Audit Reports on Financial Statements.docx

7/21/2019 Audit Reports on Financial Statements.docx

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Unmodifed Report

1. Which of the following parties is responsible for the fairness of the

representations made in nancial statement?

a. Client’s management

b. Independent auditor

c. Audit committee

d. PICPA

2. PA !"" pro#ides guidance on the$

a. Audit report that includes a modied opinion.

b. Audit report that includes an unmodied opinion.

c. Audit report that includes an unmodied opinion% though the

auditor’s report is modied due to an emphasis of matter.

d. Audit report% irrespecti#e of the t&pe of opinion issued b& the

auditor.'. Which of the following statement is not correct about the unmodied

audit report on the nancial statement?

a. (he auditor’s report shall include a section with a heading

)*anagement +esponsibilit& for the nancial statement,

b. (he auditor’s report shall include a section with a heading

)Auditor’s +esponsibilit&,

c. (he auditor’s report shall include a section with a heading )-asis

for pinion,

d. (he auditor’s report shall include a section with a heading

)pinion,

/. What is the o#erriding benet of ha#ing uniformit& in the report?

a. 0niformit& promotes credibilit& in the global maretplace b&

maing more readil& identiable those audits that ha#e been

conducted in accordance with globall& recognied standards.

b. 0niformit& in the form promotes the e3pression of unmodied

opinion.

c. 0niformit& lessens the auditor’s legal and ci#il liabilities.

d. (he audit report eliminates some disclosures re4uired in the

nancial statements.5. Which of the following elements of the auditor’s report a6rms the

auditor’s independence?

a. Introductor& paragraph

b Auditor’s +esponsibilit&

c. (itle

d. ignature



7. (he auditor’s 8udgment as to whether the nancial statements are

presented fairl&% n all material respects% is made in the conte3t of

a. Philippine tandard on Accounting

b. Applicable nancial reporting framewor

c. (he professional ethical re4uirements

d. 9enerall& accepted auditing standards

!. Auditing standards re4uire that the audit report must be titled. (his is

done in order to

a. indicate that the auditor is a CPA

b. distinguish the independent auditor’s report from the reports that

might be issued b& others

c. identif& the nancial statements audited

d. emphasie management’s responsibilit& for the fair presentation

of the nancial statements

:. (he auditor does not normall& address the report toa. (hose for whom the report was prepared.

b. (he president of Client Compan&.

c. (hose charged with go#ernment of Client Compan&.

d. (he stocholders of the client compan&.

;. (he elements of the auditor’s report that identies the nancial

statement audited is the

a. title

b. introductor& paragraph

c. management responsibilit&

d. opinion paragraph

1". (he auditor’s opinion co#ers the complete set of nancial statements.

A complete set of nancial statements does not include

a. tatement of Comprehensi#e Income

b. tatement of Changes in <inancial Position

c. tatement of Cash <lows

d. ummar& of signicant accounting policies and other e3planator&

information

11. Which of the following shall be included in the introductor& paragraph

of the auditor’s report?

Name o the entity

or whom report is

prepared

The title o each

statement

Period covered by

the fnancial

statements

a. => => =>b. => =>c. => =>



d. => =>

12. PA !"" re4uires the auditor’s report to describe management’s

responsibilit& for the nancial statements. (he description shall include

an e3planation that management is responsible for the preparation of

the nancial statements and

a. <or selecting and appl&ing appropriate accounting policies

b. <or such internal control as it determines necessar& to enable the

preparation of

<inancial statements that is free from material misstatement

c. <or maing accounting estimates that are reasonable in the

circumstances

d. Pre#enting collusion among emplo&ees

1'. Which of the following statements is not included in the auditor’s

report?a. An audit in#ol#es performing procedures to obtain audit e#idence

about the amounts and disclosures in the nancial statements

b. (he procedures selected depend on the auditor’s 8udgment%

including the assessment of the ris of material misstatements%

whether due to fraud or error

c. An audit includes e3amining on a test basis% e#idence supporting

the amounts and disclosures in the nancial statements

d. An audits includes e#aluating the appropriateness of the

accounting policies used and the reasonableness of accounting

estimates made b& management% as well as the presentation of

the nancial statements

1/. PA !"" re4uires the audit report to be signed. (he auditor’s signature

should be

a. In the name of the audit rm

b. In the personal name of the auditor

c. >ither a or b

d. either a or b

15. (he date of the audit report is important because

a. (he date of the auditor’s report informs the user of the auditor’sreport that the auditor has considered the e@ect of e#ents and

transactions of which the auditor became aware and that

occurred up to that date.

b. (he auditor bills time to the client up to and including the audit

report date% and the statement to the client should reect this

date



c. PAs re4uire all audits to be performed on a timel& basis

d. (his date coincides with the date of the nancial statements

17. (he date of the auditor’s report

a. Coincides with the date the nancial statements are issued

b. hould be the same as the nancial statements date

c. Can be earlier than the date which the auditor has obtained

su6cient appropriate audit e#idence on which to base his

opinion

d. hould not be earlier than the date of the appro#al of nancial

statements

1!. An audit report should be dated as of the

a. date the report is deli#ered to the entit& audited

b. date the nancial statements were appro#ed b& the client

management

c. balance sheet date of the latest period reported ond. date a letter of audit in4uir& is recei#ed from the entit&’s

attorne&

1:. If the statement of nancial position of a compan& s dated Becember

'1% 2"15% the audit report is dated <ebruar& :% 2"17% and both are

released on <ebruar& 15% 2"17% this indicates that the auditor has

searched for subse4uent e#ents that occurred up to$

a. Becember '1% 2"15

b. anuar& 1% 2"17

c. <ebruar& :% 2"17

d. <ebruar& 15% 2"17

1;. Which of the following is not one of the elements of the auditor’s

report?

a. Auditor’s address

b. Bate of the Auditor’s report

c. >mphasis of matter

d. Auditor’s signature

2". (he auditor’s address is indicated in the auditor’s report b&$

a. aming the location in the countr& where the auditor practices

his professionb. Including the complete mailing address of the auditor

c. identif&ing the countr& where the auditor had secured his

professional license

d. Addressing the report to the staeholders or the audit client

21. Dow are management’s responsibilit& and the auditor’s responsibilit&

represented in the auditor’s report?



Management’s Responsibility Auditor’s

Responsibility

a. >3plicitl& >3plicitl&

b. Implicitl& Implicitl&

c. Implicitl& >3plicitl&

d. >3plicitl& Implicitl&

22. (he opinion e3pressed b& the auditor when the auditor concludes that

the nancial statements are prepared% in all material respects% in

accordance with the applicable nancial reporting framewor is

a. Eualied opinion

b. 0nmodied opinion

c. 0ndeniable opinion

d. Benial of opinion

2'. (he most common t&pe of audit report contains aFnG

a. ad#erse opinionb. 4ualied opinion

c. disclaimer opinion

d. unmodied opinion

2/. Which section of the auditor’s report gi#es a general description of an

audit of nancial statements?

a. Introductor& paragraph

b. Auditor’s responsibilit&

c. *anagement’s responsibilit&

d. Auditor’s pinion

Report that contains Modifed pinion

25. (he ad#erse opinion report will be issued b& the independent auditor

when heHshe

a. uspects that client has not followed the identied nancial

reporting framewor.

b. uspects that the client’s nancial statements are not in

conformit& with PAs.

c. has nowledge that the nancial statements are not inconformit& with the applicable nancial reporting framewor.

d. Das nowledge that PAs were not followed.

27. A disclaimer is issued whene#er the auditor

a. Das been unable to satisf& himselfHherself that the o#erall

nancial statements are presented fairl&.



b. -elie#es that the o#erall nancial statements are not presented

fairl&.

c. -elie#es that some material partFsG of the nancial statements

are not presented fairl&.

d. Das determined that the nancial statements are presented

fairl&.

2!. -oth disclaimer and ad#erse opinion are used

a. When the condition is material and per#asi#e

b. Irregardless of the auditor’s independence

c. Whether the condition is material or not

d. Irregardless of the client’s choice of unacceptable accounting

method

2:. Which of the following circumstances would most liel& cause the

auditor to modif& his opinion?

!mmaterial Misstatements "cope#imitation

a. =es o

b. =es =es

c. o o

d. o =es

2;. (he auditor should e3press a modied opinion on the nancial

statements% when

The auditor

wants to draw

reader’s

attention to an

important

matter

The fnancial

statements are

not ree rom

material

misstatement

The auditor is

unable to

obtain

su$cient

appropriate

evidencea. =es =es =esb. =es o =esc. o =es =esd. =es =es o

'". If the auditor’s belie#e that a re4uired material disclosure is omitted

from the nancial statements% the auditor should decide between

issuing aFnG

a. Eualied opinion or an ad#erse opinion

b. Bisclaimer of opinion or a 4ualied opinion

c. Ad#erse opinion or a disclaimer opinion



d. 0nmodied opinion or a 4ualied opinion

'1. An auditor is confronted with an e3ception su6cientl& material to

warrant a modication of the audit report. If the e3ception relates to a

departure from the P<+% the auditor must decide between e3pressing

aFnG

a. Ad#erse opinion and an unmodied opinion.

b. Ad#erse opinion and a 4ualied opinion.

c. Ad#erse opinion and a disclaimer opinion.

d. Bisclaimer of opinion and a 4ualied opinion.

'2. In which of the following situation would a decision of selecting

between 4ualied or ad#erse opinions be inappropriate?

a. In limitation in the scope of the audit

b. (he nancial statements are materiall& misstated

c. A disagreement between the auditor and the client arose

because of the capitaliation of researched and de#elopmentcosts

d. A re4uired disclosure that is signicant is omitted from the

nancial statements

''. (he auditor should consider the nature of the item and the signicance

of e@ect when formulating an opinion on nancial statements.

Accordingl&% the auditor shall e3press a 4ualied opinion when the

potential e@ect of an item under consideration is

Material Pervasive

a. =es o

b. =es =es

c. o o

d. o =es

'/. When nancial statements contain material misstatements% the

auditor’s report ma& contain

%ualifed pinion Adverse pinion &isclaimer

pinion

a. =es o =es

b. =es =es o

c. o o =esd. =es =es =es

'5. When the auditor is unable to obtain su6cient appropriate audit

e#idence% the auditor’s report ma& contain

%ualifed pinion Adverse pinion &isclaimer

pinion



a. =es o =es

b. =es =es o

c. o o =es

d. =es =es =es

'7. (he 4ualied opinion report will be issued b& the independent auditor

when% in the auditor’s 8udgment% the e@ects or possible e@ects of the

item under consideration are

a. *aterial and per#asi#e

b. *aterial but not per#asi#e

c. Per#asi#e but not material

d. ot material and not per#asi#e

'!. An auditor was unable to obtained audited nancial statements or

other e#idence supporting an entit&’s in#estment in a large subsidiar&.

-etween which of the following opinions should the entit&’s auditorchoose?

a. Ad#erse and unmodied opinion

b. Bisclaimer and unmodied opinion with emphasis of matter

paragraph

c. Eualied and ad#erse opinion

d. Eualied and disclaimer of opinion

':. In e3treme cases% such as situation in#ol#ing multiple uncertainties

that are signicant to the nancial statements% the auditor ma&

consider it appropriate to e3press aFnG

a. Eualied opinion

b. +eport with >mphasis of a *atter paragraph

c. Bisclaimer opinion

d. Ad#erse opinion

';. (he e3pression o a 4ualied opinion means that the nancial

statements% taen as whole are

a. *ateriall& misstated

b. *ateriall& misleading

c. Presented fairl&

d. Bo not present fairl&/". *aterial misstatements in the nancial statements ma& arise from all

of the following conditions% e3cept

a. (he appropriateness of the selected accounting policies

b. (he application of the selected accounting policies

c. (he appropriateness or ade4uac& of disclosures in the nancial

statements



d. (he su6cienc& and appropriateness of audit e#idence

/1. When management does not amend the nancial statements in

circumstances where the auditor belie#es the& need to be amended

and the auditor’s report has not been released to the entit&% the

auditor should e3press

a. >ither 4ualied or ad#erse opinion

b. >ither 4ualied or disclaimer of opinion

c. An unmodied opinion with emphasis of matter paragraph

d. An unmodied report

/2. (he auditor’s inabilit& to obtain su6cient appropriate audit e#idence

ma& arise from all of the following conditions% e3cept

a. +estriction imposed b& management on the scope of the audit

b. imitations be&ond the control of the entit&

c. imitations relating to the nature or timing of the auditor’s wor

d. +estriction on the disclosures in the nancial statements/'. Circumstance imposed scope limitations include those that are$

'eyond the

control o the

entity

Related to the

nature or timing

o the auditor’s

wor(

Related to

client’s re)uest

to omit certain

proceduresa. =es o =esb. =es =es oc. o o =es

d. =es =es =es

//. Which of the following is an e3ample of circumstances imposed scope

limitation relating to the nature or timing of the auditor’s wor?

a. (he entit&’s accounting records were destro&ed b& a recent

catastrophe.

b. (he auditor determined that substanti#e tests alone are not

su6cient but the internal control is not reliable.

c. management pre#ents the auditor from obser#ing the ph&sical

count of in#entor&.

d. (he entit& is re4uired to use the e4uit& method of accounting for

in#estment in associate but the client opted to use the fair #alue

method.

/5. Which of the following is the correct order of steps that the auditor

should follow if% after accepting the engagement% the auditor becomes

aware that management has imposed a limitation on the scope of the



audit that liel& to result in a modication of opinion on the nancial

statements?

I. (he auditor shall re4uest the management to remo#e the limitation

II. (he auditor shall communicate the matter to those charged with

go#ernance

III. (he auditor shall determine whether it is possible to perform

alternati#e procedures

a. I% II% III

b. III% I% II

c. II% I% III

d. III% II% I

/7. If the auditor is unable to obtain su6cient appropriate e#idence

because of a limitation imposed b& management% the auditor ma&

%ualiy the opinion *ithdraw rom

engagement a. =es o

b. =es =es

c. o o

d. o =es

/!. In maing a decision of whether to disclaim an opinion or withdraw

from engagement due to a client imposed limitation% the auditor should

consider

a. (he materialit& of the item under consideration

b. (he per#asi#eness of e@ect on nancial statements

c. -oth the materialit& and per#asi#eness should be considered

d. (he stage of completion of the engagement at the time the

management imposed the scope limitation

/:. When an auditor e3presses a 4ualied% an ad#erse or a disclaimer of

opinion on the nancial statements% the auditor’s report shall include a

separate paragraph that pro#ides a description of the matter gi#ing

rise to the modication. (his paragraph is called

a. >3planator& paragraph

b. >mphasis of matter paragraph

c. ther matter paragraphd. -asis for modication paragraph

/;. When an auditor modies his opinion on the nancial statements

because of material misstatements% the basis for modication

paragraph shall include

A description o

material

A )uantifcation o

e+ects o



misstatement misstatement, i

practicablea. =es ob. =es =esc. o o

d. o =es

5". When an auditor modies his opinion on the nancial statements

because of inabilit& to obtain su6cient appropriate e#idnece% the basis

for modication paragraph shall include

A description o scope

limitation

A )uantifcation o

e+ects o

misstatement, i

practicablea. =es o

b. =es =esc. o od. o =es

51. Inade4uac& of disclosure in the notes to nancial statements normall&

re4uires the auditor to e3press a 4ualied opinion on the client’s

nancial statements. When this occurs% the auditor should disclose the

substanti#e reason for e3pressing a 4ualied opinion in the

a. >mphasis of matter paragraph

b. ther matter paragraph

c. otes to the nancial statements

d. -asis for modication paragraph

52. An auditor should disclose the substanti#e reason for e3pressing an

ad#erse opinion in a separate paragraph

a. Preceding the management’s responsibilit& for the nancial

statements

b. Preceding the opinion paragraph

c. <ollowing the opinion paragraph

d. Within the notes to the nancial statements

5'. An auditor who 4ualies an opinion because of inabilit& to obtainsu6cient appropriate e#idence should describe the matter gi#ing rise

to the 4ualication in a separate paragraph. (he auditor should also

modif& the

Management

Responsibility

or the -inancial

Auditor’s

Responsibility

Auditor’s

opinion



statementsa. =es o =esb. o =es oc. =es =es =esd. o =es =es

5/. An auditor who disclaim an opinion because of inabilit& to obtain

su6cient appropriate e#idences should describe the matter in a

separate paragraph. (he auditor should also modif& the

!ntroductory

paragraph

Managemen

t’s

responsibilit

y

Auditor’s

responsibilit

y

Auditor’s

opinion

a. o o =es =esb. =es =es =es o

c. =es o =es =esd. o o =es =es

>mphasis of *atter and ther *atter Paragraph

55. Which of the following is not to be construed as a modication of

opinion?

a. Eualied opinion

b. Ad#erse opinion

c. Bisclaimer of opinion

d. Audit report with emphasis of matter paragraph

57. (he use of an )>mphasis of *atter’ paragraph shall be limited onl& to

those matters

a. Bisclosed in the nancial statements

b. A@ecting the auditor’s opinion

c. ot presented in the nancial statements

d. In#ol#ing an uncertaint&

5!. (he )ther *atter, paragraph is used b& the auditor

a. (o draw the reader’s attention to a matter that is presented in

the nancial statementsb. (o draw the reader’s attention to a matter that is disclosed I the

notes to nancial statements

c. (o draw the reader’s attention to a matter that is not presented

or disclosed in the nancial statements

d. (o draw the reader’s attention toa matter that caused the auditor

to modif& is opinion



5:. Which of the following is correct about )>mphasis of a *atter,

paragraph?

a. In #er& rare circumstances% the )>mphasis of *atter, paragraph

ma& be used as a substitute for a 4ualication of an opinion.

b. An )emphasis of *atter, paragraph ma& be used to gi#e

emphasis to a specic item that has not been appropriatel&

disclosed in the notes to the nancial statements.

c. An )>mphasis of *atter, paragraph ma& be used to restrict the

distribution of the auditor’s report.

d. An )>mphasis of a *atter, paragraph ma& be used to alert the

readers that the nancial statements are presented in

accordance with a special purpose framewor.

5;. Which of the following statements is correct about )>mphasis of a

*atter, paragraph?

A. (he addition of such paragraph is not to be construed as amodication of the auditor’s report.

b. (he addition of such paragraph does not a@ect the auditor’s

opinion.

c. (he paragraph would preferabl& be presented before the opinion

paragraph.

d. (he paragraph is normall& used b& the auditor’s to e3plain the

basis for e3pressing a modied opinion.

7". Addition of an )>mphasis of *atter, paragraph to an otherwise

unmodied report would be inappropriate when

a. A ma8or catastrophe with a signicant e@ect on the entit&’s

nancial position occurred.

b. *aterial inconsistenc& e3ists between other information and

audited nancial statements.

c. <inancial statement are reissued following a subse4uent

disco#er& of fact a@ecting the nancial statements and the

auditor’s report.

d. (here is an uncertaint& relating to the future outcome of

e3ceptional litigation or regulator& action.

71. Which of the following will not normall& re4uire an auditor to issue areport that contains an emphasis of matter paragraph?

a. <inancial statements are prepared using cash basis of

accounting.

b. <inancial statements contain material misstatement.

c. >#idence obtained indicates that there is an uncertaint& about

entit&’s continued e3istence.



d. <inancial statements are a@ected b& a signicant uncertaint&.

72. What is the purpose of the following paragraph in an audit report on

nancial statements$

.*e draw attention to note /0 to the fnancial statements112

a. (o emphasie the matter.

b. (o ha#e a basis for e3pressing a 4ualied opinion.

c. (o promote readers’ understanding of the auditor’s responsibilit&

and auditor’s report.

d. (o ha#e a basis for disclaiming an opinion.

7'. An auditor who concludes% that an uncertaint& is not ade4uatel&

disclosed in the nancial statements should issue aFnG$

a. Bisclaimer of opinion

b. 0nmodied opinion with emphasis of matter paragraph

c. pecial report

d. Eualied report7/. (he independent auditor has concluded that a substantial doubt

remains about a client’s abilit& to continue in e3istence% but the client’s

nancial statements ha#e properl& disclosed all of its sol#enc&

problems. (he auditor would probabl& issue aFnG

a. 0nmodied opinion with emphasis of matter paragraph

b. Eualied pinion

c. 0nmodied report

d. Ad#erse opinion

75. (he auditor should consider adding an emphasis of matter paragraph

when

a. (he auditor is pre#ented from completing a procedure re4uired

b& PA.

b. (he nancial statements fail to disclose information re4uired b&

P<+.

c. (he nancial statements are not free from material

misstatements.

d. An uncertaint& arises about the entit&’s continued e3istence.

77. When the auditor concludes that there is substantial doubt about the

entit&’s abilit& to continue as a going concern% and this fact isade4uatel& disclosed in the notes to nancial statementsJ the

appropriate audit report could be$

I. An unmodied opinion with emphasis of matter paragraph.

II. A disclaimer of opinion.

a. I onl&

b. II onl&



c. I or II

d. either I nor II

7!. (he )ther *atter, paragraph would be appropriate when

a. (he auditor wants to restrict the distribution of the audit report.

b. (he auditor wants to emphasie a matter that is presented or

disclosed in the nancial statements.

c. (he auditor wants to emphasie a matter that is not properl&

presented or disclosed in the nancial statements.

d. (he auditor wants to draw the readers’ attention to an important

matter that caused the auditor to modif& his opinion.

7:. Dow should the )>mphasis of *atter, and )ther *atter, paragraphs

be presented in the auditor’s report?

a. >mphasis of matter paragraph is presented before the opinion

paragraph and other matter paragraph.

b. ther matter paragraph is presented before the emphasis of amatter paragraph but after the opinion paragraph.

c. >mphasis of a matter paragraph is presented after the opinion

paragraph but before the other matter paragraph.

d. ther matter paragraph is presented after the emphasis of a

matter paragraph but before the opinion paragraph.

7;. (he auditor should consider adding an emphasis of a matter paragraph

to the audit report when

a. (he auditor is pre#ented from completing a procedure re4uired

b& PA.

b. (he nancial statements fail to disclose information re4uired b&

P<+.

c. (he auditor decides to mae reference to the report a component

auditor.

d. An entit& disclosed an earl& application of a new accounting

standard.

!". An auditor includes a separate paragraph in an otherwise unmodied

report in order to emphasie an item that is properl& disclosed in the

notes to the nancial statements. (he inclusion of this paragraph$

a. Is appropriate and would not negate the unmodied opinion.b. Is considered a 4ualication of the report.

c. Is a #iolation of standards of reporting.

d. ecessities a re#ision of the opinion paragraph to include the

phrase )e3cept for,.

!1. *anagement belie#es and the auditor is satised% that a material loss

probabl& will occur when pending litigation is resol#ed. *anagement is



unable to mae a reasonable estimate of the amount or range of the

potential loss% but full& discloses the situation in the notes to the

nancial statements. If the auditor wishes to call attention to the

matter and management does not mae an accrual in the nancial

statements% the auditor should e3press aFnG

a. Eualied opinion due to a scope limitation

b. Eualied opinion due to a material misstatement

c. 0nmodied opinion with emphasis of matter paragraph

d. 0nmodied report

!2. When the auditor concludes that the use of the going concern

assumption is appropriate in the circumstances but material

uncertaint& e3ist% the auditor shall

a. issue either 4ualied or ad#erse opinion

b consider the ade4uac& of disclosure in the notes to nancial

statementsc. report to the audit committee the need to ad8ust management

estimates

d. reKissue the prior &ears audit report and add an emphasis of a

matter paragraph

!'. Which of the following circumstances will least liel& a@ect the

auditor’s opinion?

a. A client imposed scope limitation

b. A circumstances imposed scope limitation

c. Inade4uac& of disclosure in the notes to nancial statements

d. 0ncertaint& arises about entit&’s continued e3istence

!/. An auditor concludes that there is an uncertaint& about an entit&’s

abilit& to continue as a going concern for a reasonable period of time. If

the entit&’s disclosures concerning this matter are ade4uate% the audit

report ma& include aFnG$

Ad#erse opinion Eualied

opinion

Bisclaimer

a. =es =es ob. o o o

c. o o =esd. =es =es =es!5. When managements prepares nancial statements on the basis of a

going concern but the auditor belie#es that the use of the going

concern assumption is not appropriate% the auditor should issue$

a. A 4ualied opinion



b. An unmodied opinion with respect to the income statements and an

ad#erse opinion with respect to the statement of nancial position

c. A disclaimer of opinion

d. An ad#erse opinion

Comparati#es

!7. Which of the following best describes the auditor’s responsibilit& when

reporting on comparati#es?

a. <or corresponding gures% the auditor’s opinion on the nancial

statements refes to the current period onl&.

b. <or all comparati#es% the auditor’s opinion refers to each period

for which the nancial statements are presented.

c. <or all comparati#es% the auditor’s opinion the current period

onl&.d. <or comparati#e nancial statements% the auditor’s opinion on

the nancial statements refers to the current period on&.

!!. A framewor of presentation where amounts and other disclosures for

the prior period are included as an integral part of the current period

nancial statements% and are intended to be read onl& in relation to the

amounts and other disclosure relating to the current period.

a. Current period gures

b. Comparati#es

c. Comparati#e nancial statements

d. Corresponding gures

!:. When the audited nancial statements of the prior &ear are presented

together with those of the current &ear% the continuing auditor’s report

should co#er

a. -oth &ears

b. nl& the current &ear

c. nl& the current &ear% but the prior &ear’s report should be

presented

d. nl& the current &ear% but the prior &ear’s report should be

referred to!;. An auditor e3pressed 4ualied opinion on the prior &ear’s nancial

statements because of a lac of ade4uate disclosure. (hese nancial

statements are properl& restated in the current &ear and presented in

comparati#e form with the current &ear’s nancial statements. (he

auditor’s updated report on the prior &ear’s nancial statements

should



a. -e accompanied b& the auditor’s original report on the prior

&ear’s nancial statements

b. Continue to e3press a 4ualied opinion e3pressed on the prior


c. *ae no reference to the t&pe of opinion e3pressed on the prior


d. Bisclose the substanti#e reasons for the di@erent opinion

:". When reporting on comparati#e nancial statements where the

nancial statements of the prior period ha#e been e3amined b& a

predecessor auditor whose report is not presented% the successor auditor’s

report should indicate

a. (he reasons wh& the predecessor auditor’s report is not

presented

b. (he identit& of the predecessor auditor who e3amined the

nancial statements of the prior &earc. Whether the predecessor auditor’s re#iew of the current &ear’s

nancial statements re#ealed an& matters that might ha#e a

material e@ect on the successor auditor’s opinion

d. (he t&pe of opinion e3pressed b& the predecessor auditor

:1. When reporting on comparati#e nancial statements where the

nancial statements of the prior &ear ha#e been e3amined b& the

predecessor auditor whose report is not presented% the successor

auditor should mae

a. o reference to the predecessor auditor

b. +eferences to the predecessor auditor onl& if the predecessor

auditor e3pressed a 4ualied opinion

c. +eferences to the predecessor auditor onl& if the predecessor

auditor e3pressed an unmodied opinion

d. +eferences to the predecessor auditor regardless of the t&pe of

opinion e3pressed b& the predecessor auditor

:2. Comparati#e nancial statements include the nancial statements of

the prior &ear that were audited b& a predecessor auditor whose report

is not presented. If the predecessor’s opinion was modied% the

successor shoulda. Indicate the substanti#e reasons for the modication of

predecessor’s report

b. +e4uest the client to reissue the predecessor’s report on the

prior &ear’s statements

c. Issue an updated comparati#e audit report



d. >3press an opinion onl& on the current &ear’s statements and

mae no reference to the prior &ear’s statements

:'. ewel% CPA% audited Innite Co.’s prior &ear nancial statements. (hese

statements are presented with those of the current &ear for

comparati#e purposes without ewel’s auditor’s report% which

e3pressed a 4ualied opinion. In drafting the current &ear’s auditor’s

report% 9rain% CPA% the successor auditor% should

I. ot name ewel as the predecessor auditor.

II. Indicate the t&pe of opinion issued b& ewel.

III. Indicate the substanti#e reasons for ewel’s 4ualication.

a. I onl&

b. II and III onl&

c. I and II onl&

d. I% II% and III

:/. When a predecessor auditor is to reissue his report on nancialstatements and he has not e3amined the nancial statements for the

most recent audited period% he

a. hould tae steps to determine I the opinion is still appropriate

b. hould obtain a letter of representation from the client

c. Das no responsibilit& to become assured about e#ents

subse4uent to the termination of the engagement

d. eed obtain onl& #erbal assurance from the successor

:5. (he predecessor auditor% who is satised after properl& communicating

with the successor auditor% has reissued a report because the audit

client desires comparati#e nancial statements. (he predecessor

auditor’s report should mae

a. +eference to the report of the successor auditor onl& in the scope

paragraph

b. +eference to the wor of successor auditor in the scope and

opinion paragraph

c. +eference to both the wor and the report of the successor

auditor onl& in the opinion paragraph

d. o reference to the report or the wor of the successor auditor

ther !normation

:7. (he )other information, in a published report containing audited

nancial statements ma& be rele#ant to an independent auditor’s

e3amination. With respect to )other information,



a. (he auditor’s responsibilit& does not e3tend be&ond the nancial

information identied in the report

b. (he auditor is obligated to perform auditing procedure to

corroborate )other information, contained in a document

c. (he auditor need not be concerned with the )other information,

d. (he auditor must include the )other information, in the report

:!. In an amendment to other information in a document containing

audited nancial statements is necessar& and the entit& refuses to

mae the amendment% the auditor would consider issuing$

a. >ither 4ualied or ad#erse opinion

b. >ither 4ualied or disclaimer of opinion

c. An unmodied opinion with other matter paragraph

d. An unmodied report

::. An auditor concludes that there is a material inconsistenc& in the other

information in an annual report to shareholders containing auditednancial statements. If the auditor concludes that the nancial

statements do not re4uire re#ision% but the client refuses to re#ise or

eliminate the material inconsistenc&% the auditor ma&

a. Issue an )e3cept for, 4ualied opinion after discussing the

matter with the client’s board of directors

b. Consider the matter closed since the other information is in the

audited nancial statements

c. Bisclaim an opinion on the nancial statements after e3plaining

the material inconsistenc& in a separate e3planator& paragraph

d. +e#ise the auditor’s report to include other matter paragraph

describing the material inconsistenc&

:;. (he auditor will most liel& read the other information

a. Primaril& to identif& material misstatement of fact

b. Primaril& to identif& material inconsistenc&

c. (o determine the t&pe of opinion to e3press on the nancial

statements

d. (o enable him to e3press an opinion on the other information

;". -efore the date of the auditor’s report% the auditor found a material

inconsistenc& between the other information and the informationpresented in the nancial statements. If the re#ision of the nancial

statements is necessar& and management refuses to mae the

re#ision% the auditor shall

a. *odif& the opinion on the nancial statements

b. Include ther *atter paragraph in the unmodied report to

describe the material inconsistenc&



c. Bisclaim an opinion on the nancial statements

d. Bisclaim an opinion on the other information

;1. (his e3ists% when other information% not related to matters appearing in

the nancial statements% is incorrectl& stated or presented.

a. *aterial inconsistenc&

b. *aterial misstatement

c. *aterial misstatement of fact

d. *aterial error a@ecting the other information

;2. (his e3ists% when other information contradicts the information

contained in the audited nancial statements

a. *aterial inconsistenc&

b. *aterial misstatement

c. *aterial misstatement of fact

d. *aterial error a@ecting the other information

;'. Which of the following best describes the auditor’s responsibilit& for)other information, included in the annual report to the stocholders

that contains nancial statements and the auditor’s report?

a. (he auditor has no obligation to read the other information

b. (he auditor has no obligation to corroborate the other

information but should read it to determine whether it is

materiall& inconsistent with the nancial statements

c. (he auditor should e3tend the e3amination to the e3tent

necessar& to #erif& the other information

d. (he auditor must modif& the auditor’s report to state that the

other information is unaudited or not co#ered b& the auditor’s

report

;/. If an amendment is necessar& in the other information and the entit&

refuses to mae an amendment% the auditor% depending on particular

circumstances% ma& do an& of the following e3cept

a. Bescribe the material inconsistenc& in other matter paragraph

b. ot issue an audit report

c. Withdraw from the engagement

d. >3press either 4ualied or ad#erse opinion

3roup -inancial "tatements

;5. *ar is auditing the consolidated nancial statements of +e3% Inc.% a

publicl& held corporation. he is the auditor who has audited and

reported on the nancial statements of a wholl& owned subsidiar& of



+e3% Inc. *ar’s rst concern with respect to the +e3 nancial

statements is to decide whether he

a. *a& ser#e as the group auditor and report as such on the

consolidated nancial statements of +e3% Inc.

b. *a& refer to the wor of he in his report on the consolidated

nancial statements

c. hould re#iew the woring papers of he with respect to the

audit of the subsidiar&’s nancial statements

d. hould resign from the engagement because an unmodied

opinion cannot be e3pressed on the consolidated nancial

statements

;7. Which of the following will not result in a modication of the auditor’s

report?

a. +estrictions imposed b& the client

b. Inabilit& to obtain su6cient appropriate e#idencec. +eliance placed on the report of component auditor

d. Inade4uac& in the accounting records

;!. If the group auditor decides to refer in the report to the audit made b&

component auditor

a. (he group auditor assumes responsibilit& for the report on the

other auditor

b. (he component auditor is relie#ed of responsibilit& for his report

but not his wor

c. (he group auditor has #iolated the professional standards

d. (he component auditor is relie#ed of responsibilit& for his wor

but not his report

;:. -elle% CPA decides to ser#e as group auditor in the auditor of the

nancial statements of *a&a Consolidated% Inc. +ain% CPA% audits one

of *a&a’s subsidiaries. In which situationFsG should -elle refer to +ain’s

audit?

I. -elle re#iews +ain’s woring papers and assumes

responsibilit& for +ain’s wor.

II. -elle is unable to re#iew +ain’s woring papers% howe#er%

-elle’s in4uiries indicate that +ain has an e3cellentreputation for professional competence and integrit&.

a. I onl&

b. -oth I and II

c. II onl&

d. either I nor II

;;. An auditor ma& issue an unmodied report when the



a. An auditor refers to the ndings of an e3pert

b. <inancial statements are deri#ed and condensed from complete

audited nancial statements that are led with a regulator&

agenc&

c. <inancial statements are prepared on the cash receipts and

disbursements basis of accounting

d. 9roup auditor assumes responsibilit& for the wor of the

component auditor

1"". In the auditor’s report% the group auditor decides not to mae reference

to another CPA who audited the client’s subsidiar&. (he group auditor

could 8ustif& this decision if% among other re4uirements% the group

auditor

a. Issues an unmodied opinion on the consolidated nancial

statements

b. earns that the component auditor issued an unmodied opinionon the subsidiar&’s nancial statements

c. Is unable to re#iew the audit programs and woring papers of the

component auditor

d. Is satised as to the independence and professional reputation of

the component auditor

"pecial Purpose Audit 4ngagements

1"1. <inancial statements prepared in accordance with a special purpose

framewor are referred to in PA :"" as

a. pecial +eports

b. pecial Purpose <inancial tatements

c. pecial Considerations

d. pecic <inancial tatements

1"2. PA :"" )Audit of nancial statements prepared in accordance with

special framewors, does not appl& to

a. Audit of nancial statements prepared in accordance with P<+

b. Audit of nancial statements prepared in accordance with the

cash receipts and cash disbursement basis of accountingc. Audit of nancial statements prepared using modied cash basis

d. Audit of nancial presentation that complies with contractual

agreement

1"'. Which of the following is not considered a special purpose framewor?

a. Income ta3 basis of accounting

b. Cash receipts and disbursements basis of accounting



c. <inancial presentation to compl& with regulator& re4uirements

d. Accrual basis of accounting

1"/. Auditors ma& issue a special purpose audit report for all of the

following e3cept an audit of nancial presentations

a. (hat are prepared on a basis of accounting that the entit& uses to

le its ta3 return

b. 0sing modied cash basis of accounting

c. f an organiation that has limited the scope of the audit

d. (o compl& with contractual agreements

1"5. A-C Compan& prepared its nancial statements on an accounting basis

prescribed b& a go#ernment agenc& solel& for ling with that agenc&.

(he CPA belie#es that the nancial statements are not presented fairl&

in conformit& with the prescribed basis. (he CPA’s report must contain

a. An unmodied report

b. A disclaimer of opinionc. A negati#e assurance

d. An ad#erse opinion

1"7. (he CPA is ased to audit nancial statements prepared on a modied

cash basis. (his is acceptable pro#ided the CPA

a. Con#erts the nancial statements to accrual basis before

rendering an audit report

b. Eualies the audit opinion because of a departure from P<+

c. Issues an disclaimer of opinion

d. tates clearl& in the audit report that fairness was e#aluated

within the framewor of the modied cash basis rather than P<+

1"!. Which of the following is an e3ample of special purpose nancial

statements?

a. <inancial statements prepared in accordance with a nancial

reporting framewor established b& the Cooperati#e

Be#elopment Authorit&

b. ProKforma nancial presentation designed to demonstrate the

e@ect of h&pothetical transactions

c. <easibilit& studies presented to illustrate an entit&’s results of

operationsd. Interim nancial information re#iewed to determine whether

material modications should be made to the nancial

statements to conform with P<+

1":. Which statements is correct regarding report on a component of

nancial statements?



a. (his t&pe of engagement ma& be undertaen as a separate

engagement or in con8unction with an audit of the entit&’s

nancial statements

b. In determining the scope of the engagement% the auditor need

not consider those nancial statement items that are interrelated

and which could materiall& a@ect the information on which the

audit opinion is to be e3pressed.

c. (he auditor’s e3amination will ordinaril& be less e3tensi#e than if

the same component were to be audited in connection with a

report on the entire nancial statements

d. When an ad#erse opinion or disclaimer of opinion on the entire

nancial statements has been issued% the auditor ma& report

components of the nancial statements e#en if those

components are so e3tensi#e as to constitute a ma8or portion of

the nancial statements1";. Which of the following statements is correct with respect to an

auditor’s report e3pressing an opinion on a specic element of a

nancial statement?

a. *aterialit& must be related to the specic item and not to the

nancial statements as a whole

b. uch a report can be issued onl& if the auditor is also engaged to

audit the entire set of nancial statements

c. (he attention de#oted to the specied item is usuall& less than it

would be if the nancial statements as a whole were being

audited

d. (he auditor who has e3pressed an ad#erse opinion on the

nancial statements as a whole cannot e3press an opinion on a

specic element of a nancial statement

11". An auditor ma& accept an engagement to report on the summar&

nancial statements pro#ided

a. (he auditor has e3pressed an unmodied opinion on the basic

nancial statements from which the summar& nancial

statements were deri#ed

b. (he auditor has audited the basic nancial statements fromwhich the summar& nancial statements were deri#ed

c. (he client taes full responsibilit& for the ade4uac& of the

procedures to be performed

d. (he auditor taes full responsibilit& for the fair presentation of

the summar& nancial statements



111. Which statements is incorrect regarding report on summaried

nancial statements?

a. 0nless the auditor has e3pressed an audit opinion on the

nancial statements from which the summaried nancial

statements were deri#ed% the auditor shoil not report on

summaried nancial statements

b. ummaried nancial statements are presented in considerabl&

less detail than annual audited nancial statements

c. ummaried nancial statements need not to appropriatel& titled

to identif& the audited nancial statements from which the& ha#e

been deri#ed

d. ummaried nancial statements contains all the information

re4uired b& the nancial reporting framewor used for the annual

audited nancial statements

112. (he auditor’s report on summar& nancial statementsa. hould state whether the summar& nancial statements are

fairl& presented in accordance with P<+

b. hould state whether the summar& nancial statements are

consistent with the nancial from which the& were deri#ed.

c. hould be in the form of negati#e assurance

d. hould contain the same t&pe of opinion as the opinion

e3pressed on the basic nancial statements from which the

summar& nancial statements were deri#ed

11'. An auditor who e3pressed an ad#erse opinion on the nancial

statements cannot e3press an unmodied opinion on the specic

element of a nancial statement% unless

a. (he report on specic element will not be published together

with the report on the nancial statements

b. (he specic element is not a ma8or component of the nancial

statements

c. >ither a or b

d. -oth a and b

Documents

Audit Reports on Financial Statements.docx