AUDITINGAnswer the following questions andexplain the correct answers per item.Also explain why the other choicesare incorrect1. An accountant agrees to the client's request to change an engagement from a review to acompilation of financial statements. The compilation report should include:A. No reference to the original engagement.B. Reference to a departure from PSAs.C. Scope limitations that may have resulted in the change of engagement.D. Information about review procedures already performed.2. The Philippine Framework for Assurance Engagements identifies two types of assuranceengagements a practitioner is permitted to perform: a reasonable assurance engagement anda limited assurance engagement. Which of the following is the objective of a limited assuranceengagement?A. A reduction in assurance engagement risk to a very low level in the circumstances ofthe engagement as a basis for a disclaimer of the practitioner's conclusion.B. A reduction in assurance engagement risk to an acceptably low level in thecircumstances of the engagement as a basis for a positive form of expression of thepractitioner's conclusion.C. A reduction in assurance engagement risk to a level that is acceptable in thecircumstances of the engagement as a basis for a negative form of expression of thepractitioner's conclusion.D. A reduction in assurance engagement risk to a level that is acceptable in thecircumstances of the engagement as a basis for a modified form of expression of thepractitioner's conclusion.3. Which of the following is not a correct use of the terminology in relation to audit evidence?A. Evidence obtained from an independent source outside the client organization is morereliable than that obtained from within.B. Documentary evidence is more reliable when it is received by the auditor indirectlyrather than directly.C. Documents that originate outside the company are considered more reliable than thosethat originate within the client's organization.D. External evidence, such as communications form banks, is generally regarded as morereliable than answers obtained from inquiries of the client.4. The auditor's primary purpose in auditing the client's system of internal control overfinancial reporting isA. To prevent fraudulent financial statements from being issued to the public.B. To evaluate the effectiveness of the company's internal controls over all relevantassertions in the financial statements.C. To report to management that the internal controls are effective in preventingmisstatements from appearing on the financial statements.D. To efficiently conduct the audit of financial statements.5. A company is concerned with the theft of cash after the sale has been recorded. One wayin which fraudsters conceal the theft is by a process called "lapping." Which of the followingbest describes lapping?A. Reducecustomer's account by recording a sales return.B. Write off the customer's account.C. Reduce the customer's account by recording a sales allowance.D. Apply the payment from another customer to the customer's account.

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1. An accountant agrees to the client's request to change an engagement from a review to a compilation of financial statements. The compilation report should include: A. No reference to the original engagement. B. Reference to a departure from PSAs. C. Scope limitations that may have resulted in the change of engagement. D. Information about review procedures already performed.

1. An accountant agrees to the client's request to change an engagement from a review to a compilation of financial statements. The compilation report should include: A. No reference to the original engagement. B. Reference to a departure from PSAs. C. Scope limitations that may have resulted in the change of engagement. D. Information about review procedures already performed.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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