Module 4 Self-Check Exercises PDF

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MODULE 4Lesson 8: issuing an Auditor’s Report Review exercises: An audit report should be dated as of the A. date the report is delivered to the client entity B. date of management approving the audited financial statements C. balance sheet date of the latest period reported on D. date a letter of a...

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MODULE 4 Lesson 8: issuing an Auditor’s Report Review exercises: 1) An audit report should be dated as of the A. date the report is delivered to the client entity B. date of management approving the audited financial statements C. balance sheet date of the latest period reported on D. date a letter of audit inquiry is received from the entity’s attorney 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 comparative financial statements are presented and the present auditor has audited both years, the auditor should: A. Reissue the report B. Redate the report C. Dual date the report D. Update the report 4) An auditor concludes that there is substantial as a going concern for a reasonable period of adequately disclose its financial difficulties, the explanatory paragraph that specifically uses the to exceed one year‖ "Going concern"

doubt about an entity's ability to continue time. If the entity's financial statements auditor's report is required to include an phrase(s) "Reasonable period of time, not

A. Yes Yes B. Yes No C. No Yes D. No No 5) Comparative financial statements include the financial statements of a prior period that were examined by a predecessor auditor whose report is not presented. If the predecessor auditor's report was qualified, the successor auditor must A. Obtain written approval from the predecessor auditor to include the prior year's financial statements. B. Issue a standard comparative audit report indicating the division of responsibility.

C. Express an opinion on the current year statements alone and make no reference to the prior year statements. D. Disclose the reasons for any qualification in the predecessor auditor's opinion. 6) When an entity changes its method of accounting for income taxes, and this change has a material effect on comparability, the auditor should refer to the change in an explanatory paragraph added to the auditor's report. This paragraph should identify the nature of the change and A. Explain why the change is justified under generally accepted accounting principles. B. Describe the cumulative effect of the change on the audited financial statements. C. State the auditor's explicit concurrence with or opposition to the change. D. Refer to the financial statement note that discusses the change in detail. 7) When are an auditor's reporting responsibilities not met by attaching an explanation of the circumstances and a disclaimer of opinion to the client's financial statement? A. When the auditor believes the financial statements are misleading. B. When the auditor was unable to observe the taking of the physical inventory. C. When the auditor is uncertain about the outcome of a material uncertainty. D. When the auditor has performed insufficient auditing procedures to express an opinion. 8) An auditor may reasonably issue an "except for" qualified opinion for a(n) Scope Limitation Unjustified Accounting Change A. Yes No B. No Yes C. Yes Yes D. No No 9) When audited financial statements are presented in a document containing other information, the auditor A. Has an obligation to perform auditing procedures to corroborate the other information. B. Is required to issue an "except for" qualified opinion if the other information has a material misstatement of fact. C. Should read the other information to consider whether it is inconsistent with the audited financial statements. D. Has no responsibility for the other information because is not part of the basic financial statements.

10) When additional language is added to the auditor’s report without modifying the opinion, the additional language should be included in A. the introductory paragraph B. the scope paragraph C. the opinion paragraph D. one or more additional paragraph(s) that follow the opinion paragraph PART 2: Answer whether YES or NO.

TYPE OF CHANGE 1.

An error correction not involving an accounting principle.

2.

An accounting change involving a correction of an error in principle, which is accounted for as a correction of an error. An accounting change involving a change in the reporting entity, which is a special type of change in accounting principles An accounting change involving both a change in accounting principle and a change in accounting estimate. Although the effect of the change in each may be inseparable and the accounting for such a change is the same as that for a change in estimate only, an accounting principle is involved. An accounting change involving a change from one generally accepted accounting principle to another generally accepted accounting principle. An accounting change involving a change in an accounting estimate. Not an accounting change but rather a change in cla9ssification. An accounting change from one generally accepted accounting principle to another generally accepted accounting principle.

3.

4.

5.

6. 7. 8.

SHOULD AUDITOR’S REPORT BE MODIFIED? YES YES NO

NO

YES

YES NO YES

Lesson 9: A Review of the Code of Ethics Part B Review Exercises: 1. To achieve the objectives of the accountancy profession, professional accountants have to observe a number of prerequisites or fundamental principles. The fundamental principles include the following, except a. Objectivity b. Professional Competence and due Care c. Technical Standards d. Confidence

2. The principle of professional behavior requires a professional accountant to a. Be straightforward and honest in performing professional services. b. Be fair and should not allow prejudice or bias, conflict of interest or influence of others to override objectivity. c. Perform professional services with due care, competence and diligence. d. Act in a manner consistent with the good reputation of the profession and refrain from any conduct which might bring discredit to the profession. 3. Which of the following is incorrect regarding professional competence? a. Professional accountants may portray themselves as having expertise or experience they do not possess. b. Professional competence may be divided into two separate phases. c. The attainment of professional competence requires initially a high standard of general education. d. The maintenance of professional competence requires a continuing awareness of development in the accountancy profession. 4. Which of the following is the least required in attaining professional competence? a. High standard of general education. b. Specific education, training and examination in professionally relevant subjects. c. Period of meaningful work experience. d. Continuing awareness of development in the accountancy profession. 5. Which of the following is incorrect regarding confidentiality? a. Professional accountants have an obligation to respect the confidentiality of information about a client’s or employer’s affairs acquired in the course of professional services. b. The duty of confidentiality ceases after the end of the relationship between the professional accountant and the client or employer. c. Confidentiality should always be observed by a professional accountant unless specific authority has been given to disclose information or there is a legal or professional duty to disclose. d. Confidentiality requires that a professional accountant acquiring information in the course of performing professional services neither uses nor appear to use that information for personal advantage or for the advantage of a third party. 6. A professional accountant has a professional duty or right to disclose confidential information in each of the following, except a. To comply with technical standards and ethics requirements.

b. To disclose to BIR fraudulent scheme committed by the client on payment of income tax. c. To comply with the quality review of a member body or professional body d. To respond to an inquiry or investigation by a member body or regulatory body. 7. Occurs when a firm or a member of the assurance team could benefit from a financial interest in, or other self-interest conflict with, an assurance client. a. Self-interest threat c. Advocacy threat b. Self-review threat d. Familiarity threat 8. Examples of circumstances that may create self-interest threat include a. Contingent fees relating to assurance engagements. b. A direct financial interest or material indirect financial interest in an assurance client. c. A loan or guarantee to or from an assurance client or any of its directors or officers. d. All of the above. 9. Which of the following least likely create ―self-interest threat‖ a. Undue dependence on total fees from an assurance client. b. Concern about the possibility of losing the engagement. c. Having a close business relationship with an assurance client. d. Pressure to reduce inappropriately the extent of work performed in order to reduce fees. 10. Which of the following is not likely a threat to independence? a. Acting as an advocate on behalf of an assurance client in litigation or in resolving disputes with third parties. b. Long association of a senior member of the assurance team with the assurance client. c. Threat of replacement over a disagreement with the application of an accounting principle. d. Owning immaterial indirect financial interest in an audit client....