QUIZ 6

Question 1

This PSA covers special considerations in audit engagements, except:
a. PSA 850
b. PSA 800
c. PSA 805
d. PSA 810

Answer 1

a. PSA 850

Question 2

The objective of the auditor, when applying PSAs in an audit of financial
statements prepared in accordance with a special purpose framework, is
to address appropriately the special considerations that are relevant to:
a. The acceptance of the engagement
b. The planning and performance of that engagement
c. Forming an opinion and reporting on the financial statements
d. All of the answers

Answer 2

d. All of the answers

Question 3

These are financial statements prepared in accordance with a special
purpose framework.
a. Modified financial statements
b. Particular-use financial statements
c. Special-purpose financial statements
d. Specialized reporting statements

Answer 3

c. Special-purpose financial statements

Question 4

A financial reporting framework designed to meet the financial information
needs of specific users.
a. Philippine Standards on Special Reports
b. Special Purpose Framework
c. Particular Purpose Framework
d. Customized Financial Reporting Standards

Answer 4

b. Special Purpose Framework

Question 5

Examples of a special-purpose frameworks are:
I. A tax basis of accounting for a set of FS that accompany an
entity’s tax return
II. The cash receipts and disbursement basis of accounting for
cash flow information that an entity may be requested to
prepare for creditors.
III. The financial reporting provisions established by a regulator to
meet the requirements of that regulator.
IV. The financial reporting provisions of a contract, such as a bond
indenture, a loan agreement, or a project grant.
a. I, II, and III
b. I, II, and IV
c. II, III, and IV
d. I, II, III, and IV

Answer 5

d. I, II, III, and IV

Question 6

The auditor should determine the acceptability of the financial reporting
framework applied in the preparation of FS. In a audit of special-purpose
FS, the auditor shall obtain an n=understanding of:
a. The purpose for which the financial statements are prepared
b. The intended users
c. The steps taken by management to determine that the
applicable financial reporting framework is acceptable in the
circumstances
d. All of these

Answer 6

d. All of these

Question 7

In determining the acceptability of the special-purpose financial reporting
framework applied, the key factor is:
a. Cost-benefit considerations in applying the framework
b. Global acceptance of the special-purpose framework
c. Ease of auditing the FS produced under the special-purpose
framework
d. The financial information needs of the intended users

Answer 7

d. The financial information needs of the intended users

Question 8

The following are the considerations planning and performing an audit of
special-purpose FS. Select the incorrect statement.
a. In planning and performing an audit of special-purpose FS, the
auditor shall determine whether application of the PSAs
requires special consideration in the circumstances of the
engagement.
b. In the case of FS prepared in accordance with the provisions of
a contract, the auditor shall obtain an understanding of any
significant interpretations of the contract that management
made in the preparation of those FS.
c. An interpretation is insignificant when adoption of another
reasonable interpretation would have produced a material
difference in the information presented in the FS.
d. All of these statements are incorrect.

Answer 8

c. An interpretation is insignificant when adoption of another
reasonable interpretation would have produced a material
difference in the information presented in the FS.

Question 9

PSA 700 (Redrafted) delas with the form and content of the auditor’s
report. In the case of an auditor’s report on special-purpose FS, which of
the following are additional reporting requirements mentioned by PSA
800?
I. The auditor’s report shall also describe the purpose for which
the FS are prepared and, if necessary, the intended users, or
refer to a note in the special purpose FS that contains that
information.
II. If management has a choice of financial reporting frameworks
in the preparation of such FS, the explanation of management’s
responsibilities for the FS shall also make reference to its
responsibility for determining that the applicable financial
reporting framework is acceptable in the circumstances.
III. The auditor’s report on special purpose FS shall include an
Emphasis of Matter paragraph alerting users of the auditor’s
report that the FS are prepared in accordance with a special
purpose framework and that, as a result, the financial
statements may not be suitable for another purpose.
a. I and II only
b. II and III only
c. I and III only
d. I, II, and III

Answer 9

d. I, II, and III

Question 10

PSA 800 (Redrafted) requires that the auditor’s report should include an
alert on the special-purpose for which the FS have been prepared. In
addition to this alert, the auditor may consider it appropriate to indicate
that the auditor’s report is intended solely for the specific users.
Depending on the law or regulation of the particular jurisdiction, how is
this normally achieved?
a. By restricting the distribution or use of the auditor’s report.
b. By issuing a qualified opinion or adverse opinion on the
financial statements
c. By requiring the entity to add a paragraph in the notes to the
financial statements to indicate the restrictions.
d. By modifying the title of the auditor’s report, such as “Restricted
Report of Independent Auditor”

Answer 10

a. By restricting the distribution or use of the auditor’s report.

Question 11

A paragraph in an auditor’s report, placed after the opinion paragraph,
reads as follows:
Without modifying out opinion, we draw attention to Note X to the financial
statements, which describes the basis of accounting. The financial
statements are prepared to assist ABC Company to comply with the
financial reporting provisions of the contract referred to above. As a result,
the financial statements may not be suitable for another purpose. Our
report is intended to solely for ABC Company and DEF Company and
should not be distributed to or used by parties other than ABC Company
or DEF Company.
a. Refers to the basis of accounting by mention of a note to the
FS
b. Describes the purpose of the special-purpose FS
c. Restricts the distribution or use of the report
d. All of the answers

Answer 11

d. All of the answers

Question 12

If the special-purpose FS is not suitably titled or the basis of accounting
is not adequately disclosed, the auditor should:
a. Withdraw from the engagement
b. Issue an appropriately modified report
c. Reword the title of the financial statements
d. Request for additional representation in the management
representation letter

Answer 12

b. Issue an appropriately modified report

Question 13

The criteria applied by management in the preparation of the summary
FS is known as:
a. Applied criteria
b. Summary criteria
c. Financial reporting framework
d. Summary reporting standards

Answer 13

a. Applied criteria

Question 14

These are FS audited by the auditor in accordance with PSAs, and from
which the summary FS are derived:
a. Source financial statements
b. Audited financial statements
c. Original financial statements
d. Uncut financial statements

Answer 14

b. Audited financial statements

Question 15

Historical financial information that is derived from FS but that contains
less detail than the FS, while still providing a structured representation
consistent with that provided by the FS of the entity’s economic resources
or obligation at a point in time or the changes therein for a period of time,
are known as:
a. Simplified financial statements
b. Compressed financial statements
c. Summary financial statements

Answer 15

c. Summary financial statements

Question 16

Before accepting an engagement to audit summary FS, the auditor shall:
a. Determine whether the applied criteria are acceptable
b. Obtain the agreement of management that it acknowledges
and understands its responsibilities regarding the summary FS
c. Agree with management the form of opinion to be expressed
on the summary FS
d. All of the choices

Answer 16

d. All of the choices

Question 17

n the context of PSA 810 (Redrafted), management should agree with
the auditor and acknowledge its responsibilities:
a. For the preparation of the summary FS in accordance with the
applied criteria
b. To make the audited FS available to the intended users of the
summary FS without undue difficulty
c. To include the auditor’s report on the summary FS in any
document that contains the summary FS and that indicates that
the auditor has reported on them
d. All of the choices

Answer 17

d. All of the choices

Question 18

Which of the following procedures are least likely to be performed in
relation to an engagement to report on summary FS?
a. Evaluate whether the summary FS adequately disclose their
summarized nature and identify the audited FS
b. When summary FS are not accompanied by the audited FS,
evaluate whether they describe clearly from whom or where the
audited FS are available
c. Evaluate whether the summary financial statements
adequately disclose the applied criteria
d. Compare the summary FS with the related information in
the audited FS to determine whether the audited FS agree
with, or can be recalculated from, the related information
in the summary FS

Answer 18

d. Compare the summary FS with the related information in
the audited FS to determine whether the audited FS agree
with, or can be recalculated from, the related information
in the summary FS

Question 19

When the auditor’s report on the audited FS contains an adverse opinion
or a disclaimer of opinion, the auditor’s report on the summary FS shall:
a. State that the auditor’s report on the audited FS contains an
adverse opinion or disclaimer of opinion.
b. Describe the basis for that adverse opinion or disclaimer of
opinion
c. State that, as a result of the adverse opinion or disclaimer of
opinion, it is appropriate to express an opinion on the summary
FS
d. All of the answers

Answer 19

d. All of the answers

Question 20

If the summary FS are not consistent, in all material respects, with or are
not fair summary of the audited FS, in accordance with the applied criteria,
and management does not agree to make the necessary changes, the
auditor shall:
a. Express an unqualified opinion on the summary FS, with an
emphasis of a matter paragraph describing the lack of
consistency.
b. Express a qualified opinion on the summary FS, with a basis
for modification paragraph describing the lack of consistency
c. Express an adverse opinion on the summary FS
d. Withdraw from the engagement since management refuses to
make amendments to the summary FS

Answer 20

c. Express an adverse opinion on the summary FS

Question 21

This refers to an element, account, or item of a financial statement
a. Element of financial statements
b. Component
c. Part of financial statements
d. financial statements category

Answer 21

a. Element of financial statements

Question 22

If the auditor undertakes an engagement to report on a single FS or on a
specific element of FS in conjunction with an engagement to audit the
entity’s complete set of FS, the auditor shall express:
a. An opinion on the single FS or on the specific element of the
FS only
b. An opinion on the complete set of FS only
c. A single opinion covering both the single FS or specific element
of FS and the complete set of FS
d. A separate opinion for each engagement

Answer 22

d. A separate opinion for each engagement

Question 23

When audited single FS and audited specific element of FS are presented
together with the audited complete set of FS, the following must be
differentiated:
a. The single FS or specific element of FS must be differentiated
from the complete set of FS
b. The opinion for the single FS or specific element of FS must be
differentiated from the opinion on the complete set of FS
c. Both A and B
d. Neither A nor B

Answer 23

c. Both A and B

Question 24

Jannah, CPA, was asked by Sheldon Company to audit the company’s
Loans and Receivable account, in conjunction with the audit of Sheldon’s
complete FS. Jannah issued a report with unqualified opinion and with
emphasis of a matter paragraph on the complete set of FS of Sheldon’s
Company. Accordingly, Jannah shall:
a. Issue a qualified opinion on the Loans and Receivables
account.
b. Issue a disclaimer of opinion on the Loans and Receivables
account.
c. Consider the effect of the emphasis of a matter on the
auditor’s report for Loans and Receivables
d. Issue also an unqualified opinion with emphasis of a matter
paragraph for Loans and Receivables

Answer 24

c. Consider the effect of the emphasis of a matter on the
auditor’s report for Loans and Receivables

Question 25

Jannah, CPA, was asked by Sheldon Company to audit the company’s
Loans and Receivable account, in conjunction with the audit of Sheldon’s
complete FS. Jannah issued a report with unqualified opinion and with
emphasis of a matter paragraph on the complete set of FS of Sheldon’s
Company. Accordingly, Jannah shall:
a. Issue a qualified opinion on the Loans and Receivables
account.
b. Issue a disclaimer of opinion on the Loans and Receivables
account.
c. Consider the effect of the emphasis of a matter on the
auditor’s report for Loans and Receivables
d. Issue also an unqualified opinion with emphasis of a matter
paragraph for Loans and Receivables

Answer 25

c. Consider the effect of the emphasis of a matter on the
auditor’s report for Loans and Receivables

Question 26

The auditor’s inability to obtain in sufficient appropriate audit evidence
may arise from the following, except:
a. Circumstances beyond the control of the entity
b. Circumstances relating to the nature or timing of the auditor’s
work.
c. Limitations imposed by management.
d. Circumstances relating to difficulty in performing audit
procedures.

Answer 26

d. Circumstances relating to difficulty in performing audit
procedures.

Question 27

A financial reporting framework designed to meet the common financial
information needs of a wide range of users.
a. Financial reporting rules and regulations
b. Philippine Standards on Auditing
c. General-purpose framework
d. Fair presentation framework

Answer 27

c. General-purpose framework

Question 28

The element of the auditor’s report that distinguishes it from reports that
might be issued by others is the:
a. Title
b. Addressee
c. Auditor’s signature
d. Opinion paragraph

Answer 28

a. Title

Question 29

The audit report is normally addressed to the:
a. Those charged with governance and shareholders.
b. Those charged with governance and the chair of the audit
committee
c. Those charged with governance, shareholders, and the chair of
the audit committee
d. Shareholders and the chair of the audit committee

Answer 29

a. Those charged with governance and shareholders.

Question 30

Management is responsible for the preparation and fair presentation of
the financial statements in accordance with PFRS. This responsibility
includes (select the exception):
a. Designing, implementing, and maintaining internal controls
relevant to preparation of fairly stated financial statements.
b. Selecting and applying appropriate accounting policies
c. Selecting and applying aggressive accounting policies
d. Making accounting estimates that are reasonable in the
circumstances

Answer 30

c. Selecting and applying aggressive accounting policies

Question 31

. An auditor’s inability to obtain sufficient appropriate audit evidence may
arise from circumstances relating to the nature or timing of the auditor’s
work. Examples of which include the following, except:
a. The timing of the auditor’s appointment is such that the auditor
is unable to observe the counting of the physical inventories
b. The entity is required to use the equity methos of accounting
for an associated entity, and the auditor is unable to obtain
sufficient appropriate audit evidence about the latter’s financial
information to evaluate whether the equity method has been
appropriately applied.
c. The auditor was not able to obtain his current accreditation
certificate.
d. The au determines that performing substantive procedures
alone is not sufficient, but the entity’s controls are not effective.

Answer 31

c. The auditor was not able to obtain his current accreditation
certificate.

Question 32

The description of an audit in the standard auditor’s report includes which
of the following?
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 auditor’s judgement,
including the assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error.
c. An audit also includes evaluating the appropriateness of the
accounting policies used and the reasonableness of accounting
estimates made by management, as well as the overall
presentation of the financial statements.
d. All of these

Answer 32

d. All of these

Question 33

Examples of an inability to obtain sufficient appropriate audit evidence
arising from a limitation on the scope of the audit imposed by
management include when:
a. Management prevents the auditor from observing the counting
of the physical inventory
b. Management prevents the auditor from requesting external
confirmation of specific account balances.
c. Management prevents the auditor to do ocular inspection of
fixed assets acquisitions.
d. All of the above

Answer 33

d. All of the above

Question 34

Which of the following best describes the expression “financial
statements, taken as a whole”?
a. It applies equally to a complete set of financial statements
and to an individual financial statement
b. It applies only to a complete set of financial statements.
c. It applies equally to each item in each financial statement
d. It applies equally to each material item in each financial
statement

Answer 34

a. It applies equally to a complete set of financial statements
and to an individual financial statement

Question 35

The most common type of audit report contains a(n):
a. Adverse opinion
b. Qualified opinion
c. Disclaimer of opinion
d. Unqualified opinion

Answer 35

d. Unqualified opinion

Question 36

An audit report should be dated no earlier than the
a. Date the report is delivered to the entity audited
b. Date a letter of audit inquiry is received from the entity’s
attorney of record
c. Balance sheet date of the latest period reported on
d. Date of completion of the audit

Answer 36

d. Date of completion of the audit

Question 37

A dual-dated report contains the dates of a subsequent event and the
date the:
a. Auditor completed work in the client’s office
b. Financial statements were prepared
c. Subsequent event was resolved
d. Audit report was delivered

Answer 37

a. Auditor completed work in the client’s office

Question 38

Subsequent to the issuance of audited financial statements, Aaron, CPA,
becomes aware of material misstatements in the financial statements that
exist prior to the date of his audit report. In this case, Aaron should:
a. Notify the parties who are currently relying on the financial
statements
b. Discuss the matter with management, and where
necessary, recommend that the financial statements be
revised in light of the new information obtained.
c. Document such information in the audit plan for succeeding
audit
d. Submit revised copies of the financial statements and audit
report to shareholders

Answer 38

b. Discuss the matter with management, and where
necessary, recommend that the financial statements be
revised in light of the new information obtained.

Question 39

George, CPA, dated his audit report (on client’ 2012 financial statements)
as of February 10, 2013, except for Note J, as to which the date is March
3, 2013. In this case, George is taking responsibility for:
a. All subsequent events occurring through March 3, 2013.
b. All subsequent events occurring through February 10, 2013,
only.
c. All subsequent events occurring through February 10,
2013, and the specific subsequent event referred to in Note
J through March 3, 2013.
d. Only the specific subsequent event referred to in Note J through
March 3, 2013.

Answer 39

c. All subsequent events occurring through February 10,
2013, and the specific subsequent event referred to in Note
J through March 3, 2013.

Question 40

An emphasis of a matter paragraph may be included:
a. Under no circumstances
b. Always after the opinion paragraph
c. Always before the opinion paragraph
d. Can be before the opinion paragraph, or after the opinion
paragraph

Answer 40

b. Always after the opinion paragraph

Question 41

An auditor’s report includes a statement that “the financial statements do
not present fairly the financial position in accordance with Philippine
Financial Reporting Standards.” This auditor’s report was probably issued
in connection with financial statements that were:
a. Prepared on another comprehensive basis for accounting
b. Restricted for use by management
c. Misleading
d. Condensed

Answer 41

c. Misleading

Question 42

An auditor’s report that refers to a departure from generally accepted
accounting principles includes the language, “In our opinion, with the
foregoing explanation, the financial statements referred to above
presented fairly…” This is a(n)
a. Adverse opinion
b. Qualified opinion
c. Unqualified opinion with an explanatory paragraph
d. Example of inappropriate reporting

Answer 42

d. Example of inappropriate reporting

Question 43

An auditor is preparing an audit report with a qualified opinion. Which of
the following phrases is the correct way to start writing a qualified opinion?
a. “Except for…”
b. “Subject to…’
c. Either a or b
d. Neither a nor b

Answer 43

a. “Except for…”

Question 44

An auditor is unable to obtain sufficient appropriate audit evidence as a
basis for the opinion on the financial statements. This situation illustrates
a(n):
a. Scope limitation
b. Lack of independence
c. Uncertainty
d. Inconsistency

Answer 44

a. Scope limitation

Question 45

An auditor is unable to determine the amounts associated with illegal acts
committed by a client. The auditor would most likely issue:
a. Either a qualified opinion or a disclaimer of opinion
b. An adverse opinion
c. Either a qualified opinion or an adverse opinion
d. A disclaimer of opinion

Answer 45

a. Either a qualified opinion or a disclaimer of opinion

Question 46

A limitation on the scope of an audit sufficient to preclude an unqualified
opinion will always result when management:
a. Engages the auditor after the year-end physical inventory count
us completed.
b. Fails to correct a material internal control weakness that had
been identified during the prior year’s audit.
c. Refuses to furnish a management representation letter to
the auditor.
d. Prevents the auditor form reviewing the working papers of the
predecessor auditor.

Answer 46

c. Refuses to furnish a management representation letter to
the auditor.

Question 47

In case of material and pervasive client-imposed scope limitation, the
auditor must consider issuing a:
a. Qualified opinion or disclaimer of opinion
b. Unqualified report with an explanatory paragraph
c. Disclaimer of opinion or adverse opinion
d. Disclaimer of opinion

Answer 47

d. Disclaimer of opinion

Question 48

Because of inadequate records the auditor is uncertain as to whether
newly acquired property and equipment is recorded initially at cost. The
auditor should issue a(n):
a. Qualified opinion
b. Unqualified opinion
c. Adverse opinion
d. Standard opinion

Answer 48

a. Qualified opinion

Question 49

An auditor may not express a qualified opinion when
a. A scope limitation prevents the auditor from completing an
important audit procedure
b. The auditor’s report refers to the work of a specialist
c. An accounting principle at variance with GAAP is used.
d. The auditor lacks independence with respect to the audited
entity

Answer 49

d. The auditor lacks independence with respect to the audited
entity

Question 50

An auditor who concludes that an uncertainty is not adequately disclosed
in the financial statements should issue:
a. Disclaimer of Opinion
b. Unqualified report with an explanatory paragraph
c. Special report
d. Qualified report

Answer 50

d. Qualified report