Exam 15: Audit Reports on Financial Statements

For a client with serious going concern issues the auditor has to make a choice between issuing an unqualified audit report with an explanatory paragraph or a disclaimer.

A client company has a history of negative cash flow trends and continuing losses. Which type of opinion will the auditor most likely issue?

If a client expensed the acquisition cost of some assets that should have been capitalized and depreciated them over their useful lives, which of the following would be incorrect?

An auditor can issue a disclaimer of opinion because of an inability to obtain sufficient appropriate evidence.

Because of its importance, the decision about what type of opinion to issue is often made after consultation with other professionals within the firm.

An important component of an audit report is that the title includes the word "competent."

Qualified opinions can only be issued by auditors for which of the following?

According to the AICPA, the auditor needs to form an opinion on the financial statements based on an evaluation of the audit evidence obtained. This is stated in which AICPA principle governing an audit conducted in accordance with GAAS?

In which one of the following instances would an auditor most likely issue a standard unqualified opinion without explanatory language?

In which of the following circumstances would an auditor be most likely to express an adverse opinion on a company's financial statements?

In which one of the following cases would an auditor most likely issue a qualified opinion?

The auditor is only concerned about the aggregate internal control deficiencies when determining the appropriate opinion on internal control over financial reporting (ICFR).

When an auditor is faced with a material departure from GAAP that is pervasive, which of the following should the audit report contain?

For a change in accounting principles that management does not justify to the auditor, the auditor will likely choose between a qualified and an adverse opinion.

The scope paragraph of an unqualified opinion primarily provides information relating to the division of responsibilities.

Unqualified reports. Under what circumstances would an auditor issue an unqualified opinion modified by an explanatory paragraph? Would the paragraph go before or after the opinion paragraph?

Types of Audit Opinions For the past five years, Clark CPAs has audited the financial statements of a manufacturing company. During this period, the audit scope was limited by the client as to the observation of the annual physical inventory. Because Clark CPAs considers the inventories to be material and was not able to satisfy the audit requirements by using other auditing procedures, the firm was unable to express an unqualified opinion on the financial statements in each of the five years. The CPA was allowed to observe physical inventories for the current year ended December 31, 2014, because the client's bank would no longer accept the audit reports. However, to minimize audit fees, the client requested that the CPA not extend audit procedures to the inventory as of the beginning of the year, January 1, 2014. REQUIRED: Which type of audit report would you suggest be issued this year and why?

Disclaimers. Discuss what a disclaimer is, when it is issued, and how it would affect the format of a standard three paragraph audit report.

When financial statements contain a material, unjustified departure from GAAP, which of the following is contained in the audit report?

Which one of the following is an example of the contents of an opinion paragraph found in an audit report?