Forming Opinion and ReportAn Overview

1. Forming the auditor's opinion and report includes

a. b. c. d.

Determining the sufficiency and appropriateness of audit evidence obtained.

Yes

Yes

Yes

Yes

Evaluating the materiality of misstatements identified.

Yes

Yes

Yes

No

Performing necessary quality control review.

Yes

Yes

No

Yes

Communicating audit results with management and those charged with governance.

Yes

No

No

Yes

Determining SAAE

2. After the auditor has completed all audit 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. the Code of Professional Ethics.

c. generally accepted accounting principles.

d. the auditor's professional judgment.

Evaluating Materiality of Misstatements

3. Projected misstatements refer to

a. Misstatements about which there is no doubt

b. Differences arising from management's judgments concerning accounting estimates that the auditor considers unreasonable, or the selection or application of accounting policies that the auditor considers inappropriate

c. The auditor's best estimate of misstatements in populations, involving the projection of misstatements identified in audit samples to the entire populations from which the samples were drawn

d. Misstatements that the auditor has accumulated during the audit and that management has not corrected

4. Management estimates the company's allowance for doubtful accounts as P200,000, and the auditors develop an estimate that suggests that the amount should be between P230,000 and P250,000. The factual (known) misstatement in this situation is:

a. P0 c.P40,000

b. P30,000 d.P50,000

5. Which of the following statements is correct regarding the auditor's accumulation of identified misstatements?

a. The auditor must accumulate all misstatements identified during the audit.

b. The auditor must only accumulate individually material misstatements identified during the audit.

c. The auditor must accumulate misstatements identified during the audit, other than those that are clearly trivial.

d. None of the above.

6. At the end of the audit the auditor is supposed to accumulate and evaluate the need for adjustment of

a. known uncorrected errors.

b. unknown projected errors.

c. carryover of prior year errors.

d. all of the above.

7. What is the likely aggregate misstatement (LAM) when the audit results are as follows?

Likely misstatement = P1,000

Identified misstatement found in non-representative samples = P850

Misstatements found in prior year's financial statements = P2,500 (of which P1,900 was corrected in the prior year)

a. P1,850 c.P2,900

b. P2,450 d.P3,500

8. When expressing an unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the

a. Amount of known misstatement is documented in the management representation letter.

b. Estimate of the total likely misstatement is less than a material amount.

c. Amount of known misstatement is acknowledged and recorded by the client.

d. Estimate of the total likely misstatement includes the adjusting entries already recorded by the client.

Performing Engagement Quality Control Review (EQCR)

9. Which of the following is likely to be carried out as part of an engagement quality control review for a listed entity?

(1) Review of audit working paper files to ensure that the audit has been performed in accordance with professional standards and regulatory and legal requirements

(2) Review of selected audit documentation relating to significant audit judgements

(3) Review of the engagement team's evaluation of the firm's independence towards the audit

(4) Consideration of whether appropriate consultations have taken place on differences of opinion/contentious matters

a. (1) and (3)

b. (2) and (4)

c. (1), (2) and (4)

d. (2), (3) and (4)

Communicating with TCWG, MGT, and Other Parties

10. All of the following matters need to be communicated with those charged with governance in an audit of financial statements irrespective of an entity's governance structure or size. In accordance with PSA 260, Communication with Those Charged with Governance, which of the following shall be communicated in writing in case of listed entities?

a. The auditor's responsibilities in relation to the financial statement audit.

b. Planned scope and timing of the audit.

c. Significant findings from the audit.

d. Auditor independence.