AUDITING THEORY – ACTIVITY

AUDITOR’S REPORT

ANSWER THE FOLLOWING :

1. What type of opinion is appropriate when the auditor concludes than

an audit clients financial statements are prepared in all material
aspects , in accordance with the applicable financial reporting
framework.
a. Unmodified opinion
b. Qualified opinion
c. Adverse opinion
d. Disclaimer of opinion

2. Under PSA 700 (revised ) which of the following is a “modified

opinion “?
a. Qualified opinion
b. Adverse opinion
c. Disclaimer of opinion
d. All of the above

3. If a company’s external auditor expresses an unmodified opinion as a

result of the audit of the company’s financial statements , readers of
the audit report can assume that
a. The external auditor found no fraud
b. The company is financially sound and the financial statements are
accurate
c. Internal control is effective
d. The auditor concludes that the financial statements are prepared in
all material aspects , in accordance with the applicable financial
reporting framework

4. What audit report is appropriate when based on sufficient

appropriate evidence gathered , the auditor concludes that the
financial statements are materially and pervasively misstated and
 accordingly are not prepared in accordance with the applicable
financial accounting framework.
a. Unmodified opinion
b. Qualified opinion
c. Adverse opinion
d. Disclaimer of opinion

5. Which of the following paragraphs included in an audit report refers

to a matter other than those presented or disclosed in the financial
statements that in the auditor’s professional judgment is relevant to
user’s understanding of the audit, the auditor responsibilities or the
auditor’s opinion.
a. Emphasis of matter paragraph
b. Other matters paragraph
c. Other information paragraph
d. Corresponding figures paragraph

6. The other information section of the auditor’s report shall include .

a. A statement that the auditor is responsible for the other information
b. An identification of other information , if any obtained by the auditor
prior to the date of the auditors report
c. An identification of, for an audit of a non listed entity, other
information , if any, expected to be obtained after the date of the
auditor’s report
d. A statement that the auditors opinion covers the other information

7. If a misstatement is immaterial to the financial statements of the

company for the current period, but is expected to have a material
effect in future periods, it is appropriate to express a / an
a. Qualified opinion
b. Unmodified opinion
c. Disclaimer of opinion
d. Adverse opinion

8. To distinguish it from reports that might be issued by others , such

as officers of the entity, the board of directors, or from the reports of
other auditors who may not have to abide by the same ethical
 requirements as the independent auditor, the auditors report shall
have an appropriate
a. Addressee
b. Title
c. Signature
d. Opinion

9. The audit report date on an unmodified reports indicates

a. The last date on which users may institute a lawsuit against either
the client or the auditor
b. The last day of the auditors responsibility for the review of
significant events occurring after the end of the reporting period
c. The end of the reporting period
d. The date on which the financial statements were filed with the SEC

10. The auditor’s report should be addressed

a. Only to the shareholders of the entity whose financial statements are
being audited
b. Only to the board of directors of the entity whose financial
statements are being audited
c. To the CEO or the CFO of the entity whose financial statements are
being audited
d. Either to the shareholders or the board of directors of the entity
whose financial statements are being audited

11. The opinion section of the auditor’s report shall

a. State that the audit was conducted in accordance with the Philippine
standards in auditing
b. Identify the entity whose financial statements have been audited
c. Include a statement that the auditor is independent of the entity
d. State that misstatements in the entity’s financial statements can
arise from fraud or error

12. The responsibilities of management for the financial

statements section of the auditor’s report shall describe
managements responsibilities for
a. Exercising professional judgment in preparing the entity’s financial
statement
b. Obtaining an understanding of the entity’s internal control system
c. Obtaining reasonable assurance about whether the financial
statements as a whole are free from material misstatement , whether
causes by fraud or error.
d. Assessing the entity’s ability to continue as a going concern.

13. An entity’s management is responsible for the preparation and

fair presentation of the financial statements , its responsibility
includes the following except
a. Designing, implementing and maintaining internal control relevant to
the preparation and presentation of financial statements
b. Making accounting estimates that are reasonable in the
circumstances
c. Selecting and applying appropriate accounting policies
d. Assessing the risks of material misstatement of the financial
statements

14. PSA 700 states that for audits of complete sets of general
purpose financial statements of listed entities, the auditor shall
communicate _________ in the auditors report
a. Significant deficiencies in the entity’s internal control system
b. Matters of interest to those charged with governance
c. Other non assurance services performed
d. Key audit matters

15. The basis for opinion section of the auditor’s report shall
a. State that the financial statements have been audited
b. State that the objective of the auditor is to issue an auditor’s report
that includes the auditors opinion
c. Describe managements responsibility for preparing the financial
statements in accordance with the applicable financial reporting
framework
d. State that the audit was conducted in accordance with Philippine
standards on auditing.
16. In which of the following circumstances would an auditor most
likely add an emphasis of matter section to the auditors report while
expressing an unmodified opinion.

a. There is a substantial doubt about the entity’s ability to continue as a

going concern
b. Management estimates of the effects of the future events are
unreasonable
c. No depreciation has been provided in the financial statements
d. Certain transactions cannot be tested because of managements
records retention policy .

17. An auditor’s responsibility to express an opinion on the

financial statements is
a. Implicitly represented in the auditor’s report
b. Explicitly represented in the auditor’s responsibility section of the
auditor’s report
c. Explicitly represented in the managements responsibility section of
the auditors report
d. Explicitly represented in the opinion section of the auditor’s report

18. PSA 705 , modification to the opinion in the independent

auditor’s report, prohibits the auditor from communicating key audit
matters when the auditor expresses a/an
a. Unmodified opinion
b. Qualified opinion
c. Adverse opinion
d. Disclaimer of opinion

19. PSA 700 states that for audits of complete sets of general
purpose financial statements of listed entities, the auditor shall
communicate __________in the auditor’s report.
a. Significant deficiencies in the entity’s internal control system
b. Matters of interest to those charged with governance
c. Other non assurance services performed
d. Key audit matters
20. An independent auditor discovers that a payroll supervisor of a
company being audited has misappropriated 50,000. The company’s
total assets and income before tax are 70 million and 15 million
respectively. Assuming no other issues affect the report , the
auditor’s report will most likely contain a/an
a. Unmodified opinion
b. Disclaimer of opinion
c. Adverse opinion
d. Scope qualification