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Department of Accountancy: Page - 1
Department of Accountancy: Page - 1
1. Which of the following statements is not correct about the unmodified audit report on the
financial statements?
a. The auditor’s report shall include a section with heading “Management responsibility for
the financial statements”
b. The auditor’s report shall include a section with a heading “Auditor’s Responsibility”
c. The auditor’s report shall include a section with a basis “Basis for opinion”
d. The auditor’s report shall include a section with a heading “opinion”
2. Which of the following circumstances would most likely cause the auditor to modify his
opinion?
a. Yes No
b. Yes Yes
c. No No
d. No Yes
3. Which of the following elements of the auditor’s report affirms the auditor’s
independence?
a. Introductory paragraph
b. Auditor’s responsibility
c. Title
d. Signature
4. The auditor’s judgment as to whether the financial statements are presented fairly, in all
material respects, is made in the context of
a. Philippine Standards on Auditing
b. Applicable financial reporting framework
c. The professional ethical requirements
d. generally accepted auditing standards
5. Auditing standards require that the audit report must be titled. This is done in order to
a. indicate that the auditor is a CPA
b. distinguish the independent auditor’s report from the report that must be issued by the
others
c. identify the financial statements audited
d. emphasize management’s responsibility for the fair presentation of the financial
statements
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
7. The element of the auditor’s report that identifies the financial statement audited is the
a. title
b. introductory paragraph
c. management responsibility
d. opinion paragraph
8. The auditor’s opinion covers the complete set of financial statements. A complete set of
financial statements does not include
a. Statement of Comprehensive Income
b. Statement of Changes in Financial Position
c. Statement of Cash Flows
d. Summary of significant accounting policies and other explanatory information
9. Which of the following shall be included in the introductory paragraph of the auditor’s
report?
Name of the entity for whom The title for each statement Period
covered by the
the report is prepared financial
statement
10. PSA 700 requires the auditor’s report to describe management’s responsibility for the
financial statements. The description shall include an explanation that the management is
responsible for the preparation of the financial statements and
a. for selecting and applying appropriate accounting policies
b. for such internal control as it determines necessary to enable the preparation of financial
statements that are free from material misstatements
c. for making accounting estimates that are responsible for the circumstances
d. preventing collusions among employee
11. Which of the following statements is not included in the auditor’s report?
a. An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements.
b. The procedures selected depend on the auditor’s judgment, including the assessment of
the risk of material misstatements, whether due to fraud or error.
c. An audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements
d. An audit also includes evaluating the appropriateness of the accounting policies used and
the reasonableness of accounting estimates made by management, as well as the overall
presentation of the financial statements.
12. PSA 700 requires the audit report to be signed. The auditor’s signature is
a. in the name of the audit firm
b. in the personal name of the auditor
c. both a and b
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
d. either a or b
15. Which of the following is not one of the elements of the auditor’s report?
a. Auditor’s address
b. date of the auditor’s report
c. emphasis of matter
d. auditor’s signature
16. How are management’s responsibility and the auditor’s responsibility represented in the
auditor’s report?
17. The opinion expressed by the audit when the auditor concludes that the financial
statements are prepared, in all material respects, in accordance with the applicable financial
reporting framework is
a. qualified opinion
b. unmodified opinion
c. undeniable opinion
d. denial of opinion
18. Which section off the auditor’s report gives a general description of an audit of financial
statements?
a. introductory part
b. auditor’s responsibility
c. management’s responsibility
d. auditor’s opinion
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
c. disclaimer of opinion
d. audit report with emphasis of a matter paragraph
20. The auditor should express a modified opinion on the financial statements, when
21. The auditor should consider the nature of the item and the significance of effects when
formulating an opinion of the financial statements. Accordingly, the auditor shall express a
qualified opinion when the potential effect of an item under consideration is.
Material Pervasive
a. yes no
b. yes yes
c. no no
d. no yes
22. When financial statements contain material misstatements, the auditor’s report may
contain
23. When the auditor is unable to obtain sufficient appropriate audit evidence, the auditor’s
report may contain
24. The qualified opinion report will be issued by the independent auditor when, in the
auditors judgment, the effects or possible effects of the item under consideration are
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
25. In the extreme cases, such as situations involving multiple uncertainties that are
significant to the financial statements, the auditor may consider it appropriate to express a
a. qualified opinion
b. a report with emphasis of matter paragraph
c. disclaimer of opinion
d. adverse opinion
26. Material misstatements in the financial statements may arise from all of the following
conditions except
a. the appropriateness of selected accounting policies
b. the application of selected accounting policies
c. the appropriateness or adequacy of disclosures in the financial statement
d. the sufficiency and appropriateness of audit evidence
27. The auditor’s inability to obtain sufficient appropriate audit evidence may arise from all
of the following conditions, except
a. restrictions imposed by management of the scope of the audit
b. limitations beyond the control of the entity
c. limitations relating to the nature or timing of the auditor’s work
d. restrictions on the disclosures in the financial statements
a. yes no yes
b. yes yes no
c. no no yes
d. yes yes yes
30. Which of the following is not the correct order of steps that the auditor should follow if,
after accepting the engagement, the auditor becomes aware that the
management has imposed a limitation on the scope of the audit that likely to
result in the modification of opinion in the financial statements?
a. I, II, III
B. III, I, II
c. II, I, II
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
d. III, II, I
31. If the auditor is unable to obtain sufficient appropriate evidence because of limitation
imposed by management, the auditor may
Qualify the opinion Withdraw from engagement
a. yes no
b. yes yes
c. no no
d. no yes
a. explanatory paragraph
b. emphasis of matter paragraph
c. other matter paragraph
d. basis for modification paragraph
34. When an auditor modifies his opinion on the financial statements because of material
misstatements, the basis for modification paragraph shall include
a. yes no
b. yes yes
c. no no
d. no yes
35. When an auditor modifies his opinion on the financial statements because of inability to
obtain sufficient appropriate evidence. The basis for modification paragraph
shall include
a. yes no
b. yes yes
c. no no
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
d. no yes
36. When an auditor expresses a qualified opinion due to material misstatements, the
auditor shall include in the opinion paragraph
a. yes no
b. yes yes
c. no no
d. no yes
37. Inadequacy of disclosure in the notes to financial statements normally requires the
auditors to express a quantified opinion on the client’s financial statement.
When this occurs, the auditor should disclose the substantive reasons for
expressing a qualified opinion in a separate paragraph.
a. preceding the paragraph that describes the auditor’s responsibility
b. following the opinion paragraph
c. within the notes to the financial statements
d. preceding the opinion paragraph
38. an auditor should disclose the substantive reason for expressing an adverse opinion in a
separate paragraph
39. An auditor who qualifies an opinion because of inability to obtain sufficient appropriate
evidence should describe the matter giving rise to the qualification in a
separate paragraph. The auditor should also modify the
a. yes no yes
b. no yes no
c. yes yes yes
d. no yes yes
40. An auditor who qualifies an opinion because of a material misstatements should describe
the matter giving rise to the qualification in a separate paragraph. The auditor should also
modify the
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
a. yes no yes
b. no yes no
c. yes yes yes
d. no yes yes
42. An auditor who disclaims an opinion because of inability to obtain sufficient appropriate
evidence should describe the matter in a separate paragraph. The auditor should also
modify the
a. no no yes yes
b. yes yes yes no
c. yes no yes yes
d. no no no yes
43. The uses of “Emphasis of a Matter” paragraph shall be limited only to those
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
47. Which of the following statements is not correct about ‘emphasis of a matter
paragraph??”
a. the addition of such paragraph is not to be construed as a modification of the auditor’s
report
b. the addition of such paragraph does not affect the auditor’s opinion
c. this paragraph would preferably be presented after the opinion paragraph
d. this paragraph is usually used by the auditor to highlight certain items in the financial
statements
48. Which is the purpose of the following paragraph in an audit report on financial
statements?
“We draw attention to note 15 to the financial statement….”
a. Emphasis of matter
b. qualification of an opinion
c. an inappropriate reporting
d. other matter paragraph
50. How should the “emphasis of the Matter’ and ‘ Other Matter” paragraphs be presented
in the auditor’s report?
a. emphasis of the matter is presented before the auditor’s opinion paragraphs and other
matter paragraphs
b. other matter paragraphs is presented before the emphasis of the matter paragraphs but
after the opinion paragraphs
c. emphasis of a matter paragraphs is presented after the opinion paragraph, but before the
other matter paragraphs
d. other matter paragraphs is presented after the emphasis of a matter paragraphs but
before the opinion paragraphs
51. The auditor should consider adding an emphasis of a matter paragraph to an audit
report when
a. The auditor is prevented from completing a procedure required by PSA
b. the financial statements fail to disclose information required by the PFRS
c. the auditor decides to make reference to report a component auditor
d. an entry disclosed an early supplication of new accounting standard
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
53. When the auditor conclude that the use of the going concern assumption is appropriate
in the circumstances but material uncertainty exist, the auditor shall
a. issue either qualified or adverse opinion
b. consider the adequacy of disclosure in the notes to financial statements
c. report to the audit committee the need to adjust management estimates
d. reissue the prior year report and add an emphasis of a matter paragraphs.
54. Which of the following circumstances will least likely to affect the auditor’s opinion
a. A client imposed scope limitation
b. a circumstances imposed scope limitation
c. inadequacy of disclosure in the notes to financial statements
d. uncertainty arises about entity’s continued existence
55. An auditor that concludes, than an uncertainty is not adequately disclosed in the
financial statements would most likely issue a
a. disclaimer of opinion
b. a report with emphasis of matter paragraph
c. special report
d. qualified opinion
56. An auditor concludes that there is uncertainty about an entity’s ability to continue as a
going concern for a reasonable period of time. If the entity’s disclosure concerning this
matter is adequate, the audit report may include a (n).
57. When the management prepares financial statements on the basis of a going concern
but the auditor believes the use of the going concern assumption is not appropriate, the
auditor shall express
a. a qualified opinion
b. an unmodified opinion with respect to the income statement and an adverse opinion with
respect to the statement of financial position
c. disclaimer of opinion
d. adverse opinion
58. Which of the following best describes the auditor’s responsibility when reporting on
comparatives?
a. for corresponding figures, the auditor, the auditor’s opinion on the financial statement
refers to the current period only
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
b. for all comparatives, the auditor’s opinion refers to each period for which the financial
statements are presented.
c. for all comparatives, the auditor’s opinion the current period only
d. for comparative financial statement, the auditor’s opinion on the financial statements
refers to current period only.
59. A framework of presentation where amounts and other disclosures for the period are
included as na integral part of the current period financial statements, and are intended to
be read only in relation to the amounts and other disclosures relating to the current period.
60. When the audited financial statements of the prior period year are presented together
with those of the current year, the continuing auditor’s report should cover
a. both years
b. only the current year
c. only the current year, but the prior year’s report should be presented
d. only the current year but the prior year should be referred to.
61. An auditor expressed a qualified opinion on the prior year’s financial statements because
of lack of adequate disclosure. These financial statements are properly restated in the prior
year and presented in a comparative form with the current year’s financial statements. The
auditor’s updated report on the prior year’s financial statement should
a. be accompanied by the auditor’s original report on the prior year’s financial statements.
b. continue to express a qualified opinion expressed in prior year’s financial statements
c. make no reference to the type of opinion expressed on the prior year’s financial
statements.
d. disclose the substantive reasons for the different opinion in an Other Matter paragraph
62. When reporting on a comparative financial statements where the financial; statements
of the prior period have been examined by a predecessor auditor whose report is not
presented, the successor auditor should in the other matter paragraph
a. the reasons why the predecessor auditor’s report is not presented
b. the identity of the predecessor auditor who examined the financial statements of the prior
year
c. whether predecessor auditor’s review of the current year’s financial statements revealed
any matter that might have a material effect on the successor auditor’s opinion
d. the type of opinion expressed by the predecessor auditor
63. When reporting on comparative financial statements where the financial statements of
the prior year have been examined by the predecessor auditor whose report is not
presented, the successor auditor should make
a. no reference to the successor auditor
b. reference to the successor auditor only if the predecessor auditor expressed a qualified
opinion
c. . Reference to the successor auditor only if the predecessor auditor expressed an
unmodified opinion
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
d. reference to the predecessor auditor regardless of the type of opinion expressed by the
predecessor auditor
64. Comparative financial statements include the financial statement of the prior year that
was audited by the predecessor auditor whose report is not presented. If the predecessor’s
opinion is not modified, the successor should
a. indicate the substantive reasons for the modification of the predecessor’s report
b. request the client to reissue the predecessor’s report on the prior year’s statement
c. issue an updated comparative audit report
d. express an opinion only on the current year’s statement and make no reference on the
prior year’s statement.
65. Jewel, CPA, audited Infinite Co.’s prior year financial statements. These statements are
presented with those of the current year for comparative purposes without jewel’s auditor’s
report, which expressed a qualified opinion. In drafting the current year’s auditor’s report,
grain CPA, the successor auditor, should
I. Not name jewel as a predecessor auditor
II. Indicate the type of opinion expressed by Jewel
III. Indicate the substantive reasons for Jewels classification
a. I only
b. II and III only
c. I and II only
d. I, II, and III
66. The “other information” in a published report containing audited financial statements
may be relevant to an independent auditor’s examination. With respect to “other
information”
a. the auditor’s responsibility does not extend beyond the financial identified in the report
b. the auditor is obligated to perform auditing procedures to corroborate “other information”
contained in the document
c. the auditor need not be concerned with “other information”
d. the auditor must include ‘other information” in the report
67. The auditor will most likely read the other information
a. primarily to identity material misstatement of the facts
b. before the date of auditor’s report
c. to determine the type of opinion to express on the financial statements
d. to enable him to express an opinion on the other information
68. Before the date of the auditor’s report, the auditor found material inconsistencies
between the other information and the information presented in the financial statements. If
revision of the financial statements is necessary and management refuses to make the
revision, the auditor shall
a. modify the opinion on the financial statements
b. include Other Matter paragraph in the unmodified report to describe the material
inconsistencies
c. disclaim an opinion on the financial statements
d. disclaim an opinion on the other information
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
69. An auditor concludes that there is a material inconsistency in the other information in
the financial report to shareholders containing audited financial statements. If the auditor
concludes that the financial statements do not require revision, but the client refuses to
revise or eliminate the material inconsistency, the auditor may
a. use an “except for” qualified opinion after discussing the matter with the client board of
directors
b. consider the matter closed since the other information is in the audited financial
statements
c. disclaim an opinion on the financial statements after explaining the material inconsistency
in a separate paragraph
d. revise the auditor’s report to include an Other Matter paragraph describing the material
inconsistencies
70. This exist, when other information, not related to matters appearing in the financial
statements, is incorrectly stated or presented
a. material inconsistency
b. material misstatement
c. material misstatement of fact
d. material error affecting the financial statement
71. This exist, when other information contradicts the information contained in the audited
financial statements
a. material inconsistency
b. material misstatement
c. material misstatement of fact
d. material error affecting the financial statement
72. Which of the following best describes the auditor’s responsibility for “other information”
included in the annual report to the stockholders that contains financial statements and the
auditor’s report?
a. the auditor has no obligation to read the other information
b. the auditor has no obligation to corroborate the other information but should read it to
determine whether it is materially inconsistent with the financial statements
c. the auditor should extend the examination to the extent necessary to verify the other
information
d. the auditor must modify the auditor’s report to state that the other information is
unaudited or not covered by the auditor’s report
73. Financial statements prepared in accordance with a special purpose framework are
referred to in PSA 800 as
a. Special Reports
b. Special Purpose Financial Statements
c. Special Consideration
d. Specific Financial Statements
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
77. Which of the following statements is correct with respect to an auditor’s report
expressing an opinion on a specific item of a financial statement?
a. Materiality must be related to the financial statements taken as a whole
b. Such report can only be issued if the auditor is also engaged to audit the entire set of
financial statements
c. the attention devoted to the specific item is usually more that it would be if the financial
statements as a whole were being audited
d. the auditor who has expressed an adverse opinion on the financial statements as a whole
cannot express an opinion on the specific items on the financial statements
79. Which of the following phrases would most likely be found in an auditor’s report
expressing an unmodified opinion on summary financial statements?
a. the summary financial statements are fairly presented in accordance with…
b. the summary financial statements are fairly presented, in all material respects, in
accordance with…
c. the summary financial statements are consistent, in all material respects, with the audited
financial statements, in accordance with…
d. nothing came to my attention which would indicate that the summary financial
statements are not fairly presented in accordance with…
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
80. If the auditor’s report on audited financial statements contains a qualified opinion,
emphasis of a matter paragraph, or other matter paragraph, the auditor’s report on the
summary financial statements need not
a. state that the auditor’s report on the audited financial statements contains qualified
opinion, emphasis of a matter paragraph, or other matter paragraph
b. indicate the effect of such modification on the summary financial statements
c. indicate the basis for expressing qualified opinion, emphasis of a matter paragraph or
other matter paragraph
d. have to contain qualified opinion, emphasis of a matter paragraph or other matter
paragraph
81. If the auditor’s report on audited financial statements contain an adverse or disclaimer
of opinion, the auditor’s report on the summary financial statements should
a. not have to indicate the fact that the auditor’s report on the audited financial statements
contains an adverse or disclaimer of opinion
b. indicate the effect of such modification on the summary financial statements
c. indicate the basis for that opinion
d. contain either an adverse or disclaimer of opinion on the summary financial statements
82. The party responsible for assumptions identified in the preparation of prospective
financial statements is usually
a. a third party-lending institution
b. the client’s management
c. the reporting accountant
d. the client’s independent auditor
83. Given one or more hypothetical assumptions, a responsible party may prepare, to the
best of its knowledge and belief, an entity’s expected financial position, results of
operations, and changes in cash flows. Such prospective financial statements are known as:
a. pro forma financial statements
b. partial presentation
c. financial projections
d. financial forecast
85. Prospective financial information can include financial statements or more elements of
financial statements and may be prepared
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
86. The auditor should consider whether the auditor’s own participation is sufficient to be
able to act as the group auditor. For this purpose the group auditor would consider all of the
following except
a. the materiality of the portion of the financial statements which the group auditor audits
b. the group auditor’s degree of knowledge regarding the business of the components
c. the risk of material misstatements in the financial statements of the components audited
by the component auditor
d. the type of opinion that the group auditor will most likely express on the consolidated
financial statements.
87. Which of the following will not result in the modification of the auditor’s report?
a. restriction imposed by the client
b. reliance placed on the report of the component auditor
c. inability to obtain sufficient competent evidential matter
d. inadequacy in the accounting records.
88. If the group auditor decides to refer in the report to the audit made by the competent
auditor
a. the group auditor assumes responsibility for the report on the other auditor
b. the component auditor is relieved of responsibility for his report but not his work
c. the component auditor is responsible for his report and his work
d. the group auditor is violating the professional standards.
89. Pell, CPA decides to serves as group auditor in the audit of the financial statement of
Tech Consolidated, Inc. Smith CPA audits one of Tech’s subsidiaries. In which situation(s)
should Pell refer to Smith’s audit?
I. Pell reviews Smith’s working papers and assumes responsibility for Smith’s work but
expressed a qualified opinion on Tech’s financial statements
II. Pell is unable to review Smith’s working papers; however, Pell’s inquiries indicate that
Smith has as excellent reputation for professional competence and integrity
a. I only
b. II only
c. both I and II
d. neither I nor II
90. Which of the following does not require modification of audit report?
a. The report is qualified because the financial statements contain a material departure from
GAAP
b. The report includes an emphasis of a matter
c. The audit report on group financial statements where the financial statements of the
components were audited by another auditor
d. the report is qualified because the scope of the auditor’s work is restricted.
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Mindanao State University
College of Business Administration and Accountancy
DEPARTMENT OF ACCOUNTANCY
Marawi City
c. financial statements are prepared on the cash receipts and disbursement basis of
accounting
d. group auditor assumes responsibility for the work of the component auditor
92. When group auditor decides to makes reference to component auditor’s examination,
the group auditor’s report
a. should indicate the magnitude of the portion of the financial statements examined by the
other auditor
b. should indicate disclaimer of responsibility concerning the portion of the financial
statements examined by the other auditor
c. should indicate the name of the component auditor
d. would not be in accordance with the requirements of PSA 600.
93. If group auditor makes no reference to component auditors whose work they have relied
on as a part of the basis for their report, the group auditor
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