CPA REVIEW SCHOOL OF THE PHILIPPINES 6.

The audit report is normally addressed to the:

AUDIT REPORT Board of directors Stockholders Chair of the Audit Committee
a. No Yes No
1. When an independent auditor expresses an unqualified opinion he asserts that: b. Yes Yes No
c. Yes Yes Yes
(1)He performed the audit in accordance with generally accepted auditing standards. d. Yes No Yes
(2)The company is a profitable and viable entity.
(3)The financial statements examined are in conformity with GAAP. 7. If comparative financial statements are presented and the present auditor has audited both
(4)The financial statements are accurate and free of errors. years ,the auditor should:

a.All of the above statements are true.
b.Only statements (1) and (3) are true.
c.Only statements (2) and (4) are true.
d.All of the above statements are false.
2. An Audit report should be dated as of the
a.date the report is delivered to the entity audited.
b.date the financial statements were approved by the client management.
c.balance sheet date of the latest period reported on.
d.date a letter of audit inquiry is received from the entity’s attorney of record.
3.If a company’s external auditor expresses an unqualified opinion as a result of the audit of the
company’s financial statements, readers of the audit report can assume that
a. Reissue the report c. Redate the report
b. Dual date the report d. Update the report
8. In which of the following situations would the auditor appropriately issue a standard
unqualified report with no explanatory paragraph concerning consistency?
a. A change in the method of accounting for specific subsidiaries that comprise the group of
companies for which consolidated statements are presented.
b. A change from an accounting principle that is not generally accepted to one that is generally
accepted.
c. A change in the percentage used to calculate the provision for warranty expense.
d. Correction of a mistake in the application of a generally accepted accounting principle
9. An auditor’s report contains the following sentences:

a.The external auditor found no fraud. We did not audit the financial statements of B Company, a consolidated subsidiary, whose
b.The company is financial sound and the financial statements are accurate. statements reflect total assets and revenues constituting 20 percent and 22 percent,
c.Internal control is effective. respectively, of the related consolidated totals. These statements were audited by other auditors,
d.All material disagreements between the company and external auditor about the whose report has been furnished to us, and our opinion, in so far as it relates to the amounts
application of accounting principles were resolved in the satisfaction of theexternal included for B Company, is based solely upon the report of the other auditors.
auditor.
These sentences
4. A statement that the auditor’s responsibility is to express an opinion non the financial a. disclaim an opinion c. divide responsibility
statements is contained in the: b. qualify the opinion d. should not be part of the audit report
a. Opening paragraph c. Opening and scope paragraph
b. Scope paragraph d. Opinion paragraph 10. The management of a client company believes that the statement of cash flow is not a useful
document and refuses to include one in the annual report to stockholders. As a result ,the
5.The description of an audit in the scope paragraph of the standard audit report includes all of auditor’s opinion should be
the following except: a.qualified due to inadequate disclosure c.adverse
a.Evaluating the over all financial statement presentation. b.qualified due to a scope limitation d.unqualified
b.Assessing control risk.
c.Examining, on a test basis ,evidence supporting the amount and disclosures in the financial 11. An auditor’s opinion reads as follows: “In our opinion,except for the above-mentioned
statements. limitation on the scope of our audit…”This is an example of a(n)
d.Assessing the accounting principles used and significant estimates made by management.
a.review opinion c.qualified opinion
b.emphasis on a matter d.unacceptable reporting practice
12.Eagle Company’s financial statements contain a departure from generally accepted
accounting principles because,due to unusual circumstances,the statements would otherwise be
misleading. The auditor should express an opinion that is
a.Qualified and describe the departure in a separate paragraph.
b.Unqualified but not mention the departure in the auditor’s report.
c.Qualified or adverse, depending on materiality,and describe the departure in a separate
paragraph.
d.Unqualified and describe the departure in a separate paragraph.
13. An auditor is unable to determine the amounts associated with illegal acts committed by a
client. The auditor would most likely issue
17.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 principles at variance with generally accepted accounting principles is used.
d. The auditor lacks independence with respect to the audited entity.
18. An auditor decides to express a qualified opinion on an entity’s financial statements because
a major inadequacy in its computerized accounting records prevents the auditor from applying
necessary procedures.The opinion paragraph of the auditor’s report should state that the
qualification pertains to

a.Either a qualified opinion or a disclaimer of opinion. a.A client-imposed scope limitation.

b .An adverse opinion. b.A departure from generally accepted auditing standards.
c.Either a qualified opinion or an adverse opinion. c.The possible effects on the financial statements.
d.A disclaimer of opinion. d.Inadequate disclosure of necessary information.

14.The objective of the consistency standard is to provide assurance that 19. When management prepares financial statements on the basis of a going concern and the
a.There are no variations in the format and presentation of financial statements. auditorbelievesthecompanymaynotcontinueasagoingconcern,theauditorshouldissue a(n)
b.Substantially different transactions and events are not accounted for on an identical basis. a. qualified opinion
c.The auditor is consulted before material changes are made in the application of accounting b.unqualified opinion with an explanatory paragraph
principles. c.disclaimer of opinion
d.The comparability of financial statements between periods is not materially affected by d.adverse opinion
changes in accounting principles without disclosure.
20.A dual dated report contains the dates of a subsequent event and the date the:
15. If management fails to provide adequate justification for a change from one generally a. Auditor completed work in the client’s office
accepted accounting principle to another, the auditor should c.Subsequent event was resolved
b.Financial statements were prepared
a. Add an explanatory paragraph and express a qualified or an adverse opinion for lack of d.Audit report was delivered
conformity with generally accepted accounting principles.
b.Disclaim an opinion because of uncertainty. 21. If the principal auditor decides to take responsibility for the work of other auditors, the
c.Disclose the matter in a separate explanatory paragraph(s) but not modify the opinion principal auditor should:
paragraph. a.Modify the opening paragraph c.Modify all three paragraphs
d.Neither modify the opinion nor disclose the matter because both principles are generally b.Modify the opening and opinion paragraphs d.Issue a standard report
accepted.
22. An auditor who concludes that an uncertainty is not adequately disclosed in the financial
16.When an auditor qualifies an opinion because of inadequate disclosure,the auditor should statements should issue a:
describe the nature of the omission in a separate explanatory paragraph and modify the
a. Disclaimer of opinion. c. Special report.
b. Unqualified report with an explanatory paragraph. d. Qualified report.
Introductory paragraph Scope paragraph Opinion paragraph
a. Yes No No
b. Yes Yes No
c. No Yes Yes
d. No No Yes
CRC-ACE d. An audit includes evaluation the appropriateness of the accounting
policies used and the reasonableness of accounting estimates made by
1. Which of the following parties is responsible for the fairness of the representation management, as well as the overall presentation of the financial
made in financial statements? statements.
a. Client’s Management
b. Independent Auditor 7. Which of the following is not one of the elements of the auditor’s report?
c. Audit Committee a. Auditor’s address
d. PICPA b. Date of the Auditor’s report
c. Emphasis of matter
2. Which of the following statement is not correct about the unmodified audit report on the d. Auditor’s signature
financial statement?
a. The auditor’s report shall include a section with a heading “Management ‘s 8. The most common type of audit report contains a(an)
responsibility for the financial statements” a. Adverse opinion
b. The auditor’s report shall include a section with a heading “Auditor’s b. Qualified opinion
Responsibility” c. Disclaimer of opinion
c. The auditor’s report shall include a section with a heading “Basis for d. Unmodified opinion
Opinion”
d. The auditor’s report shall include a section with a heading “Opinion” 9. The adverse opinion report will be issued by the independent auditor when he/she
a. Suspects the client has not followed the identified financial reporting
3. The auditor’s judgment as to whether the financial statements are presented fairly, in framework
all material respects, is made in the context of b. Suspects the client’s financial statements are not in conformity with PSAs
a. Philippine Standards on Auditing c. Has knowledge that the financial statements are not in conformity
b. Applicable financial reporting framework. with the applicable financial reporting framework
c. The professional ethical requirements. d. Has knowledge that PSAs were not followed
d. Generally accepted auditing standards
10. If the auditor’s believes that a required material disclosure is omitted from the financial
statements, the auditor should decide between issuing, a (an)
4. The element of the auditor’s report that identifies the financial statement audited is the a. Qualified opinion or an adverse opinion
a. Title b. Disclaimer of opinion or a qualified opinion
b. Introductory paragraph c. Adverse opinion or disclaimer opinion
c. Management’s responsibility d. Unmodified opinion or a qualified opinion
d. Opinion paragraph
11. In which of the following situation would a decision of selecting between qualified or
5. The auditor’s opinion covers the complete set of financial statements. A complete set adverse opinions be inappropriate?
of financial statements does not include a. A limitation in the scope of the audit
a. Statement of Comprehensive Income b. The financial statements are materially misstated
b. Statement of Changes in Financial Position c. A disagreement between the auditor and the client arose because of the
c. Statement of Cash Flows capitalization of research and development costs.
d. Summary of significant accounting policies and other explanatory d. A required disclosure that is significant is omitted from the financial
information statements.

6. Which of the following statements is not included in the auditor’s report?

a. An audit involves performing procedures to obtain audit evidence about 12. The qualified opinion report will be issued by the independent auditor when, in the
the amounts and disclosures in the financial statements auditor’s judgment, the effect or possible effects of the item under consideration are
b. The procedures selected depend on the auditor’s judgment including the a. Material and pervasive
assessment of the risk of materials misstatements, whether due to fraud or b. Material but not pervasive
error c. Pervasive but not material
c. An audit includes examining on a test basis, evidence supporting the d. Not material and not pervasive
amounts and disclosures in the financial statements
 13. In extreme cases, such as situations involving multiple uncertainties that are significant
to the financial statements, the auditor may consider it appropriate to express a(an)
a. Qualified opinion
b. Report with Emphasis of a Matter Paragraph
c. Disclaimer of opinion
d. Adverse opinion
14. When management does not amend the financial statements in circumstances where
the auditor believes they need to be amended and the auditor’s report has not been
released to the entity, the auditor should express
a. Either qualified or adverse opinion
b. Either qualified or disclaimer of opinion
c. An unmodified opinion with emphasis of matter paragraph
d. An unmodified report
NATIONS
1. In making decision of whether to disclaim an opinion or witdraw from engagement due
to a client-imposed scope limitation, the auditor should consider
a. The materiality of the item under consideration
b. The pervasiveness of effect on financial statements
c. Both the materiality and pervasiveness should be considered
d. The stage of completion of the engagement at the time the
management imposed the scope limitation
2. When an auditor expresses a qualified, an adverse or a disclaimer of opinion on the
financial statements, the auditor’s report shall include a separate paragraph that provides a
description of the matter giving rise to the modification. This paragraph is called
a. Explanatory paragraph
b. Emphasis of matter paragraph
c. Other matter paragraph
d. Basis for modification paragraph
3. Inadequacy of disclosures in the notes to financial statements normally requires the
auditor to express a qualified opinion on the client’s financial statements. When this
occurs, the auditor should disclose the substantive reasons for expressing a qualified
opinion in the
a. Emphasis of matter paragraph
b. Other matter paragraph
c. Notes to the financial statements
d. Basis for modification paragraph
4. An auditor disclose the substantive reasons for expressing an adverse opinion in a
separate paragraph
a. Preceding the management’s responsibility for the financial
statements
b. Preceding the opinion paragraph
c. Following the opinion paragraph
d. Within the notes to the financial statements
5. Which of the following is not to be construed as a modification of opinion?
a. Qualified opinion
b. Adverse opinion
c. Disclaimer of opinion
d. Audit report with emphasis of matter paragraph
6. The use of an “Emphasis of Matter” paragraph shall be limited only to those matters
a. Disclosed in the financial statements
b. Affecting the auditor’s opinion
c. Not presented in the financial statements
d. Involving an uncertainty
7. An auditor who concludes, that an uncertainty is not adequately disclosed in the
financial statements should issue a(an):
a. Disclaimer of opinion
b. Unmodified opinion with emphasis of matter paragraph
c. Special report
d. Qualified report
8. The independent auditor has concluded that a substantial doubt remains about a client’s
ability to continue in existence, but the client’s financial statements have properly disclosed
all of its solvency problems. The auditor would probably issue a (an)
a. Unmodified opinion with emphasis of matter paragraph
b. Qualified opinion
c. Unmodified report
d. Adverse opinion
9. The “Other Matter” paragraph would be appropriate when
a. The auditor wants to restrict the distribution of the audit report.
b. The auditor wants to emphasize a matter that is presented or disclosed in
the financial statements.
c. The auditor wants to emphasize a matter that is not properly presented or
disclosed in the financial statements
d. The auditor wants to draw readers’ attention to an important matter that
caused the auditor to modify his opinion.
10. Which of the following circumstances will least likely affect the auditor’s opinion?
a. A client imposed scope limitation
b. A circumstance imposed scope limitation
c. Inadequacy of disclosure in the notes to financial statements
d. Uncertainty arises about entity’s continued existence
11. A framework of presentation where amounts and other disclosures for the prior period are 18. Financial statements prepared in accordance with a special purpose framework are
included as an integral part of the current period financial statements, and are intended to be referred to in PSA 800 as
read only in relation to the amounts and other disclosures relating to the current period. a. Special reports
a. Current period figures b. Special Purpose Financial Statements
b. Comparatives c. Special Considerations
c. Comparative financial statements d. Specific Financial Statements
d. Corresponding figures
12. When the audited financial statements of the prior year are presented together with those 19. Which of the following is not considered a special purpose framework?
of the current year, the continuing auditor’s report should cover a. Income tax basis of accounting
a. Both years b. Cash receipts and disbursements basis of accounting
b. Only the current year c. Financial presentation to comply with regulatory requirements
c. Only the current year, but the prior year’s report should be presented d. Accrual basis of accounting
d. Only the current year, but the prior year’s report should be referred to

13. When a predecessor auditor is to reissue his report on financial statements and has not RESA
examined the financial statements for the most recent audited period, he
a. Should take steps to determine if the opinion is still appropriate 1. The phrase “the financial statements do not present fairly in all material respects the
b. Should obtain a letter of representation from the client financial position, results of operation, and cash flows in conformity with GAAP” indicates:
c. Has no responsibility to become assured about events subsequent to the
termination of the engagement A. An unqualified opinion C. An adverse opinion
d. Need obtain only verbal assurance from the successor B. A qualified opinion D. A disclaimer of opinion
14. If an amendment to other information in a document containing audited financial 2. The phrase “Except for the possible effects of the matters…the financial statements present
statements is necessary and the entity refuses to make the amendment, the auditor would
fairly in all material respects the financial position, result of operations, and cash flows in
consider issuing:
a. Either qualified or adverse opinion conformity with GAAP” indicates:
b. Either qualified or disclaimer of opinion
c. An unmodified opinion with other matter paragraph A. An unqualified opinion C. An adverse opinion
d. An unmodified report B. A qualified opinion D. A disclaimer of opinion

15. The auditor will most likely read the other information 3. The phrase “Accordingly, we do not express an opinion on the financial statement…”
a. Primarily to identify material misstatement of fact indicates:
b. Primarily to identify material inconsistency
c. To determine the type of opinion to express on the financial statements. A. An unqualified opinion C. An adverse opinion
d. To enable him to express an opinion on the other information B. A qualified opinion D. A disclaimer of opinion

16. This exists, when other information contradicts the information contained in the audited 4. Pervasive effects on the financial statements are those that, in the auditor’s judgment:
financial statements
a. Material inconsistency A. Are not confined to specific elements, accounts or items of the financial statements
b. Material misstatement B. If so confined, represent or could present a substantial proportion of the financial statements
c. Material misstatement of fact
C. In relation to disclosures, are fundamental to users, understanding of the financial
d. Material error affecting the other information
statements
17. Which of the following will not result in a modification of the auditor’s report? D. All of the choices
a. Restrictions imposed by the client
b. Inability to obtain sufficient appropriate evidence
c. Reliance placed on the report of component auditor
d. Inadequacy in the accounting records
5.. 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
6. Chris, CPA, was engaged to audit the financial statements of Ube Company after its fiscal
year had ended. The timing of Chris’ appointment as auditor and the start of field work made
confirmation of accounts receivable by direct communication with the debtors ineffective.
However, Chris applied other audit procedures and was satisfied as to the reasonableness of
the account balances. Chris’ auditor’s report most likely contained a(n):
A. Unqualified opinion
B. Unqualified opinion with an emphasis of a matter paragraph.
C. Qualified opinion because of inability to obtain sufficient appropriate audit evidence.
D. Qualified opinion because of a departure from PSAs.
7. Suppose that in number 6, Chris was unable to obtain sufficient appropriate audit evidence,
since he is unable to perform alternative procedures. Accordingly (select the correct
statement):
A. If Chris concludes that the possible effects on the financial statement of undetected
misstatements, if any, could be material but not pervasive, Chris shall disclaim an opinion.
B. If Chris concludes that the possible effects on the financial statements of undetected
misstatements, if any, could be both material and pervasive so that a qualifiacation of the
opinion would be inadequate to communicate the gravity of the situation, Chris shall give an
adverse opinion.
C. If Chris concludes that the possible effects on the financial statements of undetected
misstatements, if any, could be both material and pervasive so that a qualification of the
opinion would be inadequate to communicate the gravity of the situation, Chris shall
resign from the audit, where practicable and prohibited by law or regulation.
D. If Chris concludes that the possible effects on the financial statements of undetected
misstatements, if any, could be both material but not pervasive, Chris shall give an adverse
opinion.
8. An auditor may not express a qualified opinion when
A. Circumstances prevent 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 generally accepted accounting principles is used.
D. The auditor lacks independence with respect to the audited entity.
9. An auditor who concludes that a material (but not pervasive) uncertainty is not adequately
disclosed in the financial statements should issue a(n):
A. An unqualified opinion C. An adverse opinion
B. A qualified opinion D. A disclaimer of opinion
10. An auditor has concluded that fraud or error has a material effect on the financial
statements. The fraud/ error has not been corrected and reflected in the financial statements.
In this case, the pervasiveness of the effect of fraud and error will determine the opinion.
Accordingly, the auditor should issue a(n):
A. Unqualified opinion with emphasis of matter.
B. Adverse or disclaimer of opinion.
C. Qualified or disclaimer of opinion
D. Qualified or adverse opinion
11. In which of the following situations would the auditor appropriately issue a standard
unqualified report with no emphasis of matter paragraph concerning consistency?
A. A change in the method of accounting for specific subsidiaries that comprise the group of
companies for which consolidated statements are presented.
B. A change from an accounting principle that is not generally accepted to one that is generally
accepted.
C. A change in the percentage used to calculate the provision for warranty expense.
D. Correction of a mistake in the application of a generally accepted accounting principle.
12. If management fails to provide adequate justification for a change from one generally
accepted accounting principle to another, the auditor should:
A. Add a basis for modification paragraph and express a qualified or adverse opinion for
lack of conformity with the applicable financial reporting framework.
B. Disclaim an opinion because of uncertainty.
C. Disclose the matter in a separate emphasis of matter paragraph(s) but not modify the
opinion paragraph.
D. Neither modify the opinion nor disclose the matter because both principles are generally
accepted.
13. An entity or business activity for which group or component management prepares
financial information that should be included in the group financial statements.
A. Component B. Responsibility center
B. Division D. Activity group
14. An auditor who, at the request of the group engagement team, performs work on financial 4) In which of the following situations would a decision of selecting between a qualified or
information related to a component for the group audit. adverse opinion be inappropriate?
a. A limitation in the scope of the audit
A. Successor auditor C. Specialist or expert b. The financial statements are significantly misleading
B. Component auditor D. Auxiliary auditor c. A disagreement between the auditor and the client arose because of capitalization
of research and development costs
15. The partner or other person in the firm who is responsible for the group audit engagement
d. A required disclosure that is significant is omitted from the financial statements
and its performance, and for the auditor’s report on the group financial statement that is issued
5) Misstatements detected during the audit that were initially deemed to be immaterial
on behalf of the firm.
(unless clearly trivial) must be summarized to determine their:
A. Lead partner C. Group engagement partner a. Control.
B. Managing partner D. Joint engagement partner b. Quantitative effect.
c. Aggregate effects.
16. When other information contradicts information contained in the audited financial d. Nature of misstatement.
statement, it is known as a(n): 6) What happens to the sufficiency of audit evidence collected if in the final review new
information causes the engagement partner to decide that a lower materiality threshold
A. Misstatement C. Uncertainty is required and as a result the partner reduces planning materiality for the audit?
B. Inconsistency D. Departure from PFRS a. More evidence may be required
b. Less evidence may be required
PRTC
c. The client may be asked to make correcting entries
1) What audit opinion would be appropriate when the auditor has formed an opinion that d. Both A and C
the financial statements are not fairly presented in all material respects due to a 7) Which of the following is not a required communication with the audit committee?
departure from GAAP? a. Accounting polices
a. Unqualified b. Accounting estimates
b. Qualified c. Economic trends
c. Adverse d. Difficulties encountered
d. Denial 8) How is the auditor’s report on the financial statements that require final approval by
2) If the scope of the examination has been satisfactory for all items except for one of stockholders before such financial statements are issued to the public dated?
material amount, the auditor should issue a (an) a. The auditor’s report should be dated coinciding the date of approval of the financial
a. Unqualified opinion statements by the stockholders.
b. Qualified opinion b. The auditor’s report should be dated after the approval of the financial statements
c. Disclaimer of opinion by the stockholders.
d. Adverse opinion c. The date of the auditor’s report coincides the date of approval of the
3) Which of the following would require a denial (disclaimer) of the audit opinion? financial statements by the board of directors.
a. There is a material misstatement that in the auditor’s opinion will overstate the d. The audit report should be dual dated, the first date coinciding the approval by the
value of an investment by P1,000,000. board of directors and the second date to coincide with the approval by the
b. There is a misstatement that id in the range of P200,000 to P300,000 (materiality stockholders.
is P100,000), but that cannot be calculated exactly because it involves an 9) In addition to the company’s financial statements, which of the following would be
estimate. covered by the auditor’s standard report?
c. The auditor concludes that there is a going concern issue for the audited company. a. The notes to financial statements
d. The auditor was not appointed as the auditor until after year end, after the b. Comparative figures in the financial statements
inventory count, and was unable to satisfy herself concerning inventory c. The company’s tax return for the year being audited
values by other means. d. The company’s budget for net income for the year being audited
10) The audit report issued by Lozano and Co., CPAs, included the following paragraph
that followed the opinion paragraph:
Without qualifying our opinion we draw attention to Note 11 to the financial statements.
The Company is the defendant in a lawsuit alleging infringement of certain patent
rights. . .
The paragraph is considered
a. An inappropriate reporting practice
b. An additional information to be a part of the notes to financial statements
c. An emphasis of matter regarding uncertainty which is considered an
acceptable reporting practice
d. Inappropriate because it contradicts the unqualified opinion issued by the auditor
11) An explanatory paragraph may be added to the audit report while at the same time
issuing an unqualified opinion in all cases except:
a. The client changed an accounting principle with the agreement of the auditor
b. There is an immaterial departure from PFRS to ensure fair presentation with the
agreement of the auditor
c. The audit opinion is partly based on the work of another auditor
d. The audit work has been materially limited by the management
12) The auditor’s inquiries of management regarding supplementary information on the
effects of price level changes should be directed to the judgements made concerning
a. Relevance and validity
b. Measurement and presentation
c. Accuracy and objectivity
d. Rights and obligations
13) Unaudited financial statements for the prior year presented in comparative form with
audited financial statements for the current year should be clearly marked to indicate
their status and
I. The report on the prior period should be reissued to accompany the current
period report
II. The report on the current period should include as a separate paragraph a
description of the responsibility assumed for the prior period’s financial
statements
a. I only
b. II only
c. Both I and II
d. Either I or II
14) The predecessor auditor, who is satisfied after properly communicating with the
successor auditor, has reissued a report because the audit client desires comparative
financial statements. The predecessor auditor’s report should make
a. Reference to the report of the successor auditor only in the scope paragraph
b. Reference to the work of the successor auditor in the scope and opinion
paragraphs
c. Reference to both the work and the report of the successor auditor only in the
opinion paragraph
d. No reference to the report or the work of the successor auditor
15) When single-year financial statements are presented, an auditor ordinarily would
express an unqualified opinion in an unmodified report if the
a. Auditor is unable to obtain audited financial statements supporting the entity’s
investment in a foreign affiliate
b. Entity declines to present a statement of cash flows with its balance sheet and
related statements of income and retained earnings
c. Auditor wishes to emphasize an accounting matter affecting the comparability of
the financial statements with those of the prior year
d. Prior year’s financial statements were audited by another CPA whose report
expressed an unqualified opinion, is not presented
16) Before reissuing the prior year’s auditor’s report on the financial statements of a former
client, the predecessor auditor should obtain a letter of representation from
Former client’s management Successor auditor
a. Yes Yes
b. Yes No
c. No Yes
d. No No
17) In May 20X9, an auditor reissues the auditor’s report on the 20X7 financial statements
at a continuing client’s request. The 20X7 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 auditor’s report date on the reissued report
18) When the audited financial statements are presented in a client’s document containing
other information, the auditor should
a. Perform inquiry and analytical procedures to ascertain whether the other
information is reasonable
b. Add an explanatory paragraph to the auditor’s report without changing the opinion
on the financial statements
c. Perform the appropriate substantive auditing procedures to corroborate the other
information
d. Read the other information to determine that it is consistent with the audited
financial statements
19) 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 statements do not require revision, but the client refuses to
revise or eliminate the material inconsistency, the auditor may
a. Revise the auditor’s report to include a separate explanatory paragraph
describing the material inconsistency
b. Issue an “except for” qualified opinion after discussion the matter with the client’s
board of directors
c. Consider the matter closed since the other information is not in the audited
financial statements
d. Disclaim an opinion on the financial statements after explaining the material
inconsistency in a separate explanatory paragraph
20) With regards to how KAM was addressed in the audit, the description may include the
following, except:
a. Aspects of the auditor’s response or approach and brief overview of procedures
performed
b. Indication of the outcome of the auditor’s procedures
c. Key observations with respect to the matter
d. None of the above