Polytechnic University of the Philippines

College of Accountancy
Mabini Campus Sta. Mesa Manila

ACCO 4093 – AUDITING THEORY

Fourth Evaluation Examination
October 16, 2019

Instructions: Select the correct answer for each of the following questions by shading the box corresponding to your
choice on the scannable answer sheet provided. Good luck and God bless! 

CASE - You have been presented with the following draft financial information about BDM Corporation, very
successful company that develops and licenses specialist computer software and hardware. Its non-current assets mainly
consist of property, computer hardware and investments, and there have been additions to these during the year. The
company is experiencing increasing competition from rival companies, most of which specialize in hardware or
software, but not both. There is pressure to advertise and to cut prices.

You are the audit manager. You are planning the audit and are conducting a preliminary analytical review and
associated risk analysis for this client for the year ended 31 May 2019. You have been provided with a summarized
draft statement of comprehensive income which has been produced very quickly and certain accounting ratios and
percentages. You have been informed that the company accounts for research and development costs in accordance with
IAS 38 Intangible Assets.

Statement of comprehensive income (In thousand pesos)

Year ended 31 May
2019 2018
Revenue 15,206 13,524
Cost of sales 3,009 3,007
–––––– ––––––
Gross profit 12,197 10,517
Distribution costs 3,006 1,996
Administrative expenses 994 1,768
Selling expenses 3,002 274
–––––– ––––––
Operating profit 5,195 6,479
Net interest receivable 995 395
Income tax expense 3,104 1,452
–––––– ––––––
Profit 3,086 5,422
–––––– ––––––
Retained profits 1,617 3,983
–––––– ––––––
Dividends paid 1,469 1,439

Accounting ratios and percentages:

Earnings per share 0·43 1·04
Gross margin 0·80 0·78
Expenses as a percentage of revenue:
Distribution costs 0·20 0·15
Administrative expenses 0·07 0·13
Selling expenses 0·20 0·02
Operating profit 0·34 0·48

Answer the following:

1. Using the information above, which of the following statement is true about the performance of the company
for the two years.
A. The company has increased its revenues by 12% and its gross profit by 16% which in a competitive market
is very good. However, decreased operating expenses have resulted in a reduction in operating profits of
20%.

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 B. The decrease in the distribution costs as a percentage of revenue may reflect inefficiencies in the method of
distribution in an industry that separates these functions.
C. The gross margin is very low; this is not abnormal in this sector, especially for software (although the
margin is high for hardware), but it may also be the result of errors, because the information has been
produced very quickly. This is also true of the other figures.
D. Total operating expenses as a percentage of revenue have increased substantially with the result that
operating profit as a percentage of revenue has reduced by around a third and gross margin is higher than
the previous year.

2. Using your answer to number 1, (a). Identify the areas that are subject to increased audit risk and (b). Describe
briefly the further audit work you would perform in response to those risks (Audit procedures).

Higher risk areas Audit procedures

A. Cost of sales and operating Obtain a detailed schedule of revenue and cost of sales showing the
expenses opening and closing inventory figures for both software and hardware
and perform a detailed review of changes on (say) a monthly, quarterly
and half-yearly basis.
B. Gross margin and operating Perform detailed analytical procedures on operating expenses and cost
expenses of sales/gross margins on a quarterly and monthly basis and increase
detailed testing of transactions in these areas in order to ensure that
misclassifications have not occurred.
C. Interest receivable Perform further analytical procedures on the interest costs and income
and ensure that these are in line with current interest rates and the
values and types of investments and borrowing held by the company.
D. Taxation Obtain copies of the tax calculations for detailed review, and to
corroborate explanations provided by management.
3. Unlike consulting services, assurance services
A. Are two-party contracts. C. Make recommendations to management.
B. Report on how to use information. D. Report on the quality of information.

4. An audit of financial statements is conducted to determine if the _______.

A. Auditee is following specific procedures or rules set down by some higher authority.
B. Client’s internal control is functioning as intended.
C. Organization is operating efficiently and effectively.
D. Overall financial statements are stated in accordance with an applicable financial reporting framework.

5. Non-assurance engagements include all of the following, except

A. Agreed-upon procedures. C. Compliance audit.
B. Management consulting. D. Preparation of tax returns where no conclusion is expressed.

6. For assurance engagements regarding historical financial information, limited assurance engagements are called
_______.
A. Audits B. Compilations C. Examinations D. Reviews

7. When a CPA expresses an opinion on financial statements, his or her responsibilities extend to ______.
A. Active participation in the implementation of the advice given to the client.
B. An ongoing responsibility for the client’s solvency.
C. The underlying wisdom of the client’s management decisions.
D. Whether the results of the client’s operating decisions are fairly presented in the financial statements.

8. Which one of these is not a type of evidence that would be used for both obtaining an understanding of the
control structure and testing the controls?
A. Reperformance B. Inspection C. Inquiries D. Observation

9. In which of the following situations would an expert be least likely contracted by a CPA?
A. Application of accounting methods in computing inventory balances.
B. Determination of fair values using specialized statistical techniques.
C. Legal opinions concerning interpretations of engagements, statutes and regulations.
D. Valuations of certain types of assets like land and building.

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10. Regardless of how the allocation of the preliminary judgment about materiality was done, when the audit is
complete the auditor must be confident that the combined errors in all accounts are:
A. Equal to the preliminary judgment.
B. Less than or equal to the preliminary judgment.
C. Less than the preliminary judgment.
D. More than the preliminary judgment.

11. When setting a preliminary judgment about materiality,

A. Less evidence is required for a low peso amount than for a high peso amount.
B. More evidence is required for a low peso amount than for a high peso amount.
C. The same amount of evidence is required for either low or high peso amount.
D. There is no relationship between it and peso amount of evidence needed.

12. Which of the following characteristics most likely would heighten an auditor’s concern about the risk of
intentional manipulation of financial statements?
A. Insiders recently purchased additional shares of the entity’s stock.
B. Management places substantial emphasis on meeting earnings projections.
C. The rate of change in the entity’s industry is slow.
D. Turnover of senior accounting personnel is low.

13. With respect to planning an audit, which of the following statements is always true?
A. It is acceptable to perform a portion of the audit of a continuing client at interim dates.
B. Final staffing decisions must be made prior to completion of the planning stage.
C. An inventory count must be observed at year-end.
D. An engagement should not be accepted after the client’s year-end.

14. The element of the audit planning process most likely to be agreed upon with the client before implementation
of the audit strategy is the determination of the _________.
A. Timing of inventory observation procedures to be performed.
B. Procedures to be undertaken to discover litigations, claims, and assessments.
C. Pending legal matters to be included in the inquiry of the client’s attorney.
D. Evidence to be gathered to provide a sufficient basis for the auditor’s opinion.

15. In designing audit programs, an auditor should establish specific audit objectives that related primarily to the
_________.
A. Timing of audit procedures.
B. Selected audit techniques.
C. Financial statement assertions.
D. Cost-benefit of gathering evidence.

16. When an auditor increases the planned assessed level of control risk because certain control procedures were
determined to be ineffective, the auditor would most likely increase the:
A. Level of inherent risk.
B. Level of detection risk.
C. Extent of tests of details.
D. Extent of tests of controls.

17. Which of the following audit techniques would provide an auditor with the most assurance about the
effectiveness of the operation of an internal control procedure?
A. Confirmation with outside parties.
B. Inquiry of client personnel.
C. Observation of client personnel.
D. Recomputation of account balance amounts.

18. Management’s attitude towards aggressive financial reporting and its emphasis on meeting projected profit
goals most likely would significantly influence an entity’s control environment when:
A. The audit committee is active in overseeing the entity’s financial reporting policies.
B. Management is dominated by one individual who is also a shareholder.
C. Internal auditors have direct access to the board of directors.
D. External policies established by parties outside the entity affect its accounting practices.

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19. Which of the following statements describes the processing function of an accounting system?
A. The preparation of financial reports as well as other information, in electronic or printed format, that the
entity uses in measuring and reviewing the entity’s financial performance.
B. Identifying and capturing the relevant information for transactions or events.
C. Editing and validation, calculating, measuring, valuing, summarizing, and reconciling functions.
D. All of the choices describe the processing function.

20. Which of the following descriptions pertain to physical controls?

A. The assignment of incompatible functions to different people.
B. Physical security of assets, including adequate safeguards such as secured facilities over access to assets
and records.
C. Controls performed to check accuracy, completeness, and authorization of transactions.
D. Control activities that include reviews and analyses of actual performance versus budgets, forecasts, and
prior period performance.

21. Management assertions are:

A. Directly related to financial reporting standards.
B. Directly related to standards on auditing.
C. Indirectly related to financial reporting standards.
D. Indirectly related to standards on auditing.

22. A distinction must be made between general audit objectives and specific audit objectives for each account
balance which is:
A. The specific audit objectives are applicable to every account balance on the financial statements.
B. The general audit objectives are stated in terms tailored to the engagement.
C. The general audit objectives are applicable to every account balance on the financial statements.
D. The specific audit objectives are stated in terms tailored to the agreement.

23. Which of the following is not proper match of auditor’s objective with management’s assertion?
A. Ownership matches with rights and obligations.
B. Completeness matches with completeness.
C. Classification matches with presentation.
D. Validity matches with existence/occurrence.

24. Confirmation is the process of obtaining a representation of information or of an existing condition directly
from a third party. Traditionally, confirmations are used to verify ________.
A. Individual transactions between organizations, such as sales transactions.
B. Fixed asset additions.
C. Bank balances and accounts receivable.
D. All of the choices.

25. Negative confirmation requests may be used when ________.

A. The auditor has reason to believe that respondents will disregard negative confirmation requests.
B. The assessed levels of inherent and control risks are high.
C. A substantial number of errors is expected.
D. A large number of small balances is involved.

26. When the recipient has accomplished the confirmation request, replies should be___________.
A. Not sent back since a confirmation request does not necessitate replies.
B. Sent directly to the auditor, with another copy of the reply going to the client.
C. Sent directly to the auditor.
D. Sent directly to the client, after which the client gives the replies to the auditor.

27. CPA Firm X has performed most of the audit of Consolidated Company’s financial statements and qualifies as
the principal auditor. CPA Firm Y did the remainder of the work. Firm X wishes to assume full responsibility
for Firm Y’s work. Which of the following statements is correct?
A. In such circumstances, when appropriate requirements have been met, Firm X should issue a standard
unqualified opinion on the financial statements.

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 B. In such circumstances, when appropriate requirements have been met, Firm X should issue an unqualified
opinion on the financial statements but should make appropriate reference to the Firm Y in the audit report.
C. Such assumption of responsibility violates the profession’s standards.
D. CPA Firm X should normally qualify its audit report on the basis of the scope limitation involved when
another CPA firm is involved.

28. Which of the following is most accurate with respect to a CPA’s responsibility in considering a going concern
question on audits?
A. Based on audit procedures performed, assess whether there is substantial doubt about the entity’s ability to
continue as a going concern.
B. Determine that related uncertainties are properly disclosed and make no mention in the audit report.
C. Perform analytical procedures aimed particularly at assessing whether bankruptcy is probable.
D. Issue a report with a “going concern” modification when failure is at least reasonably probable.

29. The auditor shall consider the status of legal matters up to

A. Date of issuance of the financial statements.
B. Date of audit report.
C. Date of audit report or date of issuance of financial statements, whichever is earlier.
D. Date of audit report or date of issuance of financial statements, whichever is later.

30. An attorney responding to an auditor as a result of the client’s letter of audit inquiry may appropriately limit the
response to ___________.
A. Matters to which the attorney has given substantive attention in form of legal consultation or representation.
B. Legal matters subject to unsettled points of law, uncorroborated information, or other complex judgments.
C. Items, which have high probability of being resolved to the client’s detriment.
D. Asserted claims and pending or threatened litigation.

31. The audit inquiry letter to the client’s legal counsel should be mailed only by the __________.
A. Client after the auditor has reviewed if for appropriate content.
B. Client after review by the auditor’s attorney.
C. Auditor’s attorney after preparation by the client and review by the auditor.
D. Auditor after preparation by the client and review by the auditor.

32. Practice in Public Accountancy shall constitute in a person

A. In an educational institution which involve teaching of accounting, auditing, management advisory services,
finance, business law, taxation, and other technically related subjects.
B. Involved in decision making requiring professional knowledge in the science of accounting, or when such
employment or position requires that the holder thereof must be a certified public accountant.
C. Holding out himself/herself as one skilled in the knowledge, science and practice of accounting, and as a
qualified person to render professional services as a certified public accountant; or offering or rendering, or
both, to more than one client on a fee basis or otherwise.
D. Who holds, or is appointed to, a position in an accounting professional group in government or in a
government owned and/or controlled corporation, including those performing proprietary functions, where
decision making requires professional knowledge in the science of accounting,

33. There was these restrictions that significantly limit the scope of the audit are imposed by the client, the auditor
should generally issue what type of opinion?
A. Adverse B. Disclaimer C. Qualified D. Unqualified

34. An adverse opinion is issued when the auditor believes that _______
A. Some parts of the financial statements are materially misstated, if or misleading.
B. The audit firm is not independent.
C. The financial statements will be found to be misleading or misstated, if an adequate investigation is
performed.
D. The overall financial statements are materially misstated or misleading as a whole that they do not present
fairly the financial position or results of operations and cash flows in conformity with PFRS.

35. A disclaimer is issued whenever the auditor ________.

A. Believes that the overall financial statements are not presented fairly.
B. Believes that some material part(s) of the financial statements are not presented fairly.

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 C. Has determined that the financial statements are presented fairly.
D. Has been unable to satisfy him/her that the overall financial statements are presented fairly.

36. The primary concern in measuring materiality when a client has failed to follow PFRS is usually
A. Measurability of the peso error.
B. The nature of the item in error.
C. Whether it can materially affect some future period.
D. The total peso error in the accounts involved, compared with some base.

37. An auditor who concludes that a material, but not pervasive, uncertainty is not adequately disclosed in the
financial statements should issue a(n):
A. A disclaimer of opinion. C. An adverse opinion.
B. A qualified opinion. D. An unqualified opinion.

38. An auditor has concluded that fraud or error has a material effect on the financial statements. The fraud/error
has not been corrected and reflected in the financial statements. In this case, the pervasiveness of the effect of
fraud and error will determine the opinion. Accordingly, the auditor should issue a(n):
A. Adverse or disclaimer of opinion.
B. Qualified or adverse opinion.
C. Qualified or disclaimer of opinion.
D. Unqualified opinion with emphasis of matter.

39. An entity or business activity for which group or component management prepares financial information that
should be included in the group financial statements.
A. Activity group C. Component
B. Division D. Responsibility center

40. An auditor who, at the request of the group engagement team, performs work on financial information related to
a component for the group audit.
A. Auxiliary auditor C. Component auditor
B. Specialist or expert D. Successor auditor

41. The real-time feature of a Computerized Information System would be least useful when applied to accounting
for a firm’s _______.
A. Property and depreciation. C. Merchandise inventory.
B. Customer account receivable. D. Bank-account balances.

42. Computer systems are typically supported by a variety of utility software packages that are important to an
auditor because they _________.
A. May enable unauthorized changes to data files if not properly controlled.
B. May be significant components of a client’s application programs.
C. Are written specifically to enable auditors to extract and sort data.
D. Are very versatile programs that can be used on hardware of many manufacturers.

43. An auditor would least likely use computer software to:

A. Prepare spreadsheets. C. Construct parallel simulations.
B. Assess CIS control risk. D. Access client data files.

44. Which of the following employees in a company’s computer department should be responsible for designing
new or improved data processing procedures?
A. Control group head C. Flowchart editor
B. Programmer D. System analyst

45. The detection and correction of errors in the data should be the responsibility of __________
A. The data processing manager. C. The independent CPA.
B. The IT department control group. D. The operator.

46. Which of the following is a general IT control that would most likely assist an entity whose system analysts left
the entity in the middle of a major project?

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 A. Check digit verification. C. Grandfather-father-son record retention.
B. Input and output validation routines. D. Systems and documentation.

47. Which of the following is the auditor’s concern regarding a distributed data processing set-up?
A. Systems documentation controls C. Organizational controls
B. Hardware controls D. Access controls

48. An assertion that is particularly difficult to audit respect to personal financial statement is _________
A. Completeness. C. Existence.
B. Presentation and disclosure. D. Rights.

49. Which of the following is not a currently acceptable form of association with prospective financial statements?
A. Examination C. Compilation
B. Review D. Agreed-upon procedures

50. The accountant’s compilation report should be dated as of the date of:
A. Completion of fieldwork.
B. Completion of the compilation.
C. The latest subsequent event referred to in the notes of the financial statements.
D. Transmittal of the compilation report.

51. If the special-purpose financial statements is not suitably titled or the basis of accounting is not adequately
disclosed, the auditor should:
A. Withdraw from the engagement.
B. Reword the title of the financial statements.
C. Issue an appropriately modified report.
D. Request for an additional representation in the management representation letter.

52. Which of the following conditions are generally present when misstatements due to fraud occur?
I. Incentive or pressure. II. Perceived opportunity. III. Rationalization.
A. I and II only. C. I and III only.
B. II and III only. D. I, II, and III.

53. S1: A CPA should maintain confidentiality even in a social environment/media.

S2: A CPA should also maintain confidentiality of information disclosed by a prospective client or employer.
A. Both statements are true.
B. Both statements are false.
C. First statement is true and second statement is false.
D. First statement is false and second statement is true.

54. A CPA shall not disclose any confidential information obtained in the course of a professional engagement
except with the consent of the client. This rule should be understood to preclude a CPA from responding from
an inquiry made by:
A. A Code of Professional Conduct voluntary quality review body.
B. A CPA-shareholder of the client corporation.
C. An investigative body of a CPA society.
D. The trial board of the Code of Professional Ethics.

55. In which of the situations given below would disclosure by a CPA be in violation of the Code?
A. Disclosing confidential information to another accountant interested in purchasing the CPA’s practice.
B. Disclosing confidential information in order to properly discharge the CPA’s responsibilities in accordance
with his profession’s standards.
C. Disclosing confidential information in compliance with a subpoena issued by a court.
D. Disclosing confidential information in a review of the CPA’s professional practice by the PICPA Quality
Review Committee.

56. A CPA in public practice should NOT:

A. Engage in teaching or provision of accounting instruction while still in public practice, since this would
cause a division of time and effort, resulting to impairment of the quality of service provided to clients.
B. Engage in non-accounting related activities which also involve members of the companies that comprise
his/her audit clients.

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 C. Engage in any business, occupation or activity that impairs or might impair integrity, objectivity or the good
reputation of the profession
D. Engage in any business, occupation or activity aside from his/her public accounting practice.

57. The nature and significance of threats may differ depending on whether they arise in relation to the provision of
services to a client. In which of the following types of clients would the Revised Code provide the strictest set
of requirements regarding independence?
A. A non-financial statement audit assurance client.
B. A non-client.
C. A non-assurance client.
D. A financial statement audit client.

58. Client issues that, if known, could threaten compliance with the fundamental principles include the following,
except:
A. Client involvement in illegal activities (such as money laundering).
B. Conservative basis in determining accounting estimates.
C. Dishonesty
D. Questionable financial reporting practices.

59. The objective of an audit of financial statements is to enable the auditor to express an opinion whether:
A. Illegal acts were committed in the conduct of the company’s operations.
B. The company is financially viable and profitable.
C. The financial statements are prepared, in all material respects, in accordance with an identified financial
reporting framework.
D. There is any fraud committed on part of management and employees.

60. PSA 620 (Revised and Redrafted), Using the Work of an Auditor’s Expert, deals with
A. How the auditor’s responsibility for the opinion on the entity’s financial statements will be divided between
the auditor and the auditor’s expert.
B. Situations where the engagement team includes a member with expertise in a specialized area of accounting
or auditing.
C. The auditor’s responsibilities regarding the use of an individual or organization’s work in a field of
expertise other than accounting or auditing, when that work is used to assist the auditor in obtaining
sufficient appropriate audit evidence.
D. The auditor’s use of the work of a management’s expert.

61. S1: Audit sampling can use either be a statistical or a non-statistical approach.
S2: The error that the auditor expects to be present in the population is called the sampling error.
A. Both statements are true.
B. Both statements are false.
C. First statement is true and second statement is false.
D. First statement is false and second statement is true.

62. S1: In a review engagement, the accountant is engaged to use accounting expertise as opposed to auditing
expertise to collect, classify and summarize financial information.
S2: Component is a division, branch, subsidiary, joint venture, associated company or other entity whose
financial information is included in financial statements audited by the principal auditor.
A. Both statements are true.
B. Both statements are false.
C. First statement is true and second statement is false.
D. First statement is false and second statement is true.

63. S1: The auditor may not modify the auditor’s report by using an emphasis of matter paragraph(s) to report
matters other than those affecting the financial statements.
S2: A qualified opinion is expressed when the auditor concludes that an unqualified opinion cannot be
expressed but that the effect of any disagreement with management, or limitation on scope is not so material
and pervasive as to require an adverse opinion or a disclaimer of opinion.
A. Both statements are true.
B. Both statements are false.
C. First statement is true and second statement is false.
D. First statement is false and second statement is true.

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64. S1: A adverse opinion is expressed when the possible effect of a limitation on scope is so material and
pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence and accordingly is
unable to express an opinion on the financial statements.
S2: An disclaimer of opinion is expressed when the effect of a disagreement is so material and pervasive to the
financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the
misleading or incomplete nature of the financial statements.
A. Both statements are true.
B. Both statements are false.
C. First statement is true and second statement is false.
D. First statement is false and second statement is true.

65. S1: Related parties and related party transaction are defined in International Accounting Standard 24 (IAS 24).
S2: Related party are parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial and operating decisions.
A. Both statements are true.
B. Both statements are false.
C. First statement is true and second statement is false.
D. First statement is false and second statement is true.

66. When using the work of a specialist , an auditor may refer to an and identify the specialist in the
auditor’s report if the
A. Auditor wishes to indicate a division of responsibility.
B. Specialist’s work provides the auditor greater assurance of reliability.
C. Auditors express an adverse opinion as a result of the specialist’s findings.
D. Specialist is not independent of the client.

67. In using the work of a specialist, an understanding should exist among the auditor, the client, and the
specialist’s as to the nature of the specialists work. The documentation of this understanding should cover
A. A statement that the specialist assumes no responsibility to update the specialist’s report for future events or
circumstances.
B. The conditions under which a division of responsibility may be necessary.
C. The specialist understanding of the auditor’s corroborative use of the specialist’s findings.
D. The auditor’s disclaimer as to whether the specialist’s findings corroborate the representations in the
financial statements.

68. The external auditor should obtain a sufficient understanding of the internal audit function because
A. The procedures performed by the internal audit staff may eliminate the external auditor’s need for
considering internal control.
B. The understanding of the internal audit function is an important substantive test to be performed by the
external auditor.
C. The work performed by internal auditors may be a factor in determining the nature, timing, and extent of
the external auditor’s procedures.
D. The audit programs, working papers, and reports of internal auditors may often be used as a substitute for
the work of the external auditor’s staff.

69. Which of the following is an incorrect statement concerning the relationship of the internal auditor
and the scope of the external audit of an entity’s financial statements?
A. The external auditor is not required to give consideration to the internal audit function beyond obtaining a
sufficient understanding to identify and assess the risks of material misstatements of the financial
statements and to design and perform further audit procedures.
B. The internal auditors may determine the extent to which audit procedures should be employed by the
external auditor.
C. The nature, timing, and extent of the external auditor’s substantive tests may be affected by the work of
internal auditors.
D. Under certain circumstances, the internal auditors may assist the external auditor in performing substantive
tests and tests of controls.

70. If the external auditor decides that it is efficient to consider how the work performed by the internal
auditors may affect the nature, timing, and extent of audit procedures, he/she should assess the internal auditors’
A. Competence and objectivity. C. Efficiency and experience.
B. Independence and review skills. D. Training and supervisory skills.

71. When the auditor has to determine the need to use the work of an expert, he would least likely
consider
A. The risk of material misstatement based on the nature and complexity of the matter being considered.

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 B. The quantity and quality of other audit evidence available.
C. The cost of using the services of an expert.
D. The materiality of the financial statement item being considered.

72. PSA 620 (Using the Work of an Auditor’s Expert) provides guidance using the work of an auditor’s
expert as audit evidence. According to this standard, an auditor’s expert may be
A. Contracted by the entity but never by the auditor.
B. Contracted or employed by the entity or auditor.
C. Contracted by the auditor but never by the entity.
D. Contracted but not employed by the entity.

73. Which of the following is not a specialist upon whose work an auditor may rely?
A. Internal auditor C. Engineer
B. Appraiser D. Actuary

74. When issuing an unmodified auditor’s report, the auditor

A. May refer to the work of an expert.
B. Should include in the auditor’s report the identity of the expert and the extent of the expert’s involvement.
C. Should not refer to the expert’s work.
D. Should refer to the work of an expert to indicate a division of responsibility.

75. If the results of the expert’s work do not provide sufficient appropriate audit evidence or are not
consistent with other audit evidence, the auditor should
A. Report the matter to the appropriate regulatory agency or the government.
B. Resolve the matter.
C. Express an unqualified opinion with reference to the work of the expert.
D. Withdraw from the engagement.

***END OF THE EXAMINATION***

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