1 Auditing Theory PRTC

Chapter 9
1. Which of the following pairs of accounts would an auditor most likely analyze on the same working
paper?
a. Notes receivable and interest income.
b. Accrued interest receivable and accrued interest payable.
c. Notes payable and notes receivable.
d. Interest income and interest expense.

2. With well-developed internal control, employees in the same department most likely would
approve purchase orders, and also
a. Reconcile the open invoice file. c. Authorize requisition of goods.
b. Inspect goods upon receipts. d. Negotiate terms with vendors.

3. To strengthen the system of internal accounting control over the purchase of merchandise, a
company’s receiving department should
a. Accept merchandise only if a purchase order or approval granted by the purchasing
department is on hand.
b. Accept and count all merchandise received from the usual company vendors.
c. Rely on shipping documents for the preparation of receiving reports.
d. Be responsible for the physical handling of merchandise but not for the preparation of
receiving reports

4. Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate controls
over the invoicing function allow goods to be shipped that are not invoiced. The inadequate
controls could cause an
a. Understatement of revenues, receivables, and inventory.
b. Overstatement of revenues and receivables, and an understatement of inventory.
c. Understatement of revenues and receivables, and an overstatement of inventory.
d. Overstatement of revenues, receivables, and inventories.

5. To determine whether the system of internal accounting control operated effectively to minimize
errors of failure to invoice a shipment, the auditor would select a sample of transactions from the
population represented by the
a. Customer order file. c. Open invoice file.
b. Bill of lading file. d. Sales invoice file.

6. Which of the following audit procedures would an auditor most likely perform to test controls
relating to management’s assertion concerning the completeness of sales transactions?
a. Verify that extensions and footings on the entity’s sales invoices and monthly customer
statements have been recomputed.
b. Inspect the entity’s reports of prenumbered shipping documents that have not been
recorded in the sales journal.
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c. Compare the invoiced prices on prenumbred sales invoices to the entity’s authorized price
list.
d. Inquire about the entity’s credit granting policies and the consistent application of credit
checks.

7. An auditor tests an entity’s policy of obtaining credit approved before shipping goods to customers
in support of management’s financial statement assertion of
a. Valuation or allocation. c. Existence or occurrence.
b. Completeness. d. Rights and obligations

8. An auditor observes the mailing of monthly statements to a client’s customers and reviews
evidence of follow-up on errors reported by the customers. This test of controls most likely is
performed to support management’s financial statement assertion(s) of
a. b. c. d.

Presentation and disclosure Yes Yes No No

Existence or occurrence Yes No Yes No

9. At which point in an ordinary sales transaction of a wholesaling business would a lack of specific
authorization least concern the auditor conducting an audit?
a. Determining discounts. c. Granting credit.
b. Selling goods for cash. d. Shipping goods.

10. Proper authorization of write-offs of uncollectible accounts should be approved in which of the
following departments?
a. Accounts receivable. c. Accounts payable.
b. Credit. d. Treasurer.

Chapter 10
1. If internal control is well designed, two tasks that should be performed by different persons are
a. Approval of bad debt write-offs, and reconciliation of the accounts payable subsidiary
ledger and controlling account.
b. Distribution of payroll checks and approval of sales returns for credit.
c. Posting of amounts from both the cash receipts journal and cash payments journal to the
general ledger.
d. Recording of cash receipts and preparation of bank reconciliations.

2. Internal control should follow certain basic principles to achieve its objectives. One of these
principles is the segregation of functions. Which one of the following examples does not violate the
principle of segregation of functions?
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a. The treasurer has the authority to sign checks but gives the signature block to the assistant
treasurer to run the check-signing machine.
b. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse,
may authorize disposal of damaged goods.
c. The sales manager has the responsibility to approve credit and the authority to write off
accounts.
d. The department time clerk is given the undistributed payroll checks to mail to absent
employees.

3. Audit risk consists of inherent risk, control risk, and detection risk. Which of the following
statements is true?
a. Cash is more susceptible to theft than an inventory of coal because it has a greater inherent
risk.
b. The risk that material misstatement will not be prevented or detected on a timely basis by
internal control can be reduced to zero by effective controls.
c. Detection risk is a function of the efficiency of an auditing procedure.
d. The existing levels of inherent risk, control risk, and detection risk can be changed at the
discretion of the auditor
4. Lapping is
a. Making the financial statements indicate a more favorable position by giving effect to
transactions is a period other than that in which these actually occurred.
b. Done to inflate the cash position or cover the theft of cash by depositing at the end of the
accounting period a check drawing on one bank account in another bank account without
making the necessary deduction in the balance of the first bank.
c. An irregularity that conceals cash shortages by a delay in recording cash collections,
retaining a customer's payment on credit sales and covering up the shortage with
subsequent cash receipts.
d. A kind of fraud committed by making entry of fictitious payments or failure to enter
receipts.

5. In general, material fraud perpetrated by which of the following are most difficult to detect?
a. Cashier. c. Internal auditor.
b. Keypunch operator. d. Controller.

6. Which of the following information discovered during an audit most likely would raise a question
concerning possible illegal acts?
a. Related party transactions, although properly disclosed, were pervasive during the year.
b. The entity prepared several large checks payable to cash during the year.
c. Material internal control weaknesses previously reported to management were not
corrected.
d. The entity was a campaign contributor to several local political candidates during the year.
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7. Which of the following circumstances most likely would cause an auditor to believe that material
misstatements may exist in an entity’s financial statements?
a. Accounts receivable confirmation requests yield significantly fewer responses than
expected.
b. Audit trails of computer-generated transactions exist only for a short-time.
c. The chief financial officer does not sign the management representation letter until the last
day of the auditor’s fieldwork.
d. Management consults with other accountants about significant accounting matters.

8. Those procedures specifically outlined in an audit program are primarily designed to

a. Gather evidence.
b. Detect errors or irregularities.
c. Test internal systems.
d. Protect the auditor in the event of litigation.

9. The concept of materiality will be least important to the CPA in determining the
a. Scope of his audit of specific accounts.
b. Specific transactions that should be reviewed.
c. Effects of audit exceptions upon his opinion.
d. Effects of his direct financial interest in a client upon his independence.

10. In considering materiality for planning purposes, an auditor believes that misstatements
aggregating P100,000 would have a material effect on an entity’s income statement, but the
misstatements would have to aggregate P200,000 to materially affect the balance sheet.
Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect
misstatements that aggregate
a. P100,000 b. P200,000 c. P150,000 d.P300,000

Chapter 11
1. Which of the following statements relates to the ownership assertion?
a. Inventory listings are accurately included in the inventory accounts
b. Inventory excludes items billed to customers
c. Inventory is properly classified as current asset
d. Inventory is properly stated at cost.

2. Which one of the following assertions regarding an inventory of ski equipment for Matterhorn Inc.
would be considered an incorrect statement?
a. The inventory exists at the balance sheet date
b. The inventory is owned by Matterhorn
c. Footnote disclosures concerning inventory are not required given the objective nature of
this account
d. The inventories are properly valued
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3. In a properly designed accounts payable system, a voucher is prepared after the invoice; purchase
order, requisition, and receiving report are verified. The next step in the system is to
a. Cancel the supporting documents
b. Enter the check amount in the check register
c. Approve the voucher for payment
d. Post the voucher amount to the expense amount

4. Which of the following would prevent a paid disbursement from being paid a second time?
a. Individuals responsible for signing checks should prepare vouchers
b. Disbursements should be approved by at least two responsible officials
c. The disbursement date should be within a few days of the date the voucher is presented for
payment.
d. The official signing the check should cancel the supporting documents

5. For appropriate segregation of duties, journalizing and posting summary payroll transactions should
be assigned to
a. The treasurer’s department
b. General accounting
c. Payroll accounting
d. The timekeeping department

6. Appropriate control over obsolete materials requires that they be

a. Sorted, treated, and packaged before disposition takes place, in order to obtain the best
selling price
b. Determine by an approved authority to be lacking in regular usability
c. Retained with the regular storage area
d. Carried at cost in the accounting records until the actual disposition takes place

7. Which of the following assertions is the primary assertion that is satisfied by physically observing
the client’s count of inventory
a. Rights. c. Completeness
b. Valuation. d. Existence

8. An auditor most likely would make inquiries of production and sales personnel concerning possible
obsolete or slow-moving inventory to support management’s financial statement assertion of
a. Valuation c. Existence.
b. Rights d. Presentation.

9. Employees in the same department most likely would approve purchase orders, and also
a. Reconcile the open invoice file
b. Negotiate terms with the vendors
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c. Authorize requisitions of goods

d. Inspect goods upon receipt

10. The accounts payable department receives a purchase order form to accomplish all of the following
except:
a. Comparing invoice price to purchase order price
b. Ensuring that the purchase had been properly authorized
c. Comparing quantity ordered to quantity purchased
d. Ensuring that the goods had been received by the party requesting the goods

Chapter 12
1. Property, plant, and equipment is typically judged to be one of the accounts least susceptible to
fraud because
a. The amounts recorded on the balance sheet for most companies are immaterial
b. The inherent risk is usually low.
c. The depreciated values are always smaller than cost.
d. Internal control is inherently effective regarding this account.

2. Determining that proper amounts of depreciation are expensed provides assurance about
management’s assertions of valuation and
a. Presentation and disclosure
b. Rights and obligations
c. Completeness
d. Existence or occurrence

3. The auditor may conclude that depreciation charges are insufficient by noting
a. Insured values greatly in excess of book values.
b. Large numbers of fully depreciated assets.
c. Continuous trade-in of relatively new assets.
d. Excessive recurring losses on assets retired.

4. When few property and equipment transactions occur during the year the continuing auditor
usually obtains an understanding of internal control and performs
a. Test of controls
b. Analytical procedures to verify current year additions to property and equipment
c. A thorough examination of the balances at the beginning of the year.
d. Extensive tests of current year property and equipment transactions

5. Which of the following combinations of procedures is an auditor most likely to perform to obtain
evidence about fixed assets addition?
a. Inspecting documents and physically examining assets.
b. Re-computing calculations and obtaining written management representations.
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c. Observing operating activities and comparing balances to prior period balances.

d. Confirming ownership and corroborating transactions through inquiries of client personnel.

6. If an auditor tours a production facility, which of the misstatements or questionable practices is

most likely to be detected by the audit procedures specified?
a. Depreciation expense on fully depreciated machinery has been recognized.
b. Overhead has been over-applied.
c. Necessary facility maintenance has not been performed.
d. Insurance coverage on the facility has lapsed.

7. In testing for uncorrected retirements of equipment, an auditor is most likely to

a. Select items of equipment from the accounting records and then locate them during the
plant tour.
b. Compare depreciation journal entries with similar prior-year entries in search of fully
depreciated equipment.
c. Inspect items of equipment observed during the plant tour and then trace them to the
equipment subsidiary ledger.
d. Scan the general journal for unusual equipment additions and excessive debits to repairs
and maintenance expense.

8. The auditor is least likely to learn of retirements of equipment through which of the following?
a. Review of the purchase return and allowances account.
b. Review of depreciation.
c. Analysis of the debits to the accumulated depreciation account.
d. Review of insurance policy.

9. Additions to equipment are sometimes understated. Which of the following accounts would be
reviewed by the auditor to gain reasonable assurance that additions are not understated?
a. Accounts payable
b. Depreciation expense
c. Gain on disposal of equipment
d. Repair and maintenance expense

10. In violation of policy, Coat Company erroneously capitalized the cost of painting its warehouse. An
auditor would most likely detect this when
a. Discussing capitalization policies with controller.
b. Examining maintenance expense accounts.
c. Observing that the warehouse has been painted.
d. Examining construction work orders that support items capitalized during the year.

Chapter 13
1. The auditor will most likely perform extensive tests for possible understatement of
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a. Revenues
b. Assets
c. Liabilities
d. Capital

2. A registrar/transfer agent system relating to capital stock is most likely used by:
a. A small, nonpublic company.
b. A large, publicly traded company.
c. All companies must use this type of system.
d. No companies use this system anymore

3. A company holds bearer bonds as a short-term investment. Responsibility for custody of these
bonds and submission of coupons for periodic interest collections probably should be delegated to
the
a. Chief accountant
b. Internal auditor
c. Cashier
d. Treasurer

4. Internal control over bonds payable is best when:

a. The company utilizes the services of a bond trustee.
b. The company segregates approval from issuance of the bonds.
c. Bonds are countersigned by two officers.
d. Bonds are serially numbered.

5. The audit approach for acquired treasury stock will normally include:
a. Confirmation with shareholders.
b. Inspection of certificates.
c. Inspection of cash receipts entries.
d. Recomputation of all gains and losses

6. Changes in capital stock accounts should normally be approved by:

a. The board of directors.
b. The audit committee.
c. The stockholders.
d. The president.

7. An auditor should trace corporate stock issuances and treasury stock transactions to the:
a. Numbered stock certificates.
b. Articles of incorporation.
c. Transfer agent's records.
d. Minutes of the board of directors
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8. For audit purposes, a corporation's articles of incorporation are normally:

a. Copied and placed on the owners' equity lead schedule.
b. Copied and placed in the permanent file.
c. Confirmed with the transfer agent.
d. Ignored since they are not normally considered to be related to the internal control
structure.

9. When no independent stock transfer agent is employed and the corporation issues its own stocks
and maintains stock records, canceled stock certificates should:
a. Be defaced to prevent reissuance and attached to their corresponding stubs.
b. Not be defaced but segregated from other stock.
c. Be destroyed to prevent fraudulent reissuance.
d. Be defaced and sent to the Secretary of State.

10. Bond transactions are normally confirmed with:

a. Individual holders of retired bonds.
b. Recomputation procedures performed using interest expense.
c. The bond trustee.
d. Comparisons of retired bonds with those outstanding.

CHAPTER 14
1. An auditor finds several errors in the financial statements that the client prefers not to correct. The
auditor determines that the errors are not material in the aggregate. Which of the following actions
by the auditor is most appropriate?
a. Document the errors in the summary of uncorrected errors, and document the conclusion
that the errors do not cause the financial statements to be misstated.
b. b. Document the conclusion that the errors do not cause the financial statements to be
misstated, but do not summarize uncorrected errors in the working papers.
c. Summarize the uncorrected errors in the working papers, but do not document whether
the error cause the financial statements to be misstated.
d. Do not summarize the uncorrected errors in the working papers, and do not document a
conclusion about whether the uncorrected errors cause the financial statements to be
misstated.

2. Which of the following audit procedures most likely would assist an auditor in identifying conditions
and events that may indicate there could be substantial doubt about an entity's ability to continue
as a going concern?
a. Confirmation of accounts receivable from principal customers.
b. Reconciliation of interest expense with debt outstanding.
c. Confirmation of bank balances.
d. Review of compliance with terms of debt agreements.
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3. An auditor should consider which of the following when evaluating the ability of a company to
continue as a going concern?
a. Audit fees.
b. Future assurance services.
c. Management's plans for disposal of assets.
d. A lawsuit for which judgment is not anticipated for 18 months.

4. Which of the following matters is most likely to be included in a management representation letter
as a specific representation?
a. Length of a material contract with a new customer.
b. Information concerning fraud by the CFO.
c. Reason for a significant increase in revenue over the prior year.
d. The competency and objectivity of the internal audit department.

5. Which of the following procedures most likely would assist an auditor to identify litigation, claims,
and assessments?
a. Inspect checks included with the client's cutoff bank statement.
b. Obtain a letter of representations from the client's underwriter of securities.
c. Apply ratio analysis on the current-year's liability accounts.
d. Read the file of correspondence from taxing authorities.

6. Which of the following is an analytical procedure that an auditor most likely would perform during
the final review stage of an audit?
a. Comparing each individual expense account balance with the relevant budgeted amounts
and investigating any significant variations.
b. Testing the effectiveness of internal control procedures that appear to be suitably designed
to prevent or detect material misstatements.
c. Reading the financial statements and considering whether there are any unusual or
unexpected balances that were not previously identified.
d. Calculating each individual expense account balance as a percentage of total entity
expenses and comparing the results with industry averages.

7. A CPA firm is completing the fieldwork for an audit of Swenson Co. for the current year ended
December 31. The manager in charge of the audit is performing the final steps in the evidence
accumulation phase of the audit and notes that there have been several changes in Swenson during
the year under audit. Which of the following items would indicate there could be substantial doubt
about Swenson's ability to continue as a going concern for a reasonable period of time?
a. Cash infusion by a venture capital firm.
b. Recurring working capital shortages.
c. A lack of significant contracts with new customers.
d. Term debt refinanced with a new bank.
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8. Which of the following statements is correct regarding accounting estimates?

a. The auditor's objective is to evaluate whether accounting estimates are reasonable in the
circumstances.
b. Accounting estimates should be used when data concerning past events can be
accumulated in a timely, cost-effective manner.
c. An important accounting estimate is management's listing of accounts receivable greater
than 90 days past due.
d. Accounting estimates should not be used when the outcome of future events related to the
estimated item is unknown.

9. Which of the following events least likely would indicate the existence of related party
transactions?
a. Making a loan with no scheduled date for the funds to be repaid.
b. Maintaining compensating balance arrangements for the benefit of principal stockholders.
c. Borrowing funds at an interest rate significantly below prevailing market rates.
d. Writing off obsolete inventory to net realizable value just before year end.
10. Which of the following procedures would an accountant most likely perform during an engagement
to review the financial statements of a nonissuer?
a. Review the predecessor accountant's working papers.
b. Inquire of management about related party transactions.
c. Corroborate litigation information with the entity's attorney.
d. Communicate internal control deficiencies to senior management.

CHAPTER 15
1. 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
2. When an auditor encounters a material GAAP departure that is unresolved at the conclusion of the
audit, which of the following opinions are possible?
a) Qualified or adverse
b) Unqualified or qualified
c) Only adverse is possible
d) Qualified, denial, or adverse
3. Which of the following opinions is most likely appropriate when a company faces a material loss
contingency that is fully disclosed in the financial statements?
a) Normal unqualified opinion
b) Denial of opinion
c) Qualified (scope) opinion
d) Unqualified opinion with an explanatory paragraph
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4. An auditor is unable to determine the amounts associated with illegal acts committed by a client.
The auditor would most likely
a) Issue either qualified opinion or a disclaimer opinion
b) Issue an adverse opinion
c) Issue either a qualified opinion or an adverse opinion
d) Issue a disclaimer of opinion
5. The opinion paragraph of the audit report for Schnook Co. states that the financial statements “do
not present fairly”. Which type of audit report is this?
a) Improper c) Disclaimer
b) Adverse d) Qualified
6. In which one of the following instances would an auditor most likely issue a disclaimer of opinion?
a) Management will not sign a management representation letter
b) Management declines to provide a statement of cash flow
c) The auditor is independent of the client
d) The auditor is unable to confirm receivables but performs alternative procedures
7. When an auditor lacks independence with respect to a client, the auditor should issue
a) Disclaimer of opinion
b) An adverse opinion
c) A qualified opinion with explanatory paragraph
d) An unqualified opinion
8. When there is uncertainty about a company’s ability to continue as a going concern, the auditor’s
concern is the possibility that the client may not be able to continue its operations or meet its
obligations for a “reasonable period of time.” For this purpose, a reasonable period of time is
considered not to exceed:
a) Six months from the date of the financial statements
b) One year from the date of the financial statements
c) Six months from the date of the audit report
d) One year from the date of the audit report
9. It is the term that caused confusion and controversy on its meaning the PCAOB uses to identify
cases in which the auditing firm failed to obtain sufficient appropriate evidence to support its audit
opinion
a) Audit risk.
b) Disclaim of opinion.
c) Audit deficiency
d) Audit failure
10. Comfort letters ordinarily are addressed to
a) Credit financial institutions
b) The client’s audit committee
c) The Securities and Exchange Commission
d) Underwriters of securities
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Chapter 16
1. In which of the following cases would an auditor not need the services of an expert?
a. The measurement of work completed and to be completed on contracts in progress
b. Legal opinions concerning interpretations of agreements, statutes and regulations
c. Valuations of certain types of assets like land and buildings
d. Evaluating the company’s internal control

2. Which statement is correct regarding auditing fair value measurements and disclosures?
a. Many measurements based on estimates, including fair value measurements, are
inherently precise.
b. Assumptions used in fair value measurements are similar in nature to those required when
developing other accounting estimates.
c. Underlying the concept of fair value measurements is a presumption that the entity will be
liquidated.
d. The measurement of fair value may be relatively complex for assets that are bought and
sold in active and open markets.

3. Which statement is incorrect regarding fair value measurements?

a. Underlying the concept of fair value measurements is a presumption that the entity is a
going concern.
b. Fair value is normally the amount that an entity would receive or pay in a forced
transaction, involuntary liquidation, or distress sale.
c. The measurement of fair value may be relatively simple for assets that are bought and sold
in active and open markets.
d. The estimation of fair value may be achieved through the use of a valuation model or
through the assistance of an expert, such as an independent appraiser.

4. Complex judgments are found in what types of accounts?

i. Asset accounts.
ii. Liability accounts.
iii. Income statement accounts
a. I only.
b. II only.
c. I and II.
d. I, II, and III.

5. Which of the following statements is true about accounts requiring management estimates?
a. Because these amounts are estimates, the auditor likely just accepts whatever
management determines to be appropriate.
b. Only a limited number of accounts on the balance sheet require management estimates.
c. Net accounts receivable is an account that does not require a management estimate.
d. None of the above is true.
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6. Which of the following statements is not correct about materiality?

a. The concept of materiality recognizes that some matters are important for fair presentation
of financial statements in conformity with GAAP, while other matters are not important.
b. An auditor considers materiality for planning purposes in terms of the largest aggregate
level of misstatements that could be material to any one of the financial statements.
c. Materiality judgments are made in light of surrounding circumstances and necessarily
involve both quantitative and qualitative judgments.
d. An auditor's consideration of materiality is influenced by the auditor's perception of the
needs of a reasonable person who will rely on the financial statements.

7. For which of the following judgments may an independent auditor share responsibility with an
entity's internal auditor who is assessed to be both competent and objective?
Materiality of misstatements Evaluation of accounting estimates
a. Yes No
b. No Yes
c. No No
d. Yes Yes

8. For which of the following judgments may an independent auditor share responsibility with an
entity's internal auditor who is assessed to be both competent and objective?
Materiality of misstatements Evaluation of accounting estimates
a. Yes Yes
b. Yes No
c. No Yes
d. No No

9. Which of the following is not a factor that affects the auditor's judgment, during audit planning, as
to the quantity, type, and content of working papers?
a. The auditor's preliminary assessment of control risk.
b. The auditor's preliminary evaluation of inherent risk based on discussions with the client.
c. The nature of the client’s business.
d. The type of report to be issued by the auditor.

10. Which of the following statements concerning materiality thresholds is incorrect?

a. Aggregate materiality thresholds are a function of the auditor's preliminary judgments
concerning audit risk.
b. In general, the more misstatements the auditor expects, the higher should be the
aggregate materiality threshold.
c. The smallest aggregate level of errors or fraud that could be considered material to any one
of the financial statements is referred to as a "materiality threshold."
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d. Materiality thresholds may change between the planning and review stages of the audit.
These changes may be due to quantitative and/or qualitative factors.

Chapter 17
1. Which statement is incorrect regarding the general principles of a review engagement?
a. The auditor is not required to comply with the “Code of Professional Ethics for Certified
Public Accountants” promulgated by the Board of Accountancy.
b. The auditor should conduct a review in accordance with PSA 910.
c. The auditor should plan and perform the review with an attitude of professional skepticism
recognizing that circumstances may exist which cause the financial statements to be
materially misstated.
d. For the purpose of expressing negative assurance in the review report, the auditor should
obtain sufficient appropriate evidence primarily through inquiry and analytical procedures
to be able to draw conclusions.

2. Which of the following is required to be performed in an audit but not in review engagement?
a. Complying with the “Code of Professional Ethics for Certified Public Accountants”
promulgated by the Board of Accountancy.
b. Planning the engagement.
c. Agreeing on the terms of engagement.
d. Studying and evaluating internal control structure

3. In a review engagement, the independent accountant’s procedures include:

a. Examining bank reconciliation.
b. Confirming accounts receivable with debtors.
c. Reading the financial statements to consider whether they appear to conform with GAAP.
d. Obtaining a letter of audit inquiry from all attorneys of record

4. Which of the following is not a basic element of a review report?

a. Title of the report
b. Client’s address
c. Introductory paragraph
d. Auditor’s address

5. The statement that “nothing came to our attention which would indicate that these statements are
not fairly presented” expresses which if the following?
a. Disclaimer of opinion
b. Negative confirmation
c. Negative assurance
d. Piecemeal opinion

6. An accountant’s compilation report should be dated as of the date of

a. Completion of fieldwork.
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b. Completion of the engagement.

c. Transmittal of the compilation report.
d. The latest subsequent event referred to in the notes to the financial statements.

7. The following are special purpose audit engagements, except

a. Financial statements prepared in accordance with a comprehensive basis of accounting
b. other than generally accepted accounting principles in the Philippines.
c. Specified accounts, elements of accounts, or items in a financial statement.
d. Compliance with contractual agreements.
e. Compiled financial statements.

8. When the auditor believes that the presentation and disclosure of the prospective financial
information is not adequate, the auditor should
a. Express a qualified or adverse opinion in the report on the prospective financial
information.
b. Withdraw from the engagement.
c. Disclaim the opinion in the report on the prospective financial information.
d. Either a or b.

9. On each page of the financial information or on the front of the complete set of financial
statements, the financial information compiled by the accountant should contain a reference such
as
a. "Unaudited"
b. "Compiled without Audit or Review"
c. "Refer to Compilation Report"
d. Any of the above.

10. If the accountant becomes aware of material misstatements, the accountant should try to agree
appropriate amendments with the entity. If such amendments are not made and the financial
information is considered to be misleading, the accountant should
a. Do nothing.
b. Withdraw from the engagement.
c. Issue a qualified or adverse opinion.
d. Issue a negative assurance.