Acca audit & assurance chapter 6 audit opinions mcqs

🎓 ACCA Audit & Assurance

📋 Exam Instructions

This practice test contains 50 multiple choice questions

Each question has 4 options (A, B, C, D) unless otherwise stated

Choose the best answer for each question

All questions focus on Chapter 6: Audit Opinions

Answers and explanations are provided at the end

📚 Chapter 6 Topics

Unmodified vs Modified audit opinions

Qualified, Adverse, and Disclaimer opinions

Material vs Material and Pervasive issues

Going Concern reporting

Emphasis of Matter and Other Matter paragraphs

📝 PART 1: QUESTIONS (50 Questions)

Question 1: The financial statements of ABC Co have been produced on the going concern basis but the auditor believes that there is no realistic chance of the company surviving for more than a few months The notes refer to going concern matters but the directors refuse to change the basis on which

Chapter 6: Audit Opinions - Unmodified/Modified (50 Questions)

the financial statements have been prepared Which of the following correctly describes the auditor's report?

A An unmodified opinion and a separate section headed 'Materialuncertainty related to going concern'

C It is an alternative name for an 'Emphasis of Matter' paragraph

D It may be used to refer to information in the directors' report thatconflicts with the financial statements

Question 3: The auditor of ABC Co believes that trade

receivables are materially misstated because some amounts appear to be irrecoverable The directors have refused to adjust the financial statements What form of audit opinion should the auditor give?

A An unmodified opinion

B An adverse opinion on the basis of a material misstatement

C A qualified opinion on the basis of a material misstatement

D A qualified opinion on the basis of insufficient audit evidence

Question 4: In the auditor's judgment, management's use of the going concern basis of accounting is appropriate and the material uncertainty has been adequately disclosed in a note

to the financial statements What form of auditor's report should be issued?

A A qualified opinion on the basis of insufficient audit evidence

about the company's ability to continue trading

D Uncertainties

Descriptions:

1 Matters of most significance in the audit of listed entities

2 Draws attention to matters appropriately disclosed in

financial statements

3 Refers to matters not in financial statements but relevant

to users

4 Matters whose outcome depends on future events

Question 6: The auditor has discovered a $5,000 calculation error in the depreciation expense for the year The directors have refused to alter the financial statements The carrying amount of the non-current assets is $1 million and draft profit for the year is $150,000 What is the most appropriate form of audit opinion?

A Unmodified with an emphasis of matter paragraph to draw

attention to the error

B Qualified opinion on the basis of insufficient evidence

C Unmodified

D Qualified opinion on the basis of a misstatement

Question 7: Which of the following is NOT a form of audit opinion in an auditor's report?

A When misstatements are material and pervasive

B When misstatements are material but not pervasive

C When unable to obtain sufficient appropriate audit evidence

D When the financial statements are fairly presented

Question 9: Which of the following would most likely result in

a disclaimer of opinion?

A Disagreement with management over accounting policy

B Material misstatement in inventory valuation

C Inability to attend inventory count representing 90% of total

assets

D Discovery of related party transactions

Question 10: What is the key difference between 'material' and 'material and pervasive'?

A Material affects one area, material and pervasive affects multipleareas

B There is no difference

C Material and pervasive is less significant than material

D Material relates to amounts, material and pervasive relates todisclosures

Question 11: Which ISA governs modifications to the opinion

in the independent auditor's report?

A When the auditor disagrees with management

B When there is insufficient audit evidence

C When drawing attention to a matter appropriately disclosed in thefinancial statements

D When modifying the audit opinion

Question 13: Which of the following circumstances would require a 'Basis for Qualified Opinion' section?

A When issuing an unmodified opinion

B When including an Emphasis of Matter paragraph

C When disagreeing with management about a material accountingtreatment

D When including Key Audit Matters

Question 14: What should an auditor do if management refuses to provide a written representation letter?

A Issue an unmodified opinion

B Issue a qualified opinion

C Issue a disclaimer of opinion

D Issue an adverse opinion

Question 15: Which of the following best describes when an adverse opinion should be issued?

A When audit evidence is insufficient

B When misstatements are material and pervasive

C When there are going concern uncertainties

D When management lacks integrity

Question 16: In which section of the auditor's report would going concern uncertainties typically be addressed?

A Opinion section only

B Basis for Opinion section

C A separate 'Material Uncertainty Related to Going Concern'

section

D Key Audit Matters section

Question 17: What is the auditor's response when there is a material uncertainty about going concern that is adequately disclosed?

A Modify the opinion

B Include a separate going concern section but do not modify theopinion

C Issue a disclaimer of opinion

D No special reporting required

Question 18: Which of the following would typically result in a qualified opinion due to insufficient audit evidence?

A Disagreement over depreciation method

B Inability to confirm receivables representing 15% of total assets

C Discovery of fraud

D Related party transactions

Question 19: What is the primary difference between an

Emphasis of Matter and Other Matter paragraph?

A Emphasis of Matter modifies the opinion, Other Matter does not

B Emphasis of Matter refers to matters in the financial statements,Other Matter refers to matters outside the financial statements

C There is no difference

D Other Matter is more serious than Emphasis of Matter

Question 20: When would an auditor issue an adverse opinion for going concern issues?

A When there is any going concern uncertainty

B When going concern uncertainties are adequately disclosed

C When the going concern basis is inappropriate and managementrefuses to change it

D When management discusses going concern in the directors'

report

Question 21: Which of the following is required when issuing a modified opinion?

A Key Audit Matters section

B Emphasis of Matter paragraph

C A 'Basis for [Type of] Opinion' section

D Other Matter paragraph

Question 22: What type of opinion should be given when the auditor cannot obtain sufficient evidence about opening

Question 23: Which of the following statements about

materiality in audit opinions is correct?

A Only quantitative factors determine materiality

B Materiality is the same for all clients

C Both quantitative and qualitative factors affect materiality

D Materiality only applies to the income statement

Question 24: When should comparative figures be mentioned

in the auditor's opinion?

A Always

B Never

C Only when there are issues with comparative figures

D Only for listed companies

Question 25: What is the auditor's responsibility regarding other information in the annual report?

A No responsibility

B To audit the other information

C To read and consider whether it is materially inconsistent with thefinancial statements

D To prepare the other information

Question 26: Which of the following would NOT typically result in a modified opinion?

A Material misstatement in revenue recognition

B Inability to obtain sufficient evidence about inventory

C Subsequent events that are properly disclosed

D Disagreement about accounting policy application

Question 27: What is the correct order of sections in an auditor's report with a qualified opinion?

A Opinion, Basis for Qualified Opinion, Key Audit Matters

B Basis for Qualified Opinion, Qualified Opinion, Key Audit Matters

C Qualified Opinion, Basis for Qualified Opinion, Key Audit Matters

D Key Audit Matters, Qualified Opinion, Basis for Qualified Opinion

Question 28: When is a disclaimer of opinion most

appropriate?

A When there are material misstatements

B When the auditor cannot obtain sufficient appropriate evidenceand effects are material and pervasive

C When there are going concern issues

D When management lacks experience

Question 29: Which of the following best describes the auditor's approach to evaluating misstatements?

A Each misstatement is considered individually

B Only the largest misstatement matters

C Misstatements are evaluated individually and in aggregate

D Only misstatements above a certain amount are considered

Question 30: What should an auditor do if they identify a material weakness in internal control?

A Always modify the opinion

B Include in Key Audit Matters if applicable

C Issue a disclaimer of opinion

D Ignore it if financial statements are not misstated

Question 31: Which of the following circumstances would require the most extensive modification to the auditor's report?

A A single material misstatement

B Multiple material and pervasive misstatements

C Inability to obtain evidence about one account balance

D A going concern uncertainty that is disclosed

Question 32: What is the significance of the 'except for' qualification language?

A It indicates an adverse opinion

B It indicates a disclaimer of opinion

C It indicates a qualified opinion

D It indicates an unmodified opinion

Question 33: When should an auditor consider withdrawing from an engagement?

A When any misstatements are identified

B When management lacks integrity or there are significant scopelimitations

C When the entity is loss-making

D When there are related party transactions

Question 34: Which of the following would be included in a 'Basis for Adverse Opinion' section?

A Description of Key Audit Matters

A Re-audit the prior year

B Issue a disclaimer on comparative figures

C Make reference to the other auditor in the opinion

D Ignore the comparative figures

Question 36: Which of the following is NOT a factor in

determining whether misstatements are pervasive?

A Whether effects are confined to specific elements

B Whether they represent a substantial proportion of the financialstatements

C The monetary amount of the misstatement

D Whether they relate to disclosures fundamental to users'

understanding

Question 37: What type of opinion is appropriate when the auditor disagrees with management about the adequacy of disclosures?

A The auditor must ensure compliance with all laws

B The auditor considers laws with direct effect on financial

statements

C Laws and regulations are not the auditor's concern

D Only tax laws need to be considered

Question 39: When would an auditor include an Other Matter paragraph about comparative figures?

A Always when presenting comparative figures

B When comparative figures were not audited

C Never

D Only for listed companies

Question 40: What is the primary purpose of the 'Basis for Opinion' section in an unmodified opinion?

A To describe Key Audit Matters

B To confirm compliance with auditing standards and describe thebasis for the auditor's opinion

C To describe management responsibilities

D To list audit procedures performed

Question 41: Which of the following would most likely result

in an adverse opinion?

A Inability to attend inventory count

B Disagreement about a single accounting policy

C Widespread use of inappropriate accounting policies

D Late receipt of legal confirmations

Question 42: What should be included in the auditor's report when there are uncorrected misstatements below the

materiality threshold?

A A qualified opinion

B An Emphasis of Matter paragraph

C No modification to the standard report

D An Other Matter paragraph

Question 43: Which of the following is a key consideration when determining if a scope limitation is material and

pervasive?

A The monetary amount involved

B The nature and timing of the limitation

C The potential effects on the financial statements

D All of the above

Question 44: What is the appropriate response when

management refuses to extend the scope of their assessment

of going concern?

A Always issue a disclaimer

B Consider whether this represents a scope limitation

C Issue an adverse opinion

D No impact on the audit opinion

Question 45: Which of the following statements about Key Audit Matters is correct in relation to modified opinions?

A Key Audit Matters are not included when the opinion is modified

B Key Audit Matters must include the matter giving rise to themodification

C Key Audit Matters are included but should not duplicate themodification

D Key Audit Matters replace the need for a Basis for Opinion section

Question 46: What is the auditor's responsibility regarding events after the reporting period?

A No responsibility after the balance sheet date

B To identify events up to the date of the auditor's report

C To predict future events

D Only to consider events that affect cash

Question 47: Which of the following would typically require an Emphasis of Matter paragraph?

A A material misstatement

B Insufficient audit evidence

C An unusually important subsequent event that is properly

disclosed

D Disagreement with management

Question 48: What is the key difference between a qualified opinion and an adverse opinion?

A Qualified opinions are for scope limitations, adverse opinions arefor misstatements

B Qualified opinions are for material matters, adverse opinions arefor material and pervasive matters

C There is no difference

D Adverse opinions are more serious than qualified opinions

Question 49: When should an auditor communicate with those charged with governance about potential modifications to the audit opinion?

A Only after the opinion is finalized

B As soon as potential modifications are identified

C Never, as this is confidential

D Only if requested by management

Question 50: Which of the following best describes the

concept of 'true and fair view' or 'present fairly'?

A The financial statements are completely accurate

B The financial statements are free from material misstatement andcomply with the financial reporting framework

C The financial statements guarantee future performance

D The financial statements are prepared by qualified accountants

✅ PART 2: ANSWERS & EXPLANATIONS

represents a material and pervasive misstatement The financial

statements are fundamentally inappropriate, requiring an adverse

opinion

Question 2

✅ Correct Answer: D It may be used to refer to information in the directors' report that conflicts with the financial statements

📚 Explanation:

An Other Matter paragraph refers to matters other than those

presented or disclosed in the financial statements that are relevant

to users' understanding of the audit, auditor's responsibilities, or theauditor's report This can include conflicting information in other

parts of the annual report

disclosure

Question 5 - Matching