AUE2601 Assignment 2B (COMPLETE ANSWERS) Semester 1 2024 - DUE 16 April 2024AUE2601 Assignment 2B (COMPLETE ANSWERS) Semester 1 2024 - DUE 16 April2024

(Auditing Theory: The CPA’S Professional Responsibility) .10 - ANSWER-The Board of Accountancy shall submit to the PRC the ratings obtained by each candidate within _____ days after the examination, unless extended for just cause. (Auditing Theory: The Accountancy Profession) .30 - ANSWER-The death or disability of an individual CPA and/or the dissolution and liquidation of a firm or partnership of CPAs shall be reported to the BOA not later than _____ days from the date of such death, dissolution or liquidation. (Auditing Theory: The Accountancy Profession) .A belief that management and those charged with governance are honest and have integrity relieves the auditor of the need to maintain professional skepticism. - ANSWER-The auditor is required to maintain professional skepticism throughout the audit. Which of the following statements concerning professional skepticism is false? (Auditing Theory: Auditing and Related Services) .A fine of not less than P50,000 or by imprisonment for a period not exceeding two years or both. - ANSWER-Any person who shall violate any of the provisions of the Accountancy Act or any of its implementing rules and regulations promulgated by the Board of Accountancy subject to the approval of the PRC, shall, upon conviction, be punished by (Auditing Theory: The Accountancy Profession) .A measure of management performance in meeting organizational goals. - ANSWER-Operational audits generally have been conducted by internal and COA auditors, but may be performed by certified public accountants. A primary purpose of an operational audit is to provide (Auditing Theory: Auditing and Related Services) .A. A professional accountant accepting gifts from a client whose value is inconsequential or trivial. - ANSWER-Familiarity threat could be created under the following circumstances except A. A professional accountant accepting gifts from a client whose value is inconsequential or trivial. B. Senior personnel having a long association with the assurance client. C. A director or officer of the client or an employee in a position to exert significant influence over the subject matter of the engagement having recently served as the engagement partner. D. A member of the engagement team having a close or immediate family member who is a director or officer of the client. (Auditing Theory: The CPA’S Professional Responsibility) .A. Assessing control risk may be performed concurrently during an audit with obtaining an understanding of the entity’s internal control - ANSWER-Which of the following statements is correct concerning an auditor’s assessment of control risk? A. Assessing control risk may be performed concurrently during an audit with obtaining an understanding of the entity’s internal control. B. Evidence about the operation of controls in prior audits may not be considered during the current year’s assessment of control risk. C. The basis for an auditor’s conclusions about the assessed level of control risk need not be documented unless control risk is assessed at the maximum level. D. The lower the assessed level of control risk, the less assurance the evidence must provide that the controls are operating effectively. (Risk Assessments and Internal Control) .A. Disclosure may be made to any party on consent of the client. - ANSWER-Which of the following statements concerning a CPA’s disclosure of confidential client information is ordinarily correct? A. Disclosure may be made to any party on consent of the client. B. Disclosure should not be made even if such disclosure will protect the CPA’s professional interests in legal proceedings. C. Disclosure should be made only if there is a legal or professional duty to make the disclosure. D. Disclosure may be made to any government agency without subpoena. (Auditing Theory: The Accountancy Profession) .A. Discuss the matter with those charged with governance of the audit client. - ANSWER-A direct financial interest or a material indirect financial interest in the audit client of a member of the audit team or his immediate family member may create a significant self-interest threat. Which of the following safeguards would be least likely considered to eliminate the threat or reduce it to an acceptable level? A. Discuss the matter with those charged with governance of the audit client. B. Dispose of the direct financial interest prior to the individual becoming a member of the audit team. C. Dispose of the indirect financial interest in total or dispose of a sufficient amount of it so that the remaining interest is no longer material prior to the individual becoming a member of the audit team. D. Remove the member of the audit team from the audit engagement. (Auditing Theory: The CPA’S Professional Responsibility) .A. I only - ANSWER-Misstatements in the financial statements can arise from fraud or error. The distinguishing factor between fraud and error is whether the underlying action that results in the misstatement of the financial statements is I. Intentional or unintentional. II. Rational or irrational. A. I only C. Both I and II B. II only D. Neither I nor II. (Fraud and Error) .A. Preparing calculations of current and deferred tax liabilities (or assets) for an audit client for the purpose of preparing accounting entries that will be subsequently audited by the firm creates a self-interest threat. - ANSWER-The following statements relate to the provision of taxation, internal audit or IT Systems services to audit clients. Which is false? A. Preparing calculations of current and deferred tax liabilities (or assets) for an audit client for the purpose of preparing accounting entries that will be subsequently audited by the firm creates a self-interest threat. B. A self-review threat may be created when a firm, or network firm, provides internal audit services to an audit client. C. The provision of services by a firm or network firm to an audit client that involve the design and implementation of financial information technology systems that are used to generate information forming part of a client’s financial statements may create a self-review threat. D. The provision of services in connection with the assessment, design, and implementation of internal accounting controls and risk management controls does not create a threat to independence provided that firm or network firm personnel do not perform management functions. (Auditing Theory: The CPA’S Professional Responsibility) .A. The firm promoting shares in an audit client. - ANSWER-Which of the following circumstances may create advocacy threat for a professional accountant in public practice? A. The firm promoting shares in an audit client. B. A firm issuing an assurance report on the effectiveness of the operation of financial systems after designing or implementing the systems. C. A firm being threatened with dismissal from a client engagement. D. A firm being concerned about the possibility of losing a significant client. (Auditing Theory: The CPA’S Professional Responsibility) .A. The provision of legal services to an audit client involving matters that would not be expected to have a material effect on the financial statements may create a self-review threat. - ANSWER-The following statements relate to the provision of legal services to an audit client. Which is incorrect? A. The provision of legal services to an audit client involving matters that would not be expected to have a material effect on the financial statements may create a self-review threat. B. Legal services to support an audit client in the execution of a transaction (e.g., contract support) may create a self-review threat. C. Acting for an audit client in the resolution of a dispute or litigation in such circumstances when the amounts involved are material in relation to the financial statements of the audit client would create advocacy and self-review threats so significant no safeguards could reduce the threats to an acceptable level. D. The appointment of a partner or an employee of the firm or network firm as General Counsel for legal affairs to an audit client would create self-review and advocacy threats that are so significant no safeguards could reduce the threats to an acceptable level. (Auditing Theory: The CPA’S Professional Responsibility) .Accept the engagement but he/she should conduct research or consult with others to obtain sufficient competence. - ANSWER-Which of the following is the most appropriate action to be taken by a CPA who has been asked to perform a consulting services engagement concerning the analysis of a potential merger if he/she has little experience with the industry involved? (Auditing Theory: Auditing and Related Services) .Acceptable audit risk - ANSWER-A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unmodified opinion has been issued is the (Risk Assessments and Internal Control) .Advertising - ANSWER-As defined in the Code of Ethics, __________ is the communication to the public of information as to the services or skills provided by professional accountants in public practice with a view to procuring professional business. (Auditing Theory: The CPA’S Professional Responsibility) .An incorrect accounting estimate arising from oversight or misinterpretation of facts. - ANSWER-“Error” includes (Fraud and Error) .Assertion-based engagements - ANSWER-In some assurance engagements, the evaluation or measurement of the subject matter is performed by the responsible party, and the subject matter information is in the form of an assertion by the responsible party that is made available to intended users. These engagements are called (Auditing Theory: Assurance Services) .B. A sales manager’s authorization for a sales return - ANSWER-Authorizations can be either general or specific. Which of the following is not an example of a general authorization? A. Automatic reorder points for raw materials inventory. B. A sales manager’s authorization for a sales return. C. Credit limits for various classes of transactions. D.A sales price list for merchandise. (Risk Assessments and Internal Control) .B. Checks are signed by one person. - ANSWER-Which of the following is of least concern to an auditor in assessing the risks of material misstatement? A. Signed checks are distributed by the controller to approved payees. B. Checks are signed by one person. C. Cash receipts are not deposited intact daily. D. Treasurer does not verify the names and addresses of check payees. (Risk Assessments and Internal Control) .B. Disclosing to those charged with governance of the client the nature of service provided and extent of fees charged. - ANSWER-Which of the following is an example of engagement-specific safeguards in the work environment? A. Advising partners and professional staff of those assurance clients and related entities from which they must be independent. B. Disclosing to those charged with governance of the client the nature of service provided and extent of fees charged. C. A disciplinary mechanism to promote compliance with the firm’s policies and procedures. D. Published policies and procedures to encourage and empower staff to communicate to senior levels within the firm any issue relating to compliance with the fundamental principles that concerns them. (Auditing Theory: The CPA’S Professional Responsibility) .B. Examine shipping documents for matching sales invoices. - ANSWER-Which of the following tests of controls most likely would help assure an auditor that goods shipped are properly billed? A. Scan the sales journal for sequential and unusual entries. B. Examine shipping documents for matching sales invoices. C. Compare the accounts receivable ledger to daily sales summaries. D. Inspect unused sales invoices for consecutive prenumbering. (Risk Assessments and Internal Control) .B. Process used to prepare significant accounting estimates. - ANSWER-An auditor should obtain sufficient knowledge of an entity’s information system, including the related business processes relevant to financial reporting, to understand the (Risk Assessments and Internal Control) .B. Professional accountants who author books or articles on professional subjects may state their name and professional qualifications; give the name of their organization; and give any information as to the services that the firm provides. - ANSWER-Which of the following statements concerning publicity is incorrect? A. Booklets and other documents bearing the name of a professional accountant and giving technical information for the assistance of staff or clients may be issued to such persons, other professional accountants or other interested parties. B. Professional accountants who author books or articles on professional subjects may state their name and professional qualifications; give the name of their organization; and give any information as to the services that the firm provides. C. Appropriate newspapers or magazines may be used to inform the public of the establishment of a new practice, of changes in the composition of a partnership of professional accountants in public practice, or of any alteration in the address of a practice. D. A professional accountant may develop and maintain a website in the Internet in such suitable length and style which may also include announcements, press releases, publications and such other necessary and factual information. (Auditing Theory: The CPA’S Professional Responsibility) .B. Projecting an error rate by comparing the results of a statistical sample with the actual population characteristics. - ANSWER-Which of the following would not be considered an analytical procedure? A. Estimating payroll expense by multiplying the number of employees by the average hourly wage rate and the total hours worked. B. Projecting an error rate by comparing the results of a statistical sample with the actual population characteristics. C. Computing accounts receivable turnover by dividing credit sales by the average net receivables. D. Developing the expected sales based on the sales trend of the prior five years. (The Financial Statement Audit: Client Acceptance and Planning) .B. The entity’s annualized interim financial statements. - ANSWER-Which of the following would an auditor most likely use in determining the auditor’s preliminary judgment about materiality? A. The anticipated sample size of the planned substantive tests. B. The entity’s annualized interim financial statements. C. The results of the internal control questionnaire. D. The contents of the management representation letter. (The Financial Statement Audit: Client Acceptance and Planning) .B. The internal auditors may determine the extent to which audit procedures should be employed by the external auditor. - ANSWER-Which of the following is an INCORRECT statement concerning the relationship of the internal auditor and the scope of the external audit of an entity’s financial statements? A. The external auditor is not required to give consideration to the internal audit function beyond obtaining a sufficient understanding to identify and assess the risks of material misstatement of the financial statements and to design and perform further audit procedures. B. The internal auditors may determine the extent to which audit procedures should be employed by the external auditor. C. Under certain circumstances, the internal auditors may assist the external auditor in performing substantive tests and tests of controls. D. The nature, timing, and extent of the external auditor’s substantive tests may be affected by the work of internal auditors. (The Financial Statement Audit: Client Acceptance and Planning) .B. The outcome or result of a transaction or the result of the work performed. - ANSWER-According to Section 240 of the Code of Ethics, fees charged for assurance engagements should be a fair reflection of the value of the work involved. In determining professional fees, the following should be taken into account, except A. The time necessarily occupied by each person engaged on the work. B. The outcome or result of a transaction or the result of the work performed. C. The skill and knowledge required for the type of work involved. D. The level of training and experience of the persons necessarily engaged on the work. (Auditing Theory: The CPA’S Professional Responsibility) .B. Yes Yes Yes - ANSWER-The nature, timing, and extent of an audit firm’s quality control policies and procedures depend on The Nature Appropriate The CPA of the CPA Cost-Benefit Firm’s Size Firm’s Practice Considerations A. Yes Yes No B. Yes Yes Yes C. No No No D. Yes No Yes (Auditing Theory: The CPA’S Professional Responsibility) .Both I and II - ANSWER-After accepting an assurance engagement, a practitioner is not allowed to change the engagement to a non-assurance engagement, or from a reasonable assurance engagement to a limited assurance engagement, except when there is reasonable justification for the change. Which of the following ordinarily will justify a request for a change in the engagement? I. A change in circumstances that affects the intended users’ requirements. II. A misunderstanding concerning the nature of the engagement. AUE2601 Assignment 2B (Auditing Theory: Assurance Services) .Both I and II - ANSWER-The auditor is required to comply with all PSAs relevant to the audit of an entity’s financial statements. A PSA is relevant to the audit when I. The PSA is in effect. II. The circumstances addressed by the PSA exist. (Auditing Theory: Auditing and Related Services) .Both independence of mind and independence in appearance - ANSWER-In the case of audit engagements, it is in the public interest and, therefore, required by the Code that members of audit teams, firms and network firms shall be independent of audit clients. Independence requires (Auditing Theory: The CPA’S Professional Responsibility) .C. A distinguishing mark of a profession is its acceptance of responsibility to the public. - ANSWER-Which of the following statements best explains why the CPA profession has found it essential to establish ethical standards and means for ensuring their observance? A. Vigorous enforcement of an established code of ethics is the best way to prevent unscrupulous acts. B. Ethical standards that emphasize excellence in performance over material rewards establish a reputation for competence and character. C. A distinguishing mark of a profession is its acceptance of responsibility to the public. D. A requirement for a profession is to establish ethical standards that stress primarily a responsibility to clients and colleagues. (Auditing Theory: The CPA’S Professional Responsibility) .C. Accounting for unused prenumbered purchase orders and receiving reports. - ANSWER-Which of the following controls is not usually performed in the accounts payable department? A. Indicating on th