Question 1

An assurance engagement is one in which a CA is engaged to
A)Issue a written communication expressing a conclusion concerning a subject matter for which an accountable party is responsible.
B)Provide tax advice or prepare a tax return based on financial information the CA has not audited or reviewed.
C)Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulated facts.
D)Assemble prospective financial statements based on the assumptions of the entity's management without expressing any assurance.

Accepted Answer

An assurance engagement involves a CA issuing a written communication expressing a conclusion about a subject matter for which an accountable party is responsible, providing assurance to users about the reliability of the information.

Question 2

A report giving conclusions about a firm's compliance with quality control standards is typical of which of the following?
A)Practice inspection.
B)Quality inspection.
C)Peer review.
D)Quality review.

Accepted Answer

Peer review is a process where one firm reviews another firm's compliance with quality control standards, typically resulting in a report that concludes on the firm's adherence to those standards.

Question 3

In planning an effective audit which of the following occurs first?
A)Determine the acceptability of the financial reporting framework used.
B)Decide whether to accept or retain the client.
C)Understand the auditee's business.
D)Assess materiality.

Accepted Answer

The answer of In planning an effective audit which of...

Question 4

The reporting standards require that the auditor explicitly report on whether the financial statements:
A)Contain adequate disclosure of all material matters.
B)Are in accordance with GAAP.
C)Used principles that are appropriate for the circumstances.
D)Were prepared on a consistent basis with the comparative year.

Accepted Answer

The answer of The reporting standards require that the auditor...

Question 5

According to IFAC, which of the following is not one of the elements of quality control?
A)Independence.
B)Supervision.
C)Acceptance and continuance of clients.
D)Due professional care.

Accepted Answer

The answer of According to IFAC, which of the following...

Question 6

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of
A)Objective judgment.
B)Independent integrity.
C)Professional skepticism.
D)Impartial conservatism.

Accepted Answer

Professional skepticism is an important attitude that an auditor should possess while conducting an audit. Professional skepticism means that the auditor should question the information provided and be alert for any indications that suggest that the information could be incorrect. This helps the auditor to identify any material misstatements that could affect the reliability of the financial statements. Objective judgment, independent integrity, and impartial conservatism are also important attitudes to have while conducting an audit, but they are not specifically related to the risk of material misstatement.

Question 7

CICA Handbook S.5025 "Standards for Assurance Engagements" differs from S.5100 "Generally Accepted Auditing Standards" in that the assurance standards
A)Contain no requirement to obtain an understanding of the auditee's internal control system.
B)Do not require technical training and proficiency.
C)Do not require planning for attestation engagements or supervision of accountants and consultants who perform the work.
D)Do not require a report that "states the character of the engagement."

Accepted Answer

The CICA Handbook S.5025 "Standards for Assurance Engagements" does not require obtaining an understanding of the auditee's internal control system, unlike S.5100 "Generally Accepted Auditing Standards".

Question 8

Which of the following statements is not a reporting standard for an assurance engagement?
A)A conclusion whether the assertion is presented in conformity with established or stated criteria.
B)A statement of whether the practitioner has significant reservations about the engagement.
C)Identification of the assertion(s) being reported on.
D)An indication by the accountant of responsibility to update the report.

Accepted Answer

An assurance engagement report does not require the accountant to indicate responsibility to update the report.

Question 9

Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle.Which of the following should the auditor consider to be the most authoritative?
A)CICA Handbook.
B)CICA Exposure Drafts.
C)Industry practice.
D)Federal legislation.

Accepted Answer

The CICA Handbook is the most authoritative source of GAAP in Canada. It is updated annually and is recognized as the primary source of Canadian GAAP. Both the industry practice and federal legislation could be relevant sources of information, but they would not be considered as authoritative as the CICA Handbook. Exposure drafts are proposals for future changes to the Handbook and are not authoritative until they are approved and included in a future edition.

Question 10

In establishing a quality control system, which area should be of a secondary nature?
A)Creating an independence and objectivity checklist.
B)Creating a program for continuing professional education.
C)Creating an internal review process.
D)Controlling access to client files.

Accepted Answer

The answer of In establishing a quality control system, which...

Question 11

For the audit of a for profit company, materiality should be set:
A)To 5% of profit or 1% of sales
B)By the field auditor once they begin to gather evidence.
C)By the client's board of directors who represent the shareholders.
D)Based on both quantitative and qualitative criteria.

Accepted Answer

Materiality in an audit is determined based on both quantitative factors, like financial metrics, and qualitative factors, such as the nature of transactions or the context of the financial statements.

Question 12

Williams & Co., a large international CA firm, will be subject to an external peer review.The peer review will most likely be performed by
A)Employees and partners of Williams & Co.who are not associated with the particular audits being reviewed.
B)Employees and partners of another CA firm.
C)Peer review staff of the Ontario Securities Commission.
D)Peer review staff of the CICA.

Accepted Answer

External peer reviews are typically conducted by employees and partners of another CA firm to ensure independence and objectivity in the review process.

Question 13

The mix between controls testing and substantive testing:
A)Will affect the effectiveness of the audit.
B)Will affect the efficiency of the audit.
C)Will affect the results of the audit.
D)Will affect the profitability of the audit.

Accepted Answer

The mix between controls testing and substantive testing primarily affects the efficiency of the audit, as it determines how resources are allocated and how quickly the audit can be completed.

Quiz 2: Audit, Assurance, and Quality Control Standards

An assurance engagement is one in which a CA is engaged to

A report giving conclusions about a firm's compliance with quality control standards is typical of which of the following?

In planning an effective audit which of the following occurs first?

The reporting standards require that the auditor explicitly report on whether the financial statements:

According to IFAC, which of the following is not one of the elements of quality control?

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

CICA Handbook S.5025 "Standards for Assurance Engagements" differs from S.5100 "Generally Accepted Auditing Standards" in that the assurance standards

Which of the following statements is not a reporting standard for an assurance engagement?

Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle.Which of the following should the auditor consider to be the most authoritative?

In establishing a quality control system, which area should be of a secondary nature?

For the audit of a for profit company, materiality should be set:

Williams & Co., a large international CA firm, will be subject to an external peer review.The peer review will most likely be performed by

The mix between controls testing and substantive testing: