C. Express a qualified opinion after discussing the matter with the client’s directors.

D. Consider the matter closed because the other information is not in the audited statements.

82. PSA 720 (The Auditor’s Responsibility in Relation to Other Information in Documents Containing Audited Financial
Statements) states, “If, on reading the other information, the auditor identifies a material inconsistency, the auditor
should determine whether the audited financial statements or the other information needs to be revised.” What
type of opinion should be expressed if the client refuses to make the necessary revision in the financial statements?

A. Disclaimer of opinion.
B. Qualified opinion or disclaimer of opinion.
C. Unmodified opinion with an Other Matter paragraph describing the material inconsistency.
D. Qualified or adverse opinion.

83. Which of the following phrases would an auditor most likely include in the auditor’s report when expressing a
qualified opinion because of inadequate disclosure?

A. Subject to the departure from generally accepted accounting principles, as described above.
B. With the foregoing explanation of theses omitted disclosures.
C. Except for the omission of the information discussed in the Basis for Qualified Opinion paragraph.
D. Do not present fairly in all material respects.

84. LEONOR CO.’s financial statements adequately disclosure uncertainties that concern future events, the outcome of
which are not susceptible to reasonable estimation. The auditor’s report should include

A. An unmodified opinion
B. A “subject to” qualified opinion
C. An “except for” qualified opinion
D. An adverse opinion

AASC ALERT
Series 2 of 2011
Reporting on Information Required by BIR Revenue Regulation (RR) 15-2010

85. (RR) 15-2010 requires disclosure of specific information on various taxes in the Notes to Financial Statements that
will accompany the income tax returns to be filed with the BIR. These disclosure requirements

A. Form part of the disclosure requirements under PFRS.

B. Form part of the disclosure requirements under PFRS for SMEs.
C. Form part of the disclosure requirements under PFRS and PFRS for SMEs.
D. Do not form part of the disclosure requirements under PFRS and other Philippine financial reporting frameworks
such as PFRS for SMEs.

86. Under the PSAs, the tax information required by RR 15-2010 that is presented as part of the notes to the financial
statements is considered

A. Significant information
B. Other information
C. Supplementary information
D. Material information

87. The tax information disclosures under RR 15-2010 are required to be presented

A. Only in the consolidated financial statements.

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 B. Both in the consolidated financial statements and the separate financial statements of the parent company and
its subsidiary/ies.
C. Only in the consolidated financial statements and the separate financial statements of the parent company.
D. Only in the separate financial statements of the parent company and the separate financial statements of the
subsidiary/ies.

88. When the supplementary information required by RR 15-2010 is not clearly differentiated from the financial
statements, such supplementary information shall be

A. Addressed in a separate section in the auditor’s report under the sub-title “Report on Other Legal and Regulatory
Requirements.”
B. Addressed in a separate section in the auditor’s report under the sub-title “Report on the Supplementary
Information Required under RR 15-2010.”
C. Addressed in an emphasis-of-matter paragraph in the auditor’s report.
D. Covered by the auditor’s opinion on the financial statements.

89. When the supplementary information required under RR 15-2010 is not presented

A. The auditor’s “Report on the Financial Statements” would not be affected because such supplementary
information is not part of the basic financial statements.
B. The auditor is precluded from expressing an opinion on the financial statements.
C. The auditor’s report should contain a qualified opinion.
D. The auditor’s report should contain an adverse opinion.

90. The supplementary information required under RR 15-2010 is clearly differentiated from the audited financial
statements. How would the “Report on the Supplementary Information” be affected if the auditor’s “Report on the
Financial Statements” contains an adverse opinion?

A. The auditor should express a qualified opinion on the supplementary information.

B. To attain consistency in reporting, the auditor should express an adverse opinion on the supplementary
information.
C. The auditor is precluded from expressing an opinion on the supplementary information.
D. The auditor should express an unmodified opinion on the supplementary information because such information
is not a required part of the audited financial statements.

PSA 800
Special Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks

1. Financial statements prepared in accordance with a financial reporting framework designed to meet the financial
information needs of specific users are referred to as

A. Special purpose financial statements

B. Special purpose framework
C. General purpose financial statements
D. Specific purpose financial statements

2. The following are examples of special purpose frameworks, except

A. A tax basis of accounting for a set of financial statements that accompany an entity’s tax return.
B. The cash receipts and disbursements basis of accounting for cash flow information that an entity may be
requested to prepare for creditors.
C. Philippine Financial Reporting Standards (PFRS) promulgated by the Financial Reporting Standards Council
(FRSC).
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 D. The financial information reporting provisions of a contract (for example, a financial agreement).

3. An auditor’s report on financial statements prepared in accordance with the financial reporting provisions of a
contract (that is, a special purpose framework) to comply with the provisions of that contract should include all of
the following, except

A. An opinion as to whether the financial statements are presented fairly, in all material respects, in accordance
with the financial reporting provisions of the contract.
B. A statement that indicates the basis of accounting used.
C. An opinion as to whether the basis of accounting used is appropriate under the circumstances.
D. Reference to the note to the financial statements that describes the basis of presentation.

4. When an auditor reports on financial statements prepared on an entity’s income tax basis, the auditor’s report
should

A. State the basis of presentation of the financial statements.

B. Disclaim an opinion on whether the statements were examined in accordance with Philippines Standards on
Auditing (PSAs).
C. Not express an opinion on whether the statements are presented in accordance with the tax basis of accounting
used.
D. Include an explanation of how the results of operations differ from the cash receipts and disbursements basis of
accounting.

5. An auditor is reporting on statement of cash receipts and disbursements. This statement is best referred to in the
opinion paragraph by which of the following descriptions?

A. “Results of operations arising from cash transactions.”

B. “Cash receipts and disbursements.”
C. “Income statement resulting from cash transactions.”
D. “Statements of cash flows.”

6. In an audit of special purpose financial statements, the auditor shall obtain an understanding of

I. The purpose for which the financial statements are prepared.

II. The intended users.
III. The steps taken by management to determine that the applicable financial reporting framework is acceptable in
the circumstances.

A. I only
B. II and III only
C. I and II only
D. I, II, and III

7. An auditor’s report on financial statements prepared on the cash receipts and disbursements basis of accounting
should include all of the following, except

A. A statement that the audit was conducted in accordance with Philippine Standards on Auditing.
B. A reference to the note to the financial statements that describes the cash receipts and disbursements basis of
accounting.
C. A statement that the cash receipts and disbursements basis of accounting is not a comprehensive basis of
accounting.
D. An opinion as to whether the financial statements are presented fairly, in all material respects, in accordance
with the cash receipts and disbursements basis of accounting.
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 PSA 805
Special Considerations – Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial
Statement

8. A CPA is permitted to accept a separate engagement (not in conjunction with an audit of financial statements) to
audit an entity’s

Schedule of Schedule of
Accounts Receivable Profit Participation
A. Yes No
B. No Yes
C. Yes Yes
D. No No

9. Which of the following statements is correct with respect to an auditor’s report expressing an opinion on a specific
element on a financial statement?

A. The auditor who has expressed an adverse opinion on the financial statements as a whole can never express an
unmodified opinion on a specific element in these financial statements.
B. The materiality determined for a specific element of a financial statement may be lower than the materiality
determined for the entity’s complete set of financial statements.
C. Such a report can only be issued if the auditor is also engaged to audit the entire set of financial statements.
D. The attention devoted to the specific element is usually less than it would be if the financial statements as a
whole were audited.

10. An auditor may express an opinion on an entity’s accounts receivable balance even if the auditor has disclaimed an
opinion on the financial statements taken as a whole provided the

A. Report on the accounts receivable is presented separately from the disclaimer of opinion on the financial
statements.
B. Auditor also reports on the current asset portion of the entity’s statement of financial position.
C. Use of the reports on the accounts receivable is restricted.
D. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial statements.

11. When an auditor is requested to express an opinion on the rental and royalty income of an entity, the auditor may

A. Accept the engagement provided the auditor will comply with relevant ethical requirements, including those
pertaining to independence, relating to financial statement audit engagements and all PSAs relevant to the audit.
B. Accept the engagement provided distribution of the auditor’s report is limited to the entity’s management.
C. Not accept the engagement unless also engaged to audit the full financial statements of the entity.
D. Not accept the engagement because to do so would be tantamount to agreeing to express a piecemeal opinion.

12. The following statements are ordinarily included in the separate auditor’s report on an entity’s compliance with
contractual agreements, except

A. “We conducted our audit in accordance with Philippine Standards on Auditing.”

B. “In our opinion, the financial statements of the Company are presented fairly, in all material respects, in
accordance with Philippine Financial Reporting Standards.”
C. “An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements.”
D. “We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.”
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 PSA 810
Engagements to Report on Summary Financial Statements

13. An auditor may report on summary financial statements that are derived from complete audited financial statements
if the

A. Auditor indicates whether the information in the summary financial statements is consistent with the audited
financial statements from which it was derived.
B. Summary financial statements are distributed only to management and the board of directors.
C. Auditor describes the additional review procedures performed on the summary financial statements.
D. Summary financial statements are presented in comparative form with the prior year’s summarized financial
statements.

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