An entity whose shares, stock or debt are quoted or listed on a recognized stock exchange, or are marketed
under the regulations of a recognized stock exchange or other equivalent body
a. Listed entity
c. Quoted entity
d. Recognized entity
47. Criteria for determining whether an engagement quality control review should be performed include the
following
a. All of these
b. The nature of the engagement, including extent of involvement of the public interest
c. Laws and regulations that may require an engagement quality control review
c. Addressing all issues arising during the engagement and modifying the planned approach appropriately
d. Identifying matters for consultation or consideration by less experienced engagement team members
during the engagement
49. Actions and messages that encourage a culture of quality are communicated through
a. All of these
a. The firm
d. The client
52. Quality control policies and procedures are designed to promote an internal culture recognizing that
a. The promotion of a quality-oriented internal culture depends on clear, consistent and frequent actions and
messages from all levels of the firm’s management
b. The firm should always move towards the elimination of audit risk
c. Reasonable, and not absolute, assurance can be provided by all CPA engagements
53. Controls that the firm may design and implement to maintain the confidentiality, safe custody, integrity,
accessibility and retrievability of engagement documentation include the following except
a. Procedures for properly distributing engagement documentation to the team members at the start of
engagement, processing it during engagement, and collating it at the end of engagement
b. Procedures for restricting access to, and enabling proper distribution and confidential storage of, hardcopy
engagement documentation
c. Appropriate back-up routines for electronic engagement documentation (always done at the end of the
engagement)
d. The use of a password among engagement team members to restrict access to electronic engagement
documentation to authorized users
54. The firm should establish policies and procedures designed to provide it with reasonable assurance those
individuals and firms maintain independence (where required by the Code of Ethics). Such policies and
procedures should enable the firm to (select the exception):
c. Identify and evaluate circumstances and relationships that create threats to in-dependence
55. In a certain audit engagement, several key members of the engagement team had differences of opinion
regarding a certain matter. In this case
a. The engagement partner shall issue a disclaimer of opinion due to a scope limitation
c. An increase in the audit fee will be requested due to the extension of the time required to complete the
engagements
d. Documentation will be made regarding the unsolved matter, and the auditor will withdraw from the
engagement altogether
56. AASC Engagement Standards as defined in the “Preface to the Philippines Standards on Quality Control,
Auditing Assurance and Related Services,” and relevant ethical requirements, which ordinarily comprise Parts
A and B of the IFAC Code and relevant national requirements
c. Professional Standards
a. An understanding of and practical experience with engagements of a similar nature and complexity through
appropriate training and participation
a. Engagement partner
b. Partner
59. The familiarity threat maybe 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
60. The policies and procedures adopted by a firm designed to proved it with reasonable assurance regarding
compliance with professional standards and regulatory and legal requirements, and appropriateness of
reports issued by the firm
a. Internal controls
b. Monitoring
c. Quality Controls
d. Code of Ethics
61. An entity under common control, ownership or management with the firm or any entity that a reasonable and
informed third party having knowledge of all relevant information would reasonably conclude as being part of
the firm nationally or internationally
a. Engagement team
b. Network firm
c. Listed entity
d. Firm
62. The partner or other person in the firm who is responsible for the engagement and its performance, and for
the report that is issued on behalf of the firm, and who, where required, has the appropriate authority from
the professional, legal or regulatory body
b. Engagement partner
d. Personnel
63. Controls that the firm may design and implement to maintain the confidentiality, safe custody, integrity,
accessibility and retrievability of engagement documentation include the following except
a. Procedures for restricting access to, and enabling proper distribution and confidential storage of, hardcopy
engagement documentation
b. Procedures for properly distributing engagement documentation to the team members at the start of
engagement, processing it during engagement, and collating it at the end of engagement
c. Appropriate back-up routines for electronic engagement documentation (always done at the end of the
engagement)
d. The use of a password among engagement team members to restrict access to electronic engagement
documentation to authorized users
64. An engagement quality control review for audits of financial statements of listed entities includes considering
the following, except
a. Significant risks identified during the engagement and the responses to those risks
c. Whether working papers selected for review reflect the work performed in relation to the significant
judgments and support significant management assertions
d. The engagement team’s evaluation of the firm’s independence in relation to the specific engagement
65. PSQC 1 applies to
a. all firms of professional accountants in respect of audits and reviews of financial statements
b. all firms of professional accountants in respect of audits and reviews of financial statements, and other
assurance service engagements
c. all firms of professional accountants in respect of audits and reviews of financial statements, and other
assurance and related services engagements
d. all firms of professional accountants in respect of audits
66. In pursuing its quality control objective with respect to assigning personnel to engagements, a CPA firm may
use policies and procedures such as
a. requiring timely identification of the staffing requirements of specific engagements so that enough qualified
personnel can be made available
b. rotating employees from assignment to assignment on a random basis to aid in the staff training effort
c. assigning a number of employees to each engagement in excess of the number required so as not to
overburden the staff and interfere with the quality of the audit work performed
d. allowing staff to select the assignments of their choice to promote better client relationship
67. Who should take responsibility for the overall quality on each audit engagement?
a. Engagement partner
b. CPA firm
c. Engagement team
68. Professionals, other than partners, including any experts the firm employs.
a. Engagement team
b. Staff
c. Employees
d. Personnel
69. ISA (International Standards on Auditing) 220, Quality Control for Audits of Financial Information (Revised),
states, in part, that for audits of financial statements of listed entities, the engagement partner should not
issue the auditor’s report until the completion of the
c. Management Review
b. Yes, Yes, No
c. No, No, No
b. yes, no, no
d. yes, yes, no
72. Which of the following statements regarding quality control policies and procedures is incorrect?
a. Quality control policies are objectives and goals while quality control procedures are steps to be taken to
accomplish the policies adopted
b. The policies and procedures adopted by the individual audit firms should not vary since PSA 220 prescribed
quality control policies and procedures that must be adopted by all auditing firms
c. Quality control policies and procedures should be implemented at both the level of the audit firm and on an
individual audits
d. The 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 and practices
73. 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
74. The engagement partner and, where appropriate, other members of the engagement team, shall document:
(a) Issues identified with respect to compliance with relevant ethical requirements and how they were
resolved;
(b) Conclusions on compliance with independence requirements that apply to the audit engagement, and any
relevant discussions with the firm that support these conclusions;
(c) The reviewer is not aware of any unresolved matters that would cause the reviewer to believe that the
significant judgments the engagement team made and the conclusions they reached were not appropriate
a. yes, yes, no
b. yes, no, no
d. no, no, no
75. PSQC applies to ALL firms of professional accountants in respects of audits, reviews, and other assurance &
related engagements. Compliance with this PSQC depends on various factors relating to a particular firm.
Which of the following is not a factor?
a. Operating characteristics
b. Size
d. Geographical location
76. Firm of CPAs may use policies and procedures such as notifying professional personnel as to the names of
audit clients having publicly held securities and confirming periodically with such personnel that prohibited
relations do not exist. This is done to achieve effective quality control in which of the following areas?
b. Independence.
d. Inspection
77. The extent of the engagement quality control review may depend on a number of factors. Which among the
following is not a factor?
d. risk that the auditor’s report might not be appropriate in the circumstances
78. The primary purpose of establishing quality control policies and procedures for deciding whether to accept a
new client is to
a. Minimize the likelihood of association with clients whose management lacks integrity
b. Anticipate before performing any fieldwork whether an unqualified opinion can be expressed
d. Satisfy the CPA firm’s duty to the public concerning the acceptance of new clients
79. The firms should establish policies and procedures designed to promote an internal culture based on the
recognition that quality is essential in performing engagements. Such policies and procedures should require
the firm’s chief executive officer (or equivalent) or, if appropriate, the firm’s managing board of partners (or
equivalent), to assume ultimate responsibility for the firm’s system of quality control.
b. Monitoring
c. Human resources
d. Ethical requirements
80. Communication of monitoring results should be done at least
b. for every engagement that has, for its client, a listed entity