Exam 3: Audit Reports

Subsequent to the close of Spacely Sprockets fiscal year ending October 31, 2012, a major debtor has declared bankruptcy due to a series of events.The receivable is significantly material in relation to the financial statements, and recovery is doubtful.The debtor had confirmed the full amount due to Spacely Sprocket at the balance sheet date.Because the account was confirmed at the balance sheet date, Spacely refuses to disclose any information in relation to this subsequent event.The CPA believes that all other accounts were stated fairly at the balance sheet date.In addition, Spacely changed their method of inventory valuation from FIFO to LIFO.This change was disclosed in Note X to the financial statements.Accordingly, what type of opinion should be expressed?

As a result of management's refusal to permit the auditor to physically examine inventory, the auditor must depart from the unqualified audit report because:

If the phrase "except for" is present in the opinion paragraph of the audit report, the auditor has issued a(n):

When dealing with materiality and scope limitation conditions:

A qualified opinion can be issued for which of the following? I.When a limitation on the scope of the audit has occurred II.When the auditor lacks independence III.When generally accepted accounting principles have not been used

When an auditor is trying to determine how changes can affect consistency and and/or comparability, he should keep in mind that:

When a qualified opinion is issued, an explanatory paragraph is added immediately after the opinion paragraph to explain the nature of the qualification that affects the opinion.

Whenever an auditor issues an audit report for a public company, the auditor can choose to issue a report in which of the following forms? I.A combined report on financial statements and internal control over financial reporting II.Separate reports on financial statements and internal control over financial reporting

A modified unqualified audit report arises when the auditor believes the financials are fairly stated but also believes additional information should be provided.

Which of the following is incorrect concerning scope limitations?

If there is a deviation in the statements' preparation in accordance with GAAP and another accounting principle was applied on a basis that was not consistent with that of the preceding year:

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

There are three conditions necessitating a departure from an unqualified audit report.Name, discuss and state the appropriate audit report for each of these three conditions.

The audit report date on a standard unqualified report indicates:

A misstatement in the financial statements can be considered material if knowledge of the misstatement will affect a decision of:

If most or all users' decisions that are based on the financial statements are likely to be significantly affected, the materiality level is:

Indicate which changes would require an explanatory paragraph in the audit report.

All of the following are causes for the addition of an explanatory paragraph under both AICPA and PCAOB standards except for:

More than one modification should be included in the audit report when:

The introductory paragraph of the standard audit report for a non-public company performs which functions? I.It states the CPA has performed an audit. II.It lists the financial statements being audited. III.It states the financial statements are the responsibility of the auditor.