Question 1
1 / 1 pts
In which of the following circumstances would an auditor’s report least likely include specific reference to the
corresponding figures?
When the auditor’s report on the prior period financial statement containing a material misstatement included an
unmodified opinion and the prior period financial statements have not been revised and reissued, and the
corresponding figures have not been properly restated and/or appropriate disclosures have not been made
Correct!
When the auditor’s report on the prior period, as previously issued, included a modified opinion and the matter which
gave rise to the modification is resolved and properly dealt with in the financial statements
When the auditor’s report on the prior period, as previously issued, included a modified opinion and the matter which
gave rise to the modification is unresolved, and results in a modification of the auditor’s report regarding the current
period figures
When the auditor’s report on the prior period, as previously issued, included a modified opinion and the matter which
gave rise to the modification is unresolved, but does not result in a modification of the auditor’s report regarding the
current period figures
Question 2
1 / 1 pts
The predecessor auditor, who is satisfied after properly communicating with the incoming auditor, has reissued his/her
auditor’s report on prior year financial statements. The predecessor auditor’s report should
Refer to both the work and the report of the incoming auditor only in the opinion paragraph
Correct!
Not refer to the report or the work of the incoming auditor
Refer to the work of the incoming auditor in the scope and opinion paragraphs
Refers to the report of the incoming auditor only in the scope paragraphs
Question 3
1 / 1 pts
The responsibility for the identification and disclosure of related parties and transactions with such parties rests with
the
SEC
FRSC
Auditor
Correct!
Management
Question 4
1 / 1 pts
Which of the following statements best describes the auditor’s responsibility concerning the appropriateness of the
going concern assumption in the preparation of the financial statements?
Correct!
The auditor’s responsibility is to consider the appropriateness of management’s use of the going concern assumption
and consider whether there are material uncertainties about the entity’s ability to continue as a going concern that
need to be disclosed in the financial statements
The auditor’s responsibility is to make a specific assessment of the entity’s ability to continue as a going concern
The auditor’s responsibility is to predict future events or conditions that may cause the entity to cease to continue as a
going concern
The auditor’s responsibility is to give a guarantee in the audit report that the entity has the ability to continue as a going
concern
Question 5
1 / 1 pts
After an audit report containing an unqualified opinion on a non-public client’s financial statements was issued, the
client decided to sell the shares of a subsidiary that accounts for 30% of its revenue and 25% of its net income. The
auditor should
Determine whether the information is reliable and if determined to be reliable, request that revised financial statement
be issued
Describe the effect of this subsequently discovered information in a communication with persons known to be relying on
the financial statements
Notify the entity that the auditor’s report may no longer be associated with the financial statements
Correct!
Take no action because the auditor has no obligation to make any further inquiries
Question 6
0 / 1 pts
If an accounting change has no material effect on the financial statements in the current year but the change is
reasonably certain to have a material effect in later years, the change should be
Treated as a subsequent event.
Correct Answer
Disclosed in the notes to the financial statement of the current year.
Treated as a consistency modification in the auditor’s report for the current year.
You Answered
Disclosed in the notes to financial statements and referred to in the audit report for the current year.
Question 7
0 / 1 pts
Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of
subsequent events?
You Answered
Confirming a sample of material accounts receivable established after the date of the financial statements
Comparing the financial statement being reported on with those of the prior period
Investigating personnel changes in the accounting department occurring after the date of the financial statements
Correct Answer
Inquiring as to whether any unusual adjustment were made after the date of the financial statements
Question 8
1 / 1 pts
If an amendment to other information in a document containing audited financial statements is necessary and the entity
refuses to make the amendment, the auditor would consider issuing:
Adverse or disclaimer of opinion
Qualified or adverse opinion
Correct!
Unqualified opinion with explanatory paragraph
Qualified or disclaimer of opinion
Question 9
1 / 1 pts
Naruto, CPA, dated her audit report (on a client’s 2022 financial statements) as of February 14, 2023, except for Note
X, as to which the date is March 15, 2023. In this case, Naruto is taking responsibility for:
Only the specific subsequent event referred to Note X through March 3, 2023.
All subsequent events occurring through March 15, 2023.
All subsequent events occurring through February 14, 2023 only.
Correct!
All subsequent events occurring through February 14, 2023, and the specific subsequent event referred to in Note X
through March 15, 2023.
Question 10
1 / 1 pts
During an audit, the auditor may need the assistance of an expert in obtaining sufficient appropriate evidence. A
common example is
Determining the sufficiency and appropriateness of evidential matter obtained
Evaluating the potential financial statement effect of an employee fraud
Correct!
Determination of the amounts using actuarial computations
Evaluating the integrity of management
Question 11
1 / 1 pts
A major customer of an audit client suffers a fire just prior to completion of year-end field work. The audit client
believes that this event could have a significant direct effect on the financial statements. The auditor should
Disclosure the event in the auditor’s report
Withhold submission of the auditor’s report until the extent of the direct effect on the financial statements is known
Correct!
Advise management to disclose the event in notes to the financial statement
Advise management to adjust the financial statements
Question 12
0 / 1 pts
PSA 720 states, “If, on reading the other information, the auditor identifies a material inconsistency, the auditor should
determine whether the audited financial statement or the other information needs to be amended”. What type of
opinion should be expressed if the client refuses to make the necessary amendment in the financial statements?
Qualified opinion or disclaimer of opinion
Disclaimer of opinion
You Answered
Unqualified opinion with an emphasis of matter paragraph describing the material inconsistency
Correct Answer
Qualified or adverse opinion
Question 13
1 / 1 pts
The auditor’s report should be addressed
Only to the board of directors of the entity whose financial statements are being audited
Either to the shareholders or the board of directors of the entity whose financial statement are being audited
Correct!
Either to the shareholders or the board of directors, or both, of the entity whose statements are being audited
Only to the shareholders of the entity whose financial statements are being audited
Question 14
1 / 1 pts
An auditor used the services of an expert during the audit of a client’s financial statements. When issuing an unmodified
auditor’s report, the auditor should:
Correct!
Not mention the expert as this might mislead financial statements users
Not mention the expert in the opinion and instead disclose the expert in the notes.
Mention the expert and justify the use of the expert’s services.
Mention the expert in both the audit report and the notes to the financial statements.
Question 15
1 / 1 pts
In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an
adverse opinion?
The auditor wishes to emphasize an unusually important subsequent event
Correct!
The financial statements fail to disclose information that is required by Philippine Financial Reporting Standards
The auditor did not observe the entity’s physical inventory and is unable to become satisfied as to its balance by other
auditing procedures
Events disclosed in the financial statements cause the auditor to have substantial doubt about the entity’s ability to
continue as a going concern
Question 16
1 / 1 pts
Which statement is incorrect regarding PSA 710, Comparatives?
The auditor is required to determine whether the comparatives comply in all material respects with GAAP relevant to
the financial statements being audited.
There are two broad financial reporting frameworks for comparatives; the corresponding figures and the comparative
financial statements.
Correct!
Under the corresponding figures framework, the corresponding figures for the prior period(s) are not an integral part of
the current period financial statements and may be read without reference to amounts and other disclosures relating to
the current period.
Under the comparative financial statements framework, the comparatives financial statements for the prior period(s)
are considered separate financial statements.
Question 17
1 / 1 pts
In which of the following circumstances would an auditor most likely add an emphasis of matter paragraph to the
auditor’s report while expressing an unqualified opinion?
Certain transactions cannot be tested because of management’s records retention policy
Management’s estimates of the effects of future events are unreasonable
No depreciation has been provided in the financial statements
Correct!
There is a substantial doubt about the entity’s ability to continue as a going concern
Question 18
1 / 1 pts
Which of the following statements indicates a disclaimer of opinion?
Correct!
The auditor does not express an opinion on the financial statements.
The financial statements present fairly in all material respects the financial position, results of operations, and cash
flows in conformity with PFRS.
The financial statements do not present fairly in all material respects the financial position, results of operations, and
cash flows in conformity with PFRS.
Except for the effects of a matter, the financial statements present fairly in all material respects the financial position,
results of operations, and cash flows in conformity with PFRS.
Question 19
0 / 1 pts
When determining the need to use the work of an expert, the auditor would consider the following except
The materiality of the financial statement item being considered
Correct Answer
The professional certification or licensing by, or membership in, an appropriate professional body
You Answered
The quantity and quality of other audit evidence available
The risk of misstatement based on the nature and complexity of the matter being considered
Question 20
0 / 1 pts
After issuing a report, an auditor has no obligation to make continuing inquiries or perform other procedures
concerning the audited financial statement, unless
Correct Answer
Information, which existed at the report date and may affect the report, comes to the auditor’s attention
Final determinations or resolutions are made of contingencies that had been disclosed in the financial statements
You Answered
Information about an event that occurred after the date of the auditor’s report comes to the auditor’s attention
The control environment changes after issuance of the report
Question 21
1 / 1 pts
Which of the following may not cast significant doubt about the going concern assumption of an entity?
Changes in legislation or government policy expected to adversely affect the entity
Correct!
The entity heavily used long-term capital in financing its investment in permanent assets
Non-compliance with capital or other statutory requirements
Pending legal or regulatory proceeding against the entity may, if successful, result in claims that are unlikely to be
satisfied
Question 22
1 / 1 pts
Which of the following is not among the characteristics of the procedures performed in completing the audit?
They are performed after the reporting date
They are usually performed by audit managers or other senior members of the audit team who have extensive audit
experience
They involve many subjective judgments by the auditor
Correct!
They are optional since they have only an indirect impact on the opinion to be expressed
Question 23
1 / 1 pts
When audited financial statements are presented in a document (e.g., annual report) containing other information, the
auditor
Is required to express a qualified opinion if the other information has a material misstatement of fact
Has an obligation to perform auditing procedures to corroborate the other information
Correct!
Should read the other information to consider whether it is inconsistent with the audited financial statements
Has no responsibility for the other information because it is not part of the basic financial statements
Question 24
0 / 1 pts
An auditor should disclose the substantive reasons for expressing an adverse opinion in an emphasis of matter
paragraph
Within the notes to the financial statements
Following the introductory paragraph
Correct Answer
Preceding the opinion paragraph
You Answered
Following the opinion paragraph
Question 25
1 / 1 pts
After determining that a related party transactions has, in fact, occurred, an auditor should
Correct!
Obtain an understanding of the business purpose of the transaction
Substantiate that the transaction was consummated on terms equivalent to an arm’s-length transaction
Perform analytical procedures to verify whether similar transactions occurred, but were not recorded
Add a separate paragraph to the auditor’s report to explain the transactions
Question 26
1 / 1 pts
Comparative financial statements include the financial statements of the prior year that were audited by a predecessor
auditor whose report is not presented. If the predecessor’s report was qualified, the incoming auditor should
Issue an updated comparative audit report indicating the division of responsibility
Express an opinion only on the current’s year statements and make no reference to the prior year’s statements
Request the client to reissue the predecessor’s report on the prior year’s statement
Correct!
Indicate the substantive reasons for the qualification in the predecessor auditor’s opinion
Question 27
1 / 1 pts
Each of the following procedures requires the assistance of an expert except
Interpreting major contracts
Determining the value of works of art
Determining the physical condition or quantity of underground
Correct!
Determining the adequacy of disclosure in the notes to the financial statements
Question 28
1 / 1 pts
An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders
containing audited financial statements. If the auditor concludes that the financial statement do not require revision,
but the client refuses to revise or eliminate the material inconsistency, the auditor may
Express a qualified opinion after discussing the matter with the client’s directors
Consider the matter closed because the other information is not in the audited statements
Disclaim an opinion on the financial statements after explaining the material inconsistency in an emphasis of matter
paragraph
Correct!
Revise the auditor’s report to include an emphasis of matter paragraph describing the material inconsistency
Question 29
1 / 1 pts
The following statements relate to the date of the auditor’s report. Which is false?
The date of the auditor’s report always be later than the date of the financial statement (i.e., the statement of financial
position)
Correct!
The date of the auditor’s report should not be later than the date on which financial statements are signed or approved
by management
The auditor should date the report as of the completion date of the audit
The date of the auditor’s report should not be earlier than the date on which the financial statements are signed or
approved by management
Question 30
1 / 1 pts
Which of the following terms is used in the standard to describe the effects on the financial statements of
misstatements or the possible effects on the financial statements, if any, that are undetected due to an inability to
obtain sufficient appropriate audit evidence?
Material
Persuasive
Extensive
Correct!
Pervasive
Question 31
1 / 1 pts
An auditor generally obtains from a client a formal written statement concerning the accuracy of the inventory. The
particular letter of representation is used by the auditor to
Lessen the auditor’s responsibility for the fair presentation of balance sheet inventories
Reduce the scope of the auditor’s physical inventory work but not the other inventory audit work that is normally
performed
Confirm in writing the evaluation basis used by the client to value the inventory at the lower of cost or net realizable
value
Correct!
Remind management that the primary responsibility for the overall fairness of the financial statements rests with
management and not with the auditor
Question 32
1 / 1 pts
Management’s refusal to furnish a written representation letter on a matter which the auditor considers essential
constitutes
An illegal act
An uncertainty sufficient to preclude an unqualified opinion
Prima facie evidence that the financial statement are not presented fairly
Correct!
A scope limitation sufficient to preclude an unqualified opinion
Question 33
1 / 1 pts
The auditor is most likely to place little reliance on the work of an expert who:
Is an attorney who barely passed the bar examination
Correct!
Is employed by the entity
Received his formal training at a nonaccredited institution
Does not have the highest level of certification for their profession
Question 34
1 / 1 pts
The following statements relate to unaudited prior year financial statements that are presented in comparative form
with audited current year financial statements. Which is incorrect?
Correct!
The incoming auditor need not perform audit procedures regarding opening balances of the current period
The incoming auditor should state in the auditor’s report that the comparative financial statements are unaudited
In situations where the incoming auditor identifies that the prior year unaudited figures are materially misstated, the
auditor should request management to revise the prior year’s figures or if management refuses to do so, appropriately
modify the report.
Clear disclosure in the financial statements that the comparative financial statements are unaudited is encouraged
Question 35
1 / 1 pts
Naruto, CPA, believes there is substantial doubt about the ability of Sasuke Co. to continue as a going concern for a
reasonable period of time. In evaluating Sasuke’s plans for dealing with the adverse effects of future conditions and
events, Naruto most likely would consider, as a mitigating factor, Sasuke’s plan to
Correct!
Postpone expenditures for research and development projects
Discuss with lenders the terms and loan agreements
Strengthen internal controls over cash disbursement
Purchase production facilities currently being leased from a related party
Question 36
1 / 1 pts
When comparative financial statements are presented, the auditor’s opinion on the financial statements “taken as a
whole” should be considered to apply to the financial statements of the
Periods presented plus one preceding period
Correct!
Current period and those of the other periods presented
Current period only
Current and immediately preceding period only
Question 37
1 / 1 pts
Which of the following statement is not correct about the auditor’s responsibility about management’s use of the going
concern assumptions?
The auditor should evaluate management’s assessment of the entity’s ability to continue as a going concern
The auditor should inquire of management as to its knowledge of events or conditions beyond the period of assessment
used by management that cast significant doubts on the entity’s ability to continue as a going concern
Correct!
The absence of any reference to going uncertainty in the auditor’s report can be reviewed as a guarantee as to the
entity’s ability to continue as a going concern
The auditor does not have a responsibility to design procedures other than inquiry of management to tests for
inclination of events or conditions which cast significant doubt on the entity’s ability to continue as a going concern
beyond the period assessed by management
Question 38
1 / 1 pts
Which of the following subsequent events will be least likely to result in an adjustment to the financial statements?
Culmination of events affecting the realization of inventories owned as of the reporting date
Correct!
Material changes in the quoted market prices of listed investment securities since the reporting date
Material changes in the settlement of liabilities which were estimated as of the reporting date
Culmination of events affecting the realization of accounts receivable owned as of the reporting date
Question 39
1 / 1 pts
Which of the following is included in the introductory or opening paragraph of the auditor’s report?
A statement that the responsibility of the auditor is to express an opinion on the financial statements based on the audit
A statement that the audit was conducted in accordance with Philippine Standard on Auditing
A statement that the financial statements are the responsibility of the entity’s management
Correct!
Identification of the financial statements audited, including the date of and period covered by the financial statements
Question 40
1 / 1 pts
An auditor’s report includes the following statement: “In our opinion, because of the effects of the matters discussed in
the preceding paragraph, the financial statements do not present fairly, in all material respects, the financial position of
ABC Company as of December 31, 20X1, and of its financial performance and its cash flows for the year then ended in
accordance with Philippine Financial Reporting Standards.” This auditor’s report contains a/an
. Disclaimer
Qualified
Correct!
Adverse
Unqualified
Question 41
0 / 1 pts
An auditor searching for related party transactions should obtain an understanding of each subsidiary’s relationship to
the total entity because
Intercompany transactions may have been consummated on terms equivalent to arm’s-length transactions
You Answered
This may reveal whether particular transactions would have taken place if the parties had not been related
This may permit the audit of intercompany account balances to be performed as of concurrent dates
Correct Answer
The business structure may be deliberately designed to obscure related party transactions
Question 42
1 / 1 pts
When completing the audit, the auditor performs procedures designed to identify subsequent events may require
adjustment of, or disclosure in the financial statements. 1st Scenario: Those that provide evidence about conditions
that exist at period end. 2nd Scenario: Those that are indicative of conditions that arose subsequent to period end.
Accordingly what will be done on the 1st and 2nd scenario respectively?
Correct!
Will require adjustment Will require disclosure
Will require adjustment Will require adjustment
Will require disclosure Will require adjustment
Will require disclosure Will require disclosure
Question 43
1 / 1 pts
Which of the following material event occurring subsequent to the reporting date would require an adjustment to the
financial statements before they are issued?
Correct!
Settlement of litigation, in excess of the recorded liability
Major purchase of a business which is expected to double sales volume
Loss of a plant as a result of a flood
Sale of long-term debt or capital stock
Question 44
1 / 1 pts
The expression “financial statements, taken as a whole “ applies:
Equally to each item in each financial statement.
Only to a complete set of financial statements.
Equally to each material item in each financial statement.
Correct!
Equally to a complete set of financial statements and to an individual financial statement.
Question 45
1 / 1 pts
When would the auditor refer to the work of an appraiser in the auditor’s report?
An unqualified opinion is expressed and an emphasis of matter paragraph is added to disclose the use of the appraiser’s
work
A qualified opinion is expressed because of a matter unrelated to the work of the appraiser
Correct!
An adverse opinion is expressed based on a difference of opinion between the client and the outside appraiser as to the
value of certain assets
A disclaimer of opinion is expressed because of a scope limitation imposed on the auditor by the appraiser
Question 46
1 / 1 pts
Where an unusual fluctuation is indicated by analytical procedures and management is unable to provide a satisfactory
explanation, the auditor must assume that there is a high probability that an error or irregularity exists. In this case, the
auditor must
Issue a disclaimer
Issue either a qualified or an adverse opinion
Issue either a qualified opinion or a disclaimer
Correct!
Design other appropriate audit procedures to determine if such errors do exists
Question 47
1 / 1 pts
Which of the following phrases would an auditor most likely include in the auditor’s report when expressing a qualified
opinion because of inadequate disclosure?
With the foregoing explanation of these omitted procedures
Correct!
Except for the omission of the information included in the preceding paragraph
Subject to the departure from generally accepted accounting principles, as described above
Do not present fairly in all material respects
Question 48
1 / 1 pts
A written representation from a client’s management that, among other matters, acknowledges responsibility for the
fair presentation of financial statements, should normally be signed by the
Chief financial officer and the chair of the board of directors
Chief executive officer, the chair of the board and the client’s lawyer
Chair of the audit committee of the board of directors
Correct!
Chief executive officer and the chief of financial officer
Question 49
1 / 1 pts
Which of the following procedures should an auditor generally perform regarding subsequent events?
Send second requests to the clients customers who failed to respond to initial accounts receivable confirmation requests
Review the cut-off bank statements for several months after the year-end
Correct!
Compare the latest available interim financial statements with the financial statements being audited
Communicate material weaknesses in the internal control structure to the client’s audit committee
Question 50
1 / 1 pts
There are two broad financial reporting frameworks for comparatives: the corresponding figures and the comparative
financial statements. Which of the following statements is correct concerning these reporting frameworks?
Under the comparative financial statements framework, the amounts and other disclosures for the prior period(s) form
part of the current period financial statements
Correct!
Under the corresponding figures framework, the corresponding figures for the prior period(s) are integral part of the
current period financial statements
Under the corresponding figures framework, the corresponding figures for the prior period(s) are considered separate
financial statements
Under the comparative financial statements framework, the comparative financial statement for the prior period(s) are
intended to be read in conjunction with the amounts and other disclosures relating to the current period.
