Quiz in Acctg 113 a.

The materiality of the item in consideration

Instruction: Write the letter of your answer before b. The pervasiveness of effect on financial
the number in a Capital letter. statements

1. A report with a disclaimer of opinion will have the c. Both the materiality and pervasiveness
following change in the introductory paragraph should be considered

a. “We have audited….” d. The stage of completion of the engagement

at the time the management imposed the
b. “We cannot audit…” scope limitation

c. “We were engaged to audit…” 6. An adverse opinion is issued when the auditor
believes
d. “We have audited…”
a. Some parts of the financial statements are
2. In a report with a disclaimer of opinion, this is not
materially misstated or misleading
found
b. The financial statements will be found to be
a. Statement that the auditor’s responsibility
misleading or misstated, if an adequate
is to express on the financial statement
investigation is performed
b. Reference to the Basis for Disclaimer of
c. The overall financial statements are so
Opinion paragraph
materially misstated or misleading as a
c. General description of the audit whole that they do not present fairly the
financial position or results of operations
d. Statement that the auditor was not able to and cash flows in conformity with GAAP
obtain sufficient appropriate audit evidence
d. The audit firm is not independent
3. Disclaimer of opinion is not the appropriate
opinion when 7. When the client fails to make adequate disclosure
in the body of the statements or in the related
a. There are multiple uncertainties footnotes, it is the responsibility of the auditor to

b. Management fails to furnish written a. Inform the reader that disclosure is not
representations adequate, and to issue a qualified or an
adverse opinion
c. Management refuses to include a required
information statements and underlying b. Inform the reader that disclosure is not
records adequate, and to issue an unmodified or
qualified opinion
d. The auditor is not independent
c. Present the information in the audit report
4. An auditor may not issue a qualified opinion when
and issue an unmodified or qualified
a. A scope limitation prevents the auditor opinion
from completing an important audit
d. Present the information in the audit report
procedure
and to a qualified or an adverse opinion
b. The auditor’s report refers to the work of a
8. The substantive reasons for providing an opinion
specialist
other than unmodified shall be presented
c. The auditor lacks independence with
a. Within the auditor’s responsibility
respect to the audited entity
paragraph
d. An accounting principle at variance with
b. Within the opinion paragraph
generally accepted accounting principles is
used c. After the auditor’s responsibility paragraph
but before the opinion paragraph
5. In making a decision whether to disclaim an
opinion or withdraw from engagement due to a d. After the opinion paragraph
management-imposed scope limitation, the auditor
should consider 9. It is appropriate to issue an adverse opinion when
the auditor
 a. Has gathered sufficient appropriate 14. “Independence” in auditing means
evidence that the financial statements are
not fairly stated a. Remaining aloof from client

b. Management refuses to furnish written b. Not being financially dependent on client

representations
c. Being an advocate for the client
c. Has knowledge that the Philippine
d. Taking an unbiased viewpoint
Standards on Auditing were not followed
15. In general, which of the following is not an
d. Was not able to gather sufficient
appropriate addressee of an independent auditor’s
appropriate evidence regarding the fairness
report?
of the financial statements
a. Shareholders of the client company
10. The signature in the audit report is the
b. Company engaging the auditor
a. Personal name of the auditor
c. Board of directors of the company
b. Name of the audit firm
d. President of the client company
c. Either A or B or both
16. The opinion paragraph of a standard unmodified
d. Either A or B but cannot be both
audit report does not
11. Auditor’s report on financial statements required
a. State that the financial statements are
to be filed with the Philippine Securities and
presented fairly in material respects
Exchange Commission shall contain the following:
(choose the exception) b. Provide an unmodified opinion about the
fairness of the financial statements
a. Manual signature of the certifying partner
c. A conclusion whether the company
b. Partner’s TIN and PRC registration numbers
followed Philippine Financial Reporting
c. Accreditation with SEC Standards

d. Partner’s birth date and contact number d. State that the auditor has obtained
sufficient appropriate evidence to support
12. An auditor discovered a P50,000 the opinion
misappropriation by the payroll supervisor. The
company’s total assets and pre-tax income are P70 17. Forever Inc., uses the weighted average method
million and P15 million, respectively. Considering to value half of its inventory and the first-in, first-out
materiality, the most likely opinion would be method to value the other half. Assuming the
auditor is satisfied in all other respects, under the
a. Unmodified circumstances the auditor will issue a(n)

b. Qualified a. Opinion modified due to inconsistency

c. Adverse b. Unmodified opinion with an explanatory

paragraph
d. Disclaimer
c. Qualified or adverse opinion, depending on
13. If the balance sheet of a privately-held company materiality
is dated December 31, 2005, the audit report is
dated March 6, 2006, and both are released on d. Unmodified opinion
March 15, 2006, this indicates that the auditor has
searched for material unrecorded transactions and 18. Which of the following statements regarding the
events that occurred up to title of the audit report is incorrect?

a. December 31, 2005 a. It emphasizes that the auditor is

independent of the financial statements
b. March 15, 2006
b. It distinguishes the report from those issued
c. December 31, 2006 by others

d. March 6, 2006 c. It is the first element of the audit report

 d. It covers the reports presented as “other 23. Which of the following statements is an incorrect
information” use of the terminology?

19. The terms “reasonable assurance” in the a. Evidence obtained from an independent
auditor’s responsibility paragraph indicate that source outside the client organization is
more reliable than that obtained from
a. No misstatements exist in the financial within.
statements
b. Documents that originate outside the
b. No material misstatement exist in the company are considered more reliable than
financial statements those that originate within the client’s
organization.
c. There is a possibility that material
misstatements still exist in the financial c. Documentary evidence is more reliable
statements when it is received by the auditor directly
from an independent third party.
d. There is a possibility that immaterial
misstatements still exist in the financial d. External evidence, such as communications
statements from banks, is generally regarded as more
reliable than answers obtained from
20. When the auditor provides an unmodified
inquiries of the client.
opinion, it means that
24. Which of the following is not a specific audit
a. The financial statements are accurately
procedure enumerated in application and
prepared
explanatory material in PSA 500?
b. The company is a viable option for
a. Inspection
investment purposes
b. Recalculation
c. There were no errors or fraudulent
activities found c. External confirmation

d. It is possible that material misstatements d. Vouching

are still present in the financial statements
25. To gather evidence regarding the balance per
21. Uniformity in reporting is indispensable because bank in a bank reconciliation, an auditor would
it helps (choose exception) examine all of the following except

a. Promote global credibility a. Cutoff bank statement

b. Avoid confusion b. Year-end bank statement

c. Users understand the report c. Bank confirmation

d. Auditors avoid legal liability d. General ledger

22. Which of the following forms of evidence would 26. When the acceptable level of detection risk for
be least persuasive in forming the auditor’s opinion? cash is high, the auditor may

a. Responses to auditor’s questions by the a. Review the client’s bank reconciliation

president and controller regarding the
investments account
b. Correspondence with a stockbroker
regarding the quantity of client’s
investment held in street name by the
broker
b. Prepare the bank reconciliation using the
bank data in the client’s possession
c. Obtain the bank statements directly from
the bank and prepare the bank
reconciliation

c. Minutes of the board of directors d. Scan the client-prepared bank reconciliation

authorizing the purchase of stock as an and verify the mathematical accuracy of the
investment reconciliation

d. The auditor’s count of marketable securities

27. Which of the following is a proper alternative d. Are direct borrowings on notes payable
procedure when no response is obtained from a authorized by the board of directors?
positive confirmation request?

a. Examination of subsequent cash receipts in

payment of the receivable

b. Mailing negative confirmation request to

non-respondents

c. Expansion of the sample by the number of

non-respondents

d. Reduction of accounts receivable by the

amount of the no response

28. Which of the following procedures would least

likely lead the auditor to detect unrecorded fixed
assets disposals?

a. Examine insurance policies

b. Review property tax files

c. Scan invoices for fixed asset additions

d. Review repairs and maintenance expense

29. To gain assurance that all inventory items in a

client’s inventory listing schedule are valid, an
auditor most likely would trace

a. Inventory tags noted during the auditor’s

observation to items listed in the inventory
listing schedule

b. Inventory tags note during the auditor’s

observation to items listed in receiving
reports and vendor’s invoices

c. Items listed in the inventory listing schedule

to inventory tags and the auditor’s recorded
count sheets

d. Items listed in receiving reports and

vendor’s invoices to the inventory listing
schedule

30. Which of the following questions would an

auditor most likely include on an internal control
questionnaire for notes payable?

a. Are assets that collateralize notes payable

critically needed for the entity’s continued
existence?

b. Are two or more authorized signatures

required on checks that repay notes
payable?

c. Are proceeds from notes payable used for

the purchase of noncurrent assets?