The auditor should consider adding emphasis of matter paragraph when *

a) The auditor was prevented from completing a procedure required by PSA

b) The company adopt a new accounting standard earlier that its mandatory effective date
c) The financial statements are not free from material misstatements
d) The financial statement is failed to disclose information required by PFRS
At the end of the audit, the auditor is supposed to accumulate and evaluate the need for
adjustment of
a) known uncorrected errors
b) unknown projected errors
c) carrying over of prior year errors
d) all of these
For audits of non-listed entities, the use of key audit matter section is *
a) Discouraged
b) Not required
c) Required
d) Not allowed
If the scope of the examination has been satisfactory for all items except for one of material
amount, the auditor should issue a(an) *
a) qualified opinion
b) adverse opinion
c) unqualified opinion
d) disclaimer of opinion
In which of the following situations would a decision of selecting between qualified or adverse
opinions be inappropriate? *
a) A disagreement between the auditor and the client arose because of the capitalization of
research and development costs.
b) A required disclosure that is significant is omitted from the financial statements.
c) The financial statements are materially misstated.
d) A limitation on the scope of the audit
A major purpose of the auditor's report on financial statements is to *
a) Assure investors of the complete accuracy of the financial statements
b) Deter creditors from extending loans in high-risk situations
c) Enhance the degree of confidence of intended users in the financial statements
d) Describe the specific auditing procedures undertaken to gather evidence of the opinion

The date of the audit report is important because *

a) The date of the auditor's report informs the user of the auditor's report that the auditor has
considered the effect of events and transactions of which the auditor became aware and that
occurred up to the date
b) This date coincides with the date of the financial statements
c) PSAs require all audits to be performed on a timely basis
d) The auditor bills time to the client up to and including the audit report date, and the
statement to the client should reflect this date
The most common type of audit report contains a *
a) Qualified opinion
b) Disclaimer of opinion
c) Unmodified opinion
d) Adverse opinion
The qualified opinion report will be issued by the independent auditor when, in the auditor's
judgment, the effects or possible effects of the item under consideration are *
a) Material but not pervasive
b) Not material and not pervasive
c) Material and pervasive
d) Pervasive but not material
If an amendment to the information in a document containing audited financial statements is
necessary and the entity refuses to make the amendment, the auditor would consider issuing: *
0/1
a) Qualified or disclaimer of opinion
b) Unmodified opinion with other information section
c) Unmodified opinion.
d) Qualified or adverse opinion
The expression of a qualified opinion means that the financial statement, taken as a whole *
a) Not presented fairly
b) Affected by uncertainties
c) Presented fairly
d) Materially misleading
A disclaimer is issued whenever the auditor *
a) Believes that the overall financial statements are not presented fairly.
b) Has determined that the financial statements are presented fairly.
c) Has been unable to satisfy himself/herself that the overall financial statements are
presented fairly.
d) Believes that some material part(s) of the financial statements are not presented fairly.
Whenever there is a scope limitation, the appropriate response is to issue *
a) A qualification of scope and opinion, or a disclaimer, depending on materiality and
pervasiveness of effect
b) A qualified opinion
c) An adverse opinion
d) A disclaimer of opinion
Both disclaimer and adverse opinions are used *
a) When the condition is material and pervasive
b) Irregardless of the auditors independence
c) Regardless of client's choice of unacceptable accounting method.
d) Whether the condition is material or not.
A purpose of a management representation letter is to reduce *
a) The possibility of misunderstanding concerning management’s responsibility for the
financial statements.
b) The scope of an auditor’s procedures concerning related party transactions and
subsequent events.
c) An auditor’s responsibility to detect material misstatements only to the extent that the
letter is relied on.
d) Audit risk to aggregate level of misstatement that could be considered material
When the audited financial statements of the prior 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 referred
d) Only the current year, but the prior year's report should be presented.
If the auditor believes that a required material disclosure is omitted from the financial statements,
the auditor should decide between issuing a (n) *
a) Unmodified opinion or a qualified opinion
b) Adverse opinion or a disclaimer opinion
c) Qualified opinion or an adverse opinion
d) Disclaimer of opinion or a qualified opinion
In addition to the company’s financial statements, which of the following would be covered by
the auditor’s standard report? *
a) The company’s tax return for the year being audited
b) Comparative figures in the financial statements
c) The company’s budget for the net income for the year being audited.
d) The notes to the financial statements
The auditor's judgement as to whether the financial statements are presented fairly, in all material
respects, is made in the context of *
a) Applicable financial reporting framework
b) The professional ethical requirements
c) Philippine Standards on Auditing
d) Generally accepted auditing standards
The opinion expressed by the auditor 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) Undeniable opinion
c) Unmodified opinion
d) Denial of opinion
10 of 10 points
Which of the following best describes a CPA’s engagement to report on an entity’s internal
control over financial reporting? *
a) an attestation engagement to examine and report on management’s written assertions
about the effectiveness of its internal control.
b) a consulting engagement to provide constructive advice to the entity on its internal
control.
c) an audit engagement to render an opinion on the entity’s internal control.
d) a prospective engagement to project, for a period of time not to exceed one year, and
report on the expected benefits of entity’s internal control.
William became the new auditor for Notting Corporation, succeeding Anna who audited the
financial statements last year. William needs to report on Notting’s comparative financial
statements and should write in his report an explanation about another auditor having audited the
prior year: *
a) describing the audit but not revealing the type of opinion Anna gave.
b) only if Anna’s opinion last year was qualified.
c) describing the audit and the opinion and naming Anna as the predecessor auditor.
d) describing the prior audit and the opinion but not naming Anna as the predecessor
auditor.
An auditor’s report on financial statements prepared in accordance with another comprehensive
basis of accounting should include all of the following except *
a) an opinion as to whether the financial statements are presented fairly in conformity with
the other comprehensive basis of accounting.
b) a statement that the basis of presentation is a comprehensive basis of accounting other
than financial reporting standards.
c) an opinion as to whether the basis of accounting used is appropriate under the
circumstances
d) reference to the note to the financial statements that describes the basis of presentation.
In connection with a proposal to obtain a new client an accountant in public practice is asked to
prepare a written report on the application of accounting principles to a specific transaction. The
accountant’s report should include a statement that *
a) the guidance provided is for management use only and may not be communicated to the
prior or continuing auditors.
b) nothing came to the accountant’s attention that caused the accountant to believe that the
accounting principles violated financial reporting standards.
c) any difference in the facts, circumstances, or assumptions presented may change the
report.
d) the engagement was performed in accordance with Statements on Standards for
Consulting Services.
When reporting on comparative financial statements, an auditor should ordinarily change the
previously issued opinion on the prior year’s financial statements if the *
a) prior year statements are restated to conform with financial reporting standards.
b) prior year statements are restated following a pooling of interests in the current year.
c) auditor is a predecessor auditor who has been requested by a former client to reissue the
previously issued report.
d) prior year’s opinion was unqualified and the opinion on the current year’s financial
statements is modified due to a lack of consistency.
Which of the following best describes the auditor’s responsibility for “other information”
included in the annual report to stockholders that contains financial statements and the auditors’
report? *
a) the auditor should extend the examination to the extent necessary to verify other
information.
b) the auditor has no obligation to corroborate other information but should read it to
determine whether it is materially inconsistent with the financial statements.
c) the auditor must modify the auditor’s report to state that the other information is
unaudited or not covered by the auditor’s report.
d) the auditor has no obligation to make the other information
Comparative financial statements include the financial statements of the prior year, which were
audited by a predecessor whose report is not presented. If the predecessor’s report was qualified,
the successor should *
a) issue an updated comparative audit report indicating the division of responsibility.
b) request the client to reissue the predecessor’s report on the prior year’s statements.
c) indicate the substantive reasons for the qualification in the predecessor’s opinion.
d) express an opinion only on the current year’s statements and make no reference to the
prior year’s statements.
Alpha Life Insurance Co. prepares its financial statements on an accounting basis insurance
companies use pursuant to the rules of an insurance commission. If Abad, CPA. Alpha’s auditor,
discovers that the statements are not suitably titled, Abad should *
a) explain in the notes to the financial statements the terminology used.
b) disclose any reservation in an explanatory paragraph and qualify the opinion.
c) issue a special statutory basis report that clearly disclaims any opinion.
d) apply to the insurance commission for an advisory opinion.
When reporting on financial statements prepared on the same basis of accounting used for
income tax purposes, the auditor should include in the report a paragraph that *
a) states that the income tax basis of accounting is a comprehensive basis of accounting
other than financial reporting standards.
b) refers to the authoritative pronouncements that explain the income tax basis of accounting
being used.
c) emphasizes that the financial statements are not intended to have been examined in
accordance with generally accepted auditing standards.
d) justifies the use of the income tax basis of accounting
Which of the following best describes the auditor’s reporting responsibility concerning
information accompanying the basic financial statements in an auditor-submitted document? *
a) the auditor should report on all the information included in the document.
b) the auditor should report on the information accompanying the basic financial statements
only if he or she participated in preparing the accompanying information.
c) the auditor should report on the basic financial statements but may not issue a report
covering the accompanying information.
d) the auditor should report on the information accompanying the basic financial statements
only if the document is being distributed to public shareholders.