30 Questions
What does the Philippine Standard on Auditing (PSA) discussed in the text primarily focus on?
Auditor's responsibilities regarding comparative information in financial statements
How does the nature of comparative information in an entity's financial statements vary?
Based on the requirements of the applicable financial reporting framework
What is included as an integral part of the current period financial statements?
Corresponding figures from one or more prior periods
What dictates the level of detail presented in the comparative information?
Relevance to the current period figures
If an auditor identifies a possible material misstatement in the comparative information, what must they do?
Perform additional audit procedures to determine if a material misstatement exists
According to PSA 580, what is required regarding written representations for all periods referred to in the auditor's opinion?
The auditor shall obtain written representations
What is the primary purpose of audit procedures?
To evaluate accounting policies
In the given text, who is responsible for the preparation and fair presentation of financial statements?
Management
What did the other auditor express about the financial statements of ABC Company for the year ended December 31, 20X0?
Unmodified opinion
Which auditing standard were the audits conducted in accordance with?
Philippine Standards on Auditing
What was a basis for a qualified opinion mentioned in the text?
Departure from Philippine Financial Reporting Standards
Why are audit procedures selected based on the auditor's judgment?
To tailor procedures to specific risks
Why does the auditor request written representations for all periods referred to in the auditor's opinion?
To ensure the written representations made for prior periods are still appropriate.
In what scenario does the auditor's report on current period financial statements include an Emphasis of Matter paragraph?
When prior period financial statements were misstated, but corresponding figures have been properly restated.
When does the auditor's opinion on the current period need to refer to a modification in the opinion on the prior period?
If the modification in the prior period's opinion affects the comparability of the current and corresponding figures.
What options does an auditor have when expressing an opinion on comparative financial statements?
Express a qualified opinion, an adverse opinion, disclaim an opinion, or include an Emphasis of Matter paragraph.
Under what circumstances may the opinion expressed on prior period financial statements change during the current period's audit?
If events or circumstances materially affect the prior period financial statements during the current period's audit.
When is it necessary for an auditor to express a qualified opinion on financial statements?
If there are unresolved matters affecting comparability or disclosure of financial statements.
In the context of the text provided, what is the auditor's responsibility?
Ensure the financial statements are free from material misstatement
What is the major difference between PSA 710 (Redrafted) and ISA 710 (Redrafted)?
Deletion of 'give a true and fair view'
Why did the auditor qualify their opinion on the financial statements?
Failure to provide depreciation in the financial statements
What is the primary responsibility of management as stated in the text?
Preparing and presenting the financial statements fairly
What action might an auditor take if the predecessor auditor is unwilling to reissue the report on prior period financial statements?
Include a paragraph in their report indicating review of adjustments
Based on the text, what is the auditor's responsibility?
Conducting an audit in accordance with standards
Which standard emphasizes management's responsibility for the preparation of financial statements?
PSA 710
Why was the audit opinion modified to a Qualified Opinion in this case?
Because of issues with physical inventory counting
What aspect did the auditor evaluate as part of their audit procedures?
Appropriateness of accounting policies and reasonableness of estimates
What was the main challenge faced by the auditors regarding physical inventories?
They couldn't observe the physical inventory count
In this scenario, what does a Qualified Opinion mean for the financial statements?
They may not fully reflect the company's financial position
What aspect of internal control is highlighted as management's responsibility in the text?
All of the above
Study Notes
Comparative Information in Financial Statements
- Comparative information includes amounts and disclosures for one or more prior periods in accordance with the applicable financial reporting framework.
- Corresponding figures are included as an integral part of the current period financial statements, and the level of detail presented is dictated primarily by its relevance to the current period figures.
Auditor's Responsibilities
- The auditor shall determine whether the financial statements include the comparative information required by the applicable financial reporting framework and whether such information is appropriately classified.
- If the auditor becomes aware of a possible material misstatement in the comparative information, the auditor must perform additional audit procedures to determine if a material misstatement exists.
Written Representations
- The auditor shall obtain written representations for all periods referred to in the auditor's opinion.
- The auditor requests written representations for all periods referred to in the auditor's opinion, even if the prior period financial statements were not audited, because the auditor needs to reaffirm that the written representations it previously made with respect to the prior period remain appropriate.
Audit Procedures
- Audit procedures are designed to obtain audit evidence about the amounts and disclosures in the financial statements, and to evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management.
- The procedures are selected based on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
Reporting Modifications
- If the prior period financial statements are misstated, the auditor's report may include an Emphasis of Matter paragraph describing the circumstances.
- The auditor may express a qualified opinion, an adverse opinion, disclaim an opinion, or include an Emphasis of Matter paragraph in his/her report on comparative financial statements if the matter giving rise to the opinion modification is unresolved.
- The opinion expressed on the prior period financial statements may change if the auditor becomes aware of circumstances or events that materially affect the prior period financial statements during the current period's audit.
Philippine Standard on Auditing (PSA) 710
- There are no significant differences between PSA 710 (Redrafted) and ISA 710 (Redrafted), except for the deletion of the phrase "give a true and fair view".
- PSA 710 deals with the auditor's responsibilities regarding comparative information in an audit of financial statements.
This quiz covers the auditor's responsibilities regarding comparative information in an audit of financial statements as outlined in Philippine Standard on Auditing (PSA) 710. It discusses the nature of comparative information in financial statements and the auditor's reporting responsibilities.
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