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Unmodified Report

1.

2.

3.

4.

5.

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


representations made in financial statement?
a.
Clients management
b.
Independent auditor
c.
Audit committee
d.
PICPA
PSA 700 provides guidance on the:
a.
Audit report that includes a modified opinion.
b.
Audit report that includes an unmodified opinion.
c.
Audit report that includes an unmodified opinion, though the
auditors report is
modified due to an emphasis of matter.
d.
Audit report, irrespective of the type of opinion issued by the
auditor.
Which of the following statement is not correct about the unmodified
audit report on the financial statement?
a.
The auditors report shall include a section with a heading
Management Responsibility for the financial statement
b.
The auditors report shall include a section with a heading
Auditors Responsibility
c.
The auditors report shall include a section with a heading Basis
for Opinion
d.
The auditors report shall include a section with a heading
Opinion
What is the overriding benefit of having uniformity in the report?
a.
Uniformity promotes credibility in the global marketplace by
making more readily identifiable those audits that have been
conducted in accordance with globally recognized standards.
b.
Uniformity in the form promotes the expression of unmodified
opinion.
c.
Uniformity lessens the auditors legal and civil liabilities.
d.
The audit report eliminates some disclosures required in the
financial statements.
Which of the following elements of the auditors report affirms the
auditors independence?
a.
Introductory paragraph
b
Auditors Responsibility
c.
Title
d.
Signature

6.

7.

8.

9.

10.

11.

The auditors judgment as to whether the financial statements are


presented fairly, n all material respects, is made in the context of
a.
Philippine Standard on Accounting
b.
Applicable financial reporting framework
c.
The professional ethical requirements
d.
Generally accepted auditing standards
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 auditors report from the reports that
might be issued by others
c.
identify the financial statements audited
d.
emphasize managements responsibility for the fair presentation
of the financial statements
The auditor does not normally address the report to
a.
Those for whom the report was prepared.
b.
The president of Client Company.
c.
Those charged with government of Client Company.
d.
The stockholders of the client company.
The elements of the auditors report that identifies the financial
statement audited is the
a.
title
b.
introductory paragraph
c.
management responsibility
d.
opinion paragraph
The auditors 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
Which of the following shall be included in the introductory paragraph
of the auditors report?

a.
b.
c.

Name of the entity


for whom report is
prepared

The title of each


statement

Period covered by
the financial
statements

YES
YES
NO

YES
NO
YES

YES
YES
YES

d.
12.

YES

YES

NO

PSA 700 requires the auditors report to describe managements


responsibility for the financial statements. The description shall include
an explanation that 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 is free from material misstatement
c.
For making accounting estimates that are reasonable in the
circumstances
d.
Preventing collusion among employees
13. Which of the following statements is not included in the auditors
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 auditors 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 audits includes evaluating the appropriateness of the
accounting policies used and the reasonableness of accounting
estimates made by management, as well as the presentation of
the financial statements
14. PSA 700 requires the audit report to be signed. The auditors signature
should be
a.
In the name of the audit firm
b.
In the personal name of the auditor
c.
Either a or b
d.
Neither a or b
15. The date of the audit report is important because
a.
The date of the auditors report informs the user of the auditors
report that the auditor has considered the effect of events and
transactions of which the auditor became aware and that
occurred up to that date.
b.
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

c.
PSAs require all audits to be performed on a timely basis
d.
This date coincides with the date of the financial statements
16. The date of the auditors report
a.
Coincides with the date the financial statements are issued
b.
Should be the same as the financial statements date
c.
Can be earlier than the date which the auditor has obtained
sufficient appropriate audit evidence on which to base his
opinion
d.
Should not be earlier than the date of the approval of financial
statements
17. An audit report should be dated as of the
a.
date the report is delivered to the entity audited
b.
date the financial statements were approved by the client
management
c.
balance sheet date of the latest period reported on
d.
date a letter of audit inquiry is received from the entitys
attorney
18. If the statement of financial position of a company s dated December
31, 2015, the audit report is dated February 8, 2016, and both are
released on February 15, 2016, this indicates that the auditor has
searched for subsequent events that occurred up to:
a.
December 31, 2015
b.
January 1, 2016
c.
February 8, 2016
d.
February 15, 2016
19. Which of the following is not one of the elements of the auditors
report?
a.
Auditors address
b.
Date of the Auditors report
c.
Emphasis of matter
d.
Auditors signature
20. The auditors address is indicated in the auditors report by:
a.
Naming the location in the country where the auditor practices
his profession
b.
Including the complete mailing address of the auditor
c.
identifying the country where the auditor had secured his
professional license
d.
Addressing the report to the stakeholders or the audit client
21.
How are managements responsibility and the auditors responsibility
represented in the auditors report?

22.

23.

24.

Managements Responsibility
Auditors
Responsibility
a.
Explicitly
Explicitly
b.
Implicitly
Implicitly
c.
Implicitly
Explicitly
d.
Explicitly
Implicitly
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.
Unmodified opinion
c.
Undeniable opinion
d.
Denial of opinion
The most common type of audit report contains a(n)
a.
adverse opinion
b.
qualified opinion
c.
disclaimer opinion
d.
unmodified opinion
Which section of the auditors report gives a general description of an
audit of financial statements?
a.
Introductory paragraph
b.
Auditors responsibility
c.
Managements responsibility
d.
Auditors Opinion

Report that contains Modified Opinion


25.

26.

The adverse opinion report will be issued by the independent auditor


when he/she
a.
Suspects that client has not followed the identified financial
reporting framework.
b.
Suspects that the clients financial statements are not in
conformity with PSAs.
c.
has knowledge that the financial statements are not in
conformity with the applicable financial reporting framework.
d.
Has knowledge that PSAs were not followed.
A disclaimer is issued whenever the auditor
a.
Has been unable to satisfy himself/herself that the overall
financial statements are presented fairly.

b.

Believes that the overall financial statements are not presented


fairly.
c.
Believes that some material part(s) of the financial statements
are not presented fairly.
d.
Has determined that the financial statements are presented
fairly.
27. Both disclaimer and adverse opinion are used
a.
When the condition is material and pervasive
b.
Irregardless of the auditors independence
c.
Whether the condition is material or not
d.
Irregardless of the clients choice of unacceptable accounting
method
28. Which of the following circumstances would most likely cause the
auditor to modify his opinion?
Immaterial Misstatements
Scope
Limitation
a.
Yes
No
b.
Yes
Yes
c.
No
No
d.
No
Yes
29. The auditor should express a modified opinion on the financial
statements, when

a.
b.
c.
d.
30.

The auditor
wants to draw
readers
attention to an
important
matter
Yes
Yes
No
Yes

The financial
statements are
not free from
material
misstatement
Yes
No
Yes
Yes

The auditor is
unable to
obtain
sufficient
appropriate
evidence
Yes
Yes
Yes
No

If the auditors believe that a required material disclosure is omitted


from the financial statements, the auditor should decide between
issuing a(n)
a.
Qualified opinion or an adverse opinion
b.
Disclaimer of opinion or a qualified opinion
c.
Adverse opinion or a disclaimer opinion

d.
Unmodified opinion or a qualified opinion
31. An auditor is confronted with an exception sufficiently material to
warrant a modification of the audit report. If the exception relates to a
departure from the PFRS, the auditor must decide between expressing
a(n)
a.
Adverse opinion and an unmodified opinion.
b.
Adverse opinion and a qualified opinion.
c.
Adverse opinion and a disclaimer opinion.
d.
Disclaimer of opinion and a qualified opinion.
32. In which of the following situation would a decision of selecting
between qualified or adverse opinions be inappropriate?
a.
In limitation in the scope of the audit
b.
The financial statements are materially misstated
c.
A disagreement between the auditor and the client arose
because of the capitalization of researched and development
costs
d.
A required disclosure that is significant is omitted from the
financial statements
33. The auditor should consider the nature of the item and the significance
of effect when formulating an opinion on 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
34. When financial statements contain material misstatements, the
auditors report may contain
Qualified Opinion
Adverse Opinion
Disclaimer
Opinion
a.
Yes
No
Yes
b.
Yes
Yes
No
c.
No
No
Yes
d.
Yes
Yes
Yes
35. When the auditor is unable to obtain sufficient appropriate audit
evidence, the auditors report may contain
Qualified Opinion
Opinion

Adverse Opinion

Disclaimer

36.

37.

38.

39.

40.

a.
Yes
No
Yes
b.
Yes
Yes
No
c.
No
No
Yes
d.
Yes
Yes
Yes
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
a.
Material and pervasive
b.
Material but not pervasive
c.
Pervasive but not material
d.
Not material and not pervasive
An auditor was unable to obtained audited financial statements or
other evidence supporting an entitys investment in a large subsidiary.
Between which of the following opinions should the entitys auditor
choose?
a.
Adverse and unmodified opinion
b.
Disclaimer and unmodified opinion with emphasis of matter
paragraph
c.
Qualified and adverse opinion
d.
Qualified and disclaimer of opinion
In extreme cases, such as situation involving multiple uncertainties
that are significant to the financial statements, the auditor may
consider it appropriate to express a(n)
a.
Qualified opinion
b.
Report with Emphasis of a Matter paragraph
c.
Disclaimer opinion
d.
Adverse opinion
The expression o a qualified opinion means that the financial
statements, taken as whole are
a.
Materially misstated
b.
Materially misleading
c.
Presented fairly
d.
Do not present fairly
Material misstatements in the financial statements may arise from all
of the following conditions, except
a.
The appropriateness of the selected accounting policies
b.
The application of the selected accounting policies
c.
The appropriateness or adequacy of disclosures in the financial
statements

41.

42.

43.

d.
The sufficiency and appropriateness of audit evidence
When management does not amend the financial statements in
circumstances where the auditor believes they need to be amended
and the auditors report has not been released to the entity, the
auditor should express
a.
Either qualified or adverse opinion
b.
Either qualified or disclaimer of opinion
c.
An unmodified opinion with emphasis of matter paragraph
d.
An unmodified report
The auditors inability to obtain sufficient appropriate audit evidence
may arise from all of the following conditions, except
a.
Restriction imposed by management on the scope of the audit
b.
Limitations beyond the control of the entity
c.
Limitations relating to the nature or timing of the auditors work
d.
Restriction on the disclosures in the financial statements
Circumstance imposed scope limitations include those that are:
Beyond the
control of the
entity
a.
b.
c.
d.

44.

45.

Yes
Yes
No
Yes

Related to the
nature or timing
of the auditors
work
No
Yes
No
Yes

Related to
clients request
to omit certain
procedures
Yes
No
Yes
Yes

Which of the following is an example of circumstances imposed scope


limitation relating to the nature or timing of the auditors work?
a.
The entitys accounting records were destroyed by a recent
catastrophe.
b.
The auditor determined that substantive tests alone are not
sufficient but the internal control is not reliable.
c.
management prevents the auditor from observing the physical
count of inventory.
d.
The entity is required to use the equity method of accounting for
investment in associate but the client opted to use the fair value
method.
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 likely to result in a modification of opinion on the financial


statements?
I. The auditor shall request the management to remove the limitation
II. The auditor shall communicate the matter to those charged with
governance
III. The auditor shall determine whether it is possible to perform
alternative procedures
a.
I, II, III
b.
III, I, II
c.
II, I, III
d.
III, II, I
46. If the auditor is unable to obtain sufficient appropriate evidence
because of a 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
47. In making a decision of whether to disclaim an opinion or withdraw
from engagement due to a client imposed limitation, the auditor should
consider
a.
The materiality of the item under consideration
b.
The pervasiveness of effect on financial statements
c.
Both the materiality and pervasiveness should be considered
d.
The stage of completion of the engagement at the time the
management imposed the scope limitation
48. When an auditor expresses a qualified, an adverse or a disclaimer of
opinion on the financial statements, the auditors report shall include a
separate paragraph that provides a description of the matter giving
rise to the modification. This paragraph is called
a.
Explanatory paragraph
b.
Emphasis of matter paragraph
c.
Other matter paragraph
d.
Basis for modification paragraph
49. When an auditor modifies his opinion on the financial statements
because of material misstatements, the basis for modification
paragraph shall include
A description of
A quantification of
material
effects of

misstatement
a.
b.
c.
d.

Yes
Yes
No
No

misstatement, if
practicable
No
Yes
No
Yes

50.

When an auditor modifies his opinion on the financial statements


because of inability to obtain sufficient appropriate evidnece, the basis
for modification paragraph shall include
A description of scope
A quantification of
limitation
effects of
misstatement, if
practicable
a.
Yes
No
b.
Yes
Yes
c.
No
No
d.
No
Yes

51.

Inadequacy of disclosure in the notes to financial statements normally


requires the auditor to express a qualified opinion on the clients
financial statements. When this occurs, the auditor should disclose the
substantive reason for expressing a qualified opinion in the
a.
Emphasis of matter paragraph
b.
Other matter paragraph
c.
Notes to the financial statements
d.
Basis for modification paragraph
An auditor should disclose the substantive reason for expressing an
adverse opinion in a separate paragraph
a.
Preceding the managements responsibility for the financial
statements
b.
Preceding the opinion paragraph
c.
Following the opinion paragraph
d.
Within the notes to the financial statements
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
Management
Auditors
Auditors
Responsibility
Responsibility
opinion
for the Financial

52.

53.

a.
b.
c.
d.
54.

statements
Yes
No
Yes
No

No
Yes
Yes
Yes

Yes
No
Yes
Yes

An auditor who disclaim an opinion because of inability to obtain


sufficient appropriate evidences should describe the matter in a
separate paragraph. The auditor should also modify the
Introductory Managemen
Auditors
Auditors
paragraph
ts
responsibilit
opinion
responsibilit
y
y
a.
No
No
Yes
Yes
b.
Yes
Yes
Yes
No
c.
Yes
No
Yes
Yes
d.
No
No
Yes
Yes

Emphasis of Matter and Other Matter Paragraph


55.

56.

57.

Which of the following is not to be construed as a modification of


opinion?
a.
Qualified opinion
b.
Adverse opinion
c.
Disclaimer of opinion
d.
Audit report with emphasis of matter paragraph
The use of an Emphasis of Matter paragraph shall be limited only to
those matters
a.
Disclosed in the financial statements
b.
Affecting the auditors opinion
c.
Not presented in the financial statements
d.
Involving an uncertainty
The Other Matter paragraph is used by the auditor
a.
To draw the readers attention to a matter that is presented in
the financial statements
b.
To draw the readers attention to a matter that is disclosed I the
notes to financial statements
c.
To draw the readers attention to a matter that is not presented
or disclosed in the financial statements
d.
To draw the readers attention toa matter that caused the auditor
to modify is opinion

58.

59.

60.

61.

Which of the following is correct about Emphasis of a Matter


paragraph?
a.
In very rare circumstances, the Emphasis of Matter paragraph
may be used as a substitute for a qualification of an opinion.
b.
An emphasis of Matter paragraph may be used to give
emphasis to a specific item that has not been appropriately
disclosed in the notes to the financial statements.
c.
An Emphasis of Matter paragraph may be used to restrict the
distribution of the auditors report.
d.
An Emphasis of a Matter paragraph may be used to alert the
readers that the financial statements are presented in
accordance with a special purpose framework.
Which of the following statements is correct about Emphasis of a
Matter paragraph?
A.
The addition of such paragraph is not to be construed as a
modification of the auditors report.
b.
The addition of such paragraph does not affect the auditors
opinion.
c.
The paragraph would preferably be presented before the opinion
paragraph.
d.
The paragraph is normally used by the auditors to explain the
basis for expressing a modified opinion.
Addition of an Emphasis of Matter paragraph to an otherwise
unmodified report would be inappropriate when
a.
A major catastrophe with a significant effect on the entitys
financial position occurred.
b.
Material inconsistency exists between other information and
audited financial statements.
c.
Financial statement are reissued following a subsequent
discovery of fact affecting the financial statements and the
auditors report.
d.
There is an uncertainty relating to the future outcome of
exceptional litigation or regulatory action.
Which of the following will not normally require an auditor to issue a
report that contains an emphasis of matter paragraph?
a.
Financial statements are prepared using cash basis of
accounting.
b.
Financial statements contain material misstatement.
c.
Evidence obtained indicates that there is an uncertainty about
entitys continued existence.

62.

63.

64.

65.

66.

d.
Financial statements are affected by a significant uncertainty.
What is the purpose of the following paragraph in an audit report on
financial statements:
We draw attention to note 15 to the financial statements
a.
To emphasize the matter.
b.
To have a basis for expressing a qualified opinion.
c.
To promote readers understanding of the auditors responsibility
and auditors report.
d.
To have a basis for disclaiming an opinion.
An auditor who concludes, that an uncertainty is not adequately
disclosed in the financial statements should issue a(n):
a.
Disclaimer of opinion
b.
Unmodified opinion with emphasis of matter paragraph
c.
Special report
d.
Qualified report
The independent auditor has concluded that a substantial doubt
remains about a clients ability to continue in existence, but the clients
financial statements have properly disclosed all of its solvency
problems. The auditor would probably issue a(n)
a.
Unmodified opinion with emphasis of matter paragraph
b.
Qualified Opinion
c.
Unmodified report
d.
Adverse opinion
The auditor should consider adding an emphasis of matter paragraph
when
a.
The auditor is prevented from completing a procedure required
by PSA.
b.
The financial statements fail to disclose information required by
PFRS.
c.
The financial statements are not free from material
misstatements.
d.
An uncertainty arises about the entitys continued existence.
When the auditor concludes that there is substantial doubt about the
entitys ability to continue as a going concern, and this fact is
adequately disclosed in the notes to financial statements; the
appropriate audit report could be:
I. An unmodified opinion with emphasis of matter paragraph.
II. A disclaimer of opinion.
a.
I only
b.
II only

67.

68.

69.

70.

71.

c.
I or II
d.
Neither I nor II
The Other Matter paragraph would be appropriate when
a.
The auditor wants to restrict the distribution of the audit report.
b.
The auditor wants to emphasize a matter that is presented or
disclosed in the financial statements.
c.
The auditor wants to emphasize a matter that is not properly
presented or disclosed in the financial statements.
d.
The auditor wants to draw the readers attention to an important
matter that caused the auditor to modify his opinion.
How should the Emphasis of Matter and Other Matter paragraphs
be presented in the auditors report?
a.
Emphasis of matter paragraph is presented before the opinion
paragraph and other matter paragraph.
b.
Other matter paragraph is presented before the emphasis of a
matter paragraph but after the opinion paragraph.
c.
Emphasis of a matter paragraph is presented after the opinion
paragraph but before the other matter paragraph.
d.
Other matter paragraph is presented after the emphasis of a
matter paragraph but before the opinion paragraph.
The auditor should consider adding an emphasis of a matter paragraph
to the 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
PFRS.
c.
The auditor decides to make reference to the report a component
auditor.
d.
An entity disclosed an early application of a new accounting
standard.
An auditor includes a separate paragraph in an otherwise unmodified
report in order to emphasize an item that is properly disclosed in the
notes to the financial statements. The inclusion of this paragraph:
a.
Is appropriate and would not negate the unmodified opinion.
b.
Is considered a qualification of the report.
c.
Is a violation of standards of reporting.
d.
Necessities a revision of the opinion paragraph to include the
phrase except for.
Management believes and the auditor is satisfied, that a material loss
probably will occur when pending litigation is resolved. Management is

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


potential loss, but fully discloses the situation in the notes to the
financial statements. If the auditor wishes to call attention to the
matter and management does not make an accrual in the financial
statements, the auditor should express a(n)
a.
Qualified opinion due to a scope limitation
b.
Qualified opinion due to a material misstatement
c.
Unmodified opinion with emphasis of matter paragraph
d.
Unmodified report
72. When the auditor concludes 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.
re-issue the prior years audit report and add an emphasis of a
matter paragraph
73. Which of the following circumstances will least likely affect the
auditors 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 entitys continued existence
74. An auditor concludes that there is an uncertainty about an entitys
ability to continue as a going concern for a reasonable period of time. If
the entitys disclosures concerning this matter are adequate, the audit
report may include a(n):
Adverse opinion Qualified
Disclaimer
opinion
a.
Yes
Yes
No
b.
No
No
No
c.
No
No
Yes
d.
Yes
Yes
Yes
75. When managements prepares financial statements on the basis of a
going concern but the auditor believes that the use of the going
concern assumption is not appropriate, the auditor should issue:
a.
A qualified opinion

b.
c.
d.

An unmodified opinion with respect to the income statements and an


adverse opinion with respect to the statement of financial position
A disclaimer of opinion
An adverse opinion

Comparatives
76.

77.

78.

79.

Which of the following best describes the auditors responsibility when


reporting on comparatives?
a.
For corresponding figures, the auditors opinion on the financial
statements refes to the current period only.
b.
For all comparatives, the auditors opinion refers to each period
for which the financial statements are presented.
c.
For all comparatives, the auditors opinion the current period
only.
d.
For comparative financial statements, the auditors opinion on
the financial statements refers to the current period ony.
A framework of presentation where amounts and other disclosures for
the prior period are included as an integral part of the current period
financial statements, and are intended to be read only in relation to the
amounts and other disclosure relating to the current period.
a.
Current period figures
b.
Comparatives
c.
Comparative financial statements
d.
Corresponding figures
When the audited financial statements of the prior year are presented
together with those of the current year, the continuing auditors report
should cover
a.
Both years
b.
Only the current year
c.
Only the current year, but the prior years report should be
presented
d.
Only the current year, but the prior years report should be
referred to
An auditor expressed qualified opinion on the prior years financial
statements because of a lack of adequate disclosure. These financial
statements are properly restated in the current year and presented in
comparative form with the current years financial statements. The
auditors updated report on the prior years financial statements
should

a.

Be accompanied by the auditors original report on the prior


years financial statements
b.
Continue to express a qualified opinion expressed on the prior
years financial statements
c.
Make no reference to the type of opinion expressed on the prior
years financial statements
d.
Disclose the substantive reasons for the different opinion
80. When reporting on 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 auditors
report should indicate
a.
The reasons why the predecessor auditors report is not
presented
b.
The identity of the predecessor auditor who examined the
financial statements of the prior year
c.
Whether the predecessor auditors review of the current years
financial statements revealed any matters that might have a
material effect on the successor auditors opinion
d.
The type of opinion expressed by the predecessor auditor
81. 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 predecessor auditor
b.
References to the predecessor auditor only if the predecessor
auditor expressed a qualified opinion
c.
References to the predecessor auditor only if the predecessor
auditor expressed an unmodified opinion
d.
References to the predecessor auditor regardless of the type of
opinion expressed by the predecessor auditor
82. Comparative financial statements include the financial statements of
the prior year that were audited by a predecessor auditor whose report
is not presented. If the predecessors opinion was modified, the
successor should
a.
Indicate the substantive reasons for the modification of
predecessors report
b.
Request the client to reissue the predecessors report on the
prior years statements
c.
Issue an updated comparative audit report

d.
83.

84.

85.

Express an opinion only on the current years statements and


make no reference to the prior years statements
Jewel, CPA, audited Infinite Co.s prior year financial statements. These
statements are presented with those of the current year for
comparative purposes without Jewels auditors report, which
expressed a qualified opinion. In drafting the current years auditors
report, Grain, CPA, the successor auditor, should
I. Not name Jewel as the predecessor auditor.
II. Indicate the type of opinion issued by Jewel.
III. Indicate the substantive reasons for Jewels qualification.
a.
I only
b.
II and III only
c.
I and II only
d.
I, II, and III
When a predecessor auditor is to reissue his report on financial
statements and he has not examined the financial statements for the
most recent audited period, he
a.
Should take steps to determine I the opinion is still appropriate
b.
Should obtain a letter of representation from the client
c.
Has no responsibility to become assured about events
subsequent to the termination of the engagement
d.
Need obtain only verbal assurance from the successor
The predecessor auditor, who is satisfied after properly communicating
with the successor auditor, has reissued a report because the audit
client desires comparative financial statements. The predecessor
auditors report should make
a.
Reference to the report of the successor auditor only in the scope
paragraph
b.
Reference to the work of successor auditor in the scope and
opinion paragraph
c.
Reference to both the work and the report of the successor
auditor only in the opinion paragraph
d.
No reference to the report or the work of the successor auditor

Other Information
86.

The other information in a published report containing audited


financial statements may be relevant to an independent auditors
examination. With respect to other information

a.

The auditors responsibility does not extend beyond the financial


information identified in the report
b.
The auditor is obligated to perform auditing procedure to
corroborate other information contained in a document
c.
The auditor need not be concerned with the other information
d.
The auditor must include the other information in the report
87. In an amendment to other information in a document containing
audited financial statements is necessary and the entity refuses to
make the amendment, the auditor would consider issuing:
a.
Either qualified or adverse opinion
b.
Either qualified or disclaimer of opinion
c.
An unmodified opinion with other matter paragraph
d.
An unmodified report
88. An auditor concludes that there is a material inconsistency in the other
information in an annual 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.
Issue an except for qualified opinion after discussing the
matter with the clients 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 explanatory paragraph
d.
Revise the auditors report to include other matter paragraph
describing the material inconsistency
89. The auditor will most likely read the other information
a.
Primarily to identify material misstatement of fact
b.
Primarily to identify material inconsistency
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
90. Before the date of the auditors report, the auditor found a material
inconsistency between the other information and the information
presented in the financial statements. If the 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 inconsistency

91.

92.

93.

94.

c.
Disclaim an opinion on the financial statements
d.
Disclaim an opinion on the other information
This exists, 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 other information
This exists, 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 other information
Which of the following best describes the auditors responsibility for
other information included in the annual report to the stockholders
that contains financial statements and the auditors 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 auditors report to state that the
other information is unaudited or not covered by the auditors
report
If an amendment is necessary in the other information and the entity
refuses to make an amendment, the auditor, depending on particular
circumstances, may do any of the following except
a.
Describe the material inconsistency in other matter paragraph
b.
Not issue an audit report
c.
Withdraw from the engagement
d.
Express either qualified or adverse opinion

Group Financial Statements


95.

Mark is auditing the consolidated financial statements of Rex, Inc., a


publicly held corporation. Shek is the auditor who has audited and
reported on the financial statements of a wholly owned subsidiary of

Rex, Inc. Marks first concern with respect to the Rex financial
statements is to decide whether he
a.
May serve as the group auditor and report as such on the
consolidated financial statements of Rex, Inc.
b.
May refer to the work of Shek in his report on the consolidated
financial statements
c.
Should review the working papers of Shek with respect to the
audit of the subsidiarys financial statements
d.
Should resign from the engagement because an unmodified
opinion cannot be expressed on the consolidated financial
statements
96. Which of the following will not result in a modification of the auditors
report?
a.
Restrictions imposed by the client
b.
Inability to obtain sufficient appropriate evidence
c.
Reliance placed on the report of component auditor
d.
Inadequacy in the accounting records
97. If the group auditor decides to refer in the report to the audit made by
component 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 group auditor has violated the professional standards
d.
The component auditor is relieved of responsibility for his work
but not his report
98. Belle, CPA decides to serve as group auditor in the auditor of the
financial statements of Maya Consolidated, Inc. Rain, CPA, audits one
of Mayas subsidiaries. In which situation(s) should Belle refer to Rains
audit?
I.
Belle reviews Rains working papers and assumes
responsibility for Rains work.
II.
Belle is unable to review Rains working papers, however,
Belles inquiries indicate that Rain has an excellent
reputation for professional competence and integrity.
a.
I only
b.
Both I and II
c.
II only
d.
Neither I nor II
99. An auditor may issue an unmodified report when the

a.
b.

An auditor refers to the findings of an expert


Financial statements are derived and condensed from complete
audited financial statements that are filed with a regulatory
agency
c.
Financial statements are prepared on the cash receipts and
disbursements basis of accounting
d.
Group auditor assumes responsibility for the work of the
component auditor
100. In the auditors report, the group auditor decides not to make reference
to another CPA who audited the clients subsidiary. The group auditor
could justify this decision if, among other requirements, the group
auditor
a.
Issues an unmodified opinion on the consolidated financial
statements
b.
Learns that the component auditor issued an unmodified opinion
on the subsidiarys financial statements
c.
Is unable to review the audit programs and working papers of the
component auditor
d.
Is satisfied as to the independence and professional reputation of
the component auditor
Special Purpose Audit Engagements
101. 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 Considerations
d.
Specific Financial Statements
102. PSA 800 Audit of financial statements prepared in accordance with
special frameworks does not apply to
a.
Audit of financial statements prepared in accordance with PFRS
b.
Audit of financial statements prepared in accordance with the
cash receipts and cash disbursement basis of accounting
c.
Audit of financial statements prepared using modified cash basis
d.
Audit of financial presentation that complies with contractual
agreement
103. Which of the following is not considered a special purpose framework?
a.
Income tax basis of accounting
b.
Cash receipts and disbursements basis of accounting

c.
Financial presentation to comply with regulatory requirements
d.
Accrual basis of accounting
104. Auditors may issue a special purpose audit report for all of the
following except an audit of financial presentations
a.
That are prepared on a basis of accounting that the entity uses to
file its tax return
b.
Using modified cash basis of accounting
c.
Of an organization that has limited the scope of the audit
d.
To comply with contractual agreements
105. ABC Company prepared its financial statements on an accounting basis
prescribed by a government agency solely for filing with that agency.
The CPA believes that the financial statements are not presented fairly
in conformity with the prescribed basis. The CPAs report must contain
a.
An unmodified report
b.
A disclaimer of opinion
c.
A negative assurance
d.
An adverse opinion
106. The CPA is asked to audit financial statements prepared on a modified
cash basis. This is acceptable provided the CPA
a.
Converts the financial statements to accrual basis before
rendering an audit report
b.
Qualifies the audit opinion because of a departure from PFRS
c.
Issues an disclaimer of opinion
d.
States clearly in the audit report that fairness was evaluated
within the framework of the modified cash basis rather than PFRS
107. Which of the following is an example of special purpose financial
statements?
a.
Financial statements prepared in accordance with a financial
reporting framework established by the Cooperative
Development Authority
b.
Pro-forma financial presentation designed to demonstrate the
effect of hypothetical transactions
c.
Feasibility studies presented to illustrate an entitys results of
operations
d.
Interim financial information reviewed to determine whether
material modifications should be made to the financial
statements to conform with PFRS
108. Which statements is correct regarding report on a component of
financial statements?

a.

This type of engagement may be undertaken as a separate


engagement or in conjunction with an audit of the entitys
financial statements
b.
In determining the scope of the engagement, the auditor need
not consider those financial statement items that are interrelated
and which could materially affect the information on which the
audit opinion is to be expressed.
c.
The auditors examination will ordinarily be less extensive than if
the same component were to be audited in connection with a
report on the entire financial statements
d.
When an adverse opinion or disclaimer of opinion on the entire
financial statements has been issued, the auditor may report
components of the financial statements even if those
components are so extensive as to constitute a major portion of
the financial statements
109. Which of the following statements is correct with respect to an
auditors report expressing an opinion on a specific element of a
financial statement?
a.
Materiality must be related to the specific item and not to the
financial statements as a whole
b.
Such a report can be issued only if the auditor is also engaged to
audit the entire set of financial statements
c.
The attention devoted to the specified item is usually less than 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 a
specific element of a financial statement
110. An auditor may accept an engagement to report on the summary
financial statements provided
a.
The auditor has expressed an unmodified opinion on the basic
financial statements from which the summary financial
statements were derived
b.
The auditor has audited the basic financial statements from
which the summary financial statements were derived
c.
The client takes full responsibility for the adequacy of the
procedures to be performed
d.
The auditor takes full responsibility for the fair presentation of
the summary financial statements

111. Which statements is incorrect regarding report on summarized


financial statements?
a.
Unless the auditor has expressed an audit opinion on the
financial statements from which the summarized financial
statements were derived, the auditor shoil not report on
summarized financial statements
b.
Summarized financial statements are presented in considerably
less detail than annual audited financial statements
c.
Summarized financial statements need not to appropriately titled
to identify the audited financial statements from which they have
been derived
d.
Summarized financial statements contains all the information
required by the financial reporting framework used for the annual
audited financial statements
112. The auditors report on summary financial statements
a.
Should state whether the summary financial statements are
fairly presented in accordance with PFRS
b.
Should state whether the summary financial statements are
consistent with the financial from which they were derived.
c.
Should be in the form of negative assurance
d.
Should contain the same type of opinion as the opinion
expressed on the basic financial statements from which the
summary financial statements were derived
113. An auditor who expressed an adverse opinion on the financial
statements cannot express an unmodified opinion on the specific
element of a financial statement, unless
a.
The report on specific element will not be published together
with the report on the financial statements
b.
The specific element is not a major component of the financial
statements
c.
Either a or b
d.
Both a and b