Reference no: EM132712608

Problem 1: The standard inquiry to the client's attorney should be prepared on

a. Auditor's stationery and signed by a company official.

b. Lawyer's stationery and signed by the auditor.

c. Auditor's stationery and signed by an audit partner.

d. Client's letterhead and signed by a company official.

Problem 2: A CPA who has been engaged to audit financial statements that were prepared on a cash basis

a. Must ascertain that there is proper disclosure of the fact that the cash basis has been used.

b. May not be associated with such statements which are not in accordance with generally accepted accounting principles.

c. Must render a qualified report explaining the departure from generally accepted accounting principles in the opinion paragraph.

d. Must restate the financial statements on an accrual basis and then render the standard (short-form) report.

Problem 3:  Which of the following statements is not correct?

a. Forecasts can be provided for general use.

b. Forecasts can be provided for limited use.

c. Projections can be provided for general use.

d. Projections can be provided for limited use.

Problem 4:  Due to a shortage of personnel, the client asked a member firm to assist with the authorization of accounting transactions. This is an example of which type of threat to compliance with fundamental principles under the Code of Ethics?

a. Self-interest threat         c. Advocacy threat

b. Self-review threat           d. Familiarity threat

Problem 5: Which of the following instances would impair a CPA's independence when they have retained as the auditor?

I. A charitable organization where the CPA serves as treasurer.

II. A municipality where the CPA owns P250,000 of the P25 million outstanding bonds of the municipality.

III. A company that the CPA's investment club owns a 10% investment interest

a. I and II     c. II and III

b. I and III    d. I, II, and III