AUDIT REPORTING

ILLUSTRATIVE QUIZZERS

1. Financial statements include of changes in equity. Which two of the following are also included within
the financial statements?
I. A statement of cash flows
II. An auditor's report
III. Accounting policies
IV. A director's report
A. I and II
B. I and Ill
C. II and III
D. III and IV

2. The following are examples of general-purpose frameworks, except

A. PERSS
B. PFRSS for SMEs
C. IFRSs
D. Cash basis of accounting

3. The auditor's judgment as to whether the financial statements give a "true and fair view" or "are
presented fairly", in all material respects, is made in the context of
A. Generally accepted auditing standards
B. Applicable financial reporting framework
C. Philippine Standards on Auditing
D. Professional ethical requirements

4. Not an applicable financial reporting framework

A. Philippine Financial Reporting Framework (PFRS)
B. International Financial Reporting Framework
C. PFRS for Small-and-Medium-sized Entities
D. Philippine Standards on Auditing

5. A financial reporting framework that requires compliance with the requirements of the framework
and acknowledges that, to achieve fair presentation, it may be necessary for management to provide
disclosures beyond those specifically required, or depart from a requirement of the framework

A. Fair presentation framework

B. Conceptual framework
C. Compliance framework
D. Generally-accepted framework
6. In the auditing profession, there is a need for uniformity in reporting in order to
I. Avoid confusion
II. Promote credibility in the global marketplace
A. I only
B. II only
C. Both I and II
D. Neither I nor II

7. The auditor's report should be titled, and the title should include the word
A. Standard
B. Audit
C. Opinion
D. Independent

8. Not an appropriate addressee of an independent auditor's report

A. Shareholders of the client company
B. Board of directors of the client company
C. Company engaging the auditor
D. President of the client company

9. Standards mentioned in the Opinion Paragraph of the audit report

A. PFRSs
B. PSAs
C. Both A and B
D. Neither A nor B

10. According to PSA 700 Revised, when an auditor expresses an Adverse opinion, he/she should
disclose the substantive reasons for duch an opinion in an explanatory paragraph.
A. Preceding the opinion paragraph
B. Within the notes to the financial statements
C. Following the opinion paragraph
D. Preceding the introductory paragraph

11. For large audit firms, who normally signs the audit report?
A. Lead partner
B. All partners
C. Audit team members
D. Junior auditors

12. Unresolved disagreement with management normally leads to what type of opinion
A. Qualified or adverse
B. Adverse or disclaimer
C. Qualified or disclaimer
D. Unmodified with emphasis of matter paragraph

13. “The financial statements do not present fairly the financial position, result of operation, or cash
flows in conformity with generally accepted accounting principles.”

The above opinion was most likely issued in connection with financial statements that are
A. Inconsistent
B. Misleading
C. Based on prospective information
D. Surrounded by multiple uncertainties

14. When a client refuses to include the statement of cash flows in its financial statements because it
believes that it is not a useful document, the auditor’s opinion should be
A. Adverse
B. Unmodified
C. Qualified due to scope limitation
D. Qualified due to inadequate disclosure

15. If a scope limitation is imposed by the circumstances, which course of actions are available to the
auditor?
I. Issue a qualified opinion if effects are material
II. Disclaim an opinion if effects are pervasive
III. Resign or withdraw from the engagement
A. I and II only
B. I and III only
C. II and III only
D. I, II and III

16. The following statements relate to the date of the auditor’s report. Which is false?
A. The auditor should date the report as of the completion date of the audit.
B. The date of the Auditor’s report should not be earlier than the date on which the financial statements
are signed or approved by management.
C. The date of the Auditor’s report should not be later than the date on which the financial statements
are signed or approved by management.
D. The date of the Auditor’s report should always be later than the date on which the financial
statements (i.e., the balance sheet date).
17. In making a decision whether to disclaim an opinion or withdraw from engagement due to a
management-imposed scope limitation, the auditor should consider
A. The materiality of the item in 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

18. Evaluate the following statements:

I. Matters relevant to users' understanding and are disclosed in the financial statements
II. Matters relevant to user's understanding but are not disclosed in the financial statements
A Other Matter (OM), Emphasis of a Matter (EOM)
B. EOM, OM
C. Both OM
D. Both EOM

19. An explanatory paragraph describes an uncertainty as 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 these circumstances?

A. Unqualified
B. Qualified
C. Disclaimer
D. Adverse

20. In which of the following circumstances would an auditor most likely add an Emphasis of Matter
Paragraph to the auditor's report while expressing an unmodified opinion?
A. There is a substantial doubt about the entity's ability to continue as a going concern.
B. Management's estimates of the effects of future events are unreasonable.
C. No depreciation has been provided in the financial statements.
D. Certain transactions cannot be tested because of management's records retention policy

21. When audited financial statements are presented in a document (e.g., annual report) containing
other information, the auditor
A. Should read the other information to consider whether it is inconsistent with the audited financial
statements.
B. Has no responsibility for the other information because it is not part of the basic financial statements.
C. Has an obligation to perform auditing procedures to corroborate the other information.
D. Is required to express a qualified opinion if the other information has a material misstatement of fact.

22. 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. Disclaim an opinion on the financial statements after explaining the material inconsistency in an
emphasis of matter paragraph.
B. Revise the auditor's report to include an other matter paragraph describing the material
inconsistency.
C. Express a qualified opinion after discussing the matter with the client's directors.
D. Consider the matter closed because the other information is not in the audited statements.

23. Evaluate the following issues identified by the auditor.

I. Revenue recognition (occurrence) is considered to have high risk of material misstatement and to be a
source of significant risk
II. The auditor determines that goodwill impairment involved significant judgment from management,
utilized several estimates subject to uncertainties
III. The auditor determined that the client's acquisition (100%) of a competitor company is a significant
event.
Assuming that the items above are the most significant in the audit and were communicated with TCG,
which of the above would qualify as key audit matters?
A. I only
B. II only
C. Both I and
D. I, II, and III

24. Which of the following statements is/are correct?

Statement 1: For PLC clients, the KAM section should include a description of the KAM, reason why it is
considered most significant, how it was addressed in the audit (procedures), and the related note in the
FS.
Statement 2: If a matter resulted to the modification of an opinion, such matter may also be considered
as a KAM.
A. I only
B. Il only
C. Both I and II
D. Neither I nor II

25. Which of the following statements is/are correct?

Statement 1: If an auditor decides to disclaim an opinion then KAM must still be presented.

Statement 2: If the auditor determines no KAM is present then this must be stated in the KAM section.

A. I only

B. II only

C. Both I and II

D. Neither I nor ll

26. When comparative financial statements are presented, the standards of reporting, which refers to
financial statements "taken as a whole," should be considered to apply to the financial statements of the
A. Periods presented plus the one preceding period
B. Current period only
C. Current period and those of the other periods presented
D. Current and immediately preceding period only

27. The following statements relate to unaudited prior year financial statements that are presented in
comparative form with audited current year financial statements. Which is incorrect?
A. The incoming auditor should state in the auditor's report that the comparative financial statements
are unaudited.
B. The incoming auditor need not perform audit procedures regarding opening balances of the current
period.
C. Clear disclosure in the financial statements that the comparative financial statements are unaudited is
encouraged.
D. In situations where the incoming auditor identifies that the prior year unaudited figures are materially
misstated, the auditor should request management to revise the prior year's figures or if management
refuses to do so, appropriately modify the report.

28. Unqualified financial statements for the prior year presented in comparative form with audited
financial statements for the current year should be clearly marked to indicate their status and
I. The report on the prior period should be reissued to accompany the current period report
II. The report on the current period should include as a separate paragraph description of the
responsibility assumed for the prior period's financial statements
A. I only
B. Il only
C. Both I and II
D. Either I or II
29. The supplementary information required under RR15-2010 is clearly differentiated from the audited
financial statements. How would the "Report on the Supplementary Information" be affected if the
auditor's "Report on the Financial Statements" contains an adverse opinion?
A The auditor should express a qualified opinion on the supplementary information.
B. To attain consistency in reporting, the auditor should express an adverse opinion on the
supplementary information.
C. The auditor is precluded from expressing an opinion on the supplementary information.
D. The auditor should express an unmodified opinion on the supplementary information because such
information is not a required part of the audited financial statements.

30. If the results of the auditor's expert's work do not provide sufficient appropriate audit evidence or
are not consistent with other audit evidence, the auditor should
A. Report the matter to the appropriate regulatory agency of the government.
B. Resolve the matter.
C. Withdraw from the engagement
D. Express an unqualified opinion with reference to the work of the expert.

RESILIENCE is:

Never giving up even when things get tough.

Trying even if you're not sure you'll succeed.

The courage to come back from a failure.

Getting back up again when you've been knocked down.

BE RESILIENT TO ATTAIN YOUR CPA TITLE.

-END OF HANDOUTS