ACCT 241 EXAM QUESTIONS WITH CORRECT ANSWERS 2023ASSURED SUCCESS, Exams of Nursing

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BASICS

 The auditor communicates to the intended users his opinion through A. Management representation letter. B. Audit report. C. Newspaper of general circulation. D. Memorandum to users.  The opinion of the auditor is primarily an attest as to the A. Accuracy of the financial statements. B. Fairness of the financial statements. C. Performance of management. D. Attractiveness of the audited entity.  The auditor's unmodified report states that the financial statements are presented fairly A. With reasonable assurance. B. In all material respects. C. Without significant errors. D. On a consistent basis.  An unmodified opinion means that A. Immaterial errors were corrected.

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B. There are no material misstatements. C. Material misstatements discovered were resolved to the auditor’s satisfaction. D. The financial statements are free from any errors.  It is the difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework. A. Departure. B. Misstatement. C. Error. D. Disagreement.  Materiality of a misstatement is usually assessed based on its A. Potential to affect a user’s decision. B. Amount as set by the standards. C. Source of occurrence. D. Amount as set by management.  Consistency in the auditor’s report is achieved when A. The principles used in the financial statements are the

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same every year. B. The same auditor is engaged every year.

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C. The audit is conducted in accordance with Philippine Standards on Auditing. D. The auditor and management do not have disagreements during the audit.  Consistency in the auditor’s report is necessary because it helps A. Promote global credibility. B. Avoid professional and legal liability. C. Users compare audit reports on different entities. D. Lower exposure to audit risk.  Which of the following is not a basic element of an unmodified report? A. Title. B. Address of the client. C. Opinion paragraph. D. Addressee.  To distinguish the report from those issued by others, it must contain A. A title. B. Footnotes.

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C. Page numbers. D. A cover letter.  Auditing standards require that the audit report must be titled and that the title must A. Include the word “independent”. B. Indicate whether the auditor is a CPA. C. Indicate whether the auditor is a proprietorship, partnership, or incorporated. D. Not include any discriminatory language.  “Independence” in auditing means A. Remaining aloof from client. B. Taking an unbiased viewpoint. C. Not being financially dependent on client. D. Being an advocate for the client.  The report of the Treasurerincluded in the annual report to shareholders A. Is not covered by the auditor’s opinion on the financial statements. B. Is part of the complete set of financial statements. C. Is required to be audited by the independent auditor.

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D. Need not be read by the auditor as soon as it becomes available.  An auditor may be retained to audit the financial statements of an entity that is not a client; in such a case, the addressee will be

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A. The client. B. Those charged with governanceof the entity whose financial statements are being audited. C. The entity audited. D. Any third party.  Yellow Company hired Blue and Black, CPAs to audit the financial statements of Green Company and deliver the report to Mr. Pink. Which of the following is the client? A. Mr. Pink. B. Yellow Company. C. Green Company. D. Blue and Black CPAs.  Which of the following is not normally included as addressee in the audit report? A. The shareholders. B. The Board of Directors. C. The company President. D. The partners in a partnership. The president is a member of management.

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 The introductory paragraph of the audit report A. Identifies the name of the entity for whom the report is prepared. B. Indicates the date of the audit report. C. States that the financial statements have been audited. D. Includes a statement of management’s responsibility.  The applicable financial reporting framework is referred to in which paragraph(s) of the audit report? A. Management and auditor’s responsibility. B. Introductory and opinion. C. Management’s responsibility and opinion. D. Auditor’s responsibility and opinion.  Which of the following management’s responsibilities is explicitly referred to in the auditor’s report? A. Design and implementation of internal controls. B. Accuracy and consistency of financial statements. C. Adequacy of accounting books and records. D. Preparation and fair presentation of financial statements.  Which of the following is not included in the auditor’s responsibility paragraph in the standard unmodified report?

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A. A statement that the financial statements are presented fairly in accordance with PFRSs. B. An assessment whether sufficient appropriate audit evidence has been gathered to support the opinion. C. A statement that the audit involves assessing the reasonableness of estimates, the appropriateness of policies and the overall presentation of financial statements. D. A statement that the audit procedures depend upon the auditor’s judgment.  The scope paragraph of the audit report shall state that A. The financial statements shall be presented fairly in accordance with PFRS. B. The entity has been audited. C. Management is responsible for the preparation on financial statements. D. An audit includes consideration of internal control relevant to the financial statements.  If a misstatement is immaterial relative to the financial statements of the entity for the current period and is not expected to have a material effect in future periods, it is appropriate to issue

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A. An unmodified opinion. B. A qualified opinion. C. An adverse opinion. D. A disclaimer of opinion.  A company 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 these circumstances the auditor will issue what type of opinion? A. Unmodified opinion. B. Qualified or adverse opinion. C. Qualified or disclaimer of opinion. D. Unmodified opinion with an emphasis of matter paragraph. PAS 2 on Inventories allows both costing techniques.  Audit risk recognizes the fact that the auditor may issue an inappropriate opinion even if it followed the PSAs. In this regard, the auditor can issue A. Limited level of assurance. B. Absolute level of assurance. C. Reasonable level of assurance.

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D. Low level of assurance.  The signature in the audit report is

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A. The personal name of the auditor or the certifying partner. B. The name of the audit firm. C. That of all the members of the audit team. D. Either A or B or both.  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.  An audit report should be dated as of A. The date the report is delivered to the entity audited. B. The date of the last day of fieldwork. C. The balance sheet date of the latest period reported on. D. The date a letter of audit inquiry is received from the entity's attorney of record.  The audit report date indicates A. The date on which the financial statements were filed with the Securities and Exchange Commission.

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B. The last date on which users may institute a lawsuit against either client or auditor. C. The last day of the fiscal period. D. The last day of the auditor’s responsibility for the review of significant events that occurred after the date of the financial statements.  A report on other legal and regulatory requirements A. Is part of the audit report on financial statements. B. Is not part of the auditor’s responsibilities. C. May be included within the auditor’s report on the financial statements. D. Should be presented in a separate document and be clearly labelled.  A financial reporting framework that requires compliance with the requirements of the framework is a A. Fair presentation framework. B. Compliance framework. C. Conceptual framework. D. Special purpose framework. Answers

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1. B

2. B

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3. B

4. C

5. B

6. A

7. C

8. A

9. B

10. A

11. A

12. B

13. A

14. A

15. B

16. C

17. C

18. C

19. D

20. A

21. D

22. A

23. A

24. C

25. D

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26. D

27. B

28. D

29. C

30. B

PRACTICE QUESTIONS

1. Which of the following statements is (are) correct? I. A general purpose framework may be a fair presentation or a compliance framework. II. A special purpose framework may be a fair presentation or a compliance framework. A. I only. B. II only. C. Both I and II. D. Neither I nor II.
2. Which of the following criteria is considereda general purpose framework? A. Cash receipts and disbursements basis of accounting. B. Renewal clause in a lease contract. C. Tax basis of accounting. D. Philippine Financial Reporting Standards for SMEs.

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3. When financial statements contain a departure from PFRSs because, due to unusual circumstances, the statements would otherwise be misleading, the auditor should explain the unusual circumstances in a separate paragraph and express an opinion that is A. Unmodified. B. Qualified. C. Adverse. D. Qualified or adverse, depending on materiality. To achieve fair presentation, management adopting a fair presentation framework is allowed to depart from a requirement of that framework. Management shall disclose the departure in its notes to the financial statements. The auditor shall emphasize the disclosure in the audit report.
4. The existence of audit risk is recognized by the statement in the auditor’s standard report that the auditor A. Obtains reasonable assurance about whether the financial statements are free of material misstatement. B. Assesses the accounting principles used and also evaluates the overall financial statement presentation. C. Realizes some matters, either individually or in the

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aggregate, are important while other matters are not important. D. Is responsible for expressing an opinion on the financial statements, which are the responsibility of management

5. The terms “reasonableassurance” in the auditor’s responsibility paragraph indicate that A. No misstatements exist in the financial statements. B. No material misstatements exist in the financial statements. C. There is a possibility that material misstatements still exist in the financial statements. D. There is a possibility that immaterial misstatements still exist in the financial statements.
6. The auditor’s best defense when existing material misstatements in the financial statements are not uncovered in the audit is that A. The audit was conducted in accordance with PSAs. B. The audit was conducted in accordance with PFRSs. C. Client is guilty of contributory negligence. D. The financial statements are client’s responsibility.
7. Justine, CPA, is engaged by Shoppers Corp., a client, to audit

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the financial statements of Small Bar Corp., a company that is not Justine’s client. Shoppers expects to present Small Bar’s audited financial

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statements with Justine’s auditor’s report to Philippine Bank to obtain financing in Shoppers’s attempt to purchase Small Bar. In these circumstances, Justine’s auditor’s report would usually be addressed to A. Shoppers Corp. B. Blue Bar Corp. C. Philippine Bank. D. The investors and creditors of Blue Bar Corp.

8. An auditor’s responsibility to express an opinion on the financial statements is A. Implicitly represented in the audit report. B. Explicitly represented in the introductory paragraph of the audit report. C. Explicitly represented in the auditor’s responsibility paragraph of the audit report. D. Explicitly represented in the opinion paragraph of the audit report.
9. Which of the following statements is correct concerning an auditor's responsibilities regarding financial statements? A. An auditor may not draft an entity's financial statements based on information from management's accounting

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system. B. The adoption of sound accounting policies is an implicit part of an auditor's responsibilities. C. An auditor's responsibilities for audited financial statements are confined to the expression of the auditor's opinion. D. Making suggestions that are adopted about an entity's internal control environment impairs an auditor's independence.

10. Which is not included in the Auditor’s Responsibility paragraph of the standard unmodified report? A. Auditor’s compliance with ethical requirements. B. Assessment whether sufficient appropriate evidence has been gathered to support an opinion. C. Compliance of financial statements with applicable financial reporting framework. D. General description of an audit.
11. Lagao Trading is engaged solely in the buy and sell of children’s apparel. It is owned by Juan Poncho, who singlehandedly manages the business. For the current year, Lagao Trading submits audited financial statements to a local

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bank as a requirement for a loan application. Which of the following will not usually be present in the audit report for Lagao Trading’s financial statements? A. Opinion paragraph. B. Auditor’s Responsibility paragraph. C. Report on Other Legal and Regulatory Requirements.

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D. Management’s Responsibility paragraph.

12. The opinion paragraph of a standard unmodified audit report does not A. State that the financial statements are presented fairly in material respects. B. State that the auditor has obtained sufficient appropriate evidence to support the opinion. C. Provide an unmodified opinion about the fairness of the financial statements. D. A conclusion whether the company followed Philippine Financial Reporting Standards.
13. After the auditor has completed all the procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This is a highly subjective process that relies heavily on A. Generally accepted auditing standards. B. Code of Ethics for Professionals. C. Generally accepted accounting principles. D. The auditor’s professional judgment.

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14. For an entity's financial statements to be presented fairly in conformity with generally accepted accounting principles, the principles selected should A. Be applied on a basis consistent with those followed in the prior year. B. Be approved by the FRSC. C. Reflect transactions in a manner that presents the financial statements within a range of acceptable limits. D. Match the principles used by most other entities within the entity's particular industry.
15. An entity changed from the straight-line method to the declining balance method of depreciation for all newly acquired assets. This change has no material effect on the current year's financial statements, but is reasonably certain to have a substantial effect in later years. If the change is disclosed in the notes to the financial statements, the auditor should issue a report with a(an) A. Qualified or adverse opinion. B. Explanatory paragraph. C. Unmodified opinion. D. Modification referring to consistency.

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16. An auditor discovered a P 50,000 misappropriation by the payroll supervisor. The company’s total assets and pre-tax income are P 70 million and P 15 million, respectively. Considering materiality, the most likely opinion would be