Exam 3: Audit Reports

A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles. The auditor's report on the financial statements of the year of the change should include

Your CPA firm has completed the fieldwork for the 2019 audit of Sharp Corporation, a private company with an October year-end. You were preparing to draft a standard, unqualified audit report when you discovered that the audit manager on the Sharp engagement owns 10 shares of Sharp's common stock. Prepare the appropriate report.

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.

No reference is made in the auditor's report to other auditors who perform a portion of the audit when I. the other auditor audited an immaterial portion of the audit. II) the other auditor is well known or closely supervised by the principle auditor. III) the principle auditor has thoroughly reviewed the work of the other auditor.

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

When there is uncertainty about a company's ability to continue as a going concern, the auditor's concern is the possibility that the client may not be able to continue its operations or meet its obligations for a "reasonable period of time." For this purpose, a reasonable period of time is considered not to exceed

Auditors of public company financial statements must issue separate reports on internal control over financial reporting.

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

There are four conditions that must be met before an auditor can issue a standard unmodified opinion audit report for the audit of a private company. Please discuss each of these four conditions.

As misstatements become more pervasive, the likelihood of issuing a disclaimer rather than a qualified opinion increases.

The first paragraph of the standard unmodified opinion audit report for a nonpublic company effective for audits of financial statements for fiscal years ending on or after June 15, 2019 performs which of the following functions? I. Presents the auditors' opinion, first. II. Provides additional information related to the responsibilities of management for preparing the financial statements. III. Provides additional information regarding the responsibilities of the auditor in conducting the audit.

All of the following are causes for the addition of an emphasis of a matter paragraph under both AICPA and PCAOB standards except for

PCAOB audit report requirements require the auditor to include the auditor's signature, tenure, city and state where the audit firm is located, as well as the audit report date.

After the auditor determines whether any conditions exist which require a departure from a standard unmodified opinion audit report, the next step in the decision process is to

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

Auditors usually make the materiality judgment by referring to a standard checklist.

Auditing standards in the United States allow an auditor to perform an audit of a nonpublic U.S. entity in accordance with both generally accepted auditing standards in the U.S. and the ISAs.

If the auditor also issues a separate report on internal control over financial reporting for a public company, the additional paragraph following the opinion paragraph is included to reference the audit report on internal control.

Client imposed restrictions on the audit always require a disclaimer of opinion.

William Gregory, CPA, is the principal auditor for an international corporation. Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation. Gregory is satisfied with the independence and professional reputation of the other auditor, as well as the quality of the other auditor's examination. With respect to his report on the consolidated financial statements, taken as a whole, Gregory