AT.

M-1407
AUDIT REPORT

1. In the auditing profession, there is a need for uniformity in reporting in order to

I. Avoid confusion
II. Promote credibility in the global marketplace
a. I only
b. II only
c. Both I and II
d. Neither I nor II

2. The auditors judgment as to whether the financial statements give a true and fair view
or are presented fairly in all material respects, is made in the context of
a. Generally accepted auditing standards
b. Philippine Standards on Auditing
c. Applicable financial reporting framework
d. Professional ethical requirements

3. Not an applicable financial reporting framework

a. Philippine Financial Reporting Framework (PFRS)
b. PFRS for Small-and-Medium-sized Entities
c. International Financial Reporting Framework
d. Philippine Standards on Auditing

4. A financial reporting framework that requires compliance with the requirements of the
framework and acknowledges that, to achieve fair presentation, it may be necessary for
management to:
Provide disclosures beyond those specifically required, or
Depart from a requirement of the framework
a. Fair presentation framework
b. Compliance framework
c. Conceptual framework
d. Generally-accepted framework

5. A financial reporting framework that requires compliance with the requirements of the
framework
a. Fair presentation framework
b. Compliance framework
c. Conceptual framework
d. Generally-accepted framework

6. Not an acceptable of a general-purpose framework

a. PFRSs
b. PFRSs for SMEs
c. IFRSs
 d. Cash-basis acctg.

7. Not an example of a special-purpose framework

a. Cash-basis acctg.
b. Tax-basis acctg.
c. PFRSs
d. None of the above

8. A professional accountant or a CPA firm is associated with the financial statements of its
client
I. It consents to the use of its name in a professional connection
II. It attaches a report to the financial statements
a. I only
b. II only
c. Both I and II
d. Neither I nor II

9. A CPA firm is associated with the financial statements of its client

a. Only when it does a financial audit
b. Only when it does assurance services, such as review or an audit
c. Even if a CPA firm only assists a client in preparing financial statements but does
not do an audit
d. If it performs any services at all for the client

10. Number of paragraphs in the old standard unqualified audit report

a. 3
b. 4
c. 5
d. 6

11. Purpose of the title of the auditors report is to

I. Emphasize that the auditor is independent
II. Distinguish the report from those issued by others
III. Identify the entity for whom the report is prepared
a. I and II
b. I and III
c. II and III
d. I, II and III

12. Not an appropriate addressee of an independent auditors report

a. Shareholders of the client company
b. Company engaging the auditor
c. Board of directors of the client company
d. President of the client company

13. Cannot be an addressee in an audit report

 a. Partners of an audit of a partnership
b. Taxpayers in audit of a government agency
c. Management in audit of public company
d. Those charged with governance of an entity

14. Per PSA 700, the auditors report should be addressed

a. Only to the shareholders of the entity whose financial statements are being
audited
b. Only to the board of directors of the entity whose financial statements are being
audited
c. To the CEO or the CFO of the entity whose financial statements are being audited
d. Either to the shareholders or the board of directors of the entity whose financial
statements are being audited

15. As a further attempt to indicate that the auditor is independent, the addressee of the audit
report is usually
a. The client company
b. The BOD of client company
c. The President and/or CEO of client company
d. The stockholders of client company

16. March, CPA, is engaged by Monday Corp., a client, to audit the financial statements of
Wall Corp., a company that is not Marchs client. Monday expects to present Walls
audited financial statements with Marchs auditors report to Philippine Bank to obtain
financing in Mondays attempt to purchase Wall. In these circumstances, Marchs
auditors report would usually addressed to
a. Monday Corp.
b. Wall Corp.
c. Philippine Corp.
d. A and C

17. The introductory paragraph of the auditors report should

a. Identify the name of the entity for whom the report is prepared
b. State the auditors responsibility to express an opinion on the financial statements
c. State that the management is responsible for the fair presentation of the financial
statements
d. Refer to the summary of significant accounting policies and explanatory notes

18. Not found in the introductory paragraph of a standard unmodified audit report
a. A statement that the financial statements have been audited
b. The name of the entity being audited
c. The date of the auditors report on the financial statements
d. The title of each of the financial statements being audited

19. Standards mentioned in the Managements Responsibility Paragraph of the audit report
 a. PFRSs
b. PSAs
c. Both A and B
d. Neither A nor B

20. Not referred to in the managements responsibility paragraph

a. Design, implementation and maintenance of internal control relevant to the
preparation and fair presentation of the financial statements
b. Effectiveness and efficiency of operating decisions
c. Selection and application of appropriate accounting policies
d. Making of reasonable accounting estimates

21. In the old three-paragraph standard audit report, which of the following is included in the
Opening paragraph
I. Name of entity being audited
II. Managements responsibility
III. Auditors responsibility
a. I and II
b. I and III
c. II and III
d. I, II and III

22. Purpose of introductory (opening) paragraph in the old standard unqualified report
a. To distinguish the audit report from a compilation or review report
b. To identify the financial statements which were audited, and the dates and time
periods covered by the report
c. To communicate the responsibilities of management in preparing the financial
statements, and to clarify the respective roles of management and the auditor
d. All of the above

23. As defined by the PSAs, these are the procedures deemed necessary to achieve the
objective of the audit
a. Scope of an audit
b. Risk of assessment procedures
c. Substantive procedures
d. Analytical procedures

24. Standards mentioned in the Auditors Responsibility Paragraph of the audit report
a. PFRSs
b. PSAs
c. Both A and B
d. Neither A nor B

25. An auditors responsibility in a financial statement audit engagement is confined to the

I. Expression of opinion on the financial statements
II. Fairness of presentation of financial statements
 a. I only
b. II only
c. Both I and II
d. Neither I nor II

26. A basic element of the standard audit report

a. The disclosures provide reasonable assurance that the financial statements are free
of material statements
b. The auditor tested compliance to internal control by the client
c. An audit includes assessing significant estimates made by management
d. The financial statements are consistent with those of prior periods

27. Not included in the Auditors Responsibility Paragraph of the standard modified report
a. Auditors compliance with ethical requirements
b. Assessment whether sufficient appropriate evidence has been gathered to support
an opinion
c. General description of an audit
d. Compliance of financial statements with applicable financial reporting framework

28. Not included in the general description of audit in the Auditors Responsibility Paragraph
a. An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements
b. The procedures selected depend on the auditors judgment, including the
assessment of the risks of material misstatement of the financial statements
c. The auditor considers internal control relevant to the entitys preparation and fair
presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances for the purpose of expressing an opinion on
the effectiveness of an entitys internal control
d. 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

29. The term reasonable assurance in the auditors responsibility paragraph indicate that
a. No misstatements exist in financial statements
b. No material misstatements exists in the financial statements
c. There is a possibility that material misstatements still exist in the financial
statements
d. There is a possibility that immaterial misstatements still exist in the financial
statements

30. The guidelines which enable auditors to decide whether something is material or highly
material are provided by
a. PSA
b. PFRS
c. SEC
 d. Auditors judgment

31. Per PSA 580, it is a written statement by management provided to the auditor to confirm
certain matters or to support other audit evidence
a. Written representation
b. Engagement letter
c. Financial statements
d. Written confirmation

32. Managements written representations to confirm certain matters or to support evidence

are embodied in the
a. Management representation letter
b. Engagement letter
c. Financial statements
d. Transmittal letter

33. Per PSA 700, audit report should not be dated earlier than
a. The date on which the auditor has obtained sufficient appropriate evidence
b. The date that all the statements that comprise the financial statements have been
prepared
c. The date that those with the recognized authority have asserted that they have
taken responsibility for those financial statements
d. All of the above

34. The date of the auditors report (choose the exception)

a. Indicates that the auditor has performed procedures for subsequent events that
would materially affect the financial statements through the date of the report
b. Should not be earlier that the date management approves the financial statements
and furnishes a written representation
c. Should be later than the date of the statement of financial position
d. Must not coincide with the date of the Management Representation Letter

35. An auditor complrtrd firldwork on February 10, 2013 for a December 31, 2012 year-end
client. A significant subsequent event occurred on February 22, 2013. In this case, which
of the following report dates would not be appropriate?
a. February 10, 2013
b. February 10, except for Note 1, February 22, 2013
c. February 22, 2013
d. December 31, 2012

36. An auditor issued an audit report that is dual dated for a subsequent event occurring after
the completion of fieldwork but before the issuance of the auditors report. Auditors
responsibility for events occurring subsequent to the completion of fieldwork was
a. Extended to subsequent events occurring through the date of issuance of report
b. Extended to include all events occurring since the date of issuance of the report
 c. Limited to the specific event referenced
d. Limited to include only events occurring after the date of the last subsequent
event referenced
37. Standards mentioned in the Opinion Paragraph of the audit report
a. PFRSs
b. PSAs
c. Both A and B
d. Neither A nor B
38. If the auditors report contain a separate section on other reporting responsibilities, the
introductory, responsibilities and opinion paragraphs shall be under the sub-title
a. Independent Auditors Report
b. Report on the Financial Statements
c. Report on other Legal and Regulatory Requirements
d. Main Reporting Responsibility
39. The opinion paragraph of a standard unmodified report does not
a. State that the financial statements are presented fairly in material respects
b. State that the auditor obtained sufficient appropriate evidence to support the
opinion
c. Provide an unmodified opinion about the fairness of the financial statements
d. A conclusion whether the company followed Philippine Financial Reporting
Standards
40. An auditor expresses an unmodified opinion, it means that
a. No material error or fraud was found
b. The company is financially sound and the financial statements are accurate
c. The auditor is responsible for the fairness of the financial statements
d. Material disagreements were resolved to the auditors satisfaction
41. An unmodified opinion expressed on an audit means that
a. The financial statements, including the notes, are accurate
b. The entity is not incurring losses and is an attractive entity for investment
purposes
c. The auditor guarantees that the entity is clear of error and fraud
d. In all material respects, the financial statements are fairly presented
42. The elements of a standard unmodified report does not include
a. Signature of the auditor
b. Address of the auditor
c. Date of the auditors report
d. Address of the client company
43. Signature in the audit report
a. Personal name of the auditor
b. Name of the audit firm
c. Either A or B or both
d. Either A or B or cannot be both
44. For large audit firms, who normally signs the audit report?
a. Lead partner
b. All partners
c. Audit team members
 d. Junior auditors
45. As a minimum, who is required to have comprehensive knowledge about the audited
entity
a. The partner signing the audit report
b. All partners of the audit report
c. All members of the audit team
d. Staff doing the actual fieldwork
46. Auditors report on financial statements required to be filed with the Philippine Securities
and Exchange Commission shall contain the following: (choose the exception)
a. Manual signature of the certifying partner
b. Partners TIN and PRC registration numbers
c. Accreditation with SEC
d. Partners birth date and contact number
47. Which of the following is not specifically stated in the standard auditors report
a. The auditor believes that sufficient appropriate evidence was obtained to provide
a basis for an auditors opinion.
b. In making risk assessments, the auditor considers internal control system relevant
to the entitys preparation and presentation of the financial statements.
c. The auditor is responsible for the preparation and the fair presentation of the
financial statements in accordance with the applicable financial reporting
framework
d. An audit includes evaluating the overall presentation of the financial statements

MODIFIED AUDIT REPORT

48. Per Glossary of Terms, it is a difference between the amount, classification, presentation
or disclosure of a reported financial statement item and amount, classification,
presentation or disclosure that is required for the item to be in accordance with the
applicable financial reporting framework.
a. Fraud
b. Error
c. Departure
d. Misstatement
49. Misstatements can be caused by
a. Fraud
b. Error
c. Both A and B
d. Neither A nor B
50. Unresolved immaterial misstatements will normally lead to the expression of which
opinion?
a. Unmodified
b. Qualified
c. Adverse
d. Disclaimer
51. An discovered a P50,000 misappropriation by the payroll supervisor. The companys total
assets and pre-tax income are P 70 million and P 15 million, respectively. Considering
materiality, the most likely opinion would be
a. Unmodified
b. Qualified
c. Adverse
d. Disclaimer
52. Per PSA 200, the risk of material misstatement is a function of
a. Inherent risk and control risk
b. Inherent risk and detection risk
c. Control risk and detection risk
d. Inherent risk, control risk and detection risk
53. Audit risk component that can be controlled by the auditor
a. Inherent risk
b. Control risk
c. Detection risk
d. All of the foregoing
54. Audit risk can be defined as the risk that the auditor
I. May give an inappropriate opinion when the financial statements are
materially misstated
II. Unknowingly fails to modify an opinion when the financial statements are
materially misstated
a. I only
b. II only
c. Both I and II
d. Neither I nor II
55. The complement of audit risk
a. Assurance
b. Materiality
c. Detection risk
d. Judgment
56. Based on audit risk model, if assessments of: inherent risk 10%, control risk 5%,
detection risk 40% AR is
a. 35%
b. 2%
c. 0.20 %
d. Indeterminate
57. If audit risk is 10%, confidence level is
a. 10%
b. 90%
c. 1%
d. 0%
58. Describe detection risk.
a. It is the risk that the auditor expresses an appropriate opinion when the financial
statements are materially misleading
 b. It is the susceptibility of an account balance or class of transactions to
misstatement assuming there were no related controls
c. It is the risk that misstatement could occur and such risk will not be prevented,
detected or corrected on a timely basis by the internal controls
d. It is the risk that the auditors substantive procedures will not detect a
misstatement
59. Relationship between audit risk and materiality
a. Direct
b. Inverse
c. Parallel
d. None
60. An auditor considers materiality for planning purposes in terms of the ________
aggregate level of misstatements that could be material to any one of the financial
statements.
a. Largest
b. Smallest
c. Best
d. Maximum
61. A choice between qualified or adverse opinion is made when the cause of misstatement is
I. Material disagreement with management on PFRS application (PFRS
departure)
II. Inability to gather sufficient appropriate evidence because of restriction on
procedures (scope limitation)
a. I only
b. II only
c. Either I or II
d. Neither I nor II
62. A qualified opinion is expressed when a misstatement is
a. Material
b. Pervasive
c. Both material and pervasive
d. Highly material
63. An adverse opinion would be issued when a misstatements impact is
a. Immaterial
b. Material
c. Highly material
d. Shocking
64. It is appropriate to issue an adverse opinion when the auditor
a. Was not able to gather sufficient appropriate evidence regarding the fairness of the
financial statements
b. Management refuses to furnish written representations
c. Has knowledge that the Philippine Standards on Auditing were not followed
d. Has gathered sufficient appropriate evidence that the financial statements are not
fairly stated
65. Unresolved disagreement with management normally leads to what type of opinion
 a. Qualified or adverse
b. Qualified or disclaimer
c. Adverse or disclaimer
d. Unmodified with emphasis of matter paragraph
66. The financial statements do not present fairly the financial position, result of operations,
or cash flows in conformity with generally accepted accounting principles.

The above opinion was most likely issued with financial statements that are

a. Inconsistent
b. Misleading
c. Surrounded by multiple uncertainties
d. Based on prospective information
67. When the client refuses to include the statement of cash flows in its financial statements
because it believes that it is not a useful document, the auditors opinion should be
a. Qualified due to inadequate disclosure
b. Qualified due to scope limitation
c. Adverse
d. Unmodified
68. When the auditor expresses a qualified opinion, the financial statements, in all material
respects, are
a. Fairly stated
b. Misleading
c. Materially misstated
d. Unreliable
69. When the financial statements contain material departures from PFRS and the auditor
modifies the opinion, the auditor describes the effects in
a. The opinion paragraph
b. In a separate explanatory paragraph
c. The introductory paragraph
d. The notes to the financial statements
70. When the auditor expresses an adverse opinion, the opinion paragraph should include
a. The principal effects of the departure from the identified financial reporting
framework
b. The substantive reasons for the financial statements being misleading
c. A direct reference to a separate paragraph disclosing the basis for the opinion
d. All of the above
71. A description of the material misstatement and, if practicable, a quantification of its
effects are included in the Basis for modification paragraph if the modification is due to
I. Material misstatements
II. Inability to obtain sufficient appropriate evidence
a. I only
b. II only
c. Both I and II
d. Neither I nor II
72. The use of words like except for the above-mentioned limitation or subject to the
foregoing is
a. A violation of the standards of reporting
b. Allowed in some cases
c. Found in the opinion paragraph
d. An acceptable reporting practice
73. Select the opinion provided.

Except for the effects Because of the significance

a. Qualified Qualified
b. Qualified Adverse
c. Disclaimer Qualified
d. Disclaimer Adverse
74. The Basis for Modification Paragraph (separate explanatory paragraph) is found
a. Preceding the Opinion paragraph
b. Following the Opinion paragraph
c. Within the Opinion paragraph
d. In the Opening paragraph
75. A choice between qualified or disclaimer of opinion is made when the cause of
misstatement is
I. Material disagreement with management on PFRS application (PFRS
departure)
II. Inability to gather sufficient appropriate evidence because of restriction on
procedures (scope limitation)
a. I only
b. II only
c. Both I and II
d. Neither I nor II
76. Disclaimer of opinion, when the effect of misstatements is highly material, is usually
issued when
I. It becomes impossible to gather sufficient appropriate evidence due to
circumstance
II. No evidence can be gathered because the auditor is prevented by
management from performing such procedures and the auditor cannot also
perform alternative procedures
a. I only
b. II only
c. Both I and II
d. Neither I nor II
77. Events that limits the auditors evidence gathering procedures may be
I. Circumstances-based
II. Client-imposed
a. I only
b. II only
c. Both I and II
 d. Neither I nor II
78. It is appropriate to issue a disclaimer of opinion in the following instance, except
a. The auditor lacks independence
b. There are multiple circumstances that could significantly impact the financial
statements
c. The auditor is asked to report only on an entitys balance sheet but the auditor is
provided unlimited access to all information underlying the basic financial
statements
d. The auditor was not able to perform alternative procedures on matters for which
there were initial management-imposed restrictions and the impossible effects on
the financial statements were pervasive
79. An auditor was unable to conduct physical count of inventories. Alternative procedures
performed, however, provide satisfactory evidence as to the fairness of the assertions on
inventories. The auditor will most likely issue
a. Unmodified opinion
b. Qualified opinion
c. Adverse opinion
d. Disclaimer of opinion
80. Which of the following may properly constitute a scope limitation?
I. The clients accounting records are inadequate
II. The client refuses to disclose essential information in the notes to financial
statements
III. The auditor determines that performing substantive procedures alone is
not sufficient, but the entitys controls are not effective
a. I and II only
b. I and III only
c. II and III only
d. I, II and III
81. Always required in a financial statement audit
a. Substantive procedures
b. Test of controls
c. Engagement letter
d. All of the foregoing
82. The auditors inability to obtain sufficient appropriate audit evidence may not arise from
which condition?
a. Restrictions imposed by management on the scope of the audit
b. Limitations beyond the control of the entity
c. Limitations relating to the nature or timing of the auditors work
d. Restrictions on the disclosures in the financial statements
83. If a scope limitation is by the circumstances, which course of are available to the auditor?
I. Issue a qualified opinion if effects are material
II. Disclaim an opinion if effects are pervasive
III. Resign or withdraw from the engagement
a. I and II only
b. I and III only
 c. II and III only
d. I, II and III
84. In making a decision whether to disclaim an opinion or withdraw from engagement due
to management-imposed scope limitation, the auditor should consider
a. The materiality of the item in consideration
b. The pervasiveness of effect on financial statements
c. Both the materiality and pervasiveness should be considered
d. The stage of completion at the time the management imposed the scope limitation
85. After accepting the engagement, the auditor becomes aware that management has
imposed a limitation on the scope of the audit that are likely to result in a modification of
opinion on the financial statements, the auditor shall (select by step)
1. Communicate the matter to those charged with governance
2. Request the management to remove the limitation
3. Determine whether alternative procedures are possible
a. 1, 2 and 3
b. 3, 2 and 1
c. 2, 1 and 3
d. 3, 1 and 2
86. The auditor was prevented from applying necessary audit procedures due to the
inadequacy of the clients accounting records. Accordingly, the auditor decides to qualify
his opinion. The opinion paragraph should state that the qualification pertains to
a. A client-imposed limitation
b. A departure from GAAS
c. The possible effects on the financial statements
d. Inadequate disclosure of information
87. Will not change in an audit report with disclaimer of opinion
a. Introductory paragraph
b. Auditors Responsibility paragraph
c. Managements Responsibility paragraph
d. Opinion paragraph
88. A report with a disclaimer of opinion will have the following change in the Introductory
paragraph
a. We have audited
b. We cannot audit
c. We were engaged to
d. We have audited
89. In a report with a disclaimer of opinion, this is not found
a. A statement that the auditors responsibility is to express an opinion on the
financial statements
b. Reference to the Basis or Disclaimer of Opinion paragraph
c. General description of the audit
d. Statement that the auditor was not able to obtain sufficient appropriate audit
evidence
90. If the auditor is not independent, a disclaimer of opinion is issued
a. In all cases
 b. If the effect is material
c. If the effect is both material and pervasive
d. If the effect is highly material
91. Under the old reporting rules, the number of paragraph/s in a report where the auditor is
not independent is
a. 0
b. 1
c. 2
d. 3
92. Engagement where the auditor is asked to express an opinion on a single financial
statement only (e.g. Statement of financial position or balance sheet) but not on the other
statements
a. Engagement with limited reporting objective
b. Engagement with a piecemeal opinion
c. Non-assurance engagement
d. Not allowed under current GAAS
93. Limited reporting objective is allowed if the auditor is
a. Not independent
b. Also required a separate report on the other financial statements
c. Also granted unrestricted access to other financial statements and underlying
records
d. Expected to issue a disclaimer of opinion
94. Not allowed
a. Auditor is not independent but issues a report on agreed-upon procedures
b. Performance of engagements with limited reporting objectives and the auditor is
granted unlimited access to records and financial statements
c. Issuance of reports with piecemeal opinions
d. All of the above
95. When a publicly held company refuses to include in its audited financial statements any
of the segment information that the auditor believes is required, the auditor should
express what type of opinion?
a. Unmodified
b. Qualified
c. Adverse
d. Disclaimer
96. Which of the following statements is incorrect about the auditors responsibility when the
auditor expresses an opinion that is other than unmodified?
a. A clear description of all the substantive reasons should be included in the report
b. Unless impracticable, a quantification of the possible effects on the financial
statements should be indicated in the report.
c. The information would be ordinarily set out in a separate explanatory paragraph
following the opinion paragraph.
d. The information may include a reference to a more extensive discussion, if any, in
the notes to the financial statements
97. The distinction between an adverse opinion and a disclaimer of opinion is
 a. Lack of PFRS versus lack of GAAS
b. Knowledge versus lack of knowledge
c. The CPAs report versus the CIAs report
d. FRSC Statements versus AASC Standards
98. When there are multiple uncertainties (extreme uncertainties) faced by the company and
may impact the financial statements, the appropriate opinion is
a. Qualified or adverse
b. Qualified or disclaimer
c. Unmodified
d. Disclaimer

EMPHASIS OF MATTER PARAGRAPH

99. Emphasis of Matter paragraph is added when an item in question is a matter

I. Presented or disclosed in the financial statements
II. Other than those that are presented or disclosed in the financial statements
that, in the auditors judgment, is important to the readers understanding
of the report.
a. Both I and II
b. I only
c. II only
d. Neither I nor II

100. Report issued when an Emphasis of Matter paragraph is added

a. Modified report
b. Unmodified report
c. Special report
d. None of the choices
101. Normally, the opinion issued when an emphasis of matter paragraph is added is
a. Modified opinion
b. Unmodified opinion
c. Qualified opinion
d. Adverse opinion
102. Choose the incorrect statement. The Emphasis of Matter paragraph
a. Does not affect the auditors opinion
b. Follows the opinion paragraph but precedes the Other Matter paragraph, if any
c. Is not considered a modification to the auditors report
d. Modified opinion with Emphasis of Matter
103. Placement of the Emphasis of Matter paragaraph
a. Preceding the opinion paragraph
b. Following the opinion paragraph
c. Within the opinion paragraph
d. Following the scope paragraph
104. Significant uncertainty that is appropriately disclosed in the financial statements
leads to
a. Unmodified opinion with Emphasis of Matter
 b. Unmodified opinion without additional paragraph
c. Modified opinion without additional paragraph
d. Modified opinion with Emphasis of Matter
105. Significant uncertainty that is not appropriately disclosed in the financial
statements normally leads to
a. Unmodified opinion with Emphasis of Matter
b. Qualified opinion
c. Adverse opinion
d. Disclaimer of opinion
106. Multiple uncertainties that are appropriately disclosed in the financial statements
lead to
a. Unmodified opinion with Emphasis of Matter
b. Qualified opinion
c. Adverse opinion
d. Disclaimer of opinion
107. Not normally an expression of an Emphasis of Matter in a report with unmodified
opinion
a. We draw attention to Note 1
b. As discussed in Note 55 to the financial statements
c. Without qualifying our opinion
d. Except for the possible effects of the matter described in

GOING CONCERN

108. Primarily required to assess the entitys ability to continue as a going concern
a. Auditor
b. Management
c. BOD
d. Shareholders
109. Standards explicitly requiring management to make an assessment of the entitys
ability to continue as going concern
a. Framework
b. PAS 1
c. PAS 10
d. PFRS 1
110. An entity shall prepare the financial statements on a going concern basis unless
a. Management intends to liquidate the entity
b. Management intends to cease trading
c. Management has no realistic alternative but to liquidate or cease trading
d. All of the above
111. An incorrect requirement of PAS 1 on the going concern assumption
a. When preparing financial statements, management shall make an assessment of
an entitys ability to continue as a going concern
 b. When management is aware, in making its assessment, of material uncertainties
related to events or conditions that may cast significant doubt upon the entitys
ability to continue as a going concern, the entity shall disclose those uncertainties
c. When an entity does not prepare financial statements on a going concern basis, it
shall disclose that fact, together with the basis on which it prepared the financial
statements and the reason why the entity is not regarded as a going concern
d. In assessing whether the going concern assumption is appropriate, management
takes into account all available information about the future, which is at least, but
is not limited to, six months from the end of the reporting period
112. Choose the correct statement.
1. Auditors responsibility on going concern is to obtain sufficient appropriate evidence
about the appropriateness of managements use of the going concern assumption to
conclude whether there is a material uncertainty about the entitys continuance as a
going concern.
2. When a financial reporting framework does not require management to make an
assessment on its ability to continue as a going concern, the auditor has no
responsibility to perform 1 above.
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither I nor II
113. Minimum period to assess going concern assumption is _______from the date of
financial statements
a. 3 months
b. 6 months
c. 12 months
d. 18 months
114. If management makes going concern assessment for less than twelve months, and does
not extend the assessment to twelve months even after request by the auditor, the auditor
considers expressing
a. Unmodified opinion with Emphasis of Matter
b. Qualified or adverse opinion
c. Qualified or disclaimer of opinion
d. Disclaimer of opinion
115. The auditors responsibility when there is substantial doubt on the continuance of
an entity as a going concern is to
a. Based on materiality, appropriately modify the opinion
b. Assess whether the uncertainty was disclosed, and whether the disclosure is
adequate
c. Report to the audit committee that accounting estimates need to be revised
d. Include an Emphasis of Matter paragraph to disclose the doubt
Consider the situations that follow and choose the appropriate opinion for such situations
116. Management is properly presenting financial statements on a going concern basis.
A significant going concern uncertainty is properly disclosed in a financial statements
 a. Unmodified opinion with Emphasis of Matter
b. Qualified opinion or adverse opinion
c. Adverse opinion
d. Disclaimer of opinion
117. The use of the going concern assumption is still appropriate. A significant going
concern uncertainty, however, is not disclosed in the financial statements
a. Unmodified opinion with Emphasis of Matter
b. Qualified opinion or adverse opinion
c. Adverse opinion
d. Disclaimer of opinion
118. The financial statements are prepared on a going concern basis. The notes to the
financial statements disclosed the going concern uncertainty. The auditor, however,
believes that the going concern basis is no longer appropriate
a. Unmodified opinion with Emphasis of Matter
b. Qualified opinion or adverse opinion
c. Adverse opinion
d. Disclaimer of opinion
119. The financial statements are prepared on a basis other than going concern. The
reason is properly disclosed in the notes. The auditor believes such basis is appropriate.
a. Unmodified opinion with Emphasis of Matter
b. Qualified opinion or adverse opinion
c. Adverse opinion
d. Disclaimer of opinion
120. An auditor concludes that there is substantial doubt about an entitys ability to
continue as a going concern for a reasonable period of time. If the entitys financial
statements adequately disclose its financial difficulties, the auditors report is required to
include an explanatory paragraph that specifically uses the phrase
I. Reasonable period of time, not t exceed 1 year
II. Going concern
III. Substantial doubt
a. I and II only
b. II and III only
c. I and III only
d. I, II and III

Of the conditions that follow (121-123), choose the least likely item that may cast significant
doubt about the going concern assumption.

121.
a. Net liability or net current liability position
b. Fixed term borrowings approaching maturity without realistic prospects of
renewal or repayment
c. Excessive reliance on long-term borrowings to finance long-term assets
d. Indications of withdrawal of financial support by creditors
122.
 a. Net operating cash flows indicated by historical or prospective financial
statements
b. Adverse key financial ratios
c. Substantial operating losses or significant deterioration in the value of assets used
to generate cash flows
d. Payment of dividends
123.
a. Change from credit to cash-on-delivery transactions with suppliers
b. Emergence of a highly successful competitor
c. Loss of key management without replacement
d. Compliance with capital or other statutory requirements
124. There exists substantial doubt on the entitys going concern assumption. The
auditors considerations relating to managements plans for dealing with the adverse
effects of these conditions most likely would include managements plans to
a. Increase current dividend distributions
b. Reduce existing lines of credit
c. Increase ownership equity
d. Purchased assets formerly leased
125. Most likely be a mitigating factor on the adverse effects of going concern
uncertainty
a. Discussion with lenders the terms of all debt and loan agreements
b. Strengthening of controls over cash disbursements
c. Purchase of production facilities currently being leased from a related party
d. Postponement of an expenditures for research and development projects
126. A procedure that most likely would assist an auditor in identifying conditions and
events that may indicate substantial doubt about an entitys ability to continue as a going
concern
a. Inspecting title documents to verify whether any assets are pledged as collateral
b. Confirming with third parties the details of arrangements to maintain financial
support
c. Reconciling the cash balance per books with the cut-off bank statement and the
bank confirmation
d. Comparing the entitys depreciation and asset capitalization policies to other
entities in the industry

OTHER MATTER PARAGRAPH

127. Other Matter paragraph is added when an item in question is a matter

I. Presented or disclosed in the financial statements
II. Other than those that are presented or disclosed in the financial statements
that, in the auditors judgment, is important to the readers understanding
of the report.
a. Both I and II
b. I only
c. II only
 d. Neither I nor II
128. Placement of Other Matter paragraph
a. Preceding the opinion paragraph
b. Following the opinion paragraph
c. Within the opinion paragraph
d. Following the scope paragraph
129. Choose the incorrect statement. The other matter paragraph
a. Does not affect the auditors opinion
b. Follows the Emphasis of Matter paragraph , if any
c. Is included to alert readers on the framework used when reporting on financial
statement prepared in accordance with a special purpose framework
d. Highlights an item which is not otherwise disclosed in the financial statements
OTHER INFORMATION

130. S1. The auditors opinion on financial statements normally covers the other
information

S2. The other information may undermine the credibility of the audited financial
statements when there are material inconsistencies

a. True True
b. True False
c. False True
d. False False
131. Per PSA 720: Financial and non-financial information (other than financial
statements and the auditors report thereon) which is included either by law, regulation or
custom, in a document containing audited financial statements and the auditors report
thereon
a. Supplementary information
b. Other information
c. Annual reports
d. Other matter
132. Per PSA 720: documents containing audited financial statements refers to
a. Supplementary information
b. Other information
c. Annual reports
d. Other matter
133. Other information that contradicts information contained in the audited financial
statements is called
a. Anomaly
b. Misstatement of fact
c. Error
d. Inconsistency
134. Other information that is unrelated to matters appearing in the audited financial
statements that is incorrectly stated or presented is called
a. Anomaly
 b. Misstatement of fact
c. Error
d. Inconsistency
135. To identify material inconsistencies, what is the auditors responsibility regarding
other information?
a. Read the other information
b. Evaluate its accuracy
c. Perform substantive and compliance tests
d. Ignore the other information
136. Not included as other information per PSA 720 is (are)
a. Financial ratios, financial summaries and highlights
b. A report by management or those charged with governance on operations
c. Names of officers and directors
d. Information contained on the entitys website
137. Auditors responsibility when a material misstatement of fact is identified
a. Discuss the matter with management
b. Request management to consult with qualified third party
c. Notify the audit committee
d. Seek legal advice
138. If management is unwilling to rectify a material misstatement of fact in the other
information
a. Qualify the opinion or add an emphasis of matter paragraph
b. Request management to consult with a qualified third party
c. Notify the audit committee
d. Seek legal advice
139. Auditors responsibility when a material inconsistency is identified
a. Determine whether the audited financial statements or the other information needs
to be corrected
b. Qualify the opinion or express an adverse an opinion
c. Ask management to appropriately amend the financial statements
d. Seek legal advice
140. If management is unwilling to rectify its financial statements to resolve a material
inconsistency with the other information
a. Qualify the opinion or add an emphasis of matter paragraph
b. Add an Emphasis of Matter paragraph describing the inconsistency
c. Qualify the opinion or express an adverse opinion
d. Add an Other Matter paragraph describing the inconsistency
141. If management is unwilling to rectify the other information to resolve a material
inconsistency with the audited financial statements
a. Qualify the opinion or add an emphasis of matter paragraph
b. Add an Emphasis of Matter paragraph describing the inconsistency
c. Qualify the opinion or express an adverse opinion
d. Add an Other Matter paragraph describing the inconsistency

SUBSEQUENT EVENTS
142. Per PSA 560, Subsequent Events are
I. Events occurring between the date of the financial statements and the date
of the auditors report
II. Facts that become known to the auditor after the date of the auditors
report
a. I only
b. II only
c. Both I and II
d. Neither I nor II
143. Date the financial statements are issued
a. The date of the end of the latest period covered by the financial statements
b. The date on which all the statements that comprise the financial statements,
including the related notes, have been prepared and those with the recognized
authority have asserted that they have taken responsibility for those financial
statements
c. The date the auditor dates the report on the financial statements
d. The date that the auditors report and audited financial statements are made
available to third parties
144. It informs the reader that the auditor has considered the effect of events and
transactions of which the auditor becomes aware and that occurred up to that date
a. Date of the financial statements
b. Date of approval of financial statements
c. Date of the auditors report
d. Date the financial statements are issued
145. In some cases, financial statements are required to be approved by shareholders
after they have been issued, per PAS 10, the financial statements are authorized for issue
on
a. Date of the financial statements
b. Date of shareholders approval
c. Date of managements approval
d. Date the financial statements are issued
146. The auditor has no obligation to perform any audit procedures regarding the
financial statements
I. After the date of the auditors report
II. After the financial statements have been issued
a. I only
b. II only
c. Both I and II
d. Neither I nor II
147. Per PAS 10 Events after the reporting period, these are events that provide
evidence of conditions that existed at the end of the reporting period
a. Events after the reporting period
b. Subsequent events
c. Adjusting events
d. Non-adjusting events
148. Most likely a non-adjusting event
a. The settlement after the reporting period of a court case that confirms that the
entity had a present obligation at the end of the reporting period
b. The bankruptcy of a customer that occurs after the reporting period
c. The determination oafter the reporting period of the amount of profit-sharing or
bonus payments and the entity had a present legal or constructive obligation at the
end of the reporting period to make such payments
d. Decline in market value of investments between the end of reporting period and
the date when the financial statements are authorized to issue
149. Most likely an adjusting event
a. Declaration of dividends after the reporting period
b. A major business combination after the reporting period
c. Commencing major litigation arising solely out of events that occurred after the
reporting period
d. The discovery of fraud or errors that show that the financial statements are
incorrect
150. An event covered by the auditors responsibility is and event
a. Occurring between FS date and report date known to the auditor
b. Occurring between FS date and report date known to the auditor
c. Occurring after report date known to the auditor
d. Occurring after the report date known to the auditor
151. A subsequent event became known to the auditor after the report date but before
the financial statements are issued. The audit report was not yet provided/released to the
entity. Which is least correct?
a. Notify the person responsible for the overalol direction of the entity (those
charged with governance) not to issue the financial statements to third parties
before the necessary amendments have been made
b. Determine whether management prepared amended financial statements to reflect
the adjusting event
c. Issue a qualified or adverse opinion on the amended financial statements should
management refuse to reflect the adjusting event
d. Retain the original date the audit report if the event is an adjusting event
152. Stefan, CPA, completed the fieldwork of the audit of Damons December 21,
2012 financial statements on March 6, 2013. A subsequent event requiring adjustment to
the 2012 financial statements occurred on April 10, 2013, and came to Stefans attention
on April 24, 2013. If the adjustment is made without disclosure of the event, Stefans
report ordinarily should be dated
a. March 6, 2013
b. April 10, 2013
c. April 2r4, 2013
d. Using dual dating
153. Stefan, CPA, completed the fieldwork of the audit of Damons December 21,
2012 financial statements on March 6, 2013. A subsequent event requiring disclosure to
the 2012 financial statements occurred on April 10, 2013, and came to Stefans attention
 on April 24, 2013. If the disclosure of the event is made, Stefans report ordinarily
should be dated
a. March 6, 2013
b. April 10, 2013
c. Using dual dating
d. Either b or C
154. A subsequent event became known to the auditor after the report date but before
the financial statements are issued. The audit report was already provided to the entity.
Which is/are correct?
I. Notify the person responsible for the overall direction of the entity (those
charged with governance) not to issue the financial statements to third
parties before the necessary amendments have been made
II. If management issued the financial statements despite the auditors request
not to, the auditor shall take appropriate action to seek to prevent reliance
on the auditors report which includes, for example, obtaining legal advice
a. I only
b. II only
c. Both I and II
d. Neither I nor II
155. An audit report was dual-dated for a subsequent event. This means that the
auditors assumption of responsibility for the audit of subsequent events after the report
date covers
a. All events that occurred (known or unknown)
b. Only the event mentioned in the second date
c. Both A and B
d. Neither A nor B

COMPARATIVE INFORMATION

156. These are the amounts and disclosures included in the financial statements in
respect of one or more periods in accordance with the applicable financial reporting
framework
a. Corresponding figures
b. Current period figures
c. Comparative financial statements
d. Comparative information
157. Comparative information where amounts and other disclosures for the prior
period
Are included as an integral part of the current period financial statements, and
Are intended to be read only in relation to the amounts and other disclosures
relating to the current period
a. Corresponding figures
b. Current period figures
c. Comparative financial statements
d. Comparative figures
 158. Comparative information where amounts and other disclosures for the prior
period was
Included for comparison with the financial statements of the current period but,
If audited, are referred to in the auditors opinion are called
a. a. Corresponding figures
b. Current period figures
c. Comparative financial statements
d. Comparative figures

Consider this case for 159 and 160

ABC Trading prepares comparative financial information. Audited financial statements for the
current year 2013 are presented with audited financial statements for 2012 and 2011 and
unaudited 2010 financial statements.

159. Auditors opinion for corresponding figures covers

a. 2013 only
b. 2012 only
c. 2013, 2012, and 2011 only
d. 2013, 2012, 2011, 2010
160. Auditors opinion for comparative financial statements covers
a. 2013 only
b. 2012 only
c. 2013, 2012, and 2011 only
d. 2013, 2012, 2011, 2010
161. A continuing auditors report on prior period financial statements contained a
modified opinion. The matter giving rise to the modification is resolved in the current
period. The auditors report on current period
a. Need not make reference to the corresponding figure
b. Should be modified and should make reference to both the current periods figures
and corresponding figures giving rise to the modification
c. Should add an Other Matter paragraph describing the corresponding figure
d. Should add an Other Matter paragraph updating prior periods opinion
162. A continuing auditors report on prior period financial statements contained a
modified opinion. The matter giving rise to the modification remains unresolved in the
current period. The auditors report on current period
a. Need not make reference to the corresponding figure
b. Should be modified and should make reference to both the current periods figures
and corresponding figures giving rise to the modification
c. Should add an Other Matter paragraph describing the corresponding figure
d. Should add an Other Matter paragraph updating prior periods opinion
163. A continuing auditors report on prior period financial statements contained an
unmodified opinion. The auditor becomes aware that a material misstatement exists in
the prior period financial statements. The auditors report on current period
 I. Should be modified with respect to the corresponding figures if the matter
remains unresolved
II. Need not make reference to the corresponding figure if the matter is
resolved in the current period
a. I only
b. II only
c. Both I and II
d. Neither I nor II
164. If the financial statements of the prior period were audited by a predecessor
auditor, the auditor shall state in an Other Matter paragraph in the auditors report
(choose the exception)
a. That the financial statements of the prior period were audited by the predecessor
auditor
b. The type of opinion expressed by the predecessor auditor
c. The date of the prior period report by the predecessor auditor
d. If the opinion was modified, the identity of the predecessor auditor
165. An Other Matter paragraph may be included in the highlight that
I. The auditor is reporting is reporting in the current period as continuing
auditor
II. The prior period financial statements presented as comparative
information were unaudited
III. A continuing auditors opinion in the prior period has changed in the
current period accompanied by the substantive reasons for the different or
change in opinion
a. I and II only
b. II and III only
c. I and III only
d. I, II and III
166. A client is presenting comparative (two-year) financial statements. Which of the
following is correct concerning reporting responsibilities of a continuing auditor? The
auditor
a. Should issue 1 audit report that is both presented years
b. Should issue 2 audit reports, one on each year
c. Should issue 1 audit report, but only on the most recent year
d. May issue either 1 audit report on both presented years, or 2 audit reports, one on
each year
167. In May 2012, an auditor reissues the auditors report on the 2010 financial
statements at a continuing clients request. The 2010 financial statements are not restated
and the auditor does not revise the wording of the report. The auditor should
a. Dual date the reissued report
b. Use the release date of the reissued report
c. Use the original report date on the reissued report
d. Use the current period auditors report on the prior period financial statements
168. A continuing auditors report on prior period financial statements was changed in
the current period (e.g. from modified to unmodified) giving rise to an Other Matter
paragraph. Which of the following is not included in that paragraph?
a. The audit report date on the prior period financial statements
b. The opinion expressed on the prior period financial statements
c. The reasons for the updated opinion different from that previously issued
d. The new date for the updated auditor report on the prior period financial
statements
169. A successor auditor reports on the current period financial statements. If
comparative financial statements are presented and the predecessor auditors report on
prior period financial statements was re-issued:
I. The successor auditor reports on the current period financial statements
only
II. The successor auditor adds on Other Matter paragraph in his audit report
a. I only
b. II only
c. Both I and II
d. Neither I nor II
170. Jewel, CPA, audited Infinite Co.s prior year financial statements. These
statements are presented with those of the current year for comparative purposes without
Jewels auditors report, which expressed a qualified opinion. In drafting the current
years auditors report, Crain, CPA, the successor auditor, should
I. Name Jewel as the predecessor auditor
II. Indicate the type of report issued by jewel and the date of that report
III. Indicate the substantive reasons for Jewels qualification
a. I and II only
b. II and III only
c. I and III only
d. I, II and III
171. An auditor expressed a qualified opinion on the prior years financial statements
because of a lack of adequate disclosure. These financial statements are properly restated
in the current year and presented in comparative form with the current years financial
statements. The auditors updated report on the prior years financial statements should
a. Be accompanied by the auditors original report on the prior years financial
statements
b. Continue to express a qualified opinion on the prior years financial statements
c. Make no reference to the type of opinion expressed on the prior years financial
statements
d. Express an unqualified opinion on the restated financial statements of the prior
year
172. Before issuing the prior years auditors report on the financial statements of a
former client, the predecessor auditor should obtain a letter of representations from the
I. Former clients management
II. Successor auditor
 a. I only
b. II only
c. Both I and II
d. Neither I nor II

USING THE WORK OF AN EXPERT

173. Per PSA 620: an individual or organization possessing expertise in a field other
than accounting or auditing, whose work in that field is used by the auditor to assist the
auditor in obtaining sufficient appropriate evidence
a. Auditors report
b. Managements report
c. Auditors specialist
d. Managements specialist
174. Per PSA 620: an individual or organization possessing expertise in a field other
than accounting or auditing, whose work in that field is used by the entity in preparing
the financial statements
a. Auditors report
b. Managements report
c. Auditors specialist
d. Managements specialist
175. Not a specialist
a. Actuary
b. Appraiser
c. Internal auditor
d. Engineer
176. Which of the following are experts?
I. An individual with expertise in applying methods of accounting for
deferred income tax
II. An expert in taxation
III. An expert in methods of accounting for financial instruments
IV. An expert in complex modeling for the purpose of valuing financial
instruments
a. I and II
b. I and IV
c. I and III
d. II and III
177. An auditor normally makes reference to the work of an expert in a report
a. When the experts findings are relevant to the modification of the report
b. Regardless whether the report is modified or unmodified
c. To indicate that such reference reduces the auditors responsibility for the opinion
d. To indicate division of responsibility
178. In using the work of a specialist, an auditor may refer to the specialist in the
auditors report if, as a result of the specialists findings, the auditor
a. Discovers significant deficiencies in the design of the entitys internal control that
management does not correct
 b. Desires to disclose the specialists findings, which imply that a more thorough
audit was performed
c. Is able to corroborate another specialists findings that were consistent with
managements representations
d. Becomes aware of conditions causing substantial doubt about the entitys ability
to continue as a going concern
179. In using the work of a specialist, an auditor referred to the specialists findings in
the auditors report. This would be an appropriate reporting practice if the
a. Client is not familiar with the professional certification, personal reputation, or
particular competence of the specialist
b. Auditor, as a result of the specialists findings , adds an explanatory paragraph
emphasizing a matter regarding the financial statements
c. Client understands the auditors corroborative use of the specialists findings in
relation to the representations on the financial statements
d. Auditor, as a result of the specialists findings, decides to indicate a division of
responsibility with the specialist

WRITTEN REPRESENTATIONS

180. For which of the following matters should an auditor obtain written management
representations?
a. Managements cost-benefit justifications for not correcting internal control
weaknesses
b. Managements knowledge of the future plans that may affect the price of the
entitys stock
c. Managements compliance with contractual agreements that may affect t the
financial statements
d. Managements acknowledgement of its responsibility for employees violation of
laws
181. The date of the management representation letter should coincide with the date of
the
a. Balance sheet
b. Latest interim financial information
c. Auditors report
d. Latest related-party transaction
182. Which of the following matters would an auditor most likely include in a
management representation letter?
a. Communications with the audit committee concerning weaknesses in internal
control
b. The completeness and availability of minutes of stockholders and directors
meetings
c. Plans to acquire or merge with other entities in the subsequent year
d. Managements acknowledgement of its responsibility for the detection of
employee fraud
183. A written representation from a clients management which, among other matters,
acknowledges responsibility for the fair presentation of financial statements, should
normally be signed by the
a. CEO and the chief financial officer (CFO)
b. CFO and the chairman of the board
c. Chairman of the audit committee and of the BOD
d. CEO, BOD chairman, and the clients lawyer