10/15/2020 1PB - AR6 | Schoology

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1PB - AR6

ATTEMPT SCORE

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01 Multiple Choice 1/1

The auditor’s report is the medium through which he expresses:

His opinion = YES His disclaimer of opinion = No

His opinion = No His disclaimer of opinion = No

His opinion = No His disclaimer of opinion = YES

His opinion = YES His disclaimer of opinion = YES 

02 Multiple Choice 1/1

Professional auditing standards require that the auditor perform the audit:

Using Philippine Standards on Auditing without any exception.

To provide absolute assurance that all material errors are detected and corrected.

With the aim of detecting fraud committed by the client.

With an attitude of professional skepticism. 

03 Multiple Choice 1/1

Which of the following would most likely cause a CPA not to accept a new audit engagement?

a high level of client business risk.

concluding that there was a high inherent risk of management fraud. 

being approached by the client just before the fiscal year end.

lack of adequate knowledge of the client’s business.

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04 Multiple Choice 1/1

Which of the following situations best illustrates the application of professional skepticism by the external auditor?

G, CPA has decided to continue with the audit of ABC Company. Throughout the course of the audit, G does not
believe any of the representations made by J, controller.

G, CPA is engaged in discussions with J, the client’s controller, regarding several

audit issues. Throughout the meeting with J, J neither assumes that G is dishonest,
nor assumes unquestioned honesty in G’s oral representations.

G, CPA, is engaged in discussions with J, the client’s controller. G obtains several oral representations from J,
which the former readily accepts without further work or support from other audit procedures.

G, CPA, is discussing several audit issues with J, a member of top management. Throughout the meeting with J,

G neither assumes that J is dishonest, nor assumes unquestioned honesty in J’s oral representations.

05 Multiple Choice 1/1

The overall attitude and awareness of an entity’s board of directors concerning the importance of the internal control structure
usually is reflected in its:

Control environment.   

Computer-based controls.

Safeguards over access to assets.

System of segregation of duties.

06 Multiple Choice 1/1

An audit client had multiple uncertainties, and the auditor was able to obtain sufficient appropriate audit evidence regarding each individual
uncertainty.  However, during an audit team meeting, the audit partner believed, and the team agreed, that due to the potential interaction of
the uncertainties and their possible cumulative effect on the financial statements, the auditor concludes that it is not possible to form an
opinion on the financial statements. Select the best opinion to be expressed by the external auditor. 

Disclaimer opinion 

Unqualified opinion

Qualified opinion

Adverse opinion

07 Multiple Choice 1/1

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The audit client is a defendant in a lawsuit alleging infringement of certain patent rights.  However, the ultimate outcome of the litigation cannot
reasonably be estimated by management at this time.  The auditor believes it is reasonably possible for the client to incur a significantly
material loss.  The lawsuit is adequately disclosed in the notes to the financial statements.  Select the best audit opinion to be expressed by
the external auditor.

Adverse opinion

Unqualified opinion 

Disclaimer opinion

Qualified opinion

08 Multiple Choice 0/1

An entity changes its depreciation method for factory assets from the straight-line method to the service hours method (for half of the assets)
and the units of production method (for the remaining assets).  The change is properly reflected in the financial statements, with adequate
notes. The auditor concurs with the change, although it has a material effect on the comparability of the entity’s financial statements. Select the
best audit opinion to be expressed by the external auditor.

Disclaimer opinion

Qualified opinion 

Adverse opinion

Unqualified opinion 

09 Multiple Choice 1/1

An audit client discloses in the notes to the financial statements certain lease obligations. The auditor noted that these leases, while
properly disclosed, were not capitalized. The auditor believes that, after obtaining sufficient appropriate audit evidence, the non-
capitalization of these leases violates IFRS 16, Leases, in a material and pervasive manner. Select the best audit opinion to be expressed
by the external auditor.

Adverse opinion 

Qualified opinion

Unqualified opinion

Disclaimer opinion

10 Multiple Choice 1/1

A company changed its cost flow assumption for inventories, from FIFO to Weighted Average.  However, further audit procedures reveal that
the change could not be justified by the client.  The effect of the change is material but not pervasive. Select the best audit opinion to be
expressed by the external auditor.

Unqualified opinion

Qualified opinion 

Disclaimer opinion
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Adverse opinion

11 Multiple Choice 1/1

P 3,034,900 

P 3,117,600

P 3,057,484

P 2,059,620

12 Multiple Choice 1/1

What is the total payments for merchandise purchases?

P 2,957,275

P 2,021,995 

P 1,952,995

P 2,324,570

13 Multiple Choice 1/1

What is the total cash receipts per books?

P 3,909,900

P 4,109,900 
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P 4,109,900

P 4,034,900

P 4,084,900

14 Multiple Choice 1/1

What is the total cash disbursements per books?

P 3,908,070

P 3,639,070

P 4,010,645

P 3,708,070 

15 Multiple Choice 1/1

What is the cash balance per books on December 31?

P 601,830

P 401,830 

P 326,830

P 353,530

16 Multiple Choice 1/1

What is the adjusted cash balance on December 31?

P 401,830

P 400,830 

P 600,830

P 325,830

17 Multiple Choice 1/1

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P 850,200

P 157,800

P 550,200 

P 757,800

18 Multiple Choice 1/1

P 2,332,000

P 2,261,200 

P 2,402,800

P 1,318,800

19 Multiple Choice 1/1

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Debited by P300,000

Credited by P300,000.

No adjustment. 

Credited by P90,000.

20 Multiple Choice 1/1

In case Mahogany Company fails to record the adjusting entry to correct its receivable with Guimaras Inc., such failure would
result in:

Overstatement of net income amounting to P241,620.

Understatement of net income amounting to P241,620.

Overstatement of net income amounting to P805,400. 

Understatement of net income amounting to P805,400.

21 Multiple Choice 1/1

P 8,820,000

P 7,590,000

P 6,700,000

P 9,710,000 

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22 Multiple Choice 1/1

hat is the cost of goods sold, as estimated?

P 5,997,600

P 5,161,200

P 6,602,800 

P 4,556,000

23 Multiple Choice 1/1

What is the estimated inventory fire loss?

P 1,012,400

P 407,200 

P 416,800

P 437,200

24 Multiple Choice 1/1

Purchase cut-off procedures test the cut-off and completeness assertions. A company should include goods in its inventory if it:

Has paid for the goods.

Has physical possession of the goods.

Holds legal title to the goods 

Has sold the goods.

25 Multiple Choice 1/1

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P 13,920

P 12,728

P 36,458

P 11,600 

26 Multiple Choice 1/1

The gain to be reported on the sale of asset B is

P 18,720

P 0

P 17,528

P 16,400 

27 Multiple Choice 1/1

The 2019 depreciation expense on Asset R is

P 38,880

P 28,560

P 35,200
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35, 00

P 26,880 

28 Multiple Choice 1/1

The 2019 depreciation expense on Asset I is

P 26,000

P 24,000 

P 10,910

P 34,286

29 Multiple Choice 1/1

The total depreciation expense in 2019 on the above-mentioned PPE items is

P 131,280 

P 127,760

P 133,280

P 133,600

30 Multiple Choice 1/1

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Aclient is having discussion with the external auditor regarding impairments. Fill in the required information:

Client In computing impairment of property, plant and equipment, impairment losses

are present if the recoverable amount is less than the carrying value at the time
of impairment test. Am I right?

Auditor That is correct. The recoverable amount is computed as the higher between
the fair value less cost to sell and the value in use.

Client How do I compute the value in use?

Auditor The value in use is computed as the discounted value of net future cash
inflows from continued use of the asset.

Client Okay, which rate should I use for the discounting?

Select the correct reply of the auditor:

“Use the pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset.”

“Use the post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.”

“Use the income tax rate for the current year, considering the status of the company, including any possible exemptions and
special tax considerations allowed under the law.”

“Use the weighted average cost of inventory, since this best reflects the pattern of use of the asset for which you are computing
possible impairment.”

31 Multiple Choice 1/1

P 2,947,200

P 792,000 

None

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P 5,806,400

32 Multiple Choice 1/1

The cost of ending inventory is

P 1,080,000

P 1,269,120

P 1,440,320 

P 1,757,120

33 Multiple Choice 1/1

The total amount related to the development of computer software that should be expensed when incurred, amounted to:

None

P 5,806,400

P 3,760,000

P 5,014,400 

34 Multiple Choice 1/1

You are auditing the financial statements of PELAYO COMPANY for the year ended December 31, 2020. The following items are still
to be resolved:

During 2020, the company had a patent acquired 12 years after its registration. The estimated useful life of the patent is five
years. Pelayo’s accountant does not know what number of years to use for the amortization of the patent for this year. Company
policy states that full year amortization is taken in the year of acquisition.

During 2020, the company’s financial assets at fair value through profit or loss had an unrealized loss of P300,000. Pelayo’s
accountant decided to reflect the unrealized loss as part of other comprehensive income (Part II of the statement of comprehensive
income), net of tax.

What year should be used as denominator in computing the 2020 amortization for Pelayo’s patent?

20 years

5 years 

8 years

12 years

35 Multiple Choice 1/1

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