Audit Opinions

DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

Accountancy Department
2nd Semester A.Y. 2012-2013
Auditing Problem
DIFFERENT TYPES OF AUDIT REPORTS
I. Unqualified Opinion / Unmodified Opinion
Problem 1. Circumstances include the following:
o Audit of a complete set of financial statements.
o The financial statements are prepared for a general purpose by management of the entity in accordance with
PFRS.
o The terms of the audit engagement reflect description of management’s responsibility for the financial statements
in PSA 210 (Redrafted).
o In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under
local law.
Required: Prepare the appropriate audit report assuming the financial statements are fairly stated.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
Report on the Financial Statements
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as at December 31,
20X1, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of
significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation28 of these financial statements in accordance with Philippine
Financial Reporting Standards; this includes the design, implementation and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
Philippine Standards on Auditing.Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation29 of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control.30 An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of ABC Company as at December
31, 20X1, and (of) its financial performance and its cash flows for the year then ended in accordance with Philippine Financial Reporting
Standards.
Report on Other Legal and Regulatory Requirements

[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting
responsibilities.]
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
DLSL CPA Board Operation – Auditing Problem

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 Audit of a complete set of financial statements required by law or regulation.
 The financial statements are prepared for a general purpose by management of the entity in accordance with the
Financial Reporting Framework (XYZLaw) of Jurisdiction X (i.e., a financial reporting framework, encompassing
law or regulation, designed to meet the common financial information needs of a wide range of users, but which is
not a fair presentation framework).
 The terms of the audit engagement reflect the description of management’s responsibility for the financial
statements in PSA 210 (Redrafted).


We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as at
December 31, 20X1, and the income statement, statement of changes in equity and cash flow statement for the year then
ended, and a summary of significant accounting policies and other explanatory information.
Management is responsible for the preparation of these financial statements in accordance with XYZ Law of Jurisdiction
X; this includes the design, implementation and maintenance of internal control relevant to the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the presentation of
the financial statements.
Opinion
In our opinion, the financial statements of ABC Company for the year ended December 31, 20X1 are prepared, in all
material respects, in accordance with XYZ Law of Jurisdiction X.

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 Audit of consolidated financial statements prepared for a general purpose by management of the parent in
accordance with PFRS.
 The terms of the group audit engagement reflect the description of management’s responsibility for the financial
 In addition to the audit of the group financial statements, the auditor has other reporting responsibilities required
under local law.
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of ABC Company and its subsidiaries, which
comprise the consolidated balance sheet as at December 31, 20X1, and the consolidated income statement, statement of
changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation35 of these consolidated financial statements in
accordance with Philippine Financial Reporting Standards; this includes the design, implementation and maintenance of
internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation36 of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control.37 An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, (or give a true and fair view of)
the financial position of ABC Company and its subsidiaries as (of) December 31, 20X1, and (of) their financial
performance and cash flows for the year then ended in accordance with Philippine Financial Reporting Standards.

responsibilities.]

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II. Qualified Opinion due to Misstatement (material but not pervasive)

 Audit of a complete set of general purpose financial statements prepared by management of the entity in accordance with
Philippine Financial Reporting Standards.
 The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in
[proposed] PSA 210 (Redrafted).8
 Inventories are misstated. The misstatement is deemed to be material but not pervasive to the financial statements.
 In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under local law PSA
705 (Revised and Redrafted) and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error.
Required: Prepare the appropriate audit report.
Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing
procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend
on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation12 of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control.13 An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
The company’s inventories are carried in the balance sheet at xxx. Management has not stated the inventories at the lower of cost and
net realizable value but has stated them solely at cost, which constitutes a departure from Philippine Financial Reporting Standards.
The company’s records indicate that had management stated the inventories at the lower of cost and net realizable value, an amount of
xxx would have been required to write the inventories down to their net realizable value. Accordingly, cost of sales would have been
increased by xxx, and income tax, net income and shareholders’ equity would have been reduced by xxx, xxx and xxx, respectively.
Qualified Opinion
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements
present fairly, in all material respects, the financial position of ABC Company as at December 31, 20X1, and of its financial performance
and its cash flows for the year then ended in accordance with Philippine Financial Reporting Standards.
responsibilities.]

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III. Adverse Opinion due to Misstatement (Material and Pervasive)

o Audit of consolidated general purpose financial statements prepared by management of the parent in accordance with Philippine
Financial Reporting Standards.
o The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in [proposed]
PSA 210 (Redrafted).
o The financial statements are materially misstated due to the non-consolidation of a subsidiary. The material misstatement is deemed
to be pervasive to the financial statements. The effects of the misstatement on the financial statements have not been determined
because it was not practicable to do so.
o In addition to the audit of the consolidated financial statements, the auditor has other reporting responsibilities required under local
law.
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of ABC Company and its subsidiaries, which comprise the consolidated
balance sheet as at December 31, 20X1, and the consolidated income statement, statement of changes in equity and cash flow statement for
the year then ended, and a summary of significant accounting policies
and other explanatory information.
Management is responsible for the preparation and fair presentation16 of these consolidated financial statements in accordance with Philippine
Financial Reporting Standards; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit
involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.18 An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse audit opinion.
Basis for Adverse Opinion
As explained in Note X, the company has not consolidated the financial statements of subsidiary XYZ Company it acquired during 20X1
because it has not yet been able to ascertain the fair values of certain of the subsidiary’s material assets and liabilities at the acquisition date.
This investment is therefore accounted for on a cost basis. Under Philippine Financial Reporting Standards, the subsidiary should have been
consolidated because it is controlled by the company. Had XYZ been consolidated, many elements in the accompanying financial statements
would have been materially affected. The effects on the financial statements of the failure to consolidate have not been determined.
Adverse Opinion
In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion paragraph, the consolidated financial
statements do not present fairly the financial position of ABC Company and its subsidiaries as at December 31, 20X1, and of their financial
performance and cash flows for the year then ended in accordance
with Philippine Financial Reporting Standards.

[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.]

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IV. Qualified Opinion due to Scope Limitation (Material but not pervasive)
 Audit of a complete set of general purpose financial statements prepared by management of the entity in accordance with
Philippine Financial Reporting Standards.
 The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in
[proposed] PSA 210 (Redrafted).
 The auditor was unable to obtain sufficient appropriate audit evidence regarding an investment in a foreign affiliate. The
possible effects of the inability to obtain sufficient appropriate audit evidence are deemed to be material but not pervasive to
 In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under local law.
significant accounting policies and other explanatory notes.
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
ABC Company’s investment in XYZ Company, a foreign associate acquired during the year and accounted for by the equity method, is
carried at xxx on the balance sheet as at December 31, 20X1, and ABC’s share of XYZ’s net income of xxx is included in ABC’s income
for the year then ended. We were unable to obtain sufficient appropriate audit evidence about the carrying amount of ABC’s investment
in XYZ as at December 31, 20X1 and ABC’s share of XYZ’s net income for the year because we were denied access to the financial
information, management, and the auditors of XYZ. Consequently, we were unable to determine whether any adjustments to these
amounts were necessary.
Qualified Opinion
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial
statements present fairly, in all material respects, the financial position of ABC Company as at December 31, 20X1, and of its financial
performance and its cash flows for the year then ended in accordance with Philippine Financial Reporting Standards.

responsibilities.]

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V. Disclaimer of Opinion due to Score Limitation (Material and Pervasive)

 Audit of a complete set of general purpose financial statements prepared bymanagement of the entity in accordance
 The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in
 The auditor was unable to obtain sufficient appropriate audit evidence about a single element of the financial
statements. That is, the auditor was also unable to obtain audit evidence about the financial information of a joint
venture investment that represents over 90% of the company’s net assets. The possible effects of this inability to obtain
sufficient appropriate audit evidence are deemed to be both material and pervasive to the financial statements.
 In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under local
law.
We were engaged to audit the accompanying financial statements of ABC Company, which comprise the balance sheet as at
ended, and a summary of significant accounting policies and other explanatory notes.
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine
Financial Reporting Standards; this includes the design, implementation and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on conducting the audit in accordance with
Philippine Standards on Auditing. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however,
we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
Basis for Disclaimer of Opinion
The company’s investment in its joint venture XYZ (Country X) Company is carried at xxx on the company’s balance sheet,
which represents over 90% of the company’s net assets as at December 31, 20X1. We were not allowed access to the
management and the auditors of XYZ, including XYZ’s auditors’ audit documentation. As a result, we were unable to determine
whether any adjustments were necessary in respect of the company’s proportional share of XYZ’s assets that it controls jointly,
its proportional share of XYZ’s liabilities for which it is jointly responsible, its proportional share of XYZ’s income and expenses
for the year, and the elements making up the statement of changes in equity and cash flow statement.
Disclaimer of Opinion
Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to
obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on

[Form and content of this section of the auditor’s report will vary depending on the natureof the auditor’s other reporting
responsibilities.]

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VI. Disclaimer of Opinion due to Scope Limitation (Material and Pervasive)

 Audit of a complete set of general purpose financial statements prepared by management of the entity in accordance
 The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in
 The auditor was unable to obtain sufficient appropriate audit evidence about multiple elements of the financial
statements. That is, the auditor was unable to obtain audit evidence about the entity’s inventories and accounts
receivable. The possible effects of this inability to obtain sufficient appropriate audit evidence are deemed to be both
material and pervasive to the financial statements.
 In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under local
law.
We were engaged to audit the accompanying financial statements of ABC Company, which comprise the balance sheet as at
ended, and a summary of significant accounting policies and other explanatory notes.
Management is responsible for the preparation and fair presentation29 of these financial statements in accordance with
Philippine Financial Reporting Standards; this includes the design, implementation and maintenance of internal control relevant
to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Our responsibility is to express an opinion on these financial statements based on conducting the audit in accordance with
Philippine Standards on Auditing. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however,
we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
Basis for Disclaimer of Opinion
We were not appointed as auditors of the company until after December 31, 20X1 and thus did not observe the counting of
physical inventories at the beginning and end of the year. We were unable to satisfy ourselves by alternative means concerning
the inventory quantities held at December 31, 20X0 and 20X1 which are stated in the balance sheet at xxx and xxx, respectively.
In addition, the introduction of a new computerized accounts receivable system in September 20X1 resulted in numerous errors
in accounts receivable. As of the date of our audit report, management was still in the process of rectifying the system
deficiencies and correcting the errors. We were unable to confirm or verify by alternative means accounts receivable included in
the balance sheet at a total amount of xxx as at December 31, 20X1. As a result of these matters, we were unable to determine
whether any adjustments might have been found necessary in respect of recorded or unrecorded inventories and accounts
receivable, and the elements making up the income statement, statement of changes in equity and cash flow statement.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to
obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on

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[Form and content of this section of the auditor’s report will vary depending on the nature
of the auditor’s other reporting responsibilities.]
VII. Emphasis of a matter paragraph in a qualified opinion due to material but non-pervasive misstatement
 Audit of a complete set of general purpose financial statements prepared by management of the entity in accordance with Philippine
Financial Reporting Standards.
 The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in [proposed] PSA
210 (Redrafted).4
 There is uncertainty relating to a pending exceptional litigation matter.
 A departure from the applicable financial reporting framework resulted in a qualified opinion.
 In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under local law.
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine
presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
evaluating the overall presentation of the financial statements.
We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
The company’s short-term marketable securities are carried in the balance sheet at xxx. Management has not marked these securities
to market but has instead stated them at cost, which constitutes a departure from Philippine Financial Reporting Standards. The
company’s records indicate that had management marked the marketable securities to market, the company would have recognized an
unrealized loss of xxx in the income statement for the year. The carrying amount of the securities in the balance sheet would have been
reduced by the same amount at December 31, 20X1, and income tax, net income and shareholders’ equity would have been reduced
by xxx, xxx and xxx, respectively.
Qualified Opinion
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements
present fairly, in all material respects, the financial position of ABC Company as at December 31, 20X1, and of its financial performance
and its cash flows for the year then ended in accordance with Philippine Financial Reporting Standards.

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Emphasis of Matter
We draw attention to Note X to the financial statements which describes the uncertainty related to the outcome of the lawsuit filed
against the company by XYZ Company. Our opinion is not qualified in respect of this matter.

responsibilities.]
VII. Audit of Financial Statements prepared in accordance with special purpose framework
o The financial statements have been prepared by management of the entity in accordance with the financial
reporting provisions of a contract (i.e., a special purpose framework) to comply with the provisions of that contract.
Management does not have a choice of financial reporting frameworks.
o The applicable financial reporting framework is a compliance framework.
o The terms of the audit engagement reflect the description of management’s responsibility for the financial
o Distribution and use of the auditor’s report are restricted.

We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as at
ended, and a summary of significant accounting policies and other explanatory information. The financial statements have
been prepared by management of ABC Company based on the financial reporting provisions of Section Z of the contract
dated January 1, 20X1 between ABC Company and DEF Company (“the contract”).
Management is responsible for the preparation of these financial statements in accordance with the financial reporting
provisions of Section Z of the contract; this includes the design, implementation and maintenance of internal control
relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
Opinion
In our opinion, the financial statements of ABC Company for the year ended December 31, 20X1 are prepared, in all
material respects, in accordance with the financial reporting provisions of Section Z of the contract.
Basis of Accounting and Restriction on Distribution and Use

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Without modifying our opinion, we draw attention to Note X to the financial statements, which describes the basis of
accounting. The financial statements are prepared to assist ABC Company to comply with the financial reporting
provisions of the contract referred
to above. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for
ABC Company and DEF Company and should not be distributed to or used by parties other than ABC Company or DEF
Company.
VIII. Audit of Financial Statements prepared in accordance with special purpose framework
Problem 11. • Circumstances include the following:
 The financial statements have been prepared by management of a partnership in accordance with the tax basis of
accounting in Jurisdiction X (i.e., a special purpose framework) to assist the partners in preparing their individual
income tax returns.
 Management does not have a choice of financial reporting frameworks.
 The applicable financial reporting framework is a compliance framework.
 The terms of the audit engagement reflect the description of management’s responsibility for the financial
 Distribution of the auditor’s report is restricted.
We have audited the accompanying financial statements of ABC Partnership, which comprise the balance sheet as at
December 31, 20X1 and the income statement for the year then ended, and a summary of significant accounting policies
and other explanatory
information. The financial statements have been prepared by management using the tax basis of accounting in
Jurisdiction X.
Management is responsible for the preparation of these financial statements in accordance with the tax basis of
accounting in Jurisdiction X; this includes the design, implementation and maintenance of internal control relevant to the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the partnership’s preparation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the partnership’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
Opinion
In our opinion, the financial statements of ABC Partnership for the year ended December 31, 20X1 are prepared, in all
material respects, in accordance with [describe the applicable income tax law] of Jurisdiction X.

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Basis of Accounting and Restriction on Distribution
Without modifying our opinion, we draw attention to Note X to the financial statements, which describes the basis of
accounting. The financial statements are prepared to assist the partners of ABC Partnership in preparing their individual
income tax returns. As a result, the financial statements may not be suitable for another purpose. Our report is intended
solely for ABC Partnership and its partners and should not be distributed to parties other than ABC Partnership or its
partners.
IX. Audit of Financial Statements prepared in accordance with special purpose framework

 The financial statements have been prepared by management of the entity in accordance with the financial reporting
provisions established by a regulator (i.e., a special purpose framework) to meet the requirements of that regulator.
 Management does not have a choice of financial reporting frameworks.
 The applicable financial reporting framework is a fair presentation framework.
 The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in PSA
210 (Redrafted).
 Distribution or use of the auditor’s report is not restricted.
 The Other Matter paragraph refers to the fact that the auditor has also issued an auditor’s report on financial statements
prepared by ABC Company for the same period in accordance with a general purpose framework.
significant accounting policies and other explanatory information. The financial statements have been prepared by management based
on the financial reporting provisions of Section Y of Regulation Z.
Management is responsible for the preparation and fair presentation16 of these financial statements in accordance with the financial
reporting provisions of Section Y of Regulation Z; this includes the design, implementation and maintenance of internal control relevant
to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
purpose of expressing an opinion on the effectiveness of the entity’s internal control.18 An audit also includes evaluating the
evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of ABC Company as at December
31, 20X1, and (of) its financial performance and its cash flows for the year then ended in accordance with the financial reporting
provisions of Section Y of Regulation Z.
Basis of Accounting
Without modifying our opinion, we draw attention to Note X to the financial statements, which describes the basis of accounting. The
financial statements are prepared to assist ABC Company to meet the requirements of Regulator DEF. As a result, the financial

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statements may not be suitable for another purpose.
Other Matter
ABC Company has prepared a separate set of financial statements for the year ended December 31, 20X1 in accordance with
Philippine Financial Reporting Standards onwhich we issued a separate auditor’s report to the shareholders of ABC Company dated
March 31, 20X2.
X. SPECIAL CONSIDERATIONS—AUDITS OF SINGLE FINANCIAL STATEMENTS AND SPECIFIC ELEMENTS, ACCOUNTS OR

ITEMS OF A FINANCIAL STATEMENT

 Audit of a balance sheet (i.e., a single financial statement).
 The balance sheet has been prepared by management of the entity in accordance with the requirements of the
Financial Reporting Framework in Jurisdiction X relevant to preparing a balance sheet.
 The applicable financial reporting framework is a fair presentation framework designed to meet the common financial
information needs of a wide range of users.
 The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in
PSA 210 (Redrafted).
 The auditor has determined that it is appropriate to use the phrase “presents fairly, in all material respects,” in the
auditor’s opinion.
We have audited the accompanying balance sheet of ABC Company as at December 31, 20X1 and a summary of significant
accounting policies and other explanatory information (together “the financial statement”).
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in accordance with those
requirements of the Financial Reporting Framework in Jurisdiction X relevant to preparing such a financial statement; this
includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the
financial statement that is free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance
with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. An audit
involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control.25 An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates, if any, made by management, as well as evaluating the overall presentation of the financial statement.
Opinion
In our opinion, the financial statement presents fairly, in all material respects, the financial position of ABC Company as at
December 31, 20X1 in accordance with those requirements of the Financial Reporting Framework in Jurisdiction X relevant to
preparing such a financial statement.

Page 13 of 15
XI. SPECIAL CONSIDERATIONS—AUDITS OF SINGLE FINANCIAL STATEMENTS AND SPECIFIC ELEMENTS,

ACCOUNTS OR ITEMS OF A FINANCIAL STATEMENT
o Audit of a statement of cash receipts and disbursements (i.e., a single financial statement).
o The financial statement has been prepared by management of the entity in accordance with the cash receipts and
disbursements basis of accounting to respond to a request for cash flow information received from a creditor.
Management has a choice of financial reporting frameworks.
o The applicable financial reporting framework is a fair presentation framework designed to meet the financial information
needs of specific users.26
o The auditor has determined that it is appropriate to use the phrase “presents fairly, in all material respects,” in the
auditor’s opinion.
o Distribution or use of the auditor’s report is not restricted.
We have audited the accompanying statement of cash receipts and disbursements of ABC Company for the year ended
December 31, 20X1 and a summary of significant accounting policies and other explanatory information (together “the financial
statement”). The financial statement has been prepared by management using the cash receipts and disbursements basis of
accounting described in Note X.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in accordance with the cash
receipts and disbursements basis of accounting described in Note X; this includes determining that the cash receipts and
disbursements basis of accounting is an acceptable basis for the preparation of the financial statement in the circumstances,
and the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the
financial statement that is free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance
with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. An audit
involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates, if any, made by management, as well as evaluating the overall presentation of the financial statement.

Page 14 of 15
Opinion
In our opinion, the financial statement presents fairly, in all material respects, the cash receipts and disbursements of ABC
Company for the year ended December 31, 20X1 in accordance with the cash receipts and disbursements basis of accounting
described in Note X.
Basis of Accounting
Without modifying our opinion, we draw attention to Note X to the financial statement, which describes the basis of accounting.
The financial statement is prepared to provide information to XYZ Creditor. As a result, the statement may not be suitable for
another purpose.
XII. SPECIAL CONSIDERATIONS—AUDITS OF SINGLE FINANCIAL STATEMENTS AND SPECIFIC ELEMENTS,

ACCOUNTS OR ITEMS OF A FINANCIAL STATEMENT

 Audit of the liability for “incurred but not reported” claims in an insurance portfolio (i.e., element, account or item of
a financial statement).
 The financial information has been prepared by management of the entity in accordance with the financial
reporting provisions established by a regulator to meet the requirements of that regulator. Management does not
have a choice of financial reporting frameworks.
 The applicable financial reporting framework is a compliance framework designed to meet the financial
information needs of specific users.28
 The terms of the audit engagement reflect the description of management’s responsibility for the financial
 Distribution of the auditor’s report is restricted.

We have audited the accompanying schedule of the liability for “incurred but not reported” claims of ABC Insurance
Company as of December 31, 20X1 (“the schedule”). The schedule has been prepared by management based on
[describe the financial reporting provisions established by the regulator].
Management’s Responsibility for the Schedule
Management is responsible for the preparation of the schedule in accordance with [describe the financial reporting
provisions established by the regulator]; this includes the design, implementation and maintenance of internal control
relevant to the preparation of the schedule that is free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the schedule based on our audit. We conducted our audit in accordance
with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the schedule is free from material misstatement. An audit
involves performing procedures to obtain audit evidence about the amounts and disclosures in the schedule. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the schedule, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the schedule in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the schedule.
Opinion

Page 15 of 15
In our opinion, the financial information in the schedule of the liability for “incurred but not reported” claims of ABC
Insurance Company as of December 31, 20X1 is prepared, in all material respects, in accordance with [describe the
financial reporting provisions established by the regulator].
Basis of Accounting and Restriction on Distribution
Without modifying our opinion, we draw attention to Note X to the schedule, which describes the basis of accounting. The
schedule is prepared to assist ABC Insurance Company to meet the requirements of Regulator DEF. As a result, the
schedule may not be suitable for another purpose. Our report is intended solely for ABC Insurance Company and
Regulator DEF and should not be distributed to parties other than ABC Insurance Company or Regulator DEF.

Page 16 of 15

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DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Report on Other Legal and Regulatory Requirements

[Date of the auditor’s report]

DLSL CPA Board Operation – Auditing Problem

INDEPENDENT AUDITOR’S REPORT

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

[Date of the auditor’s report]

DLSL CPA Board Operation – Auditing Problem

INDEPENDENT AUDITOR’S REPORT

Report on the Consolidated Financial Statements

Management’s Responsibility for the Consolidated Financial Statements

Report on Other Legal and Regulatory Requirements

[Date of the auditor’s report]

DLSL CPA Board Operation – Auditing Problem

II. Qualified Opinion due to Misstatement (material but not pervasive)

Problem 4. Circumstances include the following:

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Basis for Qualified Opinion

[Date of the auditor’s report]

DLSL CPA Board Operation – Auditing Problem

Problem 5. Circumstances include the following:

INDEPENDENT AUDITOR’S REPORT

Report on the Consolidated Financial Statements

Management’s Responsibility for the Financial Statements

Basis for Adverse Opinion

Report on Other Legal and Regulatory Requirements

DLSL CPA Board Operation – Auditing Problem

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Basis for Qualified Opinion

Report on Other Legal and Regulatory Requirements

DLSL CPA Board Operation – Auditing Problem

[Date of the auditor’s report]

V. Disclaimer of Opinion due to Score Limitation (Material and Pervasive)

Problem 7. Circumstances include the following:

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Basis for Disclaimer of Opinion

Report on Other Legal and Regulatory Requirements

DLSL CPA Board Operation – Auditing Problem

VI. Disclaimer of Opinion due to Scope Limitation (Material and Pervasive)

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Basis for Disclaimer of Opinion

Report on Other Legal and Regulatory Requirements

DLSL CPA Board Operation – Auditing Problem

[Date of the auditor’s report]

INDEPENDENT AUDITOR’S REPORT

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Basis for Qualified Opinion

DLSL CPA Board Operation – Auditing Problem

Report on Other Legal and Regulatory Requirements

INDEPENDENT AUDITOR’S REPORT

Management’s Responsibility for the Financial Statements

Basis of Accounting and Restriction on Distribution and Use

DLSL CPA Board Operation – Auditing Problem

Problem 11. • Circumstances include the following:

INDEPENDENT AUDITOR’S REPORT