CPA REVIEW SCHOOL OF THE PHILIPPINES AT-9001

Manila

AUDITING THEORY CPA Review

AN INTRODUCTION TO ASSURANCE, AUDITING AND RELATED SERVICES

References:

• PREFACE TO THE PHILIPPINE STANDARDS ON QUALITY CONTROL, AUDITING, REVIEW, OTHER

ASSURANCE AND RELATED SERVICES
• PHILIPPINE FRAMEWORK FOR ASSURANCE ENGAGEMENTS
• FRAMEWORK OF PHILIPPINE STANDARDS ON AUDITING (PSA 120)
• OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR AND THE CONDUCT OF AN AUDIT IN
ACCORDANCE WITH PHILIPPINE STANDARDS ON AUDITING
(PSA 200)

THE AUTHORITY ATTACHING TO PHILIPPINE STANDARDS ISSUED BY THE AASC

Standards Application
1. Philippine Standards on Auditing (PSAs) • Audit of historical financial information
2. Philippine Standards on Review • Review of historical financial information
Engagements (PSREs)
3. Philippine Standards on Assurance • Assurance engagements dealing with
Engagements (PSAEs) subject matters other than historical
financial information
4. Philippine Standards on Related • Compilation engagements
Services (PSRSs) • Engagements to apply agreed-upon
procedures to information
• Other related services engagements as
specified by the AASC

1. PSAs, PSREs, PSAEs and PSRSs are collectively referred to as the AASC’s Engagement
Standards.
2. Philippine Standards on Quality Control (PSQC) are to be applied for all services falling under
the AASC’s engagement standards.
3. Philippine Standards are applicable to engagements in the Public Sector.

The Authority Attaching to Practice Statements Issued by the AASC

1. Philippine Practice Statements are issued to:

• provide interpretive guidance and practical assistance to professional accountants in
implementing Philippine Standards; and
• promote good practice.
2. Professional accountants should be aware of and consider Practice Statements applicable to
the engagement.
3. A professional accountant who does not consider and apply the guidance included in a
relevant Practice Statement should be prepared to explain how the basic principles and
essential procedures in the AASC’s Engagement Standard(s) addressed by the Practice
Statement have been complied with.

AASC Bulletins, AASC Alerts and Philippine Auditing Practice Notes (PAPN or Notes)

• Issued by the AASC to provide guidance to auditors in the application of PSAs.

• Not part of PSAs and do not change the requirements of relevant PSAs.

PHILIPPINE FRAMEWORK FOR ASSURANCE ENGAGEMENTS

1. The Framework does not itself establish standards or provide procedural requirements for the
performance of assurance engagements.
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2. In addition to the Framework and PSAs, PSREs and PSAEs, practitioners who perform
assurance engagements are governed by:
• the Philippine Code of Ethics for Professional Accountants; and
• Philippine Standards on Quality Control (PSQCs).

ASSURANCE ENGAGEMENTS

1. “Assurance engagement” means 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.
2. “Subject matter information” refers to the outcome of the evaluation or measurement of a
subject matter.
3. In some assurance engagements, the evaluation or measurement of the subject matter is
performed by the responsible party, and the subject matter information is in the form of an
assertion by the responsible party that is made available to intended users (assertion-
based engagements).
4. In other assurance engagements, the practitioner either directly performs the evaluation or
measurement of the subject matter, or obtains a representation from the responsible party
that has performed the evaluation or measurement that is not available to the intended users.
The subject matter information is provided to the intended users in the assurance report
(direct reporting engagements).

Two Types of Assurance Engagement

1. Reasonable assurance engagement – the objective is a reduction in 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 practitioner’s conclusion.
2. Limited assurance engagement – the objective is a reduction in assurance engagement
risk to a level that is acceptable in the circumstances of the engagement, but where the risk
is greater than for a reasonable assurance engagement, as a basis for a negative form of
expression of the practitioner’s conclusion.

Scope of the Framework

The following are non-assurance engagements and therefore are not covered by the
Framework:

1. Engagements covered by PSRSs such as agreed-upon procedures engagements and

compilations of financial or other information.
2. The preparation of tax returns where no conclusion conveying assurance is expressed.
3. Consulting (or advisory) engagements, such as management and tax consulting.

Elements of an Assurance Engagement

1. A three-party relationship involving:

• a practitioner;
• a responsible party; and
• intended users.
2. An appropriate subject matter;
3. Suitable criteria;
4. Sufficient appropriate evidence; and
5. A written assurance report in the form appropriate to a reasonable assurance engagement or
a limited assurance engagement.

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AUDIT ENGAGEMENTS

1. As defined by the American Accounting Association, an audit is a systematic process of

objectively obtaining and evaluating evidence regarding assertions about economic actions
and events to ascertain the degree of correspondence between these assertions and
established criteria and communicating the results thereof.
2. The following are key concepts obtained from the definition of an audit:
• A systematic process
• It involves objectively obtaining and evaluating evidence about assertions.
• It ascertains the degree of correspondence between assertions and established criteria
• It includes communication of the results to interested users

Types of audit

In compliance with the syllabus in Auditing of the Licensure Examination for CPAs in the
Philippines, the following are the types of audit.

1. As to nature of assertion or data

• Financial statement (FS) audit
• Operational audit
• Compliance audit

2. As to types of auditor
• External audit
• Internal audit
• Government audit

Comparison of the different types of audit

Financial Statements
Operational Audit Compliance Audit
Audit
Assertions Financial statements are Operations are Activities complied with
fairly presented conducted efficiently applicable laws, rules,
and effectively regulations, contracts
or management policy
Suitable GAAP or any other Objective set by the Applicable contracts,
Criteria identified financial management rules, regulations, laws
reporting framework or management policy
Report An opinion whether the Report on efficiency Degree of compliance
financial statements are and effectiveness. This with applicable laws,
fairly presented in will also include rules, regulations, or
conformity with an recommendations to management policy.
identified financial improve operations.
reporting framework
Generally External auditors Internal auditors Government auditors
performed by

OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR AND THE CONDUCT OF AN

AUDIT IN ACCORDANCE WITH PSAs

1. In conducting an audit of financial statements, the auditor’s OVERALL OBJECTIVES are:

a) To obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, thereby enabling the
auditor to express an opinion on whether the financial statements are prepared, in all
material respects, in accordance with an applicable financial reporting framework; and
b) To report on the financial statements, and communicate as required by the PSAs, in
accordance with the auditor’s findings.

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2. The auditor SHALL:

• Comply with all PSAs relevant to the audit.
• Comply with relevant ethical requirements, including those pertaining to
independence relating to financial statement audit engagements.
• Plan and perform an audit with professional skepticism recognizing that
circumstances may exist that cause the financial statements to be materially misstated.
• Exercise professional judgment in planning and performing an audit of financial
statements.
• Obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low
level.

ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

1. The objective of a review of financial statements is to enable a practitioner to state whether,

on the basis of procedures which do not provide all the evidence that would be required in an
audit, anything has come to the practitioner’s attention that causes the practitioner to believe
that the financial statements are not prepared, in all material respects, in accordance with an
identified financial reporting framework (negative assurance).
2. A review comprises INQUIRY and ANALYTICAL PROCEDURES which are designed to review
the reliability of an assertion that is the responsibility of one party for use by another party.
3. A review does not ordinarily involve an assessment of accounting and internal control
systems, tests of records and of responses to inquiries by obtaining corroborating evidence
through inspection, observation, confirmation and computation, which are procedures
ordinarily performed during an audit.
4. The level of assurance provided in a review report is less than that given in an audit report.

ENGAGEMENTS TO PERFORM AGREED-UPON PROCEDURES REGARDING FINANCIAL

INFORMATION

1. In an engagement to perform agreed-upon procedures, an auditor is engaged to carry out

those procedures of an audit nature to which the auditor and the entity and any appropriate
third parties have agreed and to report on FACTUAL FINDINGS.
2. The recipients of the report must form their own conclusion from the report of the auditor.
3. The report is restricted to those parties that have agreed to the procedures to be performed
since others, unaware of the reasons for the procedures, may misinterpret the results.

ENGAGEMENTS TO COMPILE FINANCIAL INFORMATION

1. In a compilation engagement, the accountant is engaged to use accounting expertise as

opposed to auditing expertise to collect, classify, and summarize financial information.
2. It ordinarily entails reducing detailed data to manageable and understandable form without a
requirement to test the assertions underlying that information.
3. The procedures performed are not designed and do not enable the accountant to express any
assurance on the financial information.
4. Users of compiled financial information derive some benefit as a result of the accountant’s
involvement because the service has been performed with due professional skill and care.

SUMMARY
Nature of service Audit Review Agreed-upon Procedures Compilation
Level of assurance High, but not absolute Moderate assurance No assurance No assurance
provided assurance

Report provided Positive assurance on Negative assurance Factual findings of Identification of

assertion (s) on assertion (s) procedures information compiled
(Audit Report) (Review Report) (Compilation Report)

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MULTIPLE CHOICE QUESTIONS

1. The practice of Accountancy includes

I. Practice of Public Accountancy
II. Practice in Commerce and Industry
III. Practice in Education/Academe
A. I and II only
B. II and III only
C. I and III only
D. I, II, and III

2. Which of the following was created by the Professional Regulation Commission (PRC) upon
the recommendation of the Board of Accountancy (BOA) to assist the BOA in the
establishment and promulgation of auditing standards in the Philippines?
A. IFAC
B. AASC
C. FRSC
D. IAASB

3. The Philippine Framework for Assurance Engagements

A. Contains basic principles, essential procedures, and related guidance for the
performance of assurance engagements.
B. Defines and describes the elements and objectives of an assurance engagement, and
identifies engagements to which PSAs, PSREs, and PSAEs apply.
C. Provides a frame of reference for CPAs in public practice when performing audits,
reviews, and compilations of historical financial information.
D. Establishes standards and provides procedural requirements for the performance of
assurance engagements.

4. Which of the following engagements is covered by the Framework for Assurance

Engagements?
A. Compliance audits.
B. Consulting engagements.
C. Agreed-upon procedures engagement.
D. Preparation of tax returns.

5. The Philippine Standards on Assurance Engagements (PSAEs) are to be applied in

A. Compilation engagements and agreements to apply agreed-upon procedures to
information.
B. The audit or review of historical financial information.
C. Assurance engagements dealing with subject matters other than historical financial
information.
D. Assurance engagements dealing with historical financial information.

6. The Philippine Standards on Quality Control (PSQCs) are to be applied to

A. Assurance engagements only.
B. Review engagements only.
C. Compilation and review engagements only.
D. All services that fall under the AASC’s engagement standards.

7. CPAs in public practice who perform assurance engagements are governed by the following,
except
A. Philippine Standards on Related Services
B. Philippine Framework for Assurance Engagements
C. Code of Ethics for Professional Accountants in the Philippines
D. Philippine Standards on Quality Control

8. These statements are issued by the AASC to provide interpretive guidance and practical
assistance to auditors in the implementation of PSAs and to promote good practice.

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A. PAPNs
B. PAEPs
C. PAPSs
D. PREPs

9. Practitioners who perform assurance engagements are governed by the following, except
A. Code of ethics for Professional Accountants in the Philippines
B. Philippine Financial Reporting Standards
C. The Framework to Assurance Engagements
D. Philippine Standards on Quality Control

10. A proposed assurance engagement can be accepted when the practitioner’s preliminary
knowledge about the engagement circumstances indicates that relevant ethical
requirements will be satisfied and
I. The subject matter of the engagement is appropriate.
II. The criteria to be used are suitable and are available to the intended users.
III. The practitioner has access to sufficient appropriate evidence to support the conclusion.
IV. The conclusion is to be contained in a written report.
V. There is a rational purpose for the engagement.
A. I, II, and III only
B. I, II, IV, and V only
C. I, II, III, and IV only
D. I, II, III, IV, and V

11. A practitioner should accept an assurance engagement only if

A. The subject matter is in the form of financial information.
B. The criteria to be used are not available to the intended users.
C. The subject matter is the responsibility of either the intended users or the practitioner.
D. The practitioner’s conclusion is to be contained in a written report.

12. Assurance services are best described as

A. Independent professional services that improve the quality of information, or its context,
for decision makers.
B. Services designed for the improvement of operations, resulting in better outcomes.
C. The assembly of financial statements based on information and assumptions of a
responsible party.
D. Services designed to express an opinion on historical financial statements based on the
results of an audit.

13. The following statements relate to the performance of an assurance engagement other than
an audit or review of historical financial information covered by PSAs and PSREs. Which is
incorrect?
A. Those persons who are to perform the engagement should collectively possess the
necessary professional competence.
B. The practitioner should consider materiality and assurance engagement risk when
planning and performing an assurance engagement.
C. The assurance report should be in writing and should contain a clear expression of the
practitioner’s conclusion about the subject matter information.
D. The practitioner is precluded from using the work of persons from other professional
disciplines.

14. Unlike consulting services, assurance services:

A. Improves the quality of information
B. Report on how to use information
C. Make recommendations to management
D. Are two party contracts

15. In an assurance engagement, the responsible party and the intended users
A. Should be from different entities.
B. Should be from the same entity.

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C. May be from the same entity or different entities.

D. Are both responsible for determining the nature, timing and extent of the procedures to
be performed.

16. The subject matter of an assurance engagement may include

Financial Internal Compliance
Information Controls with Regulation
A. Yes Yes Yes
B. No No No
C. Yes No Yes
D. No Yes No

17. How many separate parties are involved in an assurance engagement?

A. 2
B. 3
C. 4
D. 5

18. When performing an assurance service, professional accountants use standards or

benchmarks to evaluate or measure the subject matter of an assurance engagement. These
are referred to in the Philippine Framework for Assurance Engagements as
A. Criteria.
B. Benchmarks.
C. Standards.
D. Yardsticks.

19. Which of the following statements is true concerning evidence in an assurance engagement?
A. Sufficiency is the measure of the quantity of evidence.
B. Appropriateness is the measure of the quality of evidence, that is, its reliability and
persuasiveness.
C. The reliability of evidence is influenced not by its nature but by its source.
D. Obtaining more evidence may compensate for its poor quality.

20. Relevant criteria contribute to conclusion that are

A. Free from bias.
B. Clear and comprehensive.
C. Subject to different interpretations.
D. Useful for decision making.

21. The criteria against which the subject matter of the assurance engagement is to be
evaluated or measured should possess which of the following characteristics?
Relevant Concise Neutral
A. Yes No Yes
B. No Yes No
C. Yes No No
D. No Yes Yes

22. 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

23. Assurance engagement risk is the risk

A. That the practitioner expresses an inappropriate conclusion when the subject matter
information is materially misstated.
B. Of expressing an inappropriate conclusion when the subject matter information is not
materially misstated.
C. Through loss from litigation, adverse publicity, or other events arising in connection with
a subject matter reported on.

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D. Of expressing an inappropriate conclusion when the subject matter information is either

materially misstated or not materially misstated.

24. The following are components of assurance engagement risk, except

A. Inherent risk
B. Control risk
C. Detection risk
D. Business risk

25. 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.

26. In some assurance engagements, the evaluation or measurement of the subject matter is
performed by the responsible party, and the subject matter information is in the form of an
assertion by the responsible party that is made available to intended users. These
engagements are called
A. Direct reporting engagements
B. Assertion-based engagements
C. Non-assurance engagements
D. Recurring engagements

27. 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. Negative assurance engagement.

28. A practitioner’s assurance report contains the following conclusion:

“Based on our work described in this report, nothing has come to our attention that causes
us to believe that internal control is not effective in all material respects, based on ABC
criteria.”

What type of assurance engagement was performed?

A. Limited assurance engagement.
B. Reasonable assurance engagement.
C. Negative assurance engagement.
D. Positive assurance engagement.

29. Limited assurance is provided for in

A. an audit engagement.
B. a compilation engagement
C. a review engagement.
D. an assurance engagement.

30. The purpose of an audit of financial statements is to

A. Relieve management or those charged with governance of the responsibility for the
preparation and presentation of the financial statements.
B. Obtain an absolute level of assurance that the financial statements as a whole are free
from material misstatement.
C. Enhance the degree of confidence of intended users in the financial statements.
D. Assure the future viability of the entity by expressing an opinion on the entity’s financial
statements.

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31. Which of the following best describes the concept of audit risk?
A. The risk of the auditor being sued because of association with an audit client.
B. The risk that the auditor will provide an unmodified opinion on financial statements that
are, in fact, materially misstated.
C. The overall risk that a material misstatement exists in the financial statements.
D. The risk that auditors use audit procedures that are inappropriate.

32. The overall objectives of the auditor in conducting an audit of financial statements are
I. To obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether caused by fraud or error.
II. To report on the financial statements.
III. To obtain conclusive rather than persuasive evidence.
IV. To detect all misstatements, whether due to fraud or error.
A. I and II only
B. II and IV only
C. I, II, and III only
D. I, II, III, and IV

33. The auditor is required to comply with all PSAs relevant to the audit of an entity’s financial
statements. A PSA is relevant to the audit when
I. The PSA is in effect.
II. The circumstances addressed by the PSA exist.
A. I only
B. II only
C. Either I or II
D. Both I and II

34. Independent auditors of financial statements perform audits that reduce and control
A. The business risks faced by investors.
B. Quality reviews performed by other CPA firms.
C. The information risk faced by investors.
D. The complexity of financial statements.

35. The auditor is required to maintain professional skepticism throughout the audit. Which of
the following statements concerning professional skepticism is false?
A. A belief that management and those charged with governance are honest and have
integrity relieves the auditor of the need to maintain professional skepticism.
B. Maintaining professional skepticism throughout the audit reduces the risk of using
inappropriate assumptions in determining the nature, timing, and extent of the audit
procedures and evaluating the results thereof.
C. Professional skepticism is necessary to the critical assessment of audit evidence.
D. Professional skepticism is an attitude that includes questioning contradictory audit
evidence obtained.

36. Operational audits generally have been conducted by internal and COA auditors, but may
be performed by certified public accountants. A primary purpose of an operational audit is
to provide
A. A measure of management performance in meeting organizational goals.
B. The results of internal examinations of financial and accounting matters to a company’s
top-level management.
C. Aid to the independent auditor, who is conducting the examination of the financial
statements.
D. A means of assurance that internal accounting controls are functioning as planned.

37. Operational auditing is primarily oriented toward

A. Future improvements to accomplish the goals of management.
B. The accuracy of data reflected in management’s financial records.
C. The verification that a company’s financial statements are fairly presented.
D. Past protection provided by existing internal control.
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38. An objective of a performance audit is to determine whether an entity’s

A. Operational information is in accordance with government auditing standards.
B. Specific operating units are functioning economically and efficiently.
C. Financial statements present fairly the results of operations.
D. Internal control is adequately operating as designed.

39. Which of the following terms best describe the audit of a taxpayer’s return by a BIR auditor?
A. Operational audit
B. Compliance audit
C. Internal audit
D. Government audit

40. Governmental auditing often extends beyond examinations leading to the expression of
opinion on the fairness of financial presentation and includes audits of efficiency, economy,
effectiveness, and also
A. Accuracy.
B. Evaluation.
C. Compliance.
D. Internal control.

41. What is the proper organizational role of internal auditing?

A. To serve as an independent, objective assurance and consulting activity that adds value
to operations.
B. To assist the external auditor in order to reduce external audit fees.
C. To perform studies to assist in the attainment of more efficient operations.
D. To serve as the investigative arm of the audit committee of the board of directors.

42. The internal auditing department’s responsibility for deterring fraud is to

A. Establish an effective internal control system.
B. Maintain internal control.
C. Examine and evaluate the system of internal control.
D. Exercise operating authority over fraud prevention activities.

43. In general, internal auditors’ independence will be greatest when they report directly to the
A. Financial vice-president.
B. Corporate stockholders.
C. Corporate controller.
D. Audit committee of the board of directors.

44. Internal auditors review the adequacy of the company’s internal control system primarily to
A. Help determine the nature, timing, and extent of tests necessary to achieve audit
objectives.
B. Determine whether the internal control system provides reasonable assurance that the
company’s objectives and goals are met efficiently and economically.
C. Ensure that material weaknesses in the system of internal control are corrected.
D. Determine whether the internal control system ensures that financial statements are
fairly presented.

45. A practitioner is associated with financial information when

I. The practitioner attaches a report to that financial information.
II. The practitioner consents to the use of his/her name in a professional connection.
A. I only
B. II only
C. Either I or II
D. Neither I nor II

46. Which of the following attributes is more closely associated with attestation services
performed by a CPA firm than with other lines of professional work?
A. Competence.

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B. Integrity.
C. Keeping informed on current professional developments.
D. Independence.

47. Which of the following procedures is not included in a review engagement of an entity?
A. Inquiries of management
B. Inquiries regarding significant events subsequent to the balance sheet date
C. Any procedures designed to identify relationships among data that appear to be unusual
D. A study and evaluation of internal control

48. The following statements relate to the performance of an assurance engagement other than
an audit or review of historical financial information covered by PSAs and PSREs. Which is
incorrect?
A. Those persons who are to perform the engagement should collectively possess the
necessary professional competence.
B. The practitioner is precluded from using the work of persons from other professional
disciplines.
C. The practitioner should consider materiality and assurance engagement risk when
planning and performing an assurance engagement.
D. The assurance report should be in writing and should contain a clear expression of the
practitioner’s conclusion about the subject matter information.

49. May a practitioner accept an engagement to compile or review the financial statements of
an entity if the practitioner is unfamiliar with the specialized industry accounting principles,
but plans to obtain the required level of knowledge before compiling or reviewing the
financial statements?
Compilation Review
A. Yes No
B. No Yes
C. Yes Yes
D. No No

50. When performing a compilation engagement, the accountant is required to

A. Assess internal controls.
B. Make inquiries of management to assess the reliability and completeness of the
information provided.
C. Verify matters and explanations.
D. Obtain a general knowledge of the business and operations of the entity.

51. A summary of findings rather than assurance is most likely to be included in a/an
A. Agreed-upon procedures report.
B. Compilation report.
C. Examination report.
D. Review report.

52. An engagement to perform agreed-upon procedures may involve the auditor in performing
certain procedures concerning
I. Individual items of financial data.
II. A single financial statement.
III. A complete set of financial statements.
A. I and II only
B. II and III only
C. I and III only
D. I, II, and III

53. Which of the following statements concerning consulting services is false?

A. The performance of consulting services for audit clients does not, in and of itself, impair
the auditor’s independence.
B. Consulting services differ fundamentally from the CPA’s function of attesting to the
assertions of other parties.
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C. Consulting services ordinarily involve external reporting.

D. Most CPAs, including those who provide audit and tax services, also provide consulting
services to their clients.

54. Which of the following is the most appropriate action to be taken by a CPA who has been
asked to perform a consulting services engagement concerning the analysis of a potential
merger if he/she has little experience with the industry involved?
A. Accept the engagement but he/she should conduct research or consult with others to
obtain sufficient competence.
B. Decline the engagement because he/she lacks sufficient knowledge.
C. Accept the engagement and issue a report that contains his/her opinion on the
achievability of the results of the merger.
D. Accept the engagement and perform it in accordance with Philippine Standards on
Auditing (PSAs).

55. After accepting an assurance engagement, a practitioner is not allowed to change the
engagement to a non-assurance engagement, or from a reasonable assurance engagement
to a limited assurance engagement, except when there is reasonable justification for the
change. Which of the following ordinarily will justify a request for a change in the
engagement?
I. A change in circumstances that affects the intended users’ requirements.
II. A misunderstanding concerning the nature of the engagement.
A. I only C. Both I and II
B. II only D. Neither I nor II

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