re =)
CPA REVIEW SCHOOL OF THE PHILIPPINES Ay
Manila
‘AUDITING THEORY APRIL 22, 2017
FINAL PREBOARD EXAMINATION SATURDAY, 8:00AM — 9:00AM
SETA
INSTRUCTIONS: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING. FULLY SHADE
‘ONLY ONE BOX FOR EACH ITEM. STRICTLY NO ERASURES ALLOWED.
A SA 700 (Revised, Feing an Opin ad Reporting on PrenclSnerers ope:
a
1. A complete set of special purpose financial statements.
IL. A complete set of general purpose financial statements.
TIL A Single financial statement or of @ specific element, account or item of a financial
statement.¢ pO
A. Tonly. na C. Monly.
B. Land II only. D. 1,11, and III.
(> Which financial reporting framework is designed to meet the common financial information
néeds of a wide range of users?
A. Fair presentation framework. C. Special purpose framework.
B. Compliance framework. D. General purpose framework.) ~
3. According to PSA 710, Communicating Key Audit Matters in the Independent Auditor's
Report, the auditor shall determine, from the matters communicated with those charged
with governance those matters that required significant auditor attention in performing the
‘audit. In making this determination, which of the following should be taken i
1. Areas of higher assessed risk Of material misstatement, or significant risks identhed
in accordance with PSA 315.
TI. Significant auditor judgment relating to areas in the nancial statements that invaived
significant management judgment.
m. ‘The effect. on the aut of significant events or transactions that occurred during the
period.
+A. Land Il only. ¢. Land Il only
B. Il and Il only. D.LUandi.
44, An auditor concludes that there is a material inconsistency in the other information i af
annual report to shareholders containing audited financial statements. The auditor believes
that the financial statements do not ire revision, but the dient is unwilling to revise or
eliminate the material incoresiney STE other information. under these circumstances,
What action would the auditor most likely take? 1
A a acc the situation dosed because the other information 's not In the audited
financial statements.
B. Issue an selcent for" qualified opinion after discussing the matter with the dent's aust
committee.
Co eermttee opinion on the fancial statements after exniaiing the nme
Disclaim an era separate “other Information” section folowing the Bass for Opinion
‘Section.
0. SEBO tne auditor's report to Incude a separate section with » headed Coie
Ret on caserng he uncoreced material misstatement ofthe other Informatie.
Page | of 10GERREVIEW SCHOOL OF THE PHILIPPINES (CBAR) ~ MANILA FINAL PREBOARD EXAMIMATION.
sy
(_&) proatione's report issued after comping the Manca statements of n entty shoud
state that:
‘A. We are not aware of any material modifications that should be made to the
‘accompanying financial statements. °
8B. A compilation consists principally of inquiries of company personnel and analytical
procedures.
C. Since 2 compilation engagement Is not an assurance engagement, we are not required
to verify the accuracy or completeness OF the Information you provided to us to compile
these financial statements.
. A compilation is substantially less in scope than an audit in accordance with PSAs, the
‘objective of which is the expression of an opinion.»
(6 Ifthe financial statements have been Prepared using the going concern basis of accounting
but, in the auditor's judgment, management's use of the going concern basis of accounting
is inappropriate, the auditor shall express a/an CY. ot cat cere ns)
‘A. Unmodified opinion, but the aucitors report shouid include an "Other matter” section
that describes the inappropriate use of the going concern basis of accounting.
8. Unmodified opinion ifthe financial statements disclose the inappropriate use of the going
‘concern basis of accounting.
Qualified or Adverse opinion if the financial statements fail to disclose the inappropriate
use of the going concem basis of accounting.
1. Adverse opinion regardless of whether or not the financial statements include disclosure
Of the inappropriateness of management's use of the going concer basis of accounting.
2 What paragraph in the auditor’s report refers to a matter appropriately eG
¢ Opinion. We weds oy, PHEAS ~
WY D. Key Audit Matters
Page 2 of 10Rimming SLO OF THe mame (oan) — mana
mints TSTATIES ome gen Sie
12. An auditor Is auditing a mi
wtual fund company that uses a transfer agent to handle
(// ect fr shaehcdes Wich of the folowing scons bythe sudo woud be ost
iene for htereg irate she a ender hort era cat?
. Feports on intemal control In operation and its operating effectiveness
9, Medved by the agent's own aud,
. Review prior-year workpapers to determine whether the number of transactions
Processed by the agent has materially increased.
Perform an audit on the internal control function of the agent.
D. Perform tests of controls on a sample of the audited firm's transactions through the
— ent
\ 33m staining watenrepresetations frm management, materaty Its ornarty woud
apply to representations related to:
fA. Amounts concerning related party transactions. ~~
B. Irregularities involving members of management.
C. The availability of financial records.
D. The completeness of minutes of directors’ meetings.
a}
(34 practioner has been engaged to comple the financial statements of an entity. The
financial statements contain many departures from PFRS because of inadequacies in the
F accounting records. The practitioner believes that modification of the compilation report is,
4 Rok adequate to indicate the defences. Under these ircumstances, the pracioner
‘A. Inform management that the engagement can proceed only if distribution of the
accountant!'s report is restricted to Internal use.
Withdraw from the engagement and provide no further service conceming these
financial statements. ae
C. Quantify the effects of the departures from PFRS and describe the departures from PERS:
ina special report.
D. Obtain written representations from management that the financial statements will not
be used to obtain credit from financial institutions.
Finandaal forecast ~*~ _Einangial prosection ~~
‘Yes ‘Yes
B. Yes Noy
a No Yes
D. No No
_35¢ Which of the folowing prospective financial statements i(are) appropriate for general use?
A
an of the following procedures most likely would assist an auditor to identify litigation,
claims, and assessments?
‘AcwTnspect checks included with the client’s cutoff bank statement.
B. Obtain a letter of representations from the client's underwriter of securities.
C. Apply ratio analysis on the current-year’s liability accounts.
D. Read the file of comespondence from taxing authorities.
(37 Tian sping, 225% Gane me foley aces wre Ne SNES
effect on the size of the sample?
A. Tolerable rate of deviation.
B, Number of items in the population.
C. Degree of assurence desired.
D. Planned assessed level of control risk.
4 “a test of a payroll system involved comparing an indhadual's number of overtime Pours
A es lth on average of weekly overtime during a similar period in @ prior year andl
0 evaluating the results. This is an example of what type of test?
A. Range test. C. Category test.
B. Detail test. (1. Reasonableness test.
Page 3 of 10