4.The auditor needs to be aware of the existence of related parties and transactions between such parties. Which of the following is the least likely reason?

a.GAAP in the Philippines require disclosure in the financial statements of certain related party relationships and transactions.

b.Related parties and transactions between such parties are considered unusual features of business.

c.The source of audit evidence affects the auditor's assessment of its reliability.

d.A related party transaction may be motivated by other than ordinary business considerations.

8.The following statements relate to the auditor's responsibilities regarding related parties and transactions with such parties.Which is incorrect?

a.Management is required to implement adequate internal control to ensure that transactions with related parties are appropriately identified in the information system and disclosed in the financial statements.

b.The auditor should have a sufficient understanding of the entity and its environment to identify events, transactions, and practices that may result in a risk of material misstatement regarding related parties and transactions with such parties.

c.A financial statement audit cannot be expressed to detect all related party transactions.

d.The auditor is responsible for the identification and disclosure of related parties and transactions with such parties.

15.Parties are considered to be related if:

a.If a breach of covenants has occurred, and if on or before balance sheet date, one party has obtained a grace period of at least twelve months after balance sheet data during which said party can rectify the breach, and the other party has agreed not to demand payment for the term of the grace period.

b.One party has the ability to control the other party and exercise significant influence over the other party in making financial and operating decisions.

c.If one party discounts a note receivable or another party and the discounting is without recourse.

d.Is a transaction is processed in an unusual manner due to errors on the accounting and internal control system.

17.The primary concern of the auditor regarding related party transaction is that

a.Their effects are eliminated from the financial statements.

b.Their existence and significance be adequately disclosed.

c.Their form be emphasized rather than their economic substance.

d.They are reported to proper regulatory authorities because they are illegal.

18.Which of the following does PAS not identify as a related party?

a.Affiliated companies

b.Line employees of the company

c.Principal owners of the company

d.Members of company management

20.The least effective method of identifying related parties would be

a.A review of SEC filings.

b.An inquiry of management.

c.A review of the purses and sales journals for the period under audit.

d.An examination of stockholders' listings to identify principal stockholders.

8.Which is true about facts after the date of the auditor`s report but before the financial statements are issued?

a.Auditor should inform the management about such facts

b.Those charged with governance should inform the management about such facts

c.Management should inform the auditor about such facts

d.The auditor has an active duty to search for such facts

16.Which of the following statements that relate to subsequent events is inappropriately described?

a.The auditor is expected to conduct a continuing review of all matters to which previously applied procedures have provided satisfactory conclusions.

b.The auditor should consider the effect of subsequent events on the financial statements and on the auditor's report.

c.The procedures to identify events that may require adjustment of, or disclosure in, the financial statement would be performed.

d.The procedures that are designed to obtain sufficiently appropriate audit evidence that all events up to the date of the audit report that may require adjustment of, or disclosure in, the financial statements are in addition to routine procedures which may be applied to specific transactions.

18.Which of the following should do last when, after the financial statements have been issued, the auditor becomes aware of a fact that existed at the date of the auditor's report?

a.Consider whether the financial statements need revisions.

b.Discuss the matter with management.

c.Take the action appropriate in the circumstance.

d.Inform those users who are currently relying on the financial statements.

19.When a fact, that existed before the date of the report is discovered and the management revises previously issued audited financial statements, the following are appropriate except:

a.A new auditor's report should include an emphasis of a matter paragraph that refers to a note to the financial statements that discusses the reason for the revision of the financial statements and to the earlier report issued by the auditor.

b.The new auditor's report should contain the original date.

c.The performance of the procedures that are designed to obtain sufficient evidence as to subsequent events would ordinarily be extended to the date the revised financial statements are approved by the entity's management.

d.The auditor is permitted to restrict the audit procedures regarding the financial statements to the effects of the subsequent event that necessitated the revision.

20.When a fact is discovered after the date of the report but before the financial statements are issued and the client amends the financial statements, would the following procedures or actions be necessary?

ABCD

*Procedures to obtain evidence with

Respect to subsequent events are extendedYesYesNoNo

*An emphasis of a matter paragraph is

RequiredYesNoNoYes