University of Nueva Caceres

College of Business and Accountancy

AUDITING AND ASSURANCE PRINCIPLES

FINAL EXAMINATION
SET _A_

Direction: In the space provided in Blackboard, type only the letter of your answer.

1. According to PSA 400, which of the following is correct regarding internal control system?
a. Internal control system refers to all the policies and procedures adopted by the auditor
to assist in achieving management’s objective.
b. A strong environment, by itself, ensure the effectiveness of the internal control system.
c. In the audit of financial statements, the auditor is only concerned with those policies
and procedures within the accounting and internal control systems that are relevant to
the financial statements.
d. The internal control system is confined to those matters which relate directly to the
functions of the accounting system.

2. Which of the following is correct about internal control?

a. Accounting and internal control systems provide management with conclusive
evidence that objectives are reached.
b. One of the inherent limitations of accounting and internal control systems is the
possibility that the procedures may become inadequate due to changes in conditions,
and compliance with procedures may deteriorate.
c. Most internal controls tend to be directed at non-routine transactions.
d. Management does not consider costs of the accounting and internal control systems.

3. Which statement is incorrect regarding the nature of further audit procedures?

a. The nature of further audit procedures refers to their purpose and their type.
b. The higher the auditor’s assessment of risk, the less reliable and relevant is the audit
evidence sought by the auditor from substantive procedures.
c. Certain audit procedures may be more appropriate for some assertions than others.
d. The auditor is required to obtain audit evidence about the accuracy and completeness
of information produced by the entity’s information system when that information is
used in performing audit procedures.

4. Which statement is incorrect regarding the timing of tests of controls?

a. Audit evidence pertaining only to a point in time may be sufficient for the auditor’s
purpose, for example, when testing controls over the entity’s physical inventory
counting at the period end.
b. If the auditor plans to rely on controls that have changed since they were last tested,
the auditor should test the operating effectiveness of such controls in the current audit.
c. When there are a number of controls for which the auditor determines that it is
appropriate to use audit evidence obtained in prior audits, the auditor should test the
operating effectiveness of some controls each audit.
d. If the auditor plans to rely on controls that have not changed since they were last
tested, the auditor should test the operating effectiveness of such controls at least
once in every second audit.

5. The objective of dual purpose tests is to:

a. Evaluate whether internal controls are operating effectively
b. Tests internal controls as well as transactions and balances using the same test
procedures
c. Detect material misstatements in the financial statements
d. Identify unusual trends or patterns in comparative financial statements

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6. After obtaining an understanding of a client’s controls, an auditor may decide to omit tests of
controls. Which of the following is not an appropriate reason to omit tests of controls?
a. The controls appear adequate
b. The controls duplicate other controls
c. Reportable conditions preclude the auditor of assessing control risk below the
maximum
d. The effort to test controls exceeds the effort saved by not performing substantive tests

7. Which of the following is appropriate about risk assessment?

a. There is an inverse relationship between detection risk and the combined level of
inherent and control risk
b. Audit risk may be more effectively determined by assessing inherent and control risk
separately
c. The assessed level of inherent and control risk can be sufficiently low, thus resulting
to eliminating the need for substantive tests
d. Detection risk is eliminated if an auditor were to examine 100 percent of the account
balance or class of transactions

8. Which of the following models expresses the general relationship of risk associated with the
auditor’s evaluation of internal control (CR), study of the business and application of analytical
procedures (IR), and overall audit risks (AR), that would lead the auditor to conclude that
additional substantive tests of details of an account balance are not necessary?

IR CR AR

a 20% 40% 10%

b 20% 60% 5%

c 10% 70% 4.5%

d 30% 40% 5.5%

9. Which of the following is true? If control risk is assessed at the maximum, the
a. Nature of related substantive tests should be changed from more to less effective
b. Nature of related substantive tests should be changed from less to more effective
c. Timing of related substantive tests should be changed from year-end to an interim date
d. Extent of related substantive tests should be changed from a larger to a smaller
sample

10. After considering a client’s internal control, the auditor has concluded that the system is well
designed and is functioning as anticipated. Under these circumstances, the auditor would
most likely
a. Cease to perform further substantive tests
b. Increase the extent of anticipated analytical procedures
c. Increase the extent of controls to the extent outlined in the preplanned audit program
d. Not increase the extent if planned substantive tests

11. As a result of tests of controls, an auditor assessed control risk too low and decreased
substantive testing. This assessment occurred because the true deviation rate in the
population was
a. More than the risk of assessing control risk too low, based on the auditor’s sample
b. More than the deviation rate in the auditor’s sample
c. Less than the risk of assessing control risk too low, based on the auditor’s sample

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 d. Less than the deviation rate in the auditor’s sample

12. After obtaining an understanding of internal control and assessing control risk, an auditor
decided to perform tests of controls. The auditor most likely decided that:
a. It would be efficient to perform tests of controls that would result in a reduction in
planned substantive tests
b. Additional evidence to support a further reduction in control risk is not available
c. An increase in the assessed level of control risk is justified for certain financial
statement assertions
d. There were many internal control weaknesses that could allow errors to enter the
accounting system

13. Which of the following statements concerning substantive tests is incorrect?

a. Substantive tests are designed to substantiate account balances or designed to detect
material misstatements in the financial statements.
b. The assessment of control risk and results of test of control are major factors in
determining the nature, timing, and extent of the auditor’s substantive tests.
c. If the control risk is assessed at lowest level and the internal controls of the company are
effective, the auditor can issue audit opinion even without performing any type of
substantive test.
d. The decision about which audit procedures to use is based on the auditor’s judgment
about the expected effectiveness and efficiency of such procedures in satisfying the audit
objective.

14. If the control risk is assessed at a maximum level, which of the following statements is correct?
a. The auditor should perform tests of controls to determine the effectiveness of the controls.
b. The auditor should perform substantive test by using smaller sample sizes instead of
larger sample sizes.
c. The auditor should decide to perform the substantive test during the interim period rather
than at year-end.
d. The auditor should modify the substantive test from analytical procedures which is less
effective to test of details which is more effective.

15. Which of the following statements concerning the reliability of audit evidence is incorrect?
a. Audit evidence obtained from the client is more reliable than that obtained from
independent outside source.
b. Audit evidence generated internally is more reliable when the related accounting and
internal control systems are effective.
c. Audit evidence obtained directly by the auditor is more reliable than that obtained from the
entity.
d. Audit evidence in the form of documents and written representations is more reliable than
oral representations.

16. As one of the year-end audit procedures, the auditor instructed the client’s personnel to
prepare a standard bank confirmation request for a bank account that had been closed during
the year. After the client’s treasurer had signed the request, it was mailed by the assistant
treasurer. What is the major flaw in this audit procedure?
a. The confirmation request was signed by the treasurer
b. Sending the request was meaningless because the account was close
c. The request was mailed by the assistant treasurer
d. The CPA did not sign the confirmation request before it was mailed

17. An auditor should trace bank transfers for the last part of the audit period and the first part of
the subsequent period to detect whether
a. The cash receipts journal was held open for a few days after the year-end
b. Cash balances were overstated because of kiting
c. The last checks recorded before the year-end were actually mailed by the year-end
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 d. Any unusual payments to or receipts from related parties occurred

18. Which of the following substantive field work procedures provides the best evidence about the
completeness of recorded revenues?
a. Reconciling the sales journal to the general ledger control account
b. Vouching charges made to the accounts receivable subsidiary ledger to supporting
shipping records
c. Vouching shipping records to the customer order files
d. Reconciling shipping records to recorded sales

19. Which of the following procedures would an auditor most likely rely on to verify management’s
assertion of completeness?
a. Review standard bank confirmation for indications of kiting
b. Compare a sample of shipping documents to related sales invoices
c. Observe the client’s distribution of payroll checks
d. Confirm a sample of recorded receivables by direct communication with the debtors
20. The auditors may use positive and/or negative forms of confirmation requests for accounts
receivable. An auditor most likely will use
a. The positive form to confirm all balances regardless of size
b. A combination of the two forms with the positive form used for large balances and the
negative form for small balances
c. A combination of the two forms, with the positive form used for trade receivables and
the negative form for other receivables
d. The positive form when the control structure related to receivables are satisfactory,
and the negative form when controls are unsatisfactory

21. For which of the following transactions would an auditor most likely propose and adjustment
to the financial statements?
a. Inventory is included on the balance sheet at year-end, but the check for payment has
not been paid until January 12
b. An order for office supplies that has not been recorded because the goods have
neither been received nor paid for by year-end
c. Purchase of P5,000 of office furniture that was ordered on December 22 with a P1,000
deposit being made with an entry debiting “deposit on furniture” for P1,000 and a credit
to cash for P1,000. The office furniture was received on January 5
d. Shop supplies are included on the balance sheet at year-end, but the payable and
subsequent cash disbursements are not recorded until year-end

22. Which of the following best explains why accounts payable confirmation procedures are not
always used?
a. Inclusion of representation on accounts payable in the client representation letter
eliminates the need in most situations
b. Accounts payable generally are immaterial and may be audited through using
analytical procedures
c. Creditors will press for payment when they receive the confirmation
d. Confirmations are better at identifying overstatements than understatements, and
overstatements are not typically the major concern with accounts payable

23. Which of the following statements concerning auditing accounting estimates is incorrect?
a. The auditor is responsible for properly accounting and disclosing accounting estimates in
the financial statements.
b. The auditor must be careful in auditing accounting estimates because the risk of material
misstatement is greater when accounting estimates are involved.

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 c. When evaluation the reasonableness of accounting estimates, the auditor should obtain
an understanding of the procedures and methods, including the accounting and internal
control systems, used by management in making the accounting estimates.
d. The auditor should obtain sufficient appropriate evidence as to whether accounting
estimate is properly accounted for and disclosed and is reasonable in the circumstances.

24. The following unusual transactions that may indicate the existence of related parties or related
party transactions, except
a. Transactions which have normal terms of trade.
b. Transactions in which substance differs from form.
c. High volume or significant transactions with certain customers or suppliers as compared
with others.
d. Unrecorded transactions such as the receipt or provision of management services at no
charge.

25. A basic premise underlying the application of analytical procedures is that

a. The study of financial information is an acceptable alternative to the investigation of
unusual fluctuations.
b. Statistical tests of financial information may lead to the discovery of material
misstatements in the financial statements.
c. Plausible relationships among data may reasonably be expected to exist and continue in
the absence of known conditions to the contrary.
d. These procedures cannot replace tests of balances and transactions.

26. Which of the following procedures does not require the assistance of an expert?
a. Evaluating the adequacy of disclosure in the notes to the financial statements.
b. Determining the physical condition or quantity of underground mineral.
c. Ascertaining the value of works of art.
d. Interpreting major contracts.

27. Which of the following best illustrates the concept of sampling risk
a. An auditor may fail to recognize errors in the documents examined for chosen sample
b. The documents related to the chosen sample may not be available for inspection
c. A randomly chosen sample may not be representative of the population as a whole on
the characteristics of interest
d. An auditor may select audit procedure that are not appropriate to achieve the specific
objective

28. While performing a substantive test of details during an audit, the auditor determined that the
sample results supported the conclusions that the recorded account balance was materially
misstated. Which of the following is the least likely auditor reaction to this discovery?
a. Perform expanded audit tests in the relevant areas
b. Increase detection risk in the relevant areas
c. Increase the sample size for tests of control
d. Take no action until tests of other audit areas are completed

29. Which of the following statements regarding block sampling is least likely to be true?
a. Block sampling is the selection of several items in sequence
b. It is acceptable to use block sampling for tests of transactions only if a reasonable
number of blocks is used
c. Only one block should be selected to increase the probability of a representative
sample
d. Once the first item in the block is selected, the remainder of the block is chosen
automatically

30. In examining cash disbursement, an auditor plans to choose a sample using systematic
selection with a random start. The primary advantage of such a systematic selection is
population items
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 a. That include irregularities will not be overlooked when the auditor exercises compatible
reciprocal options
b. May occur in a systematic pattern, thus making the sample more representative
c. May occur more than once in a sample
d. Do not have to be prenumbered in order for the auditor to use the technique

31. An auditor plans to examine a sample of 20 purchase orders for proper approvals as
prescribed by the client’s control procedures. One of the purchase orders in chose sample of
20 cannot be found, and the auditor is unable to use alternative procedures to test whether
that purchase order was properly approved. The auditor should
a. Choose another purchase order to replace the missing purchase order in the sample
b. Consider this test of control invalid and proceed with substantive tests since internal
control cannot be relied upon on
c. Treat the missing purchase order as a deviation for the purpose of evaluating the
sample
d. Select a completely new set of 20 purchase orders

32. Which of the following statements concerning sample size is true?

a. An increase in the tolerable occurrence rate, other factors remaining unchanged,
increases sample size.
b. The higher the expected occurrence rate, other factors remaining unchanged, the
larger will be the sample size.
c. The more critical the attribute being tested, the higher will be the tolerable occurrence
rate set by the auditor, and the larger will be the sample size.
d. The lower the acceptable risk of underassessment of control risk, the smaller will be
the sample size.

33. In the examination of the financial statements of Delta Company, the auditor determines that
in performing a test of internal control effectiveness, the rate of error in the sample does not
support the auditor's preconceived notion of a tolerable occurrence rate when, in fact, the
actual error rate in the population does meet the auditor's notion of effectiveness. This
situation illustrates the risk of
a. Underassessment of control risk.
b. Overassessment of control risk.
c. Incorrect rejection.
d. Incorrect acceptance.

34. Management has asked the internal auditing staff to evaluate the efficiency of the accounts
payable system, particularly whether it would be economically feasible to reduce the number
of discounts lost through slow payment. The audit staff decides that it needs to determine the
amount currently being lost and can do so by taking a sample from payments made in the last
six months, examining each, and recording the amount, if any, of the discount lost. This
information can be used to project the total amount of discounts lost for the period. This
proposed plan is an example of
a. Attribute sampling.
b. Acceptance sampling.
c. Variables sampling.
d. Discovery sampling.

35. Which of the following statements concerning alpha and beta risk is true?
a. As alpha risk increases, beta risk decreases.
b. As inherent risk and/or control risk increase, beta risk should also increase.
c. As inherent risk and/or control risk increase, beta risk should decrease.
d. As a "rule of thumb," the auditor generally sets beta risk equal to or less than 10%,
inasmuch as it is the basis for the audit opinion.

36. In examining cash disbursement, an auditor plans to choose a sample using systematic
selection with a random start. The primary advantage of such a systematic selection is
population items
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 a. That include irregularities will not be overlooked when the auditor exercises compatible
reciprocal options
b. May occur in a systematic pattern, thus making the sample more representative
c. May occur more than once in a sample
d. Do not have to be prenumbered in order for the auditor to use the technique

37. Which of the following is not among the characteristics of the procedures being performed in
completing the audit?
a. They are optional since they have only an indirect impact on the opinion to be
expressed
b. They involve a lot of subjective judgement by the auditor
c. They do not pertain to specific transaction cycles for accounts
d. They are usually performed by the audit managers or other senior members of the
audit team who have extensive audit experience with the client

38. If based on the aggregate of uncorrected misstatements the auditor believes they may be
material misstatement, the auditor should perform additional procedures. If the client refuses
to adjust the financial statements, and the auditor is not able to conclude that the aggregate
of uncorrected misstatements is not material, the auditor should:
a. Issue a standards opinion
b. Consider resigning from the engagement
c. Appropriately modify the audit report
d. Obtain additional representation letter covering, uncorrected misstatements

39. When substantive tests are performed before the balance sheet date, at a minimum the
auditors should, at or after the balance sheet date:
a. Changes occurred in the account balances between the two dates
b. Perform analytical procedures, including comparison of the account balances at the
dates
c. Reconfirm all balances that were conformed at interim date
d. Confirm all balances that were not confirmed at interim date

40. Which of the following statements best expresses the auditor’s responsibility with respect to
events occurring in the subsequent period?
a. The auditor has no responsibility for events occurring in the subsequent period unless
these events affect transactions recorded on or before the balance sheet date
b. The auditor’s responsibility is to determine that transactions recorded on or before the
balance sheet date actually occurred
c. The auditor is fully responsible for events occurring in the subsequent period and
should extend all detailed procedures through the last day of the field work
d. The auditor is responsible for determining that a proper cutoff has been made and for
performing a general review of events occurring in the subsequent period

41. An auditor concludes that the omission of substantive procedures considered necessary at
the time of the audit may impair the auditor’s current ability to support the opinion that had
been previously issued. The auditor need not apply the omitted procedure if the
a. Risk of adverse publicity or litigation is low
b. Results of other procedures that were applied tend to compensate for the omitted
procedure
c. Auditor’s opinion is qualified because of a departure from generally accepted
accounting principles
d. Results of the subsequent period’s test of controls make the omitted procedure less
important

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42. A major customer of an audit client suffers a fire just prior to completion of year-end fieldwork.
The audit client believes that this event could have a significant direct effect on the financial
statements. The auditor should:
a. Advise the management to disclose the event in notes to the financial statements
b. Disclose the event in the auditor’s report
c. Withhold submission of the auditor’s report until the extent of the direct effect on the
financial statements is known
d. Advise the management to adjust the financial statements

43. Which of the following events occurring after the issuance of an auditor’s report most likely
would cause the auditor to make further inquiries about the previously issued financial
statements?
a. A technological development that could affect the entity’s future ability to continue as
a going concern
b. The discovery of information regarding a contingency that existed before the financial
statements were issued
c. The entity’s sole of a subsidiary that accounts for 30% of the entity’s consolidated
sales
d. The final resolution of a lawsuit which is adequately explained in a separate paragraph
of the auditor’s report
44. After issuing a report, an auditor has no obligation to make continuing inquiries or perform
other procedures concerning the audited financial statements, unless
a. An information, which existed at the report date that affects the report, comes to the
auditor’s attention
b. The control environment changes after the issuance of the report
c. An information about an event that occurred after the end of field work comes to the
auditor’s attention
d. The final determinations or resolutions are made of contingencies that had been
disclosed in the financial statements

45. The primary reason why an auditor request that letters of inquiry be sent to the client’s legal
counsel is to provide the auditor with
a. A description and evaluation of litigation, claims, and assessments that existed at the
balance sheet date of.
b. An expert opinion as to whether a loss is possible, probable, or remote
c. The opportunity to examine the documentation concerning litigation, claims and
assessments
d. Corroboration of the information furnished by the management concerning litigation,
claims and assessments

46. Six months after issuing an unqualified opinion on audited financial statements, an auditor
discovered that the engagement personnel failed to confirm several of the client’s material
accounts receivable balances. The auditor should first:
a. Request permission of the client to undertake the confirmation of accounts receivable
b. Perform alternative procedures to provide a satisfactory basis for an unqualified
opinion
c. Assess the importance of the omitted procedures to the auditor’s ability to support the
previously issued opinion
d. Inquire whether there are persons currently relying, or likely to rely, on the unqualified
opinion

47. Which of the following is not a procedure to discover unasserted claims or claims or contingent
liabilities?
a. Review of Board of Directors minutes
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 b. Sending a letter of inquiry to the client’s attorney
c. Substantive testing of company accounts receivable
d. Searching newspapers and other periodicals for stories about the client and its industry

48. An auditor accepted an engagement to audit the 2019 financial statements of DRL
Corporation and began the fieldwork on September 30, 2019. DRL gave the auditor the 2019
financial statements on January 7, 2020. The auditor completed the fieldwork and
simultaneously obtains approval of the financial statements by the management on February
10, 2020. The auditor delivered the report on February 16, 2020. The management
representation letter should normally be dated:
a. December 31, 2019
b. January 7, 2020
c. February 10, 2020
d. February 16, 2020

49. When the financial statements contain material but not pervasive misstatements because the
accounting policies selected are not consistent with the applicable financial reporting
framework, the auditor should
a. Express a qualified opinion and describe the matter giving rise to the modification in a
separate paragraph immediately before opinion paragraph.
b. Express a qualified opinion and describe the matter giving rise to the modification
within the opinion paragraph.
c. Express an unqualified opinion because the effects of the material misstatements are
not pervasive.
d. Disclaim an opinion and describe the matter giving rise to the modification in a
separate paragraph.

50. When shall an auditor express an adverse opinion?

a. The auditor, having obtained sufficient appropriate audit evidence, concludes that
misstatements, individually or in the aggregate, are material, but not pervasive, to the
financial statements.
b. The auditor is unable to obtain sufficient appropriate audit evidence on which to base the
opinion, but the auditor concludes that the possible effects on the financial statements of
undetected misstatements, if any, could be material but not pervasive.
c. The auditor, having obtained sufficient appropriate audit evidence, concludes that
misstatements, individually or in the aggregate, are both material and pervasive to the
financial statements.
d. The auditor is unable to obtain sufficient appropriate audit evidence on which to base the
opinion, and the auditor concludes that the possible effects on the financial statements of
undetected misstatements, if any, could be both material and pervasive.

51. Under which of the following circumstances would a disclaimer of opinion not be appropriate?
a. The financial statements fail to contain adequate disclosure concerning related party
transactions.
b. The auditor is engaged after fiscal year-end and is unable to observe the physical
inventories or apply alternative procedures to verify their balances.
c. The auditor is unable to determine the amounts associated with fraud committed by the
client’s management.
d. The client refuses to permit its attorney to furnish information requested in a latter of audit
inquiry.

52. Which of the following statements concerning the two broad financial reporting frameworks
for comparatives is correct?
a. Under the comparative financial statements framework, the comparative financial
statements for the prior periods are intended to be read in conjunction with the amounts
and other disclosures relating to the current period.

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 b. Under the comparative financial statements framework, the amounts and other
disclosures for the prior periods form part of the current period financial statements.
c. Under the corresponding figures framework, the corresponding figures for the prior periods
are integral part of the current period financial statements.
d. Under the corresponding figures framework, the corresponding figures for the prior periods
are considered separate financial statements.

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

54. What is the purpose of the following paragraph in a particular audit report:

“…We draw attention to note X in the financial statements which discusses that the company
incurred a net loss of P6.4 million during the year ended December 31, 2004 and as of that
date, the Company’s liabilities exceeded its total assets by P2,500,000...”

a. A standard reporting requirement.

b. Emphasis of matter about the going concern problems of the entity.
c. Inadequate disclosure qualification.
d. An inappropriate reporting.

55. An explanatory paragraph following an opinion paragraph that describes an uncertainty

follows:

As discussed in Note X to the financial statements, the company is a defendant in a lawsuit

alleging infringement of certain patent rights and claiming damages. Discovery proceedings are
in progress. The ultimate outcome of the litigation cannot presently be determined. Accordingly,
no provision for any liability that may result upon adjudication has been made in the
accompanying financial statements.

What type of opinion should the auditor express in this circumstance?

a. unqualified
b. qualified
c. disclaimer
d. adverse

56. During the year ended December 31, Jang Ga Company reported its property, plant, and
equipment at the lower of cost or market value because their fair value had declined. The loss
has been included in the income statement and the adjustment has been fully disclosed in the
notes. If a CPA believes that the values reported in the financial statements are reasonable,
what opinion should be expressed?
a. An unmodified opinion
b. A “subject to” qualified opinion
c. An adverse opinion
d. A disclaimer of opinion

57. On January 2, 2021, IC Company received a notice from its primary suppliers that effective
immediately, all wholesale prices would be increased by 10%. On the basis of the notice, IC
revalued its December 31, 2020 inventory to reflect the higher costs. As a result, the
Statement of Financial Position reflects inventory stated at an amount higher than its net
realizable value. The inventory constituted a material proportion of total assets; however, the
effect of the revaluation was material to current assets but not to total assets or net income.
In reporting on the company’s financial statements for the year ended December 31, 2020, in
which inventory is valued at the adjusted amount, the auditor would most likely
a. Express an unmodified opinion provided the nature of the adjustment and the amounts
involved are disclosed in notes to the financial statements.
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 b. Express a qualified opinion.
c. Disclaim an opinion.
d. Express an adverse opinion.

58. PSJ, CPA, audited Evermore Company’s prior year-end financial statements. These
statements are presented with those of the current year for comparative purposes without
PSJ’s auditor’s report, which expressed a qualified opinion. In drafting the current year’s
auditor’s report, KSH, CPA, the incoming auditor, should
I. Not name PSJ as the predecessor auditor
II. Indicate the type of opinion issued by PSJ
III. Indicate the substantive reasons for PSJ’s qualification
IV. Indicate the date of PSJ’s auditor’s report

a. I, II, and IV only

b. II, III, and IV only
c. I, II, and III only
d. I, II, III, and IV

59. PSA 720 states, “If, on reading the other information, the auditor identifies a material
inconsistency, the auditor should determine whether the audited financial statements or the
other information needs to be revised.” What type of opinion should be expressed if the client
refuses to make the necessary revision in the financial statements?
a. Disclaimer of opinion
b. Qualified opinion or disclaimer of opinion
c. Unmodified opinion with an Other Matter paragraph describing the material
inconsistency
d. Qualified or adverse opinion

60. Statement I. The auditor is required to issue a disclaimer of opinion in the event of a material
uncertainty.

Statement II. Materiality is an essential consideration in determining the appropriate type of

report under a given set of circumstances.

Statement III. When an auditor does not confirm material accounts receivable, but it satisfied
by the application of alternative auditing procedures, he normally should issue an unmodified
opinion, but disclose elsewhere in the report this departure from a customary procedure.

a. True; True; True

b. True; True; False
c. False; True; False
d. False; True; True

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