(A REVIEW SCHOOL OF THE PHILPPINES (CHAR) MANILA [FINAL PREBOARD EXAMINATION. sem. 21, 28. (SaTUaar 000M = 6:9et4 5. Inwhich btuatons the auctor mast ely note Include an emphass-omattrparagrach in the auditor's report? ‘A. Unusjally important subsequent events occurred. B. Signiffcant transactions with related parties were recorded. C. Theclent suffered a major catastrophe. D. An nt audit procedure was performed. 6. An auditor expressed a qualified opinion on the prior year's financial statements because of 2 lack off adequate disclosure. These financial statements are properly restated in the ‘current year and presented in comparative form with the current year’s financial statements. ‘The audithr’s updated report on the prior year’s financial statements should A ‘an unmodified opinion on the restated financial statements of the prior year. B._be aclompanied by the auditors original report on the prior year's financial statements. C. continue to express a qualified opinion on the prior year’s financial statements. . makelno reference to the type of opinion expressed on the prior year’s financial ents. 2. The a date for the client to specify as the effective date in the audit inquiry to legal course is ‘A. As cloge to the date of the auditor's report as possible. BL The date of the audit inquiry itself. c ‘working days after the request is received by legal counsel. . The ehd of the reporting period. 8. In perforphing tests concerning the granting of stock options, an auditor should ine that sufficient treasury stock is availabe to cover any new stock issued. 8 Tracethe authorization for the transaction to a vote of the board of directors. the transaction with the Secretary of Finance. ‘whose purpose is to search for fraud. | activity that measures and communicates financial and business data. CC. Adisdpline that attests to financial information presented by management. . A regylatory function that prevents the issuance of improper financial information. 10. Which of the following statements best describes a positive request for confirmation of an accounts feceivable balance? 'A. The cjstomer will be asked to indicate to the auditor the current balance in the account. B. The will be asked to respond to the confirmation request only if the balance Indicated in the request Is incorrect. . The cpstomer vill be asked to inform the auditor whether the balance indicated in the request is correct and to respond regardless of whether such stated balance is correct. The cijstomer will be asked to indicate to the auctor the balance in his/her account only ifitis positive (i.e, greater than zero). | Items 11 15 are based on the folowing independent situations for which you wil recommend ‘an appropriate audit opinion, from the following alternatives: = Unmodified = Qualified > Adverse = Discletmer oe> 11. During the course of his audit of the financial statements of a corporation for the purpose Of expressing an opinion on the statements, 2 CPA is refused permission to inspect the‘CPA REVIEW SCHOOL OF THE PHILIPPINES (CORR) ~ MANILA FINAL PREBOARD EXAMBNATION ‘aura TABOR SATURDAY / 5:00 = 600M 19, 20. 2. 24. 2 = ‘An auditor concludes that there is a material inconsistency in the other information in an ‘annual report to shareholders containing audited financial statements. The auditor believes that the finandal statements do not require revision, but the cient is unwilling to revise or eliminate the material inconsistency in the other information. Under these circumstances, ‘what action would the auditor most likely take? ‘A. Consider the situation closed because the other information is not in the audited financial statements. Issue an “except for" qualified opinion after discussing the matter with the dent's audit ‘committee. . Disciaim an opinion on the financial statements after explaining the material Inconsistency in a separate “Other Information” section following the Basis for Opinion Section. D. Revise the auditor's report to include a separate section with a heading "Other Information” describing the uncorrected material misstatement of the other information. ‘The Auditing and Assurance Standards Council (ASC) was established by the. AL PICA. PICPA and the Association of CPAs in Public Practice (ACPAPP). International Federation of Accountants (IFAC). Professional Regulation Commission (PRC) upon the recommendation of the Board of ‘Accountancy (BOA). ene Which of the following statements relating to stratification is incorrect? ‘A. When performing tests of details of transactions and account balances, the. population Js often stratified by monetary value. B, The results of audit procedures applied to 2 sample of items within a stratum can be projected to the entire population. CC. When verifying the valuation assertion for accounts receivable, account balances may be stratified by age. i | D. Stratification reduces the variability of items within each stratum ‘The following are correct statements concering the audit of fair value measurements and disclosures, except ‘A. The auditor is responsible for predicting future conditions, transactions or events, which, had they been known at the time of the audit, may have had a significant effect on management's actions or management's assumptions underlying the fait value measurements and disciosures. 8. The auditor. should obtain sufficient appropriate audit evidence that fair value ‘measurements and disclosures are in accordance with PFRS. C Many measurements based on estimates, including fair value measurements, are inherently imprecise. | ©. The auditor's Of the assumptions used Is based on information available to the auditor at the tine of the audit. \Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle? AA. Fictitious transactions may be recorded that cause an understatement of revenues and an overstatement of receivables. B. Claims received from customers for goods returned may be intentionally recorded in other customers’ accounts. . Authorization of credit memes by personnel who recelve cash may permit the misappropriation of cash. ” . The failure to prepare shipping documents may cause an overstatement of inventory balances. [A practitioner's report issued after compiling the financial statements of an entity should state that: A. We are not aware of any material. modifications that should be made to the accompanying financial statements.(PA REVIEW SCHOOL OF THE PHILIPPINES (CPAR)- MANILA [FINAL PREBOARD EXAMINATION e504, 23, 208 {SAT.RDAY/ S009M = 6.9088 « ‘and supporting documents should be marked “paid” immediately after the check is retujmed with the bank statement. D should be sent directly to the payee by the employee who prepares documents that althorize check preparation. 31. A major clistomer of an audit cient suffers a fire just prior to completion of year-end field ‘work. The auait client believes that this event could have a significant effecton the financial , The auditor should management to disclose the event in notes to the financial statements. the event inthe auditor's report. submission of the auditor's report unti! the extent of the direct effect on the jal statements is known. management to adjust the financial statements. file of the auditor's working papers generally should include tof the internal controls. charts. of the financial statements. (of bond and note indentures.. gees 223592 8 goers 9 MBP 33. Familiarity threat could be created under the following circumstances, excent ‘A. A mempber of the engagement team is the spouse of the accounting manager of the chert B ber of the engagement team is the spouse of one of the members of the Board error of the lew CC. Seniog personnel of the engagement team having a long association with the assurance client DA jonal accountant accepting gifts from a dlient whose value is inconsequential or trival. 34. After obtaining a preliminary understanding of a client's computer control structure, an uitor may decide not to perform test of controls auditing related to the control procedures {computerized portion of the client's control system. Which of the following would lid reason for choosing to omit tests of controls auditing? ‘and peso costs of testing exceed the time and peso savings in substantive the tests of computer controls show the controls to operate effectively. jent’s controt procedures appear adequate enough to justify a low control risk 35. Which statement is incorrect regarding the characteristics of a CIS organizational structure? ‘A. Certain data processing personnel may be the only ones with a detailed knowledge of the interrelationship between the source of data, how itis processed and the distribution and uge of the cutpet. B, Many conventional controls based on adequate segregation of incompatible functions ‘may Nh exist, or in the absence of access end other controls, may be less effective. . Transaction and master fle data are often concentrated, usually in machine-readable form. | D. Systems employing CIS methods de not include manual operations since the number of persoyfs involved in the processing of financial information is significantly reduced. 36. Each time! an auditor araws @ conclusion based or) evidence from a sample, an additional risk, sampling risk, 's introduced. An example of samoling risk Is ‘A. Improperly appiving a proper audit procedure to sample data. B. Properly appiying an improper audit procedure te sample data. C.__Drawing an erroneous: conclusion from sample data.