ASUPRIN

ACTIVITY WORKSHEET

Compiled by: No. 006

__________________________________________________________________________________________

Name: __________ Time & Schedule: ___

I. SHORT ANSWER QUESTIONS: Answer each question in a clear and organized paragraph. One or two sentences
that directly answer the short-answer question. Each question is worth 2 points.

1. Describe the two primary types of subsequent events that require consideration by management and
evaluation by the auditor

-The first type includes occurrences that give further evidence about conditions that existed at the balance
sheet date and have an impact on the estimates made during the financial statement preparation process. The
second type includes events that offer evidence for situations that did not exist at the time the balance sheet
was prepared but developed after that date. These events should not require a financial statement change.

2. How is management representation letter dated?

- Normally, a management representation letter is dated on the same day as the auditor's report. The
letter, however, does not predate the auditor's report. A second representation letter addressing specific
transactions or other events may be acquired during the audit or at a later date after the date of the auditor's
report, such as on the day of a public offering, in certain situations.

3. Who is responsible for assessing the reasonableness of the going-concern assumption?

- The auditor must determine if there is reasonable doubt about the entity's capacity to continue as a
going concern for a reasonable amount of time, not to exceed one year after the financial statements are
audited  The auditor's assessment is based on his or her knowledge of relevant conditions and events that exist
at the time of the auditor's report or have occurred prior to that date.

4. What are key audit matters?

- The key audit matter are chosen from those that have been communicated with people in charge of
governance. The auditor should assess which matters requiring significant auditor attention in executing the
audit based on the matters communicated with those responsible with governance. Those issues that, in the
auditor's professional opinion, were most important in the audit of the current period's financial statements.

5. Why is a client-imposed limitation generally considered more serious?

- When a client limits the scope of the engagement, auditors should be especially cautious since the client
may be attempting to prevent the auditor from uncovering serious misstatements. When the scope of the work
is considerably limited by the client's restrictions, the auditor should disclaim an opinion on the financial
statements, according to auditing standards.

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II. TRUE OR FALSE: Write the word TRUE for each correct statement; otherwise, write FALSE.

1. TRUE When testing for contingent liabilities, the primary objective at the initial stage of the tests is to
determine the existence of contingencies.
2. TRUE A lawsuit has been filed against your client. If, in the opinion of legal counsel, the likelihood your client
will lose the lawsuit is remote, no financial statement accrual or disclosure of the potential loss is required.
3. TRUE The issuance of bonds by the client subsequent to year-end would require a footnote disclosure in, but
no adjustment to, the financial statements under audit.
4. FALSE Auditors are not required to evaluate the going concern assumption as part of each audit.
5. TRUE Although the letter of representation is typed on the client’s letterhead and signed by the client, it is
common for the auditor to prepare the letter.
6. FALSE Audit reports should be dated the date on which the financial statements are issued.
7. FALSE If financial statements fail to disclose a material fact, the auditors may disclose the information in an
explanatory paragraph and issue an unqualified opinion on the statements.
8. FALSE A client imposed scope limitation will generally result in a disclaimer of opinion.
9. TRUE Analytical review procedures are required all throughout the audit engagement
10. TRUE Key Audit Matters are required for all entities.

III. MULTIPLE CHOICE QUESTIONS: Read each item carefully. Select the correct/best answer for each of the following
questions and write the letter of your choice before the number.

_____D_____ 1. Which of the following material events occurring subsequent to the balance sheet date would
require an adjustment to the financial statements before they could be issued?
A. Sale of long-term debt or capital stock
B. Loss of a plant as a result of a flood
C. Major purchase of a business which is expected to double the sales volume D. Settlement
of litigation in excess of the recorded liability

_____C_____ 2. The primary source of information to be reported about litigation, claims and assessments is
the
A. Client’s lawyer C. Client’s management
B. Court records D. Independent auditor
_____D_____
3. When an auditor concludes there is substantial doubt about an entity’s ability to continue as a
going concern for a reasonable period of time, the auditor responsibility is to
A. Prepare prospective financial information to verify whether management’s plan can be
effectively implemented
B. Project future conditions and events for a period of time not to exceed one year following
the date of the financial statements.
C. Issue a qualified or adverse opinion, depending upon materiality, due to the possible
effects on the financial statements
D. Consider the adequacy of disclosure about the entity’s possible inability to continue as a
going concern
_____D_____
4. For which of the following matters should an auditor obtain written management
representations?
A. Management’s cost-benefit justifications for not correcting internal control weaknesses
B. Management’s knowledge of future plans that may affect the price of the entity’s stock.
C. Management’s knowledge of allegations of fraud or suspected fraud affecting the entity.
D. Management’s acknowledgement of its responsibility for employees’ violations of laws.
_____C_____
5. Which of the following is not a typical analytical review procedure?
A. Study of relationships of financial information to relevant nonfinancial information.
B. Comparison of financial information with similar information.
C. Comparison of recorded amounts of major disbursements with appropriate invoices.
D. Comparison of recorded amounts of major disbursements with budgeted amounts.
_____D_____
6. Which of the following is not a procedure that auditors typically perform to search for
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_____A_____ 10. In an audit of contingent liabilities, which of the following procedures would be least effective?
A. Examining customer confirmation replies.
B. significant
Reviewing events
a bank during the subsequent
confirmation letter. period?
C. A. Reviewinvoices
Examining minutesfor
of professional
board of directors' meeting.
services.
D. B. Review
Reading thethe latestof
minutes available
the boardinterim financial
of directors statements.
meetings.
C. Inquire about any unusual adjustments made subsequent to the balance sheet date.
_____A_____ 11. The D. Review
element changes
of the in internal
auditor’s reportcontrol during the period
that distinguishes it fromsubsequent
reports thatto the balance
might sheet
be issued by date.
others is
_____D_____ 7. Which of the following events or activities normally occurs following the issuance of the
A. Title C. Auditor’s signature
auditor's opinion on the client's financial statements?
B. Addressee D. Opinion paragraph
A. Interim testing. C. "Roll-forward" work.
____D______ 12. The B. Subsequent events.
most common type of audit report contains a(n):
D. Subsequent discovery of facts.
A. Adverse opinion. C. Disclaimer of opinion.
_____B_____ 8. A subsequent event that provides additional information about a condition that existed at the
B. Qualified opinion. D. Unqualified
balance sheet date is referred to as a(n):
_____B_____ A. Revised disclosure. C. Subsequent discovery of facts.
13. An auditor would issue an adverse opinion if
B. Type I subsequent event. D. Type II subsequent event.
A. The audit was begun by other independent auditors who withdrew from the engagement.
B. The statements taken as a whole do not fairly present the financial condition and results of
_____C_____ 9. The primary objective of analytical procedures used in the final review stage of an audit is to A.
operations of the company.
Obtain evidence from details tested to corroborate management assertions.
C. A qualified opinion cannot be given because the auditor lacks independence.
B. Obtain evidence on the validity of the assessment of control risk.
D. The restriction on the scope of the audit was significant.
C. Assist the auditor in evaluating the overall financial statement presentation.
_____D_____ D. Identify areas that represent specific risks relevant to the audit.
14. Under which of the following sets of circumstances might an auditor disclaim an opinion?
A. The financial statements contain a departure from GAAP, the effect of which is material.
B. The principal auditor decides to make reference to the report of another auditor who
audited a subsidiary.
C. There has been a material change between periods in the method of the application of
accounting principles.
D. There were significant limitations on the scope of the audit.

_____C_____
15. If the auditor concludes that the fraud or error has a material effect on the financial statements
and has not been properly corrected in the financial statements, the auditor should issue a: A.
Unqualified opinion with explanatory paragraph.
B. Qualified or disclaimer of opinion.
C. Qualified or adverse opinion.
D. Adverse or disclaimer of opinion.

16. A scope restriction is least likely to result in a(an):

_____B_____
A. Qualified opinion. C. Disclaimer of opinion.
B. Adverse opinion. D. Standard unqualified opinion.

_____C_____ 17. The term "except for" in an audit report is: A. Used in an adverse opinion.
B. No longer considered appropriate.
C. Used in a qualified opinion
D. Used for an unqualified opinion when an explanatory paragraph is added.

_____A_____ 18. An audit report should be dated as of the

A. date the report is delivered to the client entity
B. date of management approving the audited financial statements
C. balance sheet date of the latest period reported on
D. date a letter of audit inquiry is received from the entity’s attorney

_____D_____ 19. Which of the following should not be included in the description of KAM?
A. Why the matter was considered to be a KAM
B. How the matter was addressed in the audit
C. Reference to the related disclosure(s), if any
D. Contain or imply discrete opinions on separate elements of the financial statements.

______C____ 20. What is the first section of the revised Auditor’s Report?
A. Introductory paragraph Page 3 of 3C. Opinion paragraph
B. Key Audit Matters paragraph D. Basis for Opinion