CHAPTER PHILIPPINE STANDARDS ON AUDITING I Review Questions Foreign public accounting firms have found that to retain their multinational clients, they have had to develop the capacity to provide services worldwide Although the roots of at least two of the big firms in the United States are traceable to European ancestry, public accounting firm involvement in international activities has paralleled the gradual involvement of businesses in international activities In the early 1900s, some public accounting firms established representative offices in foreign countries As business activity expanded, the firms opened offices in foreign cities During the 1970s, some countries forced these firms to close their offices To be able to serve their clients, the firms established correspondent relationships with locally owned accounting firms; in these relationships, local partners remain separate, local, autonomous organizations Because domestic and foreign partners in a correspondent relationship agree to follow a common code of ethics and practice guidelines, each is able to rely on the work the other performs A big firm auditing a U.S business with significant activities in France, for example, would rely on its Paris office to audit the activities of the business in France The largest firms have organized worldwide partnerships to achieve a greater uniformity of quality, to facilitate management of personnel, and to coordinate research and professional development of personnel Many small public accounting firms establish correspondent relationships with foreign public accounting firms or join a federation Firms in a federation call on one another to perform services for clients, following agreed-upon standards in conducting the work they for one another Yes According to paragraph 10 of the Preface to Philippine Standards on Auditing and Related Services, “an auditor may, in exceptional circumstances, judge it necessary to depart from a PSA in order to more effectively achieve the objective of an audit When such a situation arises, the auditor should be prepared to justify the departure.” No According to paragraph 14 of the Preface to the Philippine Standards on Auditing and Related Services, “PAPSs are issued to provide practical assistance to auditors in implementing the PSAs or to promote good practice These Statements are not intended to have the authority of the PSAs.” 6-2 Solutions Manual - Principles of Auditing and Other Assurance Services Refer to page 211, paragraph of PSA 120 Refer to page 211, paragraph of PSA 120 Refer to page 211, paragraphs 8, and 10 of PSA 120 Refer to page 214, paragraph of PSA 200 Refer to page 214, paragraph of PSA 200 Refer to page 215, paragraph of PSA 200 10 Refer to page 215, paragraph of PSA 200 II Multiple Choice Questions d b b d c c * b and d are also options available to the auditor c d d 10 a * 11 d ...6-2 Solutions Manual - Principles of Auditing and Other Assurance Services Refer to page 211, paragraph of PSA 120 Refer