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AT-5906
CPA REVIEW SCHOOL OF THE PHILIPPINES
M a n i l a
AUDITING THEORY
AUDIT REPORT
Related PSAs: PSA 700, 710, 720, 560, 570, 600 and 620
1. When an independent auditor expresses an unqualified opinion he asserts that:
[1] He performed the audit in accordance withgenerally accepted auditing standards.
[2] The company is a profitable and viable entity.
[3] The financial statements examined are in conformity with GAAP.
[4] The financial statements are accurate and free of errors.
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 approvedby 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. The external auditor found no fraud.
b. The company is financial sound and the financial statements are accurate.
c. Internal control is effective.
d.All material disagreements between the company and external auditor about the application
of accounting principles were resolved in the satisfaction of the external auditor.
4. A statement that the auditor’s responsibility is to express an opinion on the financial statements
is contained in the:
a. Opening paragraph c. Opening and scope paragraph
b. Scope paragraph d. Opinion paragraph
5. The description of an audit in the scope paragraph of the standard audit report includes all of
the following except:
a. Evaluating the overall financial statement presentation.
b. Assessing control risk.
c. Examining, on a test basis, evidence supporting the amount and disclosures in the financial
statements.
d. Assessing the accounting principles used and significant estimates made by management.
6. The audit report is normally addressed to the:
Chair of the Audit Committee
7. If comparative financial statements are presented and the present auditor has audited both
years, the auditor should:
a.Reissue the report c. Redate the report
b. Dual date the report d. Update the report
8. In which of the followingsituations 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 consolidatedstatements 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.