Quiz in Acctg 113 Instruction Write the letter of your answer before the number in a Capital letter 1 A report with a disclaimer of opinion will have the following change in the introductory paragraph[.]
Quiz in Acctg 113 a The materiality of the item in consideration Instruction: Write the letter of your answer before the number in a Capital letter b The pervasiveness of effect on financial statements A report with a disclaimer of opinion will have the following change in the introductory paragraph 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 a “We have audited….” b “We cannot audit…” c “We were engaged to audit…” d “We have audited…” An adverse opinion is issued when the auditor believes In a report with a disclaimer of opinion, this is not found a Statement that the auditor’s responsibility is to express on the financial statement b Reference to the Basis for Disclaimer of Opinion paragraph c General description of the audit d Statement that the auditor was not able to obtain sufficient appropriate audit evidence Disclaimer of opinion is not the appropriate opinion when a Some parts of the financial statements are materially misstated or misleading b The financial statements will be found to be misleading or misstated, if an adequate investigation is performed c The overall financial statements are so materially misstated or misleading as a whole that they not present fairly the financial position or results of operations and cash flows in conformity with GAAP d The audit firm is not independent When the client fails to make adequate disclosure in the body of the statements or in the related footnotes, it is the responsibility of the auditor to a There are multiple uncertainties b Management fails representations written a c Management refuses to include a required information statements and underlying records Inform the reader that disclosure is not adequate, and to issue a qualified or an adverse opinion b Inform the reader that disclosure is not adequate, and to issue an unmodified or qualified opinion c Present the information in the audit report and issue an unmodified or qualified opinion d Present the information in the audit report and to a qualified or an adverse opinion d to furnish The auditor is not independent An auditor may not issue 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 The auditor lacks independence with respect to the audited entity d An accounting principle at variance with generally accepted accounting principles is used In making a decision whether to disclaim an opinion or withdraw from engagement due to a management-imposed scope limitation, the auditor should consider The substantive reasons for providing an opinion other than unmodified shall be presented a Within the paragraph auditor’s responsibility b Within the opinion paragraph c After the auditor’s responsibility paragraph but before the opinion paragraph d After the opinion paragraph It is appropriate to issue an adverse opinion when the auditor a b Has gathered sufficient appropriate evidence that the financial statements are not fairly stated Management refuses to furnish written representations c Has knowledge that the Philippine Standards on Auditing were not followed d Was not able to gather sufficient appropriate evidence regarding the fairness of the financial statements 10 The signature in the audit report is the a Personal name of the auditor b Name of the audit firm c Either A or B or both d Either A or B but cannot be both 11 Auditor’s 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 Partner’s TIN and PRC registration numbers c Accreditation with SEC d Partner’s birth date and contact number 12 An auditor discovered a P50,000 misappropriation by the payroll supervisor The company’s total assets and pre-tax income are P70 million and P15 million, respectively Considering materiality, the most likely opinion would be 14 “Independence” in auditing means a Remaining aloof from client b Not being financially dependent on client c Being an advocate for the client d Taking an unbiased viewpoint 15 In general, which of the following is not an appropriate addressee of an independent auditor’s report? a Shareholders of the client company b Company engaging the auditor c Board of directors of the company d President of the client company 16 The opinion paragraph of a standard unmodified audit report does not a State that the financial statements are presented fairly in material respects b Provide an unmodified opinion about the fairness of the financial statements c A conclusion whether the company followed Philippine Financial Reporting Standards d State that the auditor has obtained sufficient appropriate evidence to support the opinion 17 Forever Inc., uses the weighted average method to value half of its inventory and the first-in, first-out method to value the other half Assuming the auditor is satisfied in all other respects, under the circumstances the auditor will issue a(n) a Unmodified b Qualified a Opinion modified due to inconsistency c Adverse b d Disclaimer Unmodified opinion with an explanatory paragraph c Qualified or adverse opinion, depending on materiality d Unmodified opinion 13 If the balance sheet of a privately-held company is dated December 31, 2005, the audit report is dated March 6, 2006, and both are released on March 15, 2006, this indicates that the auditor has searched for material unrecorded transactions and events that occurred up to a December 31, 2005 b March 15, 2006 c December 31, 2006 d March 6, 2006 18 Which of the following statements regarding the title of the audit report is incorrect? a It emphasizes that the auditor independent of the financial statements is b It distinguishes the report from those issued by others c It is the first element of the audit report d It covers the reports presented as “other information” 19 The terms “reasonable assurance” in the auditor’s responsibility paragraph indicate that 23 Which of the following statements is an incorrect use of the terminology? a Evidence obtained from an independent source outside the client organization is more reliable than that obtained from within b Documents that originate outside the company are considered more reliable than those that originate within the client’s organization a No misstatements exist in the financial statements b No material misstatement exist in the financial statements c There is a possibility that material misstatements still exist in the financial statements c There is a possibility that immaterial misstatements still exist in the financial statements Documentary evidence is more reliable when it is received by the auditor directly from an independent third party d External evidence, such as communications from banks, is generally regarded as more reliable than answers obtained from inquiries of the client d 20 When the auditor provides an unmodified opinion, it means that a The financial statements are accurately prepared b The company is a viable option for investment purposes c There were no errors or fraudulent activities found d It is possible that material misstatements are still present in the financial statements 21 Uniformity in reporting is indispensable because it helps (choose exception) 24 Which of the following is not a specific audit procedure enumerated in application and explanatory material in PSA 500? a Inspection b Recalculation c External confirmation d Vouching 25 To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except a Promote global credibility a Cutoff bank statement b Avoid confusion b Year-end bank statement c Users understand the report c Bank confirmation d Auditors avoid legal liability d General ledger 22 Which of the following forms of evidence would be least persuasive in forming the auditor’s opinion? a b Responses to auditor’s questions by the president and controller regarding the investments account Correspondence with a stockbroker regarding the quantity of client’s investment held in street name by the broker c Minutes of the board of directors authorizing the purchase of stock as an investment d The auditor’s count of marketable securities 26 When the acceptable level of detection risk for cash is high, the auditor may a Review the client’s bank reconciliation b Prepare the bank reconciliation using the bank data in the client’s possession c Obtain the bank statements directly from the bank and prepare the bank reconciliation d Scan the client-prepared bank reconciliation and verify the mathematical accuracy of the reconciliation 27 Which of the following is a proper alternative procedure when no response is obtained from a positive confirmation request? a Examination of subsequent cash receipts in payment of the receivable b Mailing negative confirmation request to non-respondents c Expansion of the sample by the number of non-respondents d Reduction of accounts receivable by the amount of the no response 28 Which of the following procedures would least likely lead the auditor to detect unrecorded fixed assets disposals? a Examine insurance policies b Review property tax files c Scan invoices for fixed asset additions d Review repairs and maintenance expense 29 To gain assurance that all inventory items in a client’s inventory listing schedule are valid, an auditor most likely would trace a Inventory tags noted during the auditor’s observation to items listed in the inventory listing schedule b Inventory tags note during the auditor’s observation to items listed in receiving reports and vendor’s invoices c Items listed in the inventory listing schedule to inventory tags and the auditor’s recorded count sheets d Items listed in receiving reports and vendor’s invoices to the inventory listing schedule 30 Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable? a Are assets that collateralize notes payable critically needed for the entity’s continued existence? b Are two or more authorized signatures required on checks that repay notes payable? c Are proceeds from notes payable used for the purchase of noncurrent assets? d Are direct borrowings on notes payable authorized by the board of directors?