Q.1 What is the primary objective of an assurance engagement?
To prepare financial statements
To provide an independent opinion or conclusion
To manage company resources
To provide tax advice
Explanation - Assurance engagements aim to enhance the credibility of information by providing an independent opinion or conclusion.
Correct answer is: To provide an independent opinion or conclusion
Q.2 Which of the following is NOT a type of assurance engagement?
Audit of financial statements
Review of financial statements
Tax planning engagement
Examination of prospective financial information
Explanation - Tax planning is a consulting service, not an assurance engagement.
Correct answer is: Tax planning engagement
Q.3 In a review engagement, the level of assurance provided is:
High
Moderate
Absolute
None
Explanation - Review engagements provide limited assurance, which is lower than the reasonable assurance provided in audits.
Correct answer is: Moderate
Q.4 Which standard governs assurance engagements internationally?
ISA
ISAE
IFRS
GAAP
Explanation - International Standards on Assurance Engagements (ISAE) provide guidelines for assurance engagements other than audits of financial statements.
Correct answer is: ISAE
Q.5 Reasonable assurance in an audit means:
Absolute certainty
High but not absolute certainty
Low certainty
No assurance
Explanation - Auditors provide reasonable assurance, meaning high, but not absolute, confidence that the financial statements are free from material misstatement.
Correct answer is: High but not absolute certainty
Q.6 Which of the following is a key element of an assurance engagement?
Independence of the practitioner
Financial management
Tax compliance
Payroll processing
Explanation - Independence ensures that the practitioner’s opinion is unbiased and credible.
Correct answer is: Independence of the practitioner
Q.7 Limited assurance is typically expressed in:
Positive form
Negative form
Quantitative form
Absolute terms
Explanation - Limited assurance is usually expressed in a negative form, stating nothing has come to the practitioner's attention that indicates material misstatement.
Correct answer is: Negative form
Q.8 Who is responsible for the subject matter in an assurance engagement?
The auditor
The client
Regulatory authorities
Financial institutions
Explanation - The client is responsible for the subject matter; the practitioner provides assurance on it.
Correct answer is: The client
Q.9 A practitioner expresses an opinion in which type of assurance engagement?
Audit
Review
Compilation
Consulting
Explanation - Audits provide reasonable assurance and involve expressing a formal opinion on financial statements.
Correct answer is: Audit
Q.10 Which of these statements about assurance engagements is TRUE?
They always require absolute assurance
They can only be performed on financial information
They enhance the credibility of information
They replace management responsibilities
Explanation - Assurance engagements aim to increase user confidence in the information provided by management.
Correct answer is: They enhance the credibility of information
Q.11 ISAE 3000 relates to:
Assurance engagements other than audits of historical financial information
Audits of financial statements
Tax audits
Internal control audits
Explanation - ISAE 3000 provides standards for assurance engagements other than historical financial audits, including sustainability reports or compliance engagements.
Correct answer is: Assurance engagements other than audits of historical financial information
Q.12 What is the main difference between an audit and a review?
Audit provides limited assurance; review provides reasonable assurance
Audit provides reasonable assurance; review provides limited assurance
Audit is optional; review is mandatory
Review is more detailed than audit
Explanation - Audits are more comprehensive and provide higher assurance than reviews.
Correct answer is: Audit provides reasonable assurance; review provides limited assurance
Q.13 Which of the following is an example of a non-financial assurance engagement?
Audit of financial statements
Review of quarterly accounts
Assurance on sustainability report
Tax audit
Explanation - Assurance can be provided on non-financial information, such as sustainability or ESG reports.
Correct answer is: Assurance on sustainability report
Q.14 Which form of assurance engagement requires the practitioner to gather sufficient appropriate evidence?
Audit
Consulting
Compilation
Bookkeeping
Explanation - Audits require sufficient appropriate evidence to support the auditor’s opinion.
Correct answer is: Audit
Q.15 In an assurance engagement, the term 'criteria' refers to:
Standards used to evaluate the subject matter
Financial statements
Client’s internal policies
Auditor’s judgment only
Explanation - Criteria are the benchmarks or standards against which the subject matter is evaluated.
Correct answer is: Standards used to evaluate the subject matter
Q.16 A negative assurance statement is typically used in:
Audit
Review
Internal control testing
Financial planning
Explanation - Negative assurance is generally expressed in review engagements, indicating nothing has come to attention that suggests material misstatement.
Correct answer is: Review
Q.17 Which of these is a practitioner’s responsibility in an assurance engagement?
Preparing the subject matter
Expressing an opinion or conclusion
Managing client operations
Approving financial statements
Explanation - The practitioner is responsible for forming and expressing an independent opinion or conclusion.
Correct answer is: Expressing an opinion or conclusion
Q.18 What type of assurance engagement is performed to provide confidence in compliance with regulations?
Compliance engagement
Financial audit
Tax planning
Management consulting
Explanation - Compliance engagements assess whether an entity follows specified regulations or requirements.
Correct answer is: Compliance engagement
Q.19 Which of the following best describes 'limited assurance'?
High degree of certainty
Moderate level of assurance, less than reasonable assurance
Absolute certainty
No assurance at all
Explanation - Limited assurance provides a moderate level of confidence, usually through inquiry and analytical procedures rather than detailed testing.
Correct answer is: Moderate level of assurance, less than reasonable assurance
Q.20 The conclusion of an assurance engagement is usually communicated through:
Management letter
Assurance report
Financial plan
Internal memo
Explanation - The assurance report communicates the practitioner’s opinion or conclusion to users.
Correct answer is: Assurance report
Q.21 Which of these statements about 'subject matter' is correct?
It is always financial information
It is what the assurance engagement is performed on
It is the auditor’s personal opinion
It refers to the regulatory framework
Explanation - The subject matter can be financial or non-financial information evaluated in an assurance engagement.
Correct answer is: It is what the assurance engagement is performed on
Q.22 In an ISAE 3000 engagement, the practitioner is expected to:
Express an opinion or conclusion based on evidence obtained
Prepare the client’s financial statements
Guarantee accuracy of all information
Provide tax advice
Explanation - ISAE 3000 requires practitioners to express conclusions based on sufficient appropriate evidence.
Correct answer is: Express an opinion or conclusion based on evidence obtained
Q.23 The term 'assurance engagement' can include:
Audit, review, and other assurance services
Only audits
Only financial statement preparation
Only tax audits
Explanation - Assurance engagement is a broad term covering audits, reviews, and other services providing independent assurance.
Correct answer is: Audit, review, and other assurance services
Q.24 Which factor determines the level of assurance provided in an engagement?
Nature and extent of procedures performed
Auditor’s personal preference
Size of the company
Regulatory fines
Explanation - The level of assurance depends on the procedures undertaken and the evidence obtained by the practitioner.
Correct answer is: Nature and extent of procedures performed
Q.25 Who benefits from the assurance provided in an engagement?
Users of the information
Only the auditor
Tax authorities
Internal staff only
Explanation - Assurance engagements are intended to increase confidence for external or internal users of the information.
Correct answer is: Users of the information