Exam 19: Audit Reports on Financial Statements

When determining whether an exception is highly material, the extent to which the exception affects different parts of the financial statements must be considered. This is referred to as

Beem & Lord, a PA firm, audited the financial statements of Frazer Inc. Since this was a first time audit, Beem & Lord did not audit the comparative financial statements, as this was done by the previous auditor. Beem & Lord should expand their report to include an explanation in

Whenever the client imposes restrictions on the scope of the audit, the auditor should be concerned about the possibility that management is trying to prevent discovery of misstated information. In such cases, which type of report should be issued?

Clark Kent is a PA partner at the firm of Kent, Lane, and Lang, a limited liability partnership. Kent's firm has just completed the audit of a client with a March 31, 2015, year end. How should the audit report be signed?

The "unqualified report with explanatory paragraph" or the "unqualified report with modified wording"

If the balance sheet of a company is dated December 31, 2015, the audit report is dated March 6, 2016, and both are released to the public on March 15, 2016, this indicates that the auditor has searched for material unrecorded transactions and events that occurred up to

A misstatement in the financial statements can be considered material if

The auditor's report of the Samcorp Company indicates that the auditor is unable to form an opinion on whether the financial statements of the company are fairly presented due to scope restrictions and unavailable and incomplete records. The auditor's report

Bianca Jones was engaged to conduct the audit of Smilicor Company (a toy distributor) three months after its year-end date. Bianca was unable to conduct an audit of opening inventory but was able to satisfy herself with respect to the opening balances. She was also able to conduct audit procedures for other opening balances; for example, by observing fixed assets. What type of audit opinion would Smilicor receive?

It is management's responsibility to select the accounting policies that are used in the preparation of the financial statements. What is the auditor's responsibility with respect to these accounting policies?

The audit report date is important to users because it indicates the last day

The phrase "in our opinion" indicates that

Explain four different variations that could occur in unqualified audit reports. For each variation, state how the auditor's report is affected and provide an example.

Your client has experienced a major data breach with lawsuits and fines pending of significant and uncertain amounts. These events are disclosed in the client's financial statements and are clearly explained in the notes. How do these events affect the independent auditor's report?

ProForce Inc. is facing a large lawsuit from its employees. The contingency is significant and may lead to a going concern issue if ProForce is found guilty. ProForce took the adequate measures, as prescribed by IFRS (International Financial Reporting Standards), to account, disclose, and present the contingency in the financial statements. The auditor should

When Dussault & Montgomery relies on Groves & Padden, another PA firm, to audit the Quebec subsidiaries of one of their audit clients, Dussault & Montgomery should

Your client has two sets of financial statements. One set is in compliance with IFRS, while the other set is in compliance with local tax legislation and will be used only with the tax returns. How do these events affect the independent auditor's report?

Mafah Distribution Limited has requested that the audited financial statements be completed by January 5, five days after the December 31 year-end. This means that the auditor will be unable to verify subsequent payments on accounts receivable and will be unable to determine whether accounts payable have been set up correctly. What type of audit report should Mafah receive if the auditor is unable to use alternative procedures for these two audit areas?

Julia is in the process of auditing the legal liability section of the financial statements. The controller indicated that he did not want her to contact their external lawyers and he is refusing to grant her access to the detail of the legal expense for the year and any legal invoices. What should Julia do in this situation? Indicate the steps she should take.

When the auditor knows that the financial statements may be misleading because they were not prepared in accordance with an acceptable financial reporting framework, he or she must issue