Question 1

Which of the following is a change that is not being debated by auditing standard setters and investors?

Accepted Answer

A)  Adding disclosure about which engagement partner at the firm supervised the audit and who from outside the audit firm participated in the audit 
B)  Adding commentary on areas of risk of material misstatement of the financial statements identified by the auditor. 
C)  Adding commentary about the level of materiality applied by the auditor to perform the audit. 
D)  All of the above are being debated. 
A)  Adding disclosure about which engagement partner at the firm supervised the audit and who from outside the audit firm participated in the audit 
B)  Adding commentary on areas of risk of material misstatement of the financial statements identified by the auditor. 
C)  Adding commentary about the level of materiality applied by the auditor to perform the audit. 
D)  All of the above are being debated.

Question 2

How would the auditor categorize a situation when the financial statements do not contain a footnote the auditor believes is necessary for fair presentation?

Accepted Answer

A)  A scope limitation. 
B)  An uncertainty. 
C)  A departure from GAAP. 
D)  An act discreditable. 
A)  A scope limitation. 
B)  An uncertainty. 
C)  A departure from GAAP. 
D)  An act discreditable.

Question 3

Adverse opinions affect the standard audit report in which of the following ways?

Accepted Answer

A)  Modifying the scope paragraph. 
B)  Adding an explanatory paragraph before the opinion paragraph. 
C)  Modifying the opinion paragraph to read " does not present fairly." 
D)  Both B and C. 
E)  All of the above. 
A)  Modifying the scope paragraph. 
B)  Adding an explanatory paragraph before the opinion paragraph. 
C)  Modifying the opinion paragraph to read " does not present fairly." 
D)  Both B and C. 
E)  All of the above.

Question 4

Scope limitations resulting in disclaimers under U.S. auditing standards affect the standard audit report through which of the following?

Accepted Answer

A)  Modifying the introductory paragraph 
B)  Eliminating the scope paragraph. 
C)  Adding an explanatory paragraph before the disclaimer paragraph. 
D)  Both B and C. 
E)  All of the above. 
A)  Modifying the introductory paragraph 
B)  Eliminating the scope paragraph. 
C)  Adding an explanatory paragraph before the disclaimer paragraph. 
D)  Both B and C. 
E)  All of the above.

Question 5

The auditor should only provide an opinion on the financial statements if the opinion indicates that the financial statements are fairly stated in all material respects.

Accepted Answer

A) True 
 B)False

Question 6

If the auditor concludes that the financial statements taken as a whole are not fairly presented, the auditor should issue an adverse opinion.

Accepted Answer

A) True 
 B)False

Question 7

The division of responsibility between the reporting company's management and the audit firm is described in which one of the following?

Accepted Answer

A)  Scope paragraph. 
B)  Introductory paragraph. 
C)  Notes to the financial statements. 
D)  Opinion paragraph. 
A)  Scope paragraph. 
B)  Introductory paragraph. 
C)  Notes to the financial statements. 
D)  Opinion paragraph.

Question 8

Unqualified audit reports.
For each of the following situations, define the type of problem encountered and provide an explanation as to the type of report which was issued.

Accepted Answer

The answer of Unqualified audit reports.
For each of the following...

Question 9

If a significant scope limitation is imposed by the client, a disclaimer should ordinarily be issued.

Accepted Answer

A) True 
 B)False

Question 10

In which one of the following instances would an auditor most likely issue an adverse opinion?

Accepted Answer

A)  Management declines to present earnings per share in the income statement. 
B)  There is substantial doubt about the entity's ability to continue as a going concern. 
C)  There is a material dollar misstatement that overshadows the overall financial statements. 
D)  The client does not allow the auditor to send confirmations to its three largest customers. 
A)  Management declines to present earnings per share in the income statement. 
B)  There is substantial doubt about the entity's ability to continue as a going concern. 
C)  There is a material dollar misstatement that overshadows the overall financial statements. 
D)  The client does not allow the auditor to send confirmations to its three largest customers.

Question 11

The use of another CPA firm by an audit firm to perform part of the engagement on a client's subsidiary will require the audit firm to do which of the following?

Accepted Answer

A)  Merge with the other CPA firm. 
B)  Perform a peer review on the other CPA firm. 
C)  Ensure the independence of the other CPA firm of the client. 
D)  List the other firm in the footnotes to the client's financial statements. 
A)  Merge with the other CPA firm. 
B)  Perform a peer review on the other CPA firm. 
C)  Ensure the independence of the other CPA firm of the client. 
D)  List the other firm in the footnotes to the client's financial statements.

Question 12

Andrews Corporation adopted an accounting principle that is a material departure from GAAP. The auditor determined that the financial statements are fairly presented, except for this specifically identifiable GAAP departure, and therefore would issue a disclaimer of opinion.

Accepted Answer

A) True 
 B)False

Question 13

When there is a restriction on the scope of the internal control over financial reporting (ICFR) engagement, what should the auditor do?

Accepted Answer

A)  The auditor will either withdraw from the engagement or disclaim an opinion. 
B)  The auditor will issue an adverse opinion. 
C)  The auditor will issue an opinion on the ICFR based on another audit firm's work. 
D)  The auditor will report this directly to the Treadway Commission. 
A)  The auditor will either withdraw from the engagement or disclaim an opinion. 
B)  The auditor will issue an adverse opinion. 
C)  The auditor will issue an opinion on the ICFR based on another audit firm's work. 
D)  The auditor will report this directly to the Treadway Commission.

Question 14

The opinion paragraph of the audit report for Schnook Co. states that the financial statements "do not present fairly". Which type of audit report is this?

Accepted Answer

A)  Improper. 
B)  Adverse. 
C)  Disclaimer. 
D)  Qualified. 
A)  Improper. 
B)  Adverse. 
C)  Disclaimer. 
D)  Qualified.

Question 15

In which one of the following instances would an auditor not issue a disclaimer of opinion?

Accepted Answer

A)  The auditors are not invited to the periodic inventory at year end. 
B)  There are significant misstatements in the financial statements. 
C)  There is a significant limitation on the scope of the engagement. 
D)  There is insufficient evidence for the auditor to form an opinion on the fairness of the financial statements. 
A)  The auditors are not invited to the periodic inventory at year end. 
B)  There are significant misstatements in the financial statements. 
C)  There is a significant limitation on the scope of the engagement. 
D)  There is insufficient evidence for the auditor to form an opinion on the fairness of the financial statements.

Question 16

Types of Audit Opinions.
Aloe Products is an online retailer of lotions and other beauty supplies. The company records revenues at the time that the customer orders are placed on the website, rather than when goods are shipped. Goods are typically shipped two days after the order is places. The auditor determines that the amount of orders placed but not shipped as of the balance sheet date is not material.
REQUIRED:
Which type of audit report would you suggest be issued and why?

Accepted Answer

although the client is not fol

Question 17

The audit report can be a verbal presentation to the audit committee about the client.

Accepted Answer

A) True 
 B)False

Question 18

The client will not allow Collier and Company, CPAs to read the minutes of the board of director's meetings that occurred during the year under audit. Such a limitation will usually result in the auditor issuing a disclaimer.

Accepted Answer

A) True 
 B)False

Question 19

The auditor will modify the audit report on ICFR effectiveness when management's annual certification pursuant to Section 302 of the Sarbanes-Oxley Act is misstated.

Accepted Answer

A) True 
 B)False

Question 20

Uncertainties, such as doubt about the going concern of a client, may result in an adverse opinion.

Accepted Answer

A) True 
 B)False

Which of the following is a change that is not being debated by auditing standard setters and investors?

How would the auditor categorize a situation when the financial statements do not contain a footnote the auditor believes is necessary for fair presentation?

Adverse opinions affect the standard audit report in which of the following ways?

Scope limitations resulting in disclaimers under U.S. auditing standards affect the standard audit report through which of the following?

The auditor should only provide an opinion on the financial statements if the opinion indicates that the financial statements are fairly stated in all material respects.

If the auditor concludes that the financial statements taken as a whole are not fairly presented, the auditor should issue an adverse opinion.

The division of responsibility between the reporting company's management and the audit firm is described in which one of the following?

Unqualified audit reports. For each of the following situations, define the type of problem encountered and provide an explanation as to the type of report which was issued.

If a significant scope limitation is imposed by the client, a disclaimer should ordinarily be issued.

In which one of the following instances would an auditor most likely issue an adverse opinion?

The use of another CPA firm by an audit firm to perform part of the engagement on a client's subsidiary will require the audit firm to do which of the following?

Andrews Corporation adopted an accounting principle that is a material departure from GAAP. The auditor determined that the financial statements are fairly presented, except for this specifically identifiable GAAP departure, and therefore would issue a disclaimer of opinion.

When there is a restriction on the scope of the internal control over financial reporting (ICFR) engagement, what should the auditor do?

The opinion paragraph of the audit report for Schnook Co. states that the financial statements "do not present fairly". Which type of audit report is this?

In which one of the following instances would an auditor not issue a disclaimer of opinion?

The audit report can be a verbal presentation to the audit committee about the client.

The client will not allow Collier and Company, CPAs to read the minutes of the board of director's meetings that occurred during the year under audit. Such a limitation will usually result in the auditor issuing a disclaimer.

The auditor will modify the audit report on ICFR effectiveness when management's annual certification pursuant to Section 302 of the Sarbanes-Oxley Act is misstated.

Uncertainties, such as doubt about the going concern of a client, may result in an adverse opinion.

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 15: Audit Reports on Financial Statements

Which of the following is a change that is not being debated by auditing standard setters and investors?

How would the auditor categorize a situation when the financial statements do not contain a footnote the auditor believes is necessary for fair presentation?

Adverse opinions affect the standard audit report in which of the following ways?

Scope limitations resulting in disclaimers under U.S. auditing standards affect the standard audit report through which of the following?

The auditor should only provide an opinion on the financial statements if the opinion indicates that the financial statements are fairly stated in all material respects.

If the auditor concludes that the financial statements taken as a whole are not fairly presented, the auditor should issue an adverse opinion.

The division of responsibility between the reporting company's management and the audit firm is described in which one of the following?

Unqualified audit reports. For each of the following situations, define the type of problem encountered and provide an explanation as to the type of report which was issued.

If a significant scope limitation is imposed by the client, a disclaimer should ordinarily be issued.

In which one of the following instances would an auditor most likely issue an adverse opinion?

The use of another CPA firm by an audit firm to perform part of the engagement on a client's subsidiary will require the audit firm to do which of the following?

Andrews Corporation adopted an accounting principle that is a material departure from GAAP. The auditor determined that the financial statements are fairly presented, except for this specifically identifiable GAAP departure, and therefore would issue a disclaimer of opinion.

When there is a restriction on the scope of the internal control over financial reporting (ICFR) engagement, what should the auditor do?

The opinion paragraph of the audit report for Schnook Co. states that the financial statements "do not present fairly". Which type of audit report is this?

In which one of the following instances would an auditor not issue a disclaimer of opinion?

The audit report can be a verbal presentation to the audit committee about the client.

The client will not allow Collier and Company, CPAs to read the minutes of the board of director's meetings that occurred during the year under audit. Such a limitation will usually result in the auditor issuing a disclaimer.

The auditor will modify the audit report on ICFR effectiveness when management's annual certification pursuant to Section 302 of the Sarbanes-Oxley Act is misstated.

Uncertainties, such as doubt about the going concern of a client, may result in an adverse opinion.

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters