REVIEW QUESTIONS FOR REMOVAL EXAMS

God bless on your removal exams. 😊

1. A CPA firm is associated with the financial statements even if a CPA firm only assists a client in preparing
financial statements, but does not perform an audit.
2. When management refuses to disclose illegal activities which were identified by the independent auditor, the
independent auditor may be charged with violating the Code of Professional Ethics for issuing a disclaimer of
opinion. The opinion that must be issued should be adverse opinion since the refusal of the management stemmed
from DISCLOSURE of illegal activities which is a significant departure from PFRS.
3. The purpose of an engagement letter is to document the terms of the engagement to writing in order to minimize
understandings.
4. In performing attestation engagement, a CPA typically expresses a conclusion about an assertion.
5. When an auditor believes that an understanding with the client has not been established, he or she should
ordinarily decline to accept or perform the audit.
6. Analytical procedures used in planning an audit generally use data aggregated at a high level.
7. Purposes of Audit Documentation:
a. Coordinate the audit
b. Assist in the preparation of the audit report
c. Provide evidence of the audit work performed
8. Neutral criteria contribute to conclusions that are free from bias.
9. If a client makes a change in accounting principle that is inseparable from the effect of a change in estimate, this
material event should be accounted for as a change in estimate and the auditor would report a consistency
modification.
10. An auditor may report on summary financial statements that are derived from complete financial statements if the
auditor indicates whether the information in the summary financial statements is fairly stated in all material
respects in relation to the complete financial statements from which it has been derived.
11. Order of reliability from highest to lowest:
a. blank form positive confirmations
b. positive confirmations with information included.
c. negative confirmations
12. The following wordings: “In our opinion, the schedule presents, in all material respects…” is an assurance
report. The wording of an audit report is: “In our opinion, the financial statement presents, in all material
respects…”
13. In a compilation engagement, the distribution should be restricted.
14. Credit approval must take place first before the goods can be shipped.
15. Supply chain management is a varying factor across client companies because requisition may not transpire
through traditional means.
16. If the independent auditor expresses an unqualified opinion on the financial statements, the readers of the audit
report can assume that all material disagreements between the management and external auditor regarding
acceptability of accounting policies and the methods of their application were resolved to the auditor’s
satisfaction.
17. When the audited financial statements of the prior year are presented together with those of the current year, the
continuing auditor’s report should cover both years.
18. Because of the importance of tests of controls and substantive tests of transactions for acquisitions and cash
disbursements, it is common in this audit area to use attribute sampling.
19. The reported fair market value of securities held by the client can be verified by the auditor by comparing the fair
values to credible publications and websites.
20. If there is a high probability that an error or irregularity exists, the auditor should design other appropriate audit
procedures to determine if such errors do exist.