GORDON COLLEGE

COLLEGE OF BUSINESS AND ACCOUNTANCY

Auditing Theory
Audit Sampling, Completing the Audit, Reports-Other Assurance and
Related Services, Auditors Responsibilities to Fraud in an Audit of
FS, Consideration of Laws and Regulations in an Audit of FS,
Communication with those Charged with Governance
Source : CPA Review Schools
Choose the best answer.
1. In designing audit procedures, the
auditor required to determine
appropriate means of selecting items
for testing to gather audit evidence.
Which of the following means is/are
available to the auditor?
I. Selecting all items (100%
examination)
II. Selecting specific items
III. Auditing sampling
A.
B.
C.
D.

And II only
III only
I and III only
I, II and III

A. Selection of all items over a certain

amount.
B. Application of audit procedures
to less than 100% of items within
a class of transactions or an
account balance such that all
items have a chance of selection.
C. Application of audit procedures to
all items that comprise a class of
transactions or an account balance.
D. Application of audit procedures to
all items over a certain amount and
those that are unusual or have a
history of error.

2. It will be appropriate to audit all of

the items that make up class of
transactions or account balance
(100% examination), except

4. An advantage of statistical over

nonstatistical sampling methods in
test of controls is that the statistical
methods

A. When the class of transactions

or account balance consist of
large number of small value
items.

A. Afford greater assurance than a

nonstatistical sample of equal size.

B. When the class of transactions or

account balance consist of a small
number of large value items.
C. When there is a significant risk of
misstatement and other selection
methods do not provide sufficient
appropriate audit evidence.
D. When the repetitive nature of a
calculation or other process performed
automatically by the clients computer
information system (CIS) makes a
100% examination cost effective.
3. Audit sampling involves the
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B. Provide an objective basis for

quantitatively evaluating sample
risk.
C. Can more easily convert the sample
into a dual purpose test useful for
substantive testing.
D. Eliminate the need top used
judgment in determining appropriate
sample sizes.
5. The risk of incorrect acceptance
and the likelihood of assessing control
risk too low relate to the
A. Effectiveness to the audit
B. Efficiency of the audit
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C. Preliminary estimates of materiality

levels.
D. Tolerable misstatement.
6. The likelihood of assessing control
risk too high is the risk that the
sample selected to test controls.
A. Does not support the auditors
planned assessed level of control
risk when the true operating
effectiveness of internal control
justifies such an assessment.
B. Contains misstatement that could
be material to the financial statement
when aggregated with misstatement
in other account balances of
transactions classes.
C. Contains proportionately fewer
deviations from prescribed internal
controls than exist in the balance or
class as a whole.
D. Does not support the tolerable
misstatement for some or all of
managements assertions.
7. Which of the following sample
planning factors would influence the
sample size for a substantive test of
details for a specific account?
Expected Error

Tolerable

Error
A.
B.
C.
D.

No
Yes
No
Yes

Yes
Yes
Yes
No

8. An underlying feature of randombased selection of items is that each

A. Stratum of the accounting
population is given equal
representation in the sample.
B. Item in the accounting population is
randomly ordered.
C. Item in the accounting
population should have an
opportunity to be selected.
D. Selected using replacement

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9. Which of the following statistical

selection techniques is least desirable
for use by an auditor?
A. Systematic selection
B. Stratified selection
C. Block selection
D. Sequential selection
10. The expected population deviation
rate of client billing errors is 3%. The
auditor has established a tolerable
rate of 5%. In the review client
invoices the auditor should use
A. Stratified sampling
B. Variable sampling
C. Discovery sampling
D. Attribute sampling
11. Which of the following statement
is correct concerning statistical
sampling in test of controls?
A. Deviations from control procedure
at given rate usually result in
misstatements at a higher rate.
B. As the population size doubles, the
sample size should also double.
C. The qualitative aspects of
deviations are not considered by the
auditor.
D. There is an inverse relationship
between the sample size and the
tolerable rate.
12. Which of the following statistical
sampling plans does not use a fixed
sample size for tests of controls?
A. Attributes sampling
B. Sequential sampling
C. PPS sampling
D. Variables sampling
13. When performing a test of a
control with respect to control over
cash receipts, an auditor may use a
systematic sampling technique with a
start at any randomly selected item.
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The biggest disadvantage of this type

of sampling is that the items in the
population
A. Must be systematically replaced in
the population after sampling.
B. May systematically occur more than
once in the sample.

the auditor is unable to use alternative

procedures to test whether that
purchase was properly approved. The
auditor should
A. Choose another purchase order to
replace the missing purchase order in
the sample.

C. Must be recorded in a systematic

pattern before the sample can be
drawn.

B. Consider this test of control invalid

and proceed with substantive test
since internal control cannot be relied
upon.

D. May occur in a systematic

pattern, thus destroying the
sample randomness.

C. Treat the missing purchase

order has a deviation for the
purpose of evaluating the sample.

14. Which of the following

combinations results in a decrease in
sample size in a sample for attributes?

D. Select to a completely new set of

20 purchase orders.

A.Increase
Decrease
Increase

17. Which of the following courses of

action would an auditor most likely
follow in planning a sample of cash
disbursement if the auditor is aware of
several unusually large cash
disbursements?

B.Decrease
Increase
Decrease
C. Increase
Increase
Decrease
D. Increase
Increase
Increase

15. An auditor is testing internal

control procedures that are evidenced
on an entitys vouchers by matching
random numbers with voucher
numbers. If a random number
matches the number of a voided
voucher, that voucher ordinarily
should be replaced by another
voucher in the random sample if the
voucher.
A. Constitutes a deviation.
B. Has been properly voided.
C. Cannot be located.
D. Represents an immaterial peso
amount.
16. An auditor plans to examine a
sample of 20 purchase orders for
proper approvals as prescribed by the
clients internal control procedures.
One of the purchase orders in the
chosen sample cannot be found, and
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A. Set the tolerable rate of deviation at

a lower level than originally planned.
B. Stratify the cash disbursement
population so that the unusually
large disbursements are selected.
C. Increase the sample size to reduce
the effect of the unusually large
disbursement.
D. Continue to draw new samples until
all the large disbursements appear in
the sample.
18. Use of the ratio estimation
sampling technique to estimated peso
amounts in appropriate when
A. The total book value is known and
corresponds to the sum of all the
individual book values.
B. A book value for each sample
item is known.
C. There are some observed
differences between audited values
and book values.
D. The audited values are nearly
proportional to the book values.
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19. What is an auditors evaluation of

a statistical sample for attributes when
a test of 50 documents results in three
deviations if the tolerable rate is 7%,
the expected population deviation rate
is 5%, and the allowance for sampling
risk is 2%?

A. Tolerable rate (75%) was less

than the achieved upper precision
limit (8%).

A. Modify the planned assessed level

of control risk because the tolerable
rate plus the allowance for sampling
risk exceeds the expected population
deviation rate.

C. Achieved upper precision limit (8%)

was more than the percentage of
errors in the sample (3 %).

B. Accept the sample results as

support for the planned assessed
level of control risk because the
sample deviation rate plus the
allowance for sampling risk
exceeds the tolerable rate.

21. The allowance for sampling brisk

was

C. Accept the sample results as

support for the planned assessed level
of control risk because the tolerable
rate minus the allowance for sampling
risk equals the expected population
deviation rate.

C. 3 %.

D. Modify the planned assessed level

of control risk because the sample
deviation rate plus the allowance for
sampling risk exceeds the tolerable
rate.
For questions #20 and 21
An auditor desired to test credit
approval on 10,000 sales invoices
processed during the year. The auditor
designed a statistical sample that
would provide 1% risk assessing
control risk too low (99% confidence)
that not more than 7% of the sales
invoices lacked approval. The auditor
estimated from previous experience
that about 2 % of the sales invoices
lacked approval. A sample of 200
invoices was examined and seven of
them were lacking approval. The
auditor then determined the achieved
upper precision limit to be 8%.*
20. In the evaluation of this sample,
the auditor decided to increase the
level of the preliminary assessment of
control risk because the

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B. Expected deviation rate (7%) was

more than the percentage of errors in
the sample (3 %).

D. Expected deviation rate (2 %)

was less than the tolerable rate (7%).

A. 5 %.
B. 4 %.

D. 1%.
22. When using classical variables
sampling for estimation, an auditor
normally evaluates the sampling
results by calculating the possible
misstatement in either direction. This
statistical concept is known as
A. Precision.
B. Reliability.
C. Projected misstatement.
D. Standard deviation.
23. Analytical procedures used in the
overall review stage of the audit
generally include
A. Retesting controls that appeared to
be ineffective during the assessment
of control risk.
B. Considering unusual or
unexpected account balances that
were not previously identified.
C. Gathering evidence concerning
account balances that have not
changed from the prior year.
D. Performing test of transactions to
corroborate managements financial
statement assertions.

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24. Analytical procedures performed in

the overall review stage of an audit
suggest that several account have
unexpected relationships. The results
of these procedures most likely
indicate that
A. The communication with the audit
committee should be revised.
B. Irregularities exist among the
relevant account balances.
C. Additional substantive test of
details are required.
D. Internal control activities are not
operating effectively.
25. Which of the following events most
likely indicates the existence of related
parties?
A. Making a loan without
scheduled terms for payment of
the funds.
B. Discussing merger terms with a
company that is a major competitor.
C. Selling real estate at a price that
differs significantly from its book
value.
D. Borrowing a large sum of money at
a variable rate of interest.
26. After determining that a related
party transaction has, in fact,
occurred, an auditor should
A. Obtain an understanding of the
business purpose of the
transaction.
B. Substantive that the transaction
was consummated on terms
equivalent to an arms-length
transaction.
C. Add separate paragraph to the
auditors report to explain the
transaction.
D. Perform analytical procedure to
verify whether similar transactions
occurred, but were not recorded.

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27. Which of the following statements

best describes the date of the
financial statements?
A. The date on which those with the
recognized authority assert that they
have prepared the entitys complete
set of financial statement, including
the related notes, and that they have
taken responsibility for them.
B. The date that the auditors report
and audited financial statements are
made available to third parties.
C. The date of the end of the
latest period covered by the
financial statements, which is
normally the date of the most
recent balance sheet in the
financial statement subject to
audit.
D. The date on which the auditor has
obtained sufficient appropriate audit
evidence on which to base the opinion
on the financial statement.
28. After issuing a report, an auditor
has no obligation to make continuing
inquiries or perform other procedures
concerning the audited financial
statements, unless
A. Final determinations or resolutions
are made of contingencies that had
been disclosed in the financial
statements.
B. Information about an event that
occurred after the date of the auditors
report comes to the auditors
attention.
C. The control environment changes
after issuance of the report.
D. Information, which existed at
the report date and may affect the
report, comes to the auditors
attention.
29. Which of the following statements
best describes the auditors
responsibility concerning the
appropriateness of the going concern
assumption in the preparation of the
financial statements?
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A. The auditors responsibility is to

make a specific assessment of the
entitys ability to continue as a going
concern.
B. The auditors responsibility is to
predict future events or conditions
that may cause the entity to cease to
continue as going concern.
C. The auditors responsibility is
to consider the appropriateness of
managements use of the going
concern assumption and consider
whether there are material
uncertainties about the entitys
ability to continue as a going
concern that need to be disclosed
in the financial statements.
D. The auditors responsibility is to
give a guarantee in the audit report
that the entity has the ability to
continue as a going concern.
30. Which of the following conditions
or events most likely would cause an
auditor to have substantial doubt
about an entitys ability to continue as
a going concern?
A. Cash flows from operating
activities are negative.
B. Stock dividends replace annual cash
dividends.
C. Significant related party
transactions are pervasive.
D. Research and development projects
are postponed.
31. Harold, CPA, believes there is
substantial doubt about the ability of
Jersamtan Co. to continue as a going
concern for a reasonable period of
time. In evaluating Jersamtans plans
for dealing with the adverse effects of
future conditions and events, Harold
most likely would consider, as a
mitigating factor, Jerssamtans plans
to
A. Postpone expenditures for
research and development
projects.

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B. Purchase production facilities

currently being leased from related
party.
C. Strengthen internal controls over
cash disbursement.
D. Discuss with lenders the terms of all
debt and loan agreements.
32. When an audit is made in
accordance with generally accepted
auditing standards, the auditor should
always
A. Observe the taking of physical
inventory on the balance sheet date.
B. Obtain certain written
representations from
management.
C. Employ analytical procedures as
substantive test to obtain evidence
about assertions related to account
balances.
D. Document the understanding of the
clients internal control and the basis
for all conclusions about the assessed
level of control risk for financial
statement assertions.
33. The date of the management
representation letter should coincide
with the date of the
A. Balance sheet
B. Latest related party transaction
C. Auditors report
D. Latest interim financial information
34. Which of the following statements
concerning management
representations is incorrect?
A. Representations by
management can be a substitute
for other audit evidence that the
auditor could reasonably expect
to be available.
B. If the auditor is unable to obtain
sufficient appropriate audit evidence
regarding a matter, which has, or may
have, a material effect on the financial
statements and such audit evidence is
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expected to be available; this will

constitute a limitation in the scope of
the audit, even if a representation
from management has been received
on the matter.

A. Prepared and sent by the auditor.

C. If a representation by management
is contradicted by other audit
evidence, the auditor should
investigate the circumstances and,
when necessary, reconsider the
reliability of other representations by
management.

D. Prepared by the auditor and sent by

the management.

D. The auditors working papers would

ordinarily include a summary of oral
discussions with management or
written representations from
management.
35. What type of opinion should be
expressed if the clients management
refuses to provide a representation
that the auditor considers necessary?
A. Qualified opinion or a
disclaimer of opinion.
B. Qualified opinion or an adverse
opinion.
C. Adverse opinion or a disclaimer of
opinion.
D. Unqualified opinion.
36. The primary reason an auditor
request that letters of inquiry be sent
to a clients attorneys is to provide the
auditor with
A. A description and evaluation of
litigation, claims, and assessment that
existed at the balance sheet date.
B. The attorneys opinion of the
clients historical experiences in recent
similar litigation.
C. Corroboration of the
information furnished by
management about litigation,
claims, and assessments.
D. The probable outcome of asserted
claims and pending or threatened
litigation.

B. Prepared by management and

sent by the auditor.
C. Prepared and sent by management.

38. In which of the following

circumstances would an auditor most
likely meet with the clients legal
counsel to discuss the likely outcome
of the litigation and claims?
I. The auditor determines that the
matter is a significant risk.
II. There is a disagreement between
management and the entitys legal
counsel.
III. The subject matter of the litigation
is complex.
A.
B.
C.
D.

I and II only
II and III only
I and III only
I, II and III

39.Which of the following statements

extracted from a clients lawyers
letter concerning litigation, claims, and
assessment most likely would cause
the auditor to request clarification?
A. I believe that the action can
be settled for less than the
damages claimed.
B. I believe that the company will be
able to defend this action
successfully.
C. I believe that the plaintiffs case
against the company is without merit.
D. I believe that the possible liability
to the company is nominal in amount.
40. Financial statement of an entity
that have been reviewed by an
accountant should be accompanied by
a report stating that a review
A. Provides only limited assurance that
the financial statement are fairly
presented.

37. The letter of audit inquiry should

be
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B. Includes examining, on a test basis,

information that is the representation
of management.
C. Consist principally inquiries of
company personnel and analytical
procedures applied to financial
data.
D. Does not contemplate obtaining
corroborating evidential matter or
applying certain other procedures
ordinarily performed during an audit.
41. An accountants report on an
review of the financial statements of
an entity should state that the
accountant
A. Does not express an opinion or any
form of limited assurance on the
financial statements.
B. Conducted the review in
accordance with the Philippine
Standard on Review
Engagements.
C. Obtained reasonable assurance
about whether the financial
statements are free of material
misstatements.

to present financial statement that is

free of material misstatements.
43. An accountant who reviews the
financial statements of an entity
should issue a report stating that a
review
A. Provides less assurance than
an audit.
B. Provides negative assurance that
internal control is functioning as
designed.
C. Provides only limited assurance that
the financial statements are fairly
presented.
D. Is substantially more in scope than
a compilation.
44. When compiling an entitys
financial statements, an accountant
would be least likely to
A. Perform analytical procedures
designed to identify relationships
that appear to be unusual.
B. Read the complied financial
statements and consider whether they
appear to include adequate disclosure.

D. Examined evidence, on a test basis,

supporting the amount and disclosures
in the financial statements.

C. Obtain an acknowledgement from

management of its responsibility for
the financial statements.

42. Financial statements of an entity

that have been reviewed by an
accountant should be accompanied by
a report stating that

D. Plan the work so that an effective

engagement will be performed.

A. The scope of the inquiry and

analytical procedures performed by
the accountant has not been
restricted.
B. The financial statements are
the responsibility of the
companys management.
C. A review includes examining, on a
test basis, evidence supporting the
amount and disclosures in the
financial statement.
D. A review is greater in scope than a
compilation, the objective of which is

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45. Which of the following should not

be included in an accountants report
based upon the compilation of an
entitys financial statements?
A. A statement that a compilation of
the companys financial statements
was made in accordance with the
Philippine Standard on Related
Services applicable to compilation
engagements.
B. A statement that management is
responsible for the financial
statements.
C. A statement that the accountant ha
not audited or reviewed the
statements.
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D. A statement that the

accountant does not express an
opinion but provides only
negative assurance on the
statements.
46. Given one or more hypothetical
assumptions, a responsible party may
prepare, to the best of its knowledge
and belief, an entitys expected
financial position, results of
operations, and cash flows. Such
prospective financial statements are
known as
A. Pro forma financial statements
B. Financial projections
C. Partial presentations
D. Financial forecast
47. When an accountant examines
prospective financial statement, the
accountants report should include a
separate paragraph that

A. forecast
B. Hypothetical financial information
C. Projection
D. Best-estimate projection
49. Which of the following is
prospective financial information for
general use upon which an account
may appropriately report?
A. Financial projection
B. Partial presentation
C. Pro forma financial statement
D. Financial forecast
50. Misstatement in the financial
statement that can arise from fraud or
error. The distinguishing factor
between fraud and error is whether
the underlying action that results in
the misstatement of the financial
statement is

A. Contains an opinion as to
whether the prospective financial
statement are properly prepared
on a basis of the assumptions and
are presented in accordance with
generally accepted accounting
principles in the Philippines.

I. Intentional or unintentional

B. Provides an explanation of the

differences between an examination
and an audit.

51. Error includes

C. States that the accountant is

responsible for events and
circumstances up to 1 year after the
reports date.
D. Disclaims an opinion on whether
the assumptions provide a reasonable
basis for the prospective financial
statements.
48. A prospective financial information
prepared on the basis of assumptions
as to future events which
management expects to take place
and the actions management expects
to take as of the date the information
is prepared (best-estimate
assumptions) is known as
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II. Rational or irrational

A.
B.
C.
D.

I only
II only
Both I and II
Neither I or II

A. Engaging in complex transactions

that are structured to misinterpret the
financial position or financial
performance of the entity.
B. Concealing, or not disclosing, facts
that could affect the amounts
recorded in the financial statements.
C. An incorrect accounting
estimate arising from oversight or
misinterpretation of facts.
D. Intentional misapplication of
accounting policies relating to
amounts, classification, manner or
presentation, or disclosure.
52. Fraud involving one or more
members of management or those
charged with governance is referred to
as
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A. Management fraud.
B. Employee fraud.
C. Fraudulent financial reporting.
D. Misappropriation of assets.
53. The auditor is concerned with the
fraud that causes a material
misstatement in the financial
statements. There are two types of
intentional misstatement that are
relevant to the auditor: misstatement
resulting from fraudulent financial
reporting and misstatements resulting
from
A. Management fraud.
B. Employee fraud.
C. Misappropriation of assets.
D. Collusion within the entity or with
third parties.
54. Fraudulent financial reporting
involves intentional misstatement
including omissions of amount or
disclosures in financial statements to
deceive financial statement users. It
may be accomplished in a number of
ways, including

B. An auditor should obtain absolute

assurance that material
misstatements in the financial
statements will be detected.
C. An auditor is responsible to detect
material errors but has no
responsibility to detect material fraud
that is concealed through employee
collusion or management override of
internal control.
D. An auditors failure to detect a
material misstatement resulting from
fraud is an indication of non
compliance with the requirements of
the Philippine Standards on Auditing
(PSAs).
56. When obtaining an understanding
of the entity and its environment,
including its internal control, the
auditor may identify events or
conditions that indicate an incentive or
pressure to commit fraud or provide
an opportunity to commit fraud. Such
events or conditions are referred to as
A. Fraud conditions.
B. Fraud risk factors.
C. Fraudulent activities.

A. Embezzling receipts.

D. Fraud environment.

B. Stealing physical assets or

intellectual property.

57. The following are examples of

fraud risk factors relating to
misstatement arising from
misappropriation of assets, except

C. Using an entitys assets for personal

use.
D. Manipulation, falsification, or
alteration of accounting records
or supporting documentation from
which the financial statements are
prepared.
55. Which of the following statements
best describes an auditors
responsibility regarding
misstatements?
A. An auditor should obtain
reasonable assurance that the
financial statements taken as a
whole are free from material
misstatement, whether caused by
fraud or error.
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10

A. Recurring negative cash flows

from operating activities while
reporting earnings and earnings
growth.
B. Inadequate physical safeguards
over cash, investments, inventory, or
fixed assets.
C. Inadequate segregation of duties or
independent checks.
D. Adverse relationship between the
entity and employees with access to
cash or other assets susceptible to
theft created by recent changes made
to employee compensation or benefit
plans.
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58. Opportunities to misappropriate

assets increase when there are
A. Known or anticipated future
employee layoffs.
B. Promotions, compensation, or other
rewards inconsistent with
expectations.
C. Recent or anticipated changes to
employee compensation or benefits
plans.
D. Inventory items those are small
in size, or high value, or in high
demand.
59. Which of the following conditions
or events may create
incentives/pressures to commit fraud?

D. Managements communication, if
any, to those charged with governance
regarding its processes for identifying
and responding to the risk of fraud in
the entity.
61. When the auditor identifies
misstatement in the financial
statements, the auditor should
consider whether such a misstatement
may be indicative of fraud and if there
is such an indication, the auditor
should
A. Consider the implications of the
misstatement in relation to other
aspects of audit.
B. Withdraw from the engagement.

A. Inadequate system of authorization

and approval of transactions.

C. Communicate the information to

regulatory and enforcement
authorities.

B. Lack of mandatory vacations for

employees performing key control
functions.

D. Report the matter to the person or

persons who made the audit
appointment.

C. Excessive pressure on
management or operating
personnel to meet financial
targets established by those
charged with governance,
including sales or profitability
incentive goals.

62. The following statements relate to

communication of misstatements
resulting from fraud to management
and to those charged with
governance. Which is false?

D. Inadequate access controls over

automated records.
60. When planning the audit, the
auditor should make inquiries of
management. Such inquiries should
address the following, except
A. Managements assessment of the
risk that the financial statements may
be misstated due to fraud.
B. Managements process for
identifying and responding to the risk
of fraud in the entity.
C. Managements consideration of
how an element of
unpredictability will be
incorporated, into the nature,
timing, and extent of the audit
procedures to be performed.
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11

A. The auditor need not bring to

the attention of those charged
with governance any material
weaknesses in internal control
related to the prevention and
detection of fraud.
B. If the auditor has identified fraud,
whether or not it results in a material
misstatement in the financial
statements, the auditor should
communicate these matters to the
appropriate level of management on a
timely basis, and consider the needs
to report such matter to those charged
with governance.
C. If the auditor has obtained evidence
that indicates that fraud may be exist
(even if the potential effect on the
financial statements would not be
material), the auditor should
communicate these matters to the
appropriate level of management on a
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timely basis, and consider the need to

report such matters to those charged
with governance.
D. The auditors communication with
those charged with governance may
be made orally or in writing.
63. As used in PSA 250 (Consideration
of Laws and Regulations in an Audit
Financial Statements), this term refers
to acts of omission or commissions by
the entity being audited, either
intentional or unintentional, which are
contrary to prevailing laws or
regulations.
A. Noncompliance
B. Illegal acts
C. Erotic acts
D. Unforgivable acts
64. PSA 250 states that in order to
plan to audit, the auditor should
obtain a general understanding of the
legal and regulatory framework
applicable to the entity and the
industry and how the entity is
complying with that framework. To
obtain this understanding, the
following procedures would ordinarily
be considered by the auditor, except
A. Use the existing understanding of
the entitys industry, regulatory, and
other external factors.
B. Inquire of management concerning
the entitys policies and procedures
regarding compliance with law and
regulations.
C. Inquire management as to the law
and regulations that may be expected
to have a fundamental effect on the
operations of the entity.
D. Inspect correspondence with
relevant licensing or regulatory
authorities.
65. If the auditor concludes that the
noncompliance has a material effect
on the financial statements, and has
not been properly reflected in the

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financial statements, the auditor

should express
A. A qualified or an adverse
opinion.
B. A qualified opinion or a disclaimer
of opinion.
C. A disclaimer of opinion.
D. A qualified opinion.
66. If the auditor is precluded by the
entity obtaining sufficient appropriate
audit evidence to evaluate whether
non compliance that may be material
to the financial statements, has, or is
likely to have, occurred, the auditor
should express
A. A qualified opinion or an adverse
opinion.
B. A qualified opinion or a
disclaimer of opinion.
C. An adverse opinion.
D. An adverse opinion or a disclaimer
of opinion.
67. Under which of the circumstances
below would the auditor conclude that
withdrawal from engagement is
necessary?
A. The auditor concludes that the
noncompliance has a material effect
on the financial statements and has
not been properly reflected in the
financial statements.
B. The auditor is precluded by the
entity from obtaining sufficient
appropriate audit evidence to evaluate
whether noncompliance that may be
material to the financial statements,
has, or is likely to have, occurred.
C. The auditor is unable to determine
whether noncompliance has occurred
because of limitations imposed by the
circumstances rather than by the
entity.
D. The entity does not take the
remedial action that the auditor
considers necessary in the
circumstances.
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68. Which of the following statements

relating to the communication of audit
matters of governance interest is
incorrect?
A. Audit matters of governance
interest include only those matters
that have come to the attention of the
auditor as a result of the performance
of the audit.
B. In an audit accordance with
PSAs, the auditor should design
audit procedures for the specific
purpose of identifying matters of
governance interest.
C. The auditor should identify relevant
persons who are charged with
governance and with whom audit
matters of governance interest are to
be communicated.
D. The auditors communication with
those charged with governance may
be made orally or in writing.
69. Audit matters of governance
interest to be communicated to those
charged with governance ordinarily
include
A. Audit adjustments, whether or not
recorded by the entity that have, or
could have, a material effect on its
financial statements.
B. Expected modifications to the
auditors report.
C. Material uncertainties related to
events and conditions that may cast
significant doubt on the entitys ability
to continue as a going concern.
D. All of the above.

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