AAP 2017 Updated Answer Key
Short Description
Salu...
Description
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual AS!E" #E$ % &'AP(E" 1 : )undamentals o* Assurance Ser+ices 11 1 FALSE Assurance refers to the practitioner’s satisfaction... 2 TRUE 3 FALSE 4 TRUE 5 TRUE 6 FAL FALSE The The res respo pons nsib ibe e part part! ! an" an" the the int inten en"e "e" " use userr nee nee" " not not be fro fro# # sep separ arat ate e or$ or$an ani% i%a ation tions. s. & TRUE The ter# practitioner is broa"er in in scope co#pare" to the ter# au"itor. ' FALSE A pr professiona ac accountant sh sha not a$ree a$ree to perfor# an assurance en$a$e#ent (hich the! are not co#petent to carr! out. ) TRUE 1* FAL FALSE The The int inten en"e "e" " use userr #a! #a! be the the one one (h (ho en$ en$a a$es $es the the prof profes essi sion ona a accou ccount ntan ant. t. 11 FALS FALSE E See See not note e in in nu# nu#be berr 1*. 1*. The The int inten en"e "e" " use userr is is the the pers person on or cas casss of of per perso sons ns for for (ho (ho# # the the practitioner prepares the report. 12 TRUE 13 TRUE 14 TRUE 15 FALSE The criteria in an FS au"it is +FRS or ,AA+. 16 FALSE Appropriateness re refers to to -uait! (hie sufficienc! refers to -uantit! ... ... 1& FALSE E/i"ence obtaine" "irect! t! b! the practi ctitione oner is #ore reiabe... reiabe... 1' FALSE The practitioner e0presses a concusion that pro/i"es a e/e of assurance... 1) FAL FALSE This This sta state# te#ent ent "es "escr crib ibes es a "ir "ire ect rep reporti ortin$ n$ assu assura ranc nce e en$ en$a a$e#e $e#ent nt.. 2* TRUE 21 FALSE Absoute assurance is $enera! not attainabe... attainabe... 22 FALSE +As #a! perfor# nonassurance en$a$e#ents. 23 FALS FALSE E A$re A$ree" e"u upo pon n proc proce" e"ur ures es ac ac a (rit (ritte ten n assu assura ranc nce e repo report rt or conc concu usi sion on.. t is a non non assurance en$a$e#ent. 24 FAL FALSE o#p o#pi ian ance ce au"i au"its ts are are cass assif ifie ie" " as assu assura ranc nce e en$ en$a$e# a$e#e ents. nts. 25 TRUE 12 1 2 3 4 5 6 &
A A
' ) 1* 11 12 13 14 15 16 1& 1' 1) 2*
A A A A
En$a$e#ent process is an ee#ent accor"in$ to the superse"e" +SA 1**.
Sub7ect #atte tter #a #a! in incu" u"e fi financia ia or or no nonfin financia in infor#ation ph ph!sica ca ch character teristics ics s!ste#s an" processes an" beha/ior. Sufficienc! is an attribute of au"it e/i"ence. Efficienc! an" effecti/eness #a! in/o/e sub7ecti/e factors.
o#piations are nonassurance en$a$e#ents. hoice refers to usiness Ris Assess#ent ser/ice.
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Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual AS!E" #E$ % &'AP(E" 2 : Audits o* )inancial Statements : An Introduction 21 1 TRUE 2 FALSE ...co#pie" (ith $enera! accepte" accountin$ principes or or +FRS 3 FALSE This refers to operationa au"its . 4 FAL FALSE +re +repara parati tion on of fin financi ancia a stat state# e#en ents ts is the the resp respon onsi sibi biit! it! of #ana$ ana$e e#e #ent nt.. 5 TRUE 6 FAL FALSE An au"i au"itt ai" ai"ss in in the the co# co##uni #unica cati tion on of eco econo no#i #icc "a "ata becau ecause se it pr pro/i" o/i"es es rea reasona sonab be e assurance that the financia state#ents are fair! state". & FALSE The fi financia sta statte#ents re#ain #a #ana$e#ent’s re responsibiit!. t!. ' TRUE ) TRUE 1* TRUE 11 FALS FALSE E The The #os #ostt cos cost tbe bene nefi fici cia a opti option on to re"u re"uce ce info infor# r#at atio ion n ris ris is is to to ha/ ha/e e the the fina financ ncia ia state#ents au"ite". 12 FAL FALSE An au"i au"itt "oe "oess not not pro/ pro/i" i"e e ass assur ura ance nce re$ re$a ar"in r"in$ $ the the pre pre/ent /entio ion n of of fra frau" u".. 13 TRUE 14 FALS FALSE E The The a au" u"it itor or of the the pas pastt foc focus use" e" on "ete "etect ctin in$ $ fra frau" u" (hi (hie e the the a au" u"it itor or of to"a to"a! ! foc focus use" e" on e0pressin$ an opinion on the fairness of financia state#ents. 15 TRUE 16 FALSE The rues an" re$uations are set b! a hi$her authorit! 8such 8such as e$isation9. 1& TRUE TRUE :ote :ote ho(e ho(e/e /er r that that e0te e0tern rna a au"i au"iti tin$ n$ #a #a! ! as aso o ref refer er to oper operat atio iona na au" au"it itss an" an" co#p co#pi ian ance ce au"its that are perfor#e" b! in"epen"ent au"itors. 1' TRUE 1) FALS FALSE E nte ntern rna a au"i au"its ts are are int inten en"e "e" " to to ser ser/e /e the the nee nee"s "s of #a #ana na$e $e#e #ent nt not not to ai" ai" the the e0te e0tern rna a au"itor. 2* FALSE The #a #a7or beneficia iciarr! of of in interna au au"its is #a #ana$e#ent. 21 FALSE 22 FALSE Au"itin$ re-uires that "ata shou" be /erifiabe. 23 TRUE 24 TRUE 25 FALS FALSE E The The #ai #ain n" "if iffe fere renc nce e bet bet(e (een en au"i au"ito tors rs an" an" a acc ccou ount ntan ants ts is is the the abi abiit it! ! to to $at $athe herr an" an" e/a e/aua uate te e/i"ence.
22 1 2 3 4 5 6 & ' ) 1* 11 12
13 14 15
A A
e$ree of correspon"ence bet(een assertions an" estabishe" criteria .
This refers to the co#peteness assertion
hoic oice A is (ron$ because in"epen"ent au"itin$ in$ is not a branch of acco ccountin$. hoice ice refers to accountin$. hoice is incorrect because au"itin$ au"itin$ cannot assure the accurac! of financia state#ents. Line fu functi ctions ar are p po ositio tions th that e0 e0ercise " "e ecision#a #ain$ po(ers or or re responsibiitie ties.
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Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 16 1& 1' 1) 2* 21 22 23
A A
24 25 26
2& 2' 2) 3*
AS!E" #E$ % -1 1 FALSE 2 TRUE 3 FALSE 4 FAL FALSE 5 FALSE 6 FAL FALSE &
FALSE
' ) 1* 11 12
TRUE FALS FALSE E FALSE TRUE FALS FALSE E
13
FALS FALSE E
14 15 16 1& 1' 1) 2*
FAL FALSE TRUE FALSE TRUE FALSE FALSE FALS FALSE E
21
FALS FALSE E
22
FALSE
nfor# or#atio tion ri ris is the ie ieihoo" that infor#ation pres resente" te" is fase or #is isea"in$ in$. The be best re reason for for au"its is is th the co confict of of in inter terest be bet(e t(een pr preparers an an" us users of fi financia state#ents. hoic oice re refers to the ob7ecti/ cti/e e of a financia stat tate#ent au au"it not a reason for au au"its. Stat tate#ent 1 is fa fase b be ecau cause + +As ha ha/e a ass th their pr pri#a i#ar! re responsibii iit! th the p pe erfor#ance of the au"it function on pubishe" financia stat e#ents of pubic! tra"e" corporations.
So#e o#e e/i"ence supportin tin$ peso representati tation onss in the financia stat tate#ents #ust be obtaine" b! ora or (ritten representation of #ana$e#ent .
&'AP(E" - : (.e Pro*essional Practice o* Accounting
There ar are 1* 1* si si$natories a a #e #e#bers of of AS ASEA: of of th the ;R ;RA. The The +A +A teach eachin in$ $ is pract ractic icin in$ $ the the prof profes essi sion on in the the e"uc e"ucat atio ion n sect sector or.. ...has pai"up capita of at east F4A.
:aturai%e" Fiipino citi%ens #a! tae the +A oar" E0a#s.
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Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual AS!E" #E$ % &'AP(E" / : Setting p and Maintaining An Accounting Practice /1 1 2 3 4 5
TRUE FALSE FAL FALSE FALSE TRUE RUE
6 & ' ) 1* 11 12 13 14 15 16 1&
TRUE FALSE FALSE FALSE FALSE FALSE FALSE TRUE FAL FALSE FALSE FALS FALSE E FALS FALSE E
1' 1) 2*
TRUE FALSE TRUE
/2 1 2 3 4 5 6 & ' ) 1* 11 12 13 14 15 16 1& 1' 1) 2*
A A
At e east '* '* un units b! b! 2* 2*1& in increasin$ $r $ra"ua! to to 12 12* un units The The corp corpor orat ate e for# for# is not not a ao(e o(e" " for the the prac practi tice ce of pubi ubicc acco accoun unta tanc nc!. !. This #etho" of biin$ refers to per "ie# basis. :ote :ote ho(e ho(e/ /er tha that thi thiss is is not not the the # #a ain "ete "eter# r#in inan antt of of the the a# a#ou ount nt of pro profe fess ssio iona na fee fees. s. See See reate" -uestion nu#ber 6. This is a contin$ent fee arran$e#ent. :ot an!#ore re-uire" per >A Resoution :o. 5) This refers to soicitation. ...sha be /ai" for a perio" of three !ears ... ... @3* "a!s fro# "ate of such "eath @ao(e" sub7ect to certain con"itions @the @there re is no such such con con"iti "ition on for for re/o re/oca cati tion on of partn artne er’s r’s ice icens nse e @+R @+R + +E o ounci ca can "e "ee$ate the the (o (or to to + ++A + +E o ounci @not @not i##e i##e"i "iat ate e!. !. Thre Three e !ea !ears rs of #e #ean anin in$f $fu u e0pe e0peri rien ence ce sha sha be earn earne" e" firs firstt b! b! the the +A +A @it’ @it’ss the the cert certif ific icat ate e of of re$i re$ist stra rati tion on that that is is $ran $rante te" " on! on! onc once. e. er erti tifi fica cate te of of Acc Accre re"i "ita tati tion on is is /ai" for three !ears. @first na#e is ao(e" These are aternati/e #etho"s of earnin$ + u un nits.
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Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual AS!E" #E$ % &'AP(E" : uality &ontrols 1 1 2 3 4 5 6 &
TRUE FALSE FALSE FALSE TRUE TRUE FAL FALSE
' ) 1* 11 12 13 14 15
TRUE FALSE FALSE FALSE FALSE TRUE FALS FALSE E FALS FALSE E
2 1 2 3 4 5 6 & ' ) 1*
A
11 12 13 14
A
15 16 1& 1' 1) 2* 21 22 23 24 25
A A A
The fir#’s partners assu#es assu#es uti#ate responsibiit!... At east annua! A fa#iiarit! threat occurs... S#aer fir#s #a! e#po! ess for#a... for#a... ons onsu uta tati tion on is a nor nor#a #a par partt of of a +A’ +A’ss en$ en$a$ a$e# e#e ents nts an" appi ppies es in par parti ticu cua arr to to contentious or "ifficut #atters. An en en$a$e#ent -u -uait it! co contro tro re re/ie( is is re re-uire" fo for a a au au"its of iste" entities. The en$a$e#ent partner #a! consut (ith (ith the en$a$e#ent -uait! contro re/ie(er... ...incu"e at east one en$a$e#ent for for each en$a$e#ent partner o/er an inspection c !ce. Au"it (orin$ papers are the propert! of the au"itor. +SA +SA 22* 22* fo foo( o(ss the the cas cassi sifi fica cati tion on of ee# ee#en ents ts of -ua -uait it! ! con contr tro o #e #ent ntio ione ne" " in in +S +S :o. :o. 1 +SA +SA 22* 22* a app ppi ies es to au"i au"its ts of of his histo tori rica ca fin finan anci cia a info infor# r#at atio ion n (hi (hie e +S +S :o. :o. 1 app appie iess to to assurance ser/ices in $enera.
En$a$e#ent -uait! contro re/ie( appies to en$a$e#ents prior to issuance of the report (hie inspections app! to co#pete" en$a$e#ents. en$a$e#ents. ;onitorin$ is the responsibiit! of the ea"ers of the fir#.
Rot Rotation tion of se senior personn onne 8i 8i.e. pa partn rtner9 is is "o "one e/ e/er! fifi/e !e !ears as as #a #an"ate" b! b! the o"e of Ethics. The o"e of Ethics "oes not re-uire continuance of the en$a$e#ent. ...coachin$ b! #ore e0perience" e0perience" staff. hoice ice is incorr orrect because super/ision incu" u"es consi"erin$ the cap capabiities an" co#petence of in"i/i"ua #e#bers of the assurance tea# . hoice is incorrect because super/ision incu"es a""ressin$ si$nificant issues... hoice is incorrect because super/ision incu"es i"entif!in$ #atters for consutation or consi"eration b! #ore e0perience" en$a$e#ent tea# #e#bers.
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Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual AS!E" #E$ % &'AP(E" 3 : (.e &ode o* Et.ics Et.ics *or &PAs in t.e P.ilippines 31 1 2 3 4 5 6 & ' ) 1* 11 12 13 14 15 16 1&
FALSE TRUE FALSE FALSE TRUE TRUE FALSE TRUE FALSE FALSE TRUE FALS FALSE E TRUE FAL FALSE FALSE FALS FALSE E FALS FALSE E
1' 1) 2*
TRUE FALSE FALS FALSE E
32 1 2 3 4 5 6 & ' ) 1* 11 12
A A A
13 14 15 16 1& 1' 1) 2* 21
A
22 23
A
The au"itor shou" as the cient to correct the error. A +A #a! not /ountari!... /ountari!...
A fa#iiarit! threat ... ... A professiona accountant in pubic practice (i or"inari! nee" ... ... A pr professiona ac accountant in in p pu ubic pr practice #a #a! not rea"i!... rea"i!... :et( :et(or or fir fir#s #s are are as aso o rere-ui uire re" " to to be be in" in"ep epen en"e "ent nt of a fin finan anci cia a stat state# e#en entt au" au"it it cie cient nt.. >n! >n! e$i e$iti ti# #ate ate ai#s i#s #ust #ust be furt furthe here re" " an" supp suppor orte te" " b! the the +A. +A. +As ca cannot pr pro/i"e as assurance of of in infaibiit!. The The firs firstt re#e re#e"! "! is is to app app! ! the the po poic icie iess of the the or$ or$an ani% i%at atio ion n on on reso resou uti tion on of of eth ethic ica a con conf fic ict. t. >b7e >b7ect cti/ i/it it! ! is is "if "iffe fere rent nt fro# fro# stub stubbo born rnne ness ss.. >b7e >b7ect cti/ i/it it! ! si# si#p p! ! ref refer erss to to bei bein$ n$ neut neutra ra or or unbiase". See co##ents in nu#ber 14 ;a! ;a! be be a ao( o(e" e" on! on! if the the nec neces essa sar! r! safe safe$u $uar ar"s "s are are in in p pa ace ce 8to 8to re"u re"uce ce or ei# ei#in inat ate e thr threa eats ts to co#piance (ith fun"a#enta principes9.
A secon" on" re#e"! (ou (ou" be to en$a$e the ser/ices of e0perts. n the absence of re#e"ies the +A has no choice but to "ecine the en$a$e#ent.
ontin$ent fe fees re resut to si si$nificant th threats to co co#piance (i (ith fun"a#enta pr principes (h (hen ao(e" for assurance en$a$e#ents. :oteB Assu#e tha that the the +As ha/e not estab tabishe" the neces cessar! safe$uar"s to re"uce threats to co#piance (ith fun"a#enta principes.
&
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 24 25 26 2& 2' 2) 3* 31 32 33 34 35
A A A
Cith"ra(a of fees fro# cient’s #onies re-uire cient appro/a. There #a #a! be be ti ti#es (h (hen th the ai ai#s of of th the pr profession an an" th the e# e#po!er ar are in in co confict.
ear $ui"eines for #e#bers of the au"it personne on issues of securit! an" confi"entiait!. orrectionB The choices shou" be nu#bers not etters.
&'AP(E" 7 : (.e )inancial Statements Audit Process 71 : (rue or )alse 1
FAL FALSE
2 3
TRUE FALS FALSE E
4 5 6 & ' ) 1*
FALS FALSE E TRUE TRUE TRUE TRUE TRUE FALS FALSE E
11 12
TRUE FALS FALSE E
13 14 15
TRUE TRUE TRUE
+rof +rofes essi sion ona a co#p co#pet eten ence ce an" an" "ue "ue care care is obt obtaine aine" " thr throu ou$h $h a co# co#bi bina nati tion on of e"uc e"ucat atio ion n an" e0perience. t cannot be obtaine" throu$h e"ucation aone. ;ate ;ateri ria ait it! ! is is one one of the the #a7 #a7or or fact factor orss con consi si"e "ere re" " in in "ete "eter# r#in inin in$ $ tra trans nsac acti tion onss tha thatt (ou (ou" " be re/ie(e". Ris Ris of #a #ate teri ria a #iss #issta tate te#e #ent nt is $rea $reate terr (he (hen n tra trans nsac acti tion onss an" an" baa baanc nces es in/o in/o/ /e" e" esti esti#a #ate tess
The The suc succe cess ssor or au" au"it itor or has has the the "ut! "ut! to init initia iate te co# co##u #uni nica cati tion on (ith (ith the the pre" pre"ec eces esso sorr au" au"it itor or since the atter is boun" b! t he "ut! of confi"entiait!. The The pri pri#a #ar! r! ob7e ob7ect cti/ i/e e of of the the stu" stu"! ! an" an" e/a e/aua uati tion on of inte intern rna a cont contro ro is is to to "et "eter er#i #ine ne the the nature e0tent an" ti#in$ of substanti/e tests to be perfor#e".
72 : Multiple &.oice 1 2 3 4 5 6 & ' ) 1* 11 12 13 14
A A A A A
+ease chan$e choice A to Fairness an" an" reiabiit! of accountin$ "ata.
'
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 15 16 1& 1' 1) 2* 21 22 23 24 25 26 2& 2' 2) 3*
A A A A
hoice ice A refers to E0istence. hoice ice refers to o#peteness. hoic oice refers to ri$hts an" obi$ations.
&'AP(E" 4 : Audit Planning 41 : (rue or )alse 1 2
FALSE FAL FALSE
3 4 5
TRUE TRUE FALS FALSE E
6
FALS FALSE E
& ' ) 1*
FALSE TRUE TRUE FALSE
11 12 13
TRUE TRUE FALS FALSE E
14 15
TRUE TRUE TRUE
16
FALS FALSE E
1&
FALSE
1' 1)
TRUE FALS FALSE E
+annin$ assists in in proper assi$n#ent of (or to assist ants. The The t!p t!pe e of of op opinio inion n to to be be e0p e0pre ress sse" e" is not not a con consi si"e "era rati tion on in "eter eter#i #ini nin$ n$ the the e0t e0te ent of pannin$.
ie ient nt’s ’s cons consen entt sho shou u" " be be obta obtain ine" e" befo before re the the succ succes esso sorr au"i au"ito torr can can #a #ae e in-u in-uir irie iess (ith (ith pre"ecessor au"itor an" accept an en$a$e#ent fro# a ne( cient. The The ob7e ob7ect cti/ i/e e of perf perfor or#i #in$ n$ ana ana!t !tic ica a proc proce" e"ur ures es in pan panni nin$ n$ an au"i au"itt is to obta obtain in an un"erstan"in$ of the transactions an" e/ents that are refecte" in the financia state#ents an" "eter#inin$ unusua ite#s (hich cou" in"icate possibe #isstate#ents in the financia state#ents. Shou" fo focus on on un un"erstan tan"in$ th the c cien ient’s bu business en en/iron#ent
An au"it "oes not nor#a! nor#a! incu"e au"it proce"ures specifica! "esi$ne" to "etect ie$a acts that ha/e an in"irect but #ateria effect on the financia state#ents.
An au"i au"ito torr sho shou u" " "es "esi$ i$n n the the (ri (ritt tten en au"i au"itt pro pro$r $ra# a# so tha thatt the the spec specif ific ic au"i au"itt ob7 ob7ec ecti ti/e /ess of of the en$a$e#ent are achie/e". The The cci ien ent’ t’ss #an #ana$ a$e# e#en entt is is e0p e0pec ecte te" " to to ha/ ha/e e a "eep "eeper er un"e un"ers rsta tan" n"in in$ $ of of the the enti entit! t! an" an" its its en/iron#ent. Ris Ris asse assess ss#e #ent nt pro proce ce"u "ure ress are are au"i au"itt pro proce ce"u "ure ress "es "esi$ i$ne ne" " to to obt obtai ain na an nu un" n"er erst stan an"i "in$ n$ of the entit! an" its en/iron#ent. t is not necessar! necessar! for a tea# #e#bers to ha/e a co#prehensi/e no(e"$e of a aspects of the au"it. Chat is i#portant is that coecti/e! coecti/e! the! possess the nee"e" no(e"$e. Stra Strate te$i $ies es are are ope opera rati tion ona a appr approa oach ches es b! (hic (hich h #an #ana$ a$e# e#en entt int inten en"s "s to achi achie/ e/e e its its
)
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual ob7ecti/es. >b7ecti/es are the o/era pans for the entit!. 2* 21 22 23 24 25
TRUE TRUE TRUE TRUE TRUE TRUE
42 : Multiple &.oice 1 2 3 4 5 6 & ' ) 1* 11 12 13 14 15 16 1& 1' 1) 2* 21
A A A A A
22 23 24 25
A A
26 2& 2' 2) 3*
A
Representation e etters ar are cco onsi"ere" at at au au"it co co#petion. The #ost cost! proce"ure is test of baances.
This is is a area"! a further au au"it pr proce"ure 8p 8perfor#e" af after p pannin$9. :ote that the cient un"er consi"eration is a continuin$ au"it au"it cient. o#pariso ison of actu ctua res resuts /ersu rsus bu"$ete" fi$ures is no(n as /ariance ana!sis.
+SA 55* co/ers reate" parties. Reate" parties are in"icate" b! transactions (hich ha/e abnor#a ter#s of tra"e.
ien ient #a #ana$e#ent is e0pecte" to ha/e a "eeper un un"erstan tan"in$ of of th the en entit!’ t!’s op operatio tions. The au"itor is e0pecte" to obtain an un"erstan"in$ of t he entit! sufficient for hi#=her to perfor# the au"it effecti/e! but not so #uch as to be co#parabe to the e/e o f operationa no(e"$e possesse" b! #ana$e#ent. This proce"ure is a substanti/e test .
;ost business riss "o ha/e financia conse-uences.
1*
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual &'AP(E" 5 : Study and E+aluation o* Internal &ontrol 51 : (rue or )alse 1 2
FAL FALSE FAL FALSE
3 4 5 6 & '
FAL FALSE FALSE TRUE TRUE TRUE FALS FALSE E
) 1* 11 12 13 14
TRUE TRUE FAL FALSE TRUE TRUE TRUE TRUE
15 16 1& 1'
TRUE FALSE TRUE FALS FALSE E
1)
FALS FALSE E
2* 21 22 23 24 25 26 2& 2'
TRUE FAL FALSE TRUE TRUE FALS FALSE E TRUE FALS FALSE E TRUE FALS FALSE E
2) 3*
TRUE FALS FALSE E
>bta >btain in un"e un"ers rsta tan n"in$ "in$ of inter nterna na con contr tro oss re reate ate" " to to fin finan anci cia a sta state te#e #ent ntss au" au"it it nte ntern rna a cont contro ro "o "oes not not a"" a""re ress ss a a bus busin ines esss ris riss s 8on 8on! ! thos those e ris riss s (h (hich ich ha ha/e bee een n i"entifie" b! #ana$e#ent9. t is the the au" au"it itor or’s ’s seco secon" n"ar ar! ! con consi si"e "era rati tion on to pro/ pro/i" i"e e con consstruc tructi ti/e /e su$$ su$$e esti stions ons. S#aer entities use ess for#a #eans #eans an" si#per processes.
Ris Ris asse assess ss#e #ent nt is the the i"e i"ent ntif ific icat atio ion n an" an" ana ana!s !sis is of ree ree/a /ant nt ris risss to to achi achie/ e/e# e#en entt of the the ob7ecti/es for#in$ a basis for "eter#inin$ ho( the riss shou" be #ana$e".
ont ontro ro ac acti/i ti/iti tie es #a #a! as aso o be be app appi ie" e" in a co co#put #puter eri% i%e e" e en/ n/ir iron on#e #en nt.
:ote :ote ho(e ho(e/e /err that that #oni #onito tori rin$ n$ is #a #ain in! ! perf perfor or#e #e" " for for the the purp purpos ose e of "ete "eter# r#in inin in$ $ the the a"e-uac! an" effecti/eness of interna contros. :ot a a contros ar are re ree/ant to to the au"it. >bta >btain inin in$ $ an an un" un"er erst stan an"i "in$ n$ of inte intern rna a cont contro ros s in/o in/o/ /es es e/a e/aua uati tin$ n$ the the "es "esi$ i$n na an" n" i#pe#entation 8or operation9 of contros. A (ea (ean nes esss in inte intern rna a cont contro ro tha thatt cou cou" " ha/e ha/e a #at #ater eria ia eff effec ectt on the the fin finan anci cia a stat state# e#en ents ts is no(n as a #ateria (ea3ness in interna contro . f contr ontro oss are are not not effe effect cti/ i/e e contr ontro o ris ris is ass assesse esse" " at ?,? ?,?..
Furt Furthe herr au"i au"itt proc proce" e"ur ures es inc incu" u"e e test testss of cont contro ros s an" an" subs substa tant nti/ i/e e test testss on on!. !. Test Testss of cont contro ros s are are per perfo for# r#e" e" on! on! (hen (hen the the pre prei i#i #ina nar! r! con contr tro o ris ris asse assess ss#e #ent nt is is ?, ?,?. ?. Asse Assess ss#e #ent nt of cont contro ro ris ris is sub7 sub7ec ectt to to poss possib ibe e re/i re/isi sion on in i$h i$htt of of sub subse se-u -uen entt "e/eop#ents "urin$ the au"it. Lac Lac of se$r se$re$ e$at atio ion n of of "ut "utie iess is is not not an inhe inhere rent nt i#i i#ita tati tion on of inte intern rna a cont contro ro. .
52 : Multiple &.oice 1 2
A
3 4 5
hoice A is incorrect because the au"itor #ust sti obtain an un"erstan"in$ of the accountin$ s!ste# an" contro proce"ures of an entit!. hoice is incorrect because contro proce"ures 8ree/ant to the au"it9 au"it9 aso re-uire the au"itor’s au"itor’s consi"eration. hoice is incorrect because not a contro proce"ures are consi"ere" b! the au"itor 8on! those ree/ant to the au"it9.
The interna contro s!ste# of a co#pan! is broa"er in scope co#pare" to the accountin$
11
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual s!ste# of the entit!. 6 & '
) 1*
A
11 12
13 14 15 16 1& 1' 1) 2* 21 22 23 24 25 26
A A A A
2&
A
2'
2)
3* 31 32 33 34 35 36 3& 3'
A A
3) 4*
A
:ot a contros are ree/ant to the au"itor’ or’s ris is assess#ent 8on! tho those (hich ich #a! affect the entit!’s abiit! to pro"uce fair! state" financia state#ents9. hoice ice A refers to ris assess#ent proce ocess. hoice refers to the the infor# or#atio tion s!ste# te#. hoice refers to contro acti/ities. Spec Specif ific ic autho uthori ri%a %ati tion on is re-u re-uir ire" e" for non nonrou routi tine ne tra transac nsacti tion ons s (hi (hie e $ener enera a autho uthori ri%a %ati tion on is re-uire" for routine transactions. Ris arises fro# chan$e. hoice sho(s stabiit! 8no chan$e9.
See )1 nu#ber 1' The un"erstan"in$ of interna contro is use" to "eter#ine the contro ris3 not inherent ris. See nu#ber 1&.
The basis for for the contro tro ris assess#ent is "ocu#ente" on! (hen the contro ris assess#ent is Less than ?i$h. hoice is in incorrect be because th the pr prei#inar! as assess#ent of of co contro ri ris is is "o "one before tests tests of contros. hoice is incorrect because the prei#inar! assess#ent of contro ris for a financia state#ent assertion is nor#a! ?4,? uness the au"itor is abe to i"entif! contros that are potentia! reiabe. hoice A is incorrect 8see co##ent in nu#ber 269. hoice is incorrect because substanti/e tests cannot be ei#inate" re$ar"ess of the contro ris assess#ent. assess#ent. hoice is incorrect because e/i"ence re$ar"in$ the operation of contros in a prior perio" #a! be consi"ere" "urin$ the current au"it. hoice ice A is in incorrect becau cause te tests of of co contro tros are us use" to to /e /erif! eff effe ecti/e i/eness of of co contro tros not #ana$e#ent assertions. hoice is incorrect because ana!tica ana!tica proce"ures cannot be use" to /ai"ate contro ris an" substanti/e t ests are not use" to /ai"ate contro ris. hoice is incorrect because the assess#ent of contro ris has area"! been perfor#e" 8see -uestion9. Tests of contros (i not be perfor#e" since there are #issin$ contros. hoices an" are substanti/e tests. hoice is e/i"ence obtaine" "urin$ the perfor#ance of substanti/e tests. See co##ent for hoice in nu#ber 2).
As the acceptabe e/e of "etection ris "ecreases the au"itor reies on #ore strin$ent substanti/e testin$.
12
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual &'AP(E" 10 : Su6stanti+e (esting and ocumentation 101 : (rue or )alse 1 2 3 4 5 6 &
FALSE FALS FALSE E TRUE TRUE FALSE FALSE FALSE
' ) 1* 11 12 13
TRUE TRUE TRUE FALSE TRUE FALS FALSE E
14
FALSE
15 16 1&
TRUE FAL FALSE FALS FALSE E
1'
FALS FALSE E
1) 2* 21 22 23 24
TRUE FAL FALSE FALS FALSE E TRUE FALSE FALS FALSE E
25
FALSE
1*2 1 A 2 3 4 5 6 & ' )
1* 11 12 13
Au"i Au"itt e/i e/i"e "enc nce e inc incu u"e "ess on on! ! the the inf infor or#a #ati tion on use" use" b! the the au"i au"ito torr as as a basi basiss for for his his opi opini nion on..
Accountin$ recor"s on their o(n "o not constitute constitute sufficient appropriate au"it e/i"ence. The hi$her the -uait! of au"it e/i"ence the ess e/i"ence e/i"ence is re-uire". >bt >btainin$ in$ au"it e/ e/i"ence reatin$ in$ to a particu icuar as assertion is not a a substitute for obtainin$ au"it e/i"ence re$ar"in$ another assertion.
This state#ent refers to substanti/e tests . n-u n-uir ir! ! is is con consi si"e "ere re" " as as ins insuf uffi fici cien entt un unes esss cor corro robo bora rate te" " b! b! e/i e/i"e "enc nce e fro fro# # oth other er au"i au"itt proce"ures. The hi$her the assess#ent of ris the more reiabe is the au"it e/i"ence sou$ht b! the au"itor fro# substanti/e proce"ures. Subs Substa tant nti/ i/e e test testss are ne/e ne/err ei ei#ina #inate te" " in an au"i au"itt en$a en$a$e $e#e #ent nt.. Au"i Au"itt ob7e ob7ect cti/ i/es es est estab abi ish sh bro broa" a" $en $ener era a $oa $oas s (hi (hie e au"i au"itt proc proce" e"ur ures es spe speci cif! f! the the "et "etai aie e" " (or to be perfor#e". Ana Ana!t !tic ica a proc proce" e"ur ures es are are re-u re-uir ire" e" as a pa pann nnin in$ $ pro proce ce"u "ure re an" an" a co# co#p pet etio ion np pro roce ce"u "ure re but but not as a substanti/e test. Test Testss of of "et "eta ais is ca can be be u usse" for for /er /erif if!i !in$ n$ e0is e0iste tenc nce e an" an" /au /auat atio ion. n. Cor Corin in$ $ pape papers rs "o not not ser ser/e /e as a subs substi titu tute te for for the the cie cient nt’s ’s fina financ ncia ia rec recor or"s "s.. Corin$ papers shou" not be ept in the cient’s pre#ises. Cor Corin in$ $ pap paper erss (hi (hich ch cont contai ain n inf infor or#a #ati tion on rea reati tin$ n$ pri# pri#ar ari i! ! to to the the au" au"it it of of a sin sin$ $e e per perio io" " are no(n as current fies. The primary purpose primary purpose of in"e0in$ is to increase efficienc! in in the rechecin$ an" re/ie( of (or perfor#e".
&orrection: hoice A shou" rea"B DThe infor#ation obtaine" b! the au"itor ... ...
So#e au"it proce"ures a""ress t(o or #ore au"it ob7ecti/es. See notes in 1*1 nu#ber &
The -uestion "e#an"s for e0a#pes of assets (hich (hich are inspecte". hoice A is inco#pete. hoice incu"es cancee" checs an" saes "ocu#ents 8both of (hich are not assets9. hoice incu"es cancee" checs 8a$ain not an asset9.
13
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 14 15 16 1& 1' 1)
A A
2*
21 22
23 24 25 26 2& 2' 2) 3* 31 32 33 34 35 36 3& 3' 3) 4*
A A A A
Sa#pin$ affects the sufficienc! of au"it e/i"ence.
The " "iifficu cut! an" e0pense in in/o/e" in in tes testin tin$ a particu ticuar ite ite# # is is no not a /ai" ba basis fo for an an au"itor to "eci"e to o#it a test. The hi$her the au"itor’s assess#ents of inherent an" contro riss the #ore reiabe reiabe an" ree/ant is the au"it e/i"ence sou$ht b! the au"itor. hoice is incorrect because substanti/e tests are in/erse! reate" to to the au"itor’s reiance on interna contros.
hoices A an" (a (arrant th the use of positi/e confir#ation re-uests.
A cop! of the e0terna au"itor’s au"it pro$ra# shou" be incu"e" in the (orin$ papers.
&'AP(E" 11 % Basic Audit Sampling &oncepts 111 : (rue or )alse 1 2 3 4 5 6 & ' ) 1* 11 12 13 14 15 16 1&
FALSE TRUE RUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE FALSE FALSE TRUE TRUE FALSE FALS FALSE E FALSE
Test Testss per perfo for# r#e e" on on 1** 1** of of the the ite# ite#ss (it (ithi hin n a popu popua ati tion on "oes "oes not not con const stit itut ute e sa sa#pi #pin n$.
The a ar$er th the to toer erabe er error or th the s# s#ae er th the sa sa#pe si si%e n tests of contros the toerabe "e/iation rate is the #a0i#u#... #a0i#u# ...
This state#ent refers to ran"o# seection . Stra Strati tifi fica cati tion on #a! #a! be be app appro ropr pria iate te to to ass assis istt in the the eff effic icie ient nt an" an" effe effect cti/ i/e e "eis "eis$n $n of of the the sa#p sa#pe e.. The ris of o/erreian iance an" the ris is of incorr orrect acceptance ... ...
14
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 1' 1) 2* 21 22 23 24 25
TRUE TRUE TRUE FAL FALSE FALSE TRUE TRUE TRUE TRUE
26
FALSE
:on :onsstati tatist stic ica a sa#p sa#pin$ in$ "oes "oes not use use stati tatist stic ica a for# for#u ua as. Sa#pin$ for /ariabes is is $enera! use" in substanti/e testin$.
f the the popu popua ati tion on is e0pe e0pect cte" e" to be erro error rfr free ee thi thiss (arr (arran ants ts a re"u re"uct ctio ion n of of but but not not ei#ination of the sa#pe si%e.
112 : Multiple &.oice 1 2 3 4 5 6 & ' ) 1* 11 12 13 14
A A A A A A
15 16 1&
A A
1' 1) 2* 21 22 23 24 25 26 2& 2'
A
2) 3* 31 32 33 34 35
A
Seectin$ specific ite#s in/o/e seectin$ hi$h /aue or 3e! ite#s .
;isstate#ents refer to errors foun" "urin$ substanti/e testin$.
Sa#pin$ in$ ris is in/erse! reate" te" to sa#pe si%e. :ote aso that sa#pin$ ris is can can be ei#inate" b! 1** testin$.
hoice ice is incorr orrect be because th the -u -uestion is is ta tain$ ab about out te tests of of co contros s no not su substanti/ ti/e tests. hoice is incorrect because tests of contros an" substanti/e tests ha/e been been co#bine" in this state#ent. hoice refers to the ieihoo" of assessin$ contro ris too o(.
The inter/a is co#pute" as popuation si%e "i/i"e" b! sa#pe si%e . The "isa"/anta$e can be rectifie" b! the use of ran"o# starts.
This rate is "e/eope" in i$ht of the the au"itor tor’s un"erstan tan"in$ of the entit! tit! an" its en/iron#ent. This ra rate is is "e "e/eope" ba base" on on th the au"itor’s pr professiona 7u 7u"$#ent.
Refer to +SA 53* Appen"i0
15
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 36 3& 3'
A A
3) 4* 41 42 43 44 45 46 4& 4'
A
4) 5* 51 52 53
A
4=1** G 4 sa#pe "e/iat iation rate H 2 ao(a o(ance for sa#pin$ ris is G 6 upper "e/iation ion rate /ersus toerabe "e/iation rate of 5
Toerabe #isstate#ent is in/erse! reate" to sa#pe si%e
:ote th that th the sa sa#pe " "e e/iation rate 88iin tes tests of of co contro tros9 ne nee" not be be pro7ecte cte"I on on! th the sa#pe #isstate#ent 8in substanti/e tests9 nee" to be pro7ecte" to the popuation.
&'AP(E" 12 : &ompleting t.e Audit 121 : (rue or )ales 1 2 3 4 5 6 & ' ) 1* 11
TRUE TRUE FALSE TRUE FAL FALSE FALSE TRUE FALSE TRUE FAL FALSE FALS FALSE E
12 13 14 15
TRUE RUE TRUE TRUE FALS FALSE E
A pro/ision is not uncertain as to e0istence. :ot :ot a a subs subsee-ue uent nt e/en e/ents ts nee" nee" a"7u a"7ust st#e #ent ntII so#e so#e re-u re-uir ire e "isc "isco osu sure re on! on!..
The perio" of assess#ent is at east 12 12 #onths fro# the reportin$ "ate. The The au" au"it itor or in this this case case shou shou" " issu issue e a -ua -uai ifi fie" e" or "isc iscai ai#e #err of of opi opin nion. ion. Chen Chen othe otherr suf suffi fici cien entt app appro ropr pria iate te e/i" e/i"en ence ce can can be be rea reaso sona nab b! ! e0p e0pec ecte te" " to to e0i e0ist st suc such h e/i"ence is obtaine" rather than si#p! $ettin$ (ritten representations fro# #ana$e#ent. +SA 5' 5'* re re-uire ires (r (ritte tten #a #ana$e#ent re representation e etter ters.
Fo( Fo(ch char arts ts of inte intern rna a cont contro ro "o not not con const stit itut ute e a for# for# of inte intern rna a co## co##un unic icat atio ion. n.
122 : Multiple &.oice 1 2 3 4 5
A A A
6 & '
A
Subse-uent e/ents tha that pertai tain to con"ition ions that "i" not e0ist as of baance sheet "ate are nor#a! "iscose".
This acco#pishes no purpose reate" to subse-uent e/ents.
16
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual ) 1* 11 12
13
A
14 15 16 1& 1' 1) 2* 21
A A
22 23 24 25 26 2& 2' 2) 3*
A
31 32 33 34
A A
hoice ices A an an" in/o/e incre creasin$ e0pen"itur tures (h (hich cou ou" a$$ra/ate the the area"! precarious con"ition of ?i o. :onco co#piance (ith (ith ter#s of "ebt a$ree#ents nor#a! raise ise a "oubts about $oin$ concern.
See co##ents un"er 121 nu#ber 11 The #inu inutes of #eetin tin$s #ust a be #a"e a/aiabe to the the au"itor tor. ;ater teriait! is not appicabe here J a #inutes #ust be pro/i"e" to the au"itor.
Rea Reate te" " pa partie ties so so#eti#e i#es ac account fo for th their tr transacti ctions ons in in a (a! th that su substan tance "iffers fro# the for#.
&'AP(E" 1- : (.e Audit "eport 1-1 : ("E or )A8SE 1 2 3 4 5
TRUE FAL FALSE FALSE TRUE FAL FALSE
6
FALS FALSE E
&
FALS FALSE E
' ) 1* 11 12 13 14
FAL FALSE TRUE TRUE FALSE TRUE TRUE TRUE
This This situ situa ation tion resu resut tss to to a "is "isa$ a$re ree# e#en entt (i (ith #a #ana na$e $e#e #en nt not a i# i#it ita ation tion on sco scope pe..
This This situ situa ation tion (ou (ou" " rere-ui uire re the the u use se of a -u uaif aifie ie" " or or a"/ a"/er erse se opi opinion nion "ep "epe en"in n"in$ $ on on #ateriait!. The The au" au"it itor or is resp respon onsi sib be e in in "et "etec ecti tin$ n$ #a #ate teri ria a #iss #issta tate te#e #ent ntss ari arisi sin$ n$ fro# fro# eith either er an erro errorr or or frau". f the the au"i au"ito torr can can not not re reie ie" " on the the be$i be$inn nnin in$ $ in/ in/en ento tor! r! the the $ros $rosss prof profit it aso aso can can not not be reie" upon hence resuts of operations can not be reie" upon but the baance sheet (ith the correct baance of en"in$ in/entor! can be reie" upon E#ph E# phas asis is of a # #at atte terr par para a$rap $raphs hs are are a(a a(a!s !s pace ace" " bef befor ore e a #o" #o"ifie ifie" " opin opiniion. on.
1&
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 15 16 1& 1' 1)
TRUE FALS FALSE E TRUE TRUE FALS FALSE E
2*
TRUE
isc isca ai# i#er er of opin opinio ion n is is not not appr approp opri riat ate e "ue "ue to a #at #ater eria ias s "epa "epart rtur ure e fro fro# # ,AA+ ,AA+..
The The au" au"it itor or shou shou" " not not acc accep eptt or or (it (ith" h"ra ra( ( fro# fro# en$a en$a$e $e#e #ent nt if the the au" au"it itor or is not not in"epen"ent in reation to the cient.
1-2 : M8(IP8E &'9I&E 1 2 3 4 5 6 & ' ) 1* 11 12 13 14 15 16 1& 1' 1) 2* 21 22 23 24 25 26 2& 2' 2) 3* 31 32 33 34 35 36 3& 3' 3) 4* 41 42
A A A A A A A A A A A A A A A A
,AAS in the +hiippines are no(n as +SAs.
Please disregard Cron$ hoices
This situation incu"es an a"/erse opinion. There is unifor# (or"in$ for the au"it report 8See +SA &**=&*1 an" &*5=&*69
1'
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 43 44 45
A
&'AP(E" 1/ : Special &onsiderations and Audits Audits o* Summary )inancial Statements Statements 1/1 : (rue or )alse 1 2 3 4
TRUE FALSE TRUE FAL FALSE
5 6 &
FAL FALSE FALSE FALS FALSE E
' ) 1*
TRUE TRUE TRUE
The re-uire#ents of +SA '** sha pre/ai. The The spe speci cia a repo report rt on #o"i #o"ifi fie" e" cash cash basis asis sta state#e te#ent ntss nee nee"s "s to in" in"icat icate e the the basis asis of accountin$ use". Au"i Au"itt of of co# co#po pone nen nts res resu uts ts in in a re report port on on a par parti ticu cua arr par partt of the the fin finan anci cia a sta state te# #ents ents.. Au"it of co#ponents resut to a #ore e0tensi/e e0a#ination e0a#ination of that co#ponent. Chen Chen an a"/e a"/ers rse e opin opinio ion n or "isc "isca ai# i#er er of opin opinio ion n on the the enti entire re fina financ ncia ia stat state# e#en ents ts has has been e0presse" the au"itor shou" report on co#ponents o f the financia state#ents on! if those co#ponents are co#ponents are not so e0tensi/e .... ....
1/2 : Multiple &.oice 1 2 3 4 5 6 & ' ) 1* 11 12 13 14 15 16 1& 1'
A A A A
1) 2* 21 22 23 24 25 26 2&
A
f st state#ents ar are p prrepare" us usin$ th the ac accrua ba basis th the stan"ar" au"it re report ap appies.
Specia re reports on co co#piance (it (ith h co contra tractua tua a$ a$ree#ents are st sti au au"it re reportsI tsI he hence the! re-uire in"epen"ence.
1)
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 2' 2) 3* 31 32 33 34 35 36 3& 3' 3) 4* 41
A A
&'AP(E" 1 : onAudit Assurance Assurance Engagements Engagements and "elated Ser+ices Ser+ices 11 : (rue or )alse 1 2 3 4 5 6 & ' ) 1* 11 12
FALSE FALSE TRUE TRUE TRUE FALSE TRUE FALS FALSE E TRUE FALSE TRUE FAL FALSE
Re/ Re/ie( of interi# financia state#ents are base" on +SREs. Au"its are not part of reate" ser/ices.
Re/ie( se ser/ices re re-uire au au"itor in in"epen"ence. onf onfir ir#a #ati tion on an" an" /er /erif ific icat atio ion n of of si$ si$ni nifi fica cant nt acco accoun untt ba baan ance cess are are part part of au"i au"its ts not not re/i re/ie( e(s. s. A +A #a! not pro/i"e pro/i"e assurance as to the achie/abiit! of a forecast. A$re A$ree" e"u up pon proc proce e"ure "uress en en$a$e $a$e#e #ent ntss "o "o no not rere-u uire ire in" in"ep epe en"en n"ence ce..
12 : Multiple &.oice 1 2 3 4 5 6 & ' ) 1* 11 12 13 14 15 16 1& 1'
A A = A A A A
hoice is part of a stan"ar" au"it en$a$e#ent.
2*
Auditing and Assurance Principle 2017 Edition By : Ireneo, Ireneo Ireneo and James James Solutions Manual 1) 2* 21 22 23 24 25 26 2&
A
A +A is a(a!s re-uire" to e0ercise "ue professiona care. o#piations re-uire accountin$ e0pertise not au"it e0pertise.
See 151 nu#ber 12
E
21
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