Philippine School of Business Administration

826 R. Papa St. Sampaloc Manila

Auditing Theory AT – Quizzer 20

Prof. Francis H. Villamin
==============================================================================

“NON ASSURANCE SERVICES”

1. Mark, CPA, has significant indirect financial interest on Apollo Corporation. Apollo Corporation
engaged Mark to apply agreed-upon procedures on accounts receivable and thereafter submit a
Report of Factual Findings to Discount Finance. According to Philippine Standards on Related
Services that applies to this engagement, Mark:
a. should decline the engagement because of his lack of independence.
b. should convince Apollo Corporation to change the engagement to compilation due to his lack of
independence.
c. can accept the engagement, issue the Report of Factual Finding and state in the report his lack
of independence.
d. perform agreed-upon procedures and withhold the findings due to his lack of independence.

2. According to Philippine Standard on Auditing, the procedures employed in doing agreed-upon

procedures are:
a. designed to enable the accountant to express a limited assurance.
b. designed to enable the accountant to express a negative assurance.
c. designed to enable the accountant to provide identified user(s) findings.
d. less extensive than compilation procedures but more extensive than review procedures.

3. The objective of an agreed-upon procedures engagement is for the auditor to:

a. carry out procedures of an audit nature to which the auditor and the entity and any appropriate
third parties have agreed and to report on factual findings.
b. carry out procedures of a review nature to which the auditor and the entity and any appropriate
third parties have agreed and to report on factual findings.
c. carry out procedures of a review nature and to express limited assurance based on those
agreed procedures.
d. carry out procedures of an audit nature and is express limited assurance.

4. Which of the following ethical principles governing the auditor’s professional responsibilities for
agreed-upon procedures engagement is not required of auditors?
a. Technical standards
b. Confidentiality
c. Integrity
d. Independence

5. Which of the following is incorrect about agreed-upon procedures engagement?

a. An engagement to perform agreed-upon procedures may involve the auditor in performing
certain procedures concerning individual items of financial data.
b. Users of the agreed-upon procedures report assess for themselves the procedures and
findings reported by the auditor and draw their conclusion from the auditor’s work.
c. The auditor should be independent of the financial data or financial statements where agreed
procedures have to be applied.
d. The report is restricted to those parties that have agreed to the procedures to be performed.

6. Matters to be agreed in an agreed-upon procedures engagement include the following, except:

a. stated purpose of the engagement
b. limitations on distribution of the report of factual findings
c. anticipated form of the report and the level of assurance to be provided
d. nature, timing and extent of the specific procedures to be applied

7. The following procedures may be performed by CPAs in an engagement.

I. Consideration of internal control
II. Observation
III. Inquiry and Analysis
IV. Inspection
V. Confirmation
VI. Obtaining management representation letter
AT Quizzer 20 “Non Assurance Services” Page 2

Which of the foregoing may be performed in an agreed-upon procedures engagement?

a. II and VI only
b. I, II and VI only
c. II, III, IV and V only
d. II, III, IV and VI only

8. The report on an agreed-upon procedures engagement needs to describe the purpose and the
procedures that have been agreed upon in sufficient details. The report should appropriately
include the “title”
a. Report of Agreed-Upon Procedures
b. Report of Factual Findings
c. Report of Agreed Procedures and Finding
d. CPA’s Report of Agreed-Upon Procedures

9. Which of the following report is of limited distribution?

a. Review Report
b. Compilation Report
c. Report of Factual Findings
d. Audit Report

10. A CPA’s report on applying agreed-upon procedures to prospective financial statements always
include a(n):
a. disclaimer of opinion
b. adverse opinion
c. restrictions on its distribution
d. unqualified opinion

11. Distribution of a report is always restricted when:

a. negative assurance is given
b. there is a positive expression of opinion
c. agreed-upon procedures have been performed
d. a review has been performed

12. Which of the following would not be appropriate to a report on an engagement to apply agreed-
upon procedures to specified financial statement items?
a. Indicate the intended distribution of the report
b. Provide an opinion on the specified elements, accounts or items
c. Enumerate the procedures performed
d. State that the report relates to the elements, accounts, or items specified

13. Which of the following is not appropriate for the accountant’s report on the results of applying
agreed-upon procedures to prospective financial statements?
a. State the accountant’s opinion on the results of applying the agreed-upon procedures.
b. Indicate the prospective financial statements reported on.
c. Indicate that the use of the report is limited to the specified user(s).
d. Indicate that the prospective results may not be achieved.

14. Which statement is incorrect regarding agreed-upon procedures?

a. Users of the report assess for themselves the procedures and findings reported by the auditor
and draw their own conclusions from the auditor’s work.
b. The report is restricted to those parties that have agreed to the procedures to be performed
since others, unaware of the reasons for the procedures, may misinterpret the results.
c. The auditor should conduct an agreed-upon procedures engagement in accordance with PSA
and the terms of the engagement.
d. Where the auditor is not independent, a statement to that effect need not be made in the report
of factual findings.

15. The report on an agreed-upon procedures engagement needs to describe the purpose and the
agreed-upon procedures of the engagement in sufficient detail to enable the reader to understand
the nature and the extent of the work performed. The report of factual findings should not contain:
a. addressee (ordinarily the client who engaged the auditor to perform the agreed-upon
procedures).
b. identification of the purpose for which the agreed-upon procedures were performed.
c. a description of the auditor’s factual findings including sufficient details of errors and exceptions
found.
d. a statement that the procedures performed constitutes an audit, and, as such, an opinion is
expressed.
AT Quizzer 20 “Non Assurance Services” Page 3

16. A report for an agreed upon procedures ordinarily includes:

a. Findings – Yes; Negative Assurance – Yes
b. Findings – Yes; Negative Assurance – No
c. Findings – No; Negative Assurance – Yes
d. Findings – No; Negative Assurance – No

17. Clients sometimes engage auditors to perform a specified set of procedures concerning an element
of a financial statement. This type of engagement is called
a. individual Account engagement
b. agreed-upon Procedures engagement
c. assurance service
d. compliance audit

18. A CPA who is not independent may issue a

a. compilation report
b. compilation report and review report
c. comfort letter
d. report of any type

19. Compilation is an example of which one of the following types of services?

a. Auditing
b. Review
c. Consulting
d. Accounting

20. Which statement is incorrect regarding compilation engagement?

a. This ordinarily entails reducing detailed data to a manageable and understandable form without
a requirement to test the assertions underlying that information.
b. The procedures employed are designed to enable the accountant to express limited assurance
on the financial information.
c. Users of the compiled financial information derive some benefit as a result of the accountant’s
involvement because the service has been performed with professional competence and due
care.
d. In all circumstances when an accountant’s name is associated with financial information
compiled by the accountant, the accountant should issue a report.

21. The objective of a compilation engagement

a. Is to enable the auditor to express an opinion whether the financial statements are prepared in
all material respects, in accordance with an identified financial reporting framework.
b. Is to enable the auditor to state whether, on the basis of procedures which do not provide all
the evidence that would be required in an audit, anything that has come to the auditor’s
attention that causes the auditor to believe that the financial statements are not prepared in all
material respects, in accordance with an identified financial reporting framework.
c. Is to carry out those procedures of an audit nature to which the auditor and the entity and any
appropriate third parties have agreed and to report on factual findings.
d. Is to use accounting expertise as opposed to auditing expertise to collect, classify and
summarize financial information.

22. When associated with financial statements of a nonpublic entity, the procedures and report issued
differ based on whether an auditor has performed a compilation, review or an audit. Which of the
following statements normally relate to compilation?
a. Includes inquiry of client’s legal counsel.
b. The auditor who lacks independence may perform this service.
c. Includes obtaining an understanding of internal control.
d. Includes assessing control risk.

23. Which of the following procedures does an auditor in a compilation engagement of a nonpublic
entity ordinarily perform?
a. Reading the financial statements to consider whether they are free of obvious mistakes in the
application of accounting principles.
b. Obtaining written representations from management indicating that the compiled financial
statements will not be used to obtain credit.
c. Making inquiries of management concerning actions taken at meetings of the stockholders and
the board of directors.
d. Applying analytical procedures designed to corroborate management’s assertions that are
embodied in the financial statement components.
AT Quizzer 20 “Non Assurance Services” Page 4

24. An accountant’s compilation report should be dated as of the date of

a. Completion of field work
b. Completion of compilation
c. Transmittal of the compilation report
d. The latest subsequent event referred to in the notes to financial statements

25. Which of the following evidence gathering technique is a CPA most likely to utilize when performing
a compilation engagement?
a. Confirmation
b. Computation
c. Analysis
d. Observation

26. Roger, a CPA, has agreed to a compilation engagement for a client and is preparing the financial
statements based on the client’s information. If Roger feels that the financial statements will be
misleading based on information provided by the client, how should he proceed?
a. Roger should not be concerned about whether the financial statements are misleading, since
this is only a compilation engagement.
b. Roger should correct the financial statements even if the client does not agree to the necessary
changes.
c. Roger should issue an adverse opinion.
d. Roger should resign from the engagement.

27. A CPA has been engaged to compile financial statements for a nonpublic client. Which of the
following statements best describes this engagement?
a. The CPA must perform the basic accepted auditing procedures necessary to determine that the
statements are in conformity with GAAP.
b. The CPA is performing an accounting service rather than an examination of financial
statements.
c. The financial statements are representations of both management and the CPA.
d. The CPA may prepare the statements from the books but may not assist in adjusting and
closing the books.

28. Which of the following provides a “notice to reader”?

a. A review engagement
b. A compilation engagement
c. Any assurance engagement
d. An external audit

29. Which of the following is incorrect about agreed-upon procedures engagement?

a. An engagement to perform agreed-upon procedures may involve the auditor in performing
certain procedures concerning individual items of financial data.
b. Users of the agreed-upon procedures report assess for themselves the procedures and findings
reported by the auditor and draw their conclusion from the auditor’s work.
c. The auditor should be independent of the financial data or financial statements where agreed
procedures have to be applied.
d. The report is restricted to those parties that have agreed to the procedures to be performed.

30. Matters to be agreed in an agreed-upon procedures engagement include the following, except:
a. Stated purpose of the engagement
b. Limitations on distribution of the report of factual findings
c. Anticipated form of the report and the level of assurance to be provided
d. Nature, timing and extent of the specific procedures to be applied

31. A CPA’s report on agreed-upon procedures related to management’s assertion about an entity’s
compliance with specific requirements should contain:
a. A statement of limitations on the use of the report.
b. An opinion about whether management’s assertion is fairly stated.
c. Negative assurance that control risk has not been assessed.
d. An acknowledgement of responsibility for the sufficiency of the procedures.
AT Quizzer 20 “Non Assurance Services” Page 5

32. Compilation services are intended to enable a CPA firm to compete with
a. Management advisory service firms
b. Tax preparation businesses
c. Computer service businesses
d. Bookkeeping firms

33. Which of the following is the format of compilation that would not be acceptable?
a. A compilation with full disclosures in accordance with generally accepted accounting principles.
b. A compilation that omits substantially all disclosures, the report indicates that they are missing,
and their absence is not an intent to mislead the users.
c. A compilation with a separate paragraph warning readers that the CPA is not responsible for
exercising due care when performing this type of engagement.
d. A compilation with a separate paragraph that admits that the CPA is not independent with
respect to this client.

34. An accountant who is not independent of the client is precluded from issuing a:
a. Report on management advisory services.
b. Compilation report on historical financial statements.
c. Compilation reports on prospective financial statements.
d. Special reports on compliance with contractual agreements.

35. According to PSRS 4410, the following procedures are required whenever a CPA performs a
compilation engagement (select the exception):
a. Agreement with the client regarding the terms of engagement.
b. Planning for the engagement.
c. Use of audit expertise.
d. Issuance of a report.

36. Troy, CPA, is performing a compilation service for Abundant Corporation. In the course of
performing compilation procedures, Troy became aware that some of the information provided by
Abundant’s management are incomplete. Client management refuses to comply with Troy’s
requests for additional information. In this case, Troy should:
a. Issue a qualified opinion on the financial statements compiled.
b. Issue an adverse opinion on the financial statements compiled.
c. Issue a disclaimer of opinion on the financial statements compiled.
d. Withdraw from the engagement.

37. On each page of the financial information or on front of the complete set of financial statements, the
financial information compiled by the accountant should contain a reference such as:
a. “Compiled without audit or review”
b. “Unaudited”
c. “Refer to the compilation report”
d. “Any of these”

38. An accountant may accept an engagement to apply agreed-upon procedures to prospective

financial statements provided that
a. Distribution of the report is to be restricted to the specified users involved.
b. The prospective financial statements are also examined.
c. Responsibility for the adequacy of the procedures performed is taken by the accountant.
d. Negative assurance is expressed on the prospective financial statements taken as a whole.

39. The following statements pertain to agreed-upon procedures. Which one is incorrect?
a. Users of the report assess for themselves the procedures and findings reported by the auditor
and draw their own conclusions from the auditor’s work.
b. The auditor should conduct an agreed-upon procedures engagement in accordance with PSRS
4400 and the terms of the engagement.
c. The report is restricted to those parties that have agreed to the procedures to be performed
since others, unaware of the reasons for the procedures, may misinterpret the results.
d. Independence is required when performing an agreed-upon procedures engagement.
AT Quizzer 20 “Non Assurance Services” Page 6

40. The following are elements of a report on factual findings of procedures, except:
a. Identification of specific financial or non-financial information to which the agreed-upon
procedures have been applied.
b. A listing of the specific procedures performed.
c. A description of the auditor’s factual findings including sufficient details of errors and exceptions
found.
d. A statement (when applicable) that the audit opinion expressed relates only to the elements,
accounts, items or financial and non-financial information, specified and that it does not extend
to the entity’s FS taken as a whole.

*******************************