Exam 19: Audit Reports on Financial Statements

Dussault & Montgomery, the auditors of Greenwich Corp., relied on Groves & Padden, another PA firm, to audit the Quebec subsidiaries of Greenwich. The responsibility for the opinion to issue on the financial statements is the responsibility of

A misstatement in the financial statements can be considered material if

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

The independent auditor's opinion explains how much evidence the auditor collects during the independent audit. How much evidence is collected?

The use of the term "reasonable assurance" is intended to indicate that an audit cannot be expected to

The appropriate date for the audit report for a public company is the date on which the

When a misstatement in the financial statements exists but is unlikely to affect the decisions of a reasonable user, it would be appropriate to issue

The ASPE (Accounting Standards for Private Enterprises) financial reporting framework normally requires the auditor to report using the corresponding figures approach. This means that the auditor reports on

Double dating a report is done when

When a material uncertainty exists, the auditor must

The auditor's report of the Huge Mega Company indicates that the financial statements are fairly presented except for the goodwill balance, which does not comply with International Financial Reporting Standards. The auditor's report is

Under Canadian Auditing Standards, the introductory paragraph of the independent auditor's report indicates that the auditor has audited the balance sheet, the income statement, the cash flow, a summary of accounting policies and notes, and

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

The auditor would most likely issue a disclaimer of opinion because of

Your client is a large financial institution in Canada. Canadian regulators require that financial statements for such institutions have an audit report that provides an opinion on the consistency of accounting policies. How do these events affect the independent 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?

A company has changed its method of inventory valuation from an unacceptable one to one that complies with ASPE (Accounting Standards for Private Enterprises). The auditor's report on the financial statements of the year of the change should include

The scope paragraph of the standard unqualified audit report in the auditor responsibility section states that the audit is designed to

The following are two unrelated situations. For each situation outline possible deviations (if any) from a standard auditor's report that may be necessary and give reasons. State your assumptions. A) Queen Lake Construction Ltd. uses an aggressive revenue recognition policy under the percentage of completion method for long-term construction contracts. Your review of this year's contracts indicates that several projects look as if they will be high in revenue for the first two years and then have negligible earnings for the next three years. B) Maple Manufacturing Limited constructs furniture out of maple wood. The furniture is prized for its durability and craftsmanship. Last year, the company received a letter from a government agency advising that it had been found that Maple's factory was located on contaminated land that leached hazardous chemicals into the air. This was a preliminary letter stating that a full investigation into the health effects was underway. Management has stated that everything is okay and the investigation was terminated. However, the lawyer refused to sign the legal letter with respect to several lawsuits with regarding employee claims for long-term disability due to a nervous disorder that affected employees' ability to work. Neither the investigation nor the lawsuits are disclosed in the notes to the financial statements.

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