1.

A suitable criteria is:

Ans: Relevant, complete, reliable, neutral and understandable

2. It is a written report containing the conclusion that conveys the

assurance that is designed to enhance the degree of confidence that an intended user may place on the subject
matter.
Ans: Assurance Report

3. In what cases should the auditor not accept or withdraw from an engagement?
Ans:
a. The assumptions are clearly unrealistic.
b. The auditor believes that the prospective financial information will be inappropriate for its intended use.
1. Q: Subject matter and subject matter information of an assurance engagement can take many forms. Give three
forms.
A:
Financial performance or conditions,
Non-financial performance or conditions,
Physical characteristics,
Systems and processes
Behaviour
2. Q: Give three things that an auditor should consider before accepting an engagement to examine prospective
financial information.
A:
The intended use of the information.
Whether the information will be for general or limited distribution.
The nature of the assumptions, that is, whether they are best-estimate or hypothetical assumptions.
The elements to be included in the information.
The period covered by the information.
1. What are the characteristics of suitable criteria? Explain each briefly.
(a) Relevance: relevant in the decision making of intended users
(b) Completeness: criteria that could affect the conclusion of the engagement is not omitted
(c) Reliability: reliable criteria allow reasonably consistent evaluation or measurement of the subject matter
(d) Neutrality: neutral criteria contribute to conclusions that are free from bias
(e) Understandability: understandable criteria contribute to conclusions that are clear, comprehensive, and not subject
to significantly different interpretations.
2. What is professional skepticism?
An attitude of professional skepticism means the practitioner makes a critical assessment, with a questioning mind, of
the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of
documents or representations by the responsible party.
3. Differentiate forecast from projection.

A forecast means prospective financial information prepared on the basis of assumptions as to future events which
management expects to take place and the actions management expects to take as of the date the information is
prepared while a projection means prospective financial information prepared on the basis of hypothetical
assumptions about future events and management actions which are not necessarily expected to take place, and
illustrates the possible consequences as of the date the information is prepared if the events and actions projected
were to occur.
1. Q: What are the two types of assurance engagements that auditors are permitted to perform as indicated in the
framework and differentiate the two?
A: The two types of assurance engagements are reasonable assurance engagement and limited assurance
engagement. A reasonable assurance engagement aims to reduce the assurance engagement risk to an acceptably
low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioners
conclusion while a limited assurance engagement aims to reduce the assurance engagement risk to a level that is
acceptable in the circumstance of the engagement, but where the risk is greater than for a reasonable assurance
engagement, as a basis for a negative form of an expression of the practitioners conclusion.
2. Q: What are the characteristics of appropriate criteria for assurance engagements?
A: Relevance, completeness, reliability, neutrality, and understandability
3. Q: What is the difference between a forecast and a projection?
A: A forecast is prospective financial information prepared on the basis of assumptions as to future events and actions
which management expects to take place as of the date the information was prepared, while a projection is prepared
on the basis of hypothetical assumptions about future events and management actions which are not necessarily
expected to take place.
1. Obtaining more evidence may compensate for poor quality. True or false?
Answer: False.

2. What do you call a prospective financial information on the basis of assumptions as to future events and
management actions that are likely to happen?
Answer: Forecast

3. The assurance report in a reasonable assurance engagement is presented in what form?

Answer: Positive form of expression of the conclusion
1. Q: Who constitutes the three party relationship?
A: The three party relationship is compose of the practitioner, the responsible party and the intended users

2. Q: What do you mean by professional skepticism?

A: An attitude of professional skepticism means the practitioner makes a critical assessment, with a questioning mind,
of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of
documents or representations by the responsible party.

3. Q: What should an auditor do when the presentation of the prospective financial information appears to be
inadequate?
A:The auditor should express a qualified or adverse opinion in the report on the prospective financial information, or
withdraw from the engagement as appropriate.

1. Q: Title of PSAE 3400

A: the examination of prospective financial information"
2. Q: What is an assurance engagement that provides high level of assurance that the fs are free of material
misstatement?
A: independent financial statement audit.
3. Q: Who is the person who provides the assurance to the intended users about a subject matter that is the
responsibility of another party?
A: Practitioner
2. The auditors satisfaction as to the reliability of an assertion being made by one party is called:
Answer:
Assurance
3. The party responsible for assumptions identified in the preparation of prospective financial statements is usually:
Answer:
Clients management
1.) A type of Assurance Engagement wherein the practitioner expresses the conclusion in a negative form.
Answer: Limited Assurance Engagement
2. ) It is a prospective financial information prepared on the basis of hypothetical assumptions about future events and
management actions which are NOT necessarily expected to take place.
Answer: Projection

3.) These are benchmarks used to evaluate or measure the subject matter.
Answer: Criteria
1. What is the objective of reasonable assurance engagement?
A: The objective of a reasonable assurance engagement is a reduction in assurance engagement risk to an
acceptably low level in the circumstances of the engagement6 as the basis for a positive form of expression of the
practitioners conclusion.
3. What is prospective financial information?
A: Prospective financial information means financial information based on assumptions about events that may occur
in the future and possible actions by an entity.
1. What are the 5 ethical principles that accountants (A) are required to observe?
Answer: integrity, objectivity, personal competence and due care, confidentiality, and professional behavior.
2. Define "assurance engagements.
Answer: An engagement in which a practitioner expresses a conclusion designed to enhance the degree of
confidence of the intended users other than the responsible party about the outcome of the evaluation or
measurement of a subject matter against criteria.
3. When was the effective date of the PSAE 3400?
Answer: On or before January 1, 2004

2. What is professional scepticism?

A: An attitude of professional scepticism means the practitioner makes a critical assessment, with a questioning mind,
of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of
documents or representations by the responsible party.
3. Who constitutes the three party relationships?
- Practitioner
- Responsible party
- Intended users
1) When can an auditor and a practitioner withdraw from an engagement?
Answer: When upon thorough review of the written report, the auditor believes that the presentation and disclosure of
the prospective financial information is not adequate, or one or more significant assumptions do not provide a
reasonable basis for the prospective financial information prepared on the basis of best-estimate assumptions or
hypothetical assumptions, or it is affected by conditions that preclude application of one or more procedures
considered necessary in the circumstances, the auditor should withdraw from the engagement as appropriate or
express a qualified or adverse opinion. A practitioner does not accept an engagement if preliminary knowledge of the
engagement circumstances indicates that ethical requirements regarding professional competence will not be
satisfied.

2) What difference is there between an auditor as stated in the PSA and the practitioner as stated in the framework?
Answer: An auditor can be a practitioner but not all practitioners are auditors. Auditors in the PSA relate only to
practitioners performing audit or review engagements with respect to historical financial information. Based on the
framework, they should possess the requisite skills and knowledge, and an adequate level of involvement in the
engagement and understanding of the work in cases when they are asked to perform in a wide range of subject
matters in an assurance engagement.
3 When was the PFAE effected?
Answer: January 1, 2005

1. Criteria that are embodied in laws or regulations, or issued by authorized or recognized bodies of experts that
follow a transparent due process are called
A. Suitable Criteria
B. Established criteria
C. Specifically developed criteria
D. General criteria
answer: B
2. What type of assurance engagement is involved when the practitioner expresses a positive form of conclusion?
A. Limited assurance engagement
B. Positive assurance engagement
C. Reasonable assurance engagement
D. Absolute assurance engagement
answer: C
3. Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of the following
factors, except
A. The use of selective testing.
B. The fact that much of the evidence available to the practitioner is persuasive rather than conclusive.

C. The practitioner may not have the required assurance knowledge and skills to gather and evaluate evidence.
D. The use of judgment in gathering and evaluating evidence and forming conclusions based on that evidence
answer: C

1.) These are the benchmarks used to evaluate or measure the subject matter including, where relevant, benchmarks
for presentation and disclosure.
Answer: Criteria
2.) This means the practitioner makes a critical assessment, with a questioning mind, of the validity of evidence
obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations
by the responsible party.
Answer:
Professional scepticism.
3.) is the risk that the practitioner expresses an inappropriate conclusion when the subject matter information is
materially misstated.
Answer: Assurance Engagement Risk
1. Can an absolute assurance be attained? Why(not)?
ANSWER: Absolute assurance in auditing is not attainable because of certain factors such as the use of judgment,
testing, the inherent limitations of accounting and internal control systems and most of the pieces of evidence made
available to auditors are persuasive, rather than conclusive.
2. The longer the period covered by the prospective financial information becomes, the more speculative its evidence
are and the ability to make best-estimate assumptions, increases or decreases?
ANSWER: Decreases
3. The Public Sector Perspective of ISA has yet been adopted by the PSA thus, The principles dealing with
information of the public sector in the Philippines are in the jurisdiction of?
ANSWER: Commission on Audit
1. Question: What are the two types of Assurance Engagements?
Answer: (1) Reasonable Assurance Engagements (2) Limited Assurance Engagements

1. What is the term used to mean the outcome of the evaluation or measurement of the subject matter?
Answer: Subject matter information

3. When was the effective date of the PSAE 3400?

Answer: January 1, 2004
1. A responsible party can be an intended user alone.
Answer: False

2. An assurance engagement should exhibit the ff. characteristics except:

a. a subject matter
b. a suitable criteria
c. written assurance report
d. review

answer: d

3. which is not a component of engagement risk?

a. control risk
b. inherent
c. business
d. detection
Answer: C

1. Only moderate assurance, and not high assurance is provided by the auditor in an agreed upon procedures
engagement. (F-no assurance)
2. With reliable evidence on hand, the auditor is in the position to assure that the prospective financial information will
be achieved (F)
3. Only moderate assurance, and not high assurance is provided by the auditor in an audit of prospective financial
information. (T)
1. When can a practitioner change from an assurance engagement to a non-assurance engagement; and when can
he change from a reasonable assurance engagement to a limited assurance engagement?
- A practitioner can only change from an assurance engagement to a non-assurance engagement, and from a
reasonable assurance engagement to a limited assurance engagement when and only when there is reasonable
justification to do so. A change in circumstances affecting the intended users requirements, or a misunderstanding of
the nature of the engagement qualify for a request on a reasonable justification for such change/s.
2. Differentiate assertion-based engagements from direct reporting engagements.
- Assertion-based engagements are engagements wherein the responsible party himself performs the evaluation or
measurement of the subject matter, and that the subject matter information is in the form of an assertion from such
responsible party and is made available to the intended users. Direct reporting engagements, on the other hand, are
engagements wherein the practitioner himself conducts the evaluation or measurement of the subject matter, or that
he obtains a representation from the responsible party, who has performed the evaluation or measurement of subject
matter, of which is not made available to intended users. The subject matter information in this case is provided to
intended users through the practitioners assurance report.
3. What is the Auditors stand/position with regards to Prospective Financial Information?
- The evidences supporting the assumptions on which prospective financial information is based on are, by nature,
future events and may or may not occur. The auditor, therefore, is in no position to express an opinion or stand on
whether the results from such prospective financial information will be achieved, he is only in the position to examine
such prospective financial information
1.) It is a type of assurance engagement with the objective of reducing the assurance engagement risk to an
acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the
practitioners conclusion.
a.) Assertion-based engagement
b.) Direct reporting engagement
c.) Reasonable assurance engagement
d.) Limited assurance engagement

ANSWER: C. REASONABLE ASSURANCE ENGAGEMENT

2.) Statement 1: All engagements performed by practitioners are assurance engagements.
Statement 2: Consulting (or advisory) engagements, such as management and tax consulting are within the scope of
the Philippine Framework for Assurance Engagements (PFAEs).
a.) Only statement 1 is true
b.) Only statement 2 is true
c.) Both statements are true
d.) Both statements are false
ANSWER: D. BOTH STATEMENTS ARE FALSE
3.) It is the susceptibility of the subject matter information to a material misstatement, assuming that there are no
related controls.
a.) Assurance engagement risk
b.) Inherent risk
c.) Control risk
d.) Detection Risk
ANSWER: B. INHERENT RISK