Question 1

When a qualified or adverse opinion is issued,the qualifying paragraph is inserted

Accepted Answer

A) between the introductory and scope paragraphs. 
B) between the scope and opinion paragraphs. 
C) after the opinion paragraph,as a fourth paragraph. 
D) immediately after the address,as the first paragraph. 
A) between the introductory and scope paragraphs. 
B) between the scope and opinion paragraphs. 
C) after the opinion paragraph,as a fourth paragraph. 
D) immediately after the address,as the first paragraph.

Question 2

An unmodified opinion audit report with an emphasis-of-matter paragraph is issued when the auditor believes the financials are fairly stated but also believes additional information should be provided.

Accepted Answer

A) True 
 B)False

Question 3

The dollar amount of some misstatements cannot be accurately measured.For example,if the client were unwilling to disclose an existing lawsuit,the auditor must estimate the likely effect on

Accepted Answer

A) net income. 
B) users of the financial statements. 
C) the auditor's exposure to lawsuits. 
D) management's future decisions. 
A) net income. 
B) users of the financial statements. 
C) the auditor's exposure to lawsuits. 
D) management's future decisions.

Question 4

When an auditor issues a qualified report due to a scope limitation an explanatory paragraph is normally added.Which,if any,of the following paragraphs are also modified?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 5

Most auditors believe that financial statements are "presented fairly" when the statements are in accordance with GAAP,and that it is also necessary to

Accepted Answer

A) determine that they are not in violation of FASB statements. 
B) examine the substance of transactions and balances for possible misinformation. 
C) review the statements using the accounting principles promulgated by the SEC. 
D) assure investors that net income reported this year will be exceeded in the future. 
A) determine that they are not in violation of FASB statements. 
B) examine the substance of transactions and balances for possible misinformation. 
C) review the statements using the accounting principles promulgated by the SEC. 
D) assure investors that net income reported this year will be exceeded in the future.

Question 6

When there is a lack of consistent application of GAAP due to a new accounting pronouncement,no explanatory paragraph is required.

Accepted Answer

A) True 
 B)False

Question 7

Misstatements must be compared with some measurement base before a decision can be made about materiality.A commonly accepted measurement base includes

Accepted Answer

A) net income. 
B) total assets. 
C) working capital. 
D) all of the above. 
A) net income. 
B) total assets. 
C) working capital. 
D) all of the above.

Question 8

Assume you are the partner in charge of the 2016 audit of Becker Corporation,a private company.The audit report has not yet been prepared.In each independent situation following (1-8),indicate the appropriate action (a-g)to be taken.The possible actions are as follows:
a. Issue an unmodified opinion audit report.
b. Qualify both the scope and opinion paragraphs.
c. Qualify the opinion paragraph.
d. Issue an unmodified opinion with an explanatory paragraph.
e. Issue an unmodified opinion with revised wording (no explanatory paragraph).
f. Issue an adverse opinion.
g. Disclaim an opinion.
The situations are as follows:
________ 1.Becker Corporation carries its property,plant,and equipment accounts at current market values.Current market values exceed historical cost by a highly material amount,and the effects are pervasive throughout the financial statements.
________ 2.Management of Becker Corporation refuses to allow you to observe,or make,any counts of inventory.The recorded book value of inventory is highly material.
________ 3.You were unable to confirm accounts receivable with Becker's customers.However,because of detailed sales and cash receipts records,you were able to perform reliable alternative audit procedures.
________ 4.One week before the end of fieldwork,you discover that the audit manager on the Becker engagement owns a material amount of Becker's common stock.
________ 5.You relied upon another CPA firm to perform part of the audit.Although you were the principal auditor,the other firm audited a material portion of the financial statements.You wish to refer to (but not name)the other firm in your report.
________ 6.You have substantial doubt about Becker's ability to continue as a going concern.
________ 7.Becker Corporation changed its method of computing depreciation in 2016.You concur with the change and the change is properly disclosed in the financial statement footnotes.
________ 8.Ten days after the balance sheet date,one of Becker's buildings was destroyed by a fire.Becker refuses to disclose this information in a footnote to the financial statements,but you believe disclosure is required to conform with GAAP.The amount of the uninsured loss was material,but not highly material.

Accepted Answer

1.f,2.g,3.

Question 9

An audit of historical financial statements most commonly includes the

Accepted Answer

A) balance sheet,statement of retained earnings,and the statement of cash flows. 
B) income statement,the statement of cash flows,and the statement of net working capital. 
C) statement of cash flows,balance sheet,and the statement of retained earnings. 
D) balance sheet,income statement,statement of cash flows,and the statement of changes in stockholders' equity. 
A) balance sheet,statement of retained earnings,and the statement of cash flows. 
B) income statement,the statement of cash flows,and the statement of net working capital. 
C) statement of cash flows,balance sheet,and the statement of retained earnings. 
D) balance sheet,income statement,statement of cash flows,and the statement of changes in stockholders' equity.

Question 10

Which of the following modifications of the auditor's report does not include an explanatory paragraph?

Accepted Answer

A) A qualified report is due to a GAAP departure. 
B) The report includes an emphasis of a matter. 
C) There is a very material scope limitation. 
D) A principal auditor accepts the work of an other auditor. 
A) A qualified report is due to a GAAP departure. 
B) The report includes an emphasis of a matter. 
C) There is a very material scope limitation. 
D) A principal auditor accepts the work of an other auditor.

Question 11

The term "explanatory paragraph" was replaced in the AICPA auditing standards with

Accepted Answer

A) going concern paragraph. 
B) emphasis-of-matter paragraph. 
C) departure from principles paragraph. 
D) consistency paragraph. 
A) going concern paragraph. 
B) emphasis-of-matter paragraph. 
C) departure from principles paragraph. 
D) consistency paragraph.

Question 12

Which of the following is a correct statement regarding the standard unmodified opinion audit report?

Accepted Answer

A) The format of the audit report for public and nonpublic entities are identical. 
B) The auditor's responsibility paragraph includes a statement that the auditors are responsible for selecting the appropriate accounting principles. 
C) The audit report includes the name of the lead partner on the audit. 
D) The scope paragraph includes a statement that the auditor considers internal controls when designing the audit procedures performed. 
A) The format of the audit report for public and nonpublic entities are identical. 
B) The auditor's responsibility paragraph includes a statement that the auditors are responsible for selecting the appropriate accounting principles. 
C) The audit report includes the name of the lead partner on the audit. 
D) The scope paragraph includes a statement that the auditor considers internal controls when designing the audit procedures performed.

Question 13

Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?

Accepted Answer

A) The entity is suing a competitor for a minor patent infringement. 
B) The entity has lost a major customer. 
C) The entity has significant recurring operating losses. 
D) The entity has working capital deficiencies. 
A) The entity is suing a competitor for a minor patent infringement. 
B) The entity has lost a major customer. 
C) The entity has significant recurring operating losses. 
D) The entity has working capital deficiencies.

Question 14

Financial statement users are normally much more concerned about a disclaimer than an unmodified opinion audit report that contains an additional-emphasis-of-matter paragraph.

Accepted Answer

A) True 
 B)False

Question 15

Materiality is essential when an auditor considers his/her determination of the appropriate report for a given set of circumstances.

Accepted Answer

A) True 
 B)False

Question 16

Management has recorded prepaid insurance as an asset in the previous year.This year,to reduce record-keeping costs,it expenses insurance.If the amount is immaterial to the financial statements,

Accepted Answer

A) a disclaimer opinion is issued. 
B) a a qualified opinion is issued. 
C) a standard unmodified opinion audit report is issued. 
D) no audit report can be issued. 
A) a disclaimer opinion is issued. 
B) a a qualified opinion is issued. 
C) a standard unmodified opinion audit report is issued. 
D) no audit report can be issued.

Question 17

Auditing standards require that the audit report must be titled and that the title must

Accepted Answer

A) include the word "independent." 
B) indicate if the auditor is a CPA. 
C) indicate if the auditor is a proprietorship,partnership,or corporation. 
D) indicate the type of audit opinion issued. 
A) include the word "independent." 
B) indicate if the auditor is a CPA. 
C) indicate if the auditor is a proprietorship,partnership,or corporation. 
D) indicate the type of audit opinion issued.

Question 18

The most common case in which conditions beyond the client's and auditor's control cause a scope restriction in an engagement is when the

Accepted Answer

A) auditor is not appointed until after the client's year-end. 
B) client won't allow the auditor to confirm receivables for fear of offending its customers. 
C) auditor doesn't have enough staff to satisfactorily audit all of the client's foreign subsidiaries. 
D) client is going through Chapter 11 bankruptcy. 
A) auditor is not appointed until after the client's year-end. 
B) client won't allow the auditor to confirm receivables for fear of offending its customers. 
C) auditor doesn't have enough staff to satisfactorily audit all of the client's foreign subsidiaries. 
D) client is going through Chapter 11 bankruptcy.

Question 19

The only unmodified opinion audit report that does not include an explanatory paragraph is when other auditors are involved.In this case only the introductory paragraph is modified.

Accepted Answer

A) True 
 B)False

Question 20

Users of the financial statements rely on the auditor's report because of the absolute assurance the report provides.

Accepted Answer

A) True 
 B)False

Exam 3: Audit Reports

When a qualified or adverse opinion is issued,the qualifying paragraph is inserted

An unmodified opinion audit report with an emphasis-of-matter paragraph is issued when the auditor believes the financials are fairly stated but also believes additional information should be provided.

The dollar amount of some misstatements cannot be accurately measured.For example,if the client were unwilling to disclose an existing lawsuit,the auditor must estimate the likely effect on

When an auditor issues a qualified report due to a scope limitation an explanatory paragraph is normally added.Which,if any,of the following paragraphs are also modified?

Most auditors believe that financial statements are "presented fairly" when the statements are in accordance with GAAP,and that it is also necessary to

When there is a lack of consistent application of GAAP due to a new accounting pronouncement,no explanatory paragraph is required.

Misstatements must be compared with some measurement base before a decision can be made about materiality.A commonly accepted measurement base includes

An audit of historical financial statements most commonly includes the

Which of the following modifications of the auditor's report does not include an explanatory paragraph?

The term "explanatory paragraph" was replaced in the AICPA auditing standards with

Which of the following is a correct statement regarding the standard unmodified opinion audit report?

Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?

Financial statement users are normally much more concerned about a disclaimer than an unmodified opinion audit report that contains an additional-emphasis-of-matter paragraph.

Materiality is essential when an auditor considers his/her determination of the appropriate report for a given set of circumstances.

Management has recorded prepaid insurance as an asset in the previous year.This year,to reduce record-keeping costs,it expenses insurance.If the amount is immaterial to the financial statements,

Auditing standards require that the audit report must be titled and that the title must

The most common case in which conditions beyond the client's and auditor's control cause a scope restriction in an engagement is when the

The only unmodified opinion audit report that does not include an explanatory paragraph is when other auditors are involved.In this case only the introductory paragraph is modified.

Users of the financial statements rely on the auditor's report because of the absolute assurance the report provides.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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