Question 1

PCAOB auditing standards require the disclosure of the audit engagement partner's name and other accounting firms participating in the audit engagement in the audit report.

Accepted Answer

A) True 
 B)False

Question 2

Whenever an auditor issues a qualified report, he or she must use the term "except for " in the opinion paragraph.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements are true for the standard unmodified opinion audit report of a nonpublic entity for fiscal years ending on or after June 15, 2019?
I. The management's responsibilities paragraph states that management is responsible for the preparation and the fair presentation of the financial statements.
II. The opinion paragraph is stated as a statement of absolute fact and a guarantee by the auditor.

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  I and II 
D)  Neither I nor II

Question 4

The appropriate audit report date for a standard unmodified opinion audit report for a nonpublic entity should be

Accepted Answer

A)  the date the financial statements are given to the Board of Directors. 
B)  the date of the financial statements. 
C)  the date the auditor completed the auditing procedures in the field. 
D)  60 days after the date of the financial statements as required by the SEC. 
A)  the date the financial statements are given to the Board of Directors. 
B)  the date of the financial statements. 
C)  the date the auditor completed the auditing procedures in the field. 
D)  60 days after the date of the financial statements as required by the SEC.

Question 5

When an adverse opinion is issued, a scope paragraph would be

Accepted Answer

A)  qualified. 
B)  unchanged. 
C)  deleted. 
D)  expanded to identify the additional procedures which the auditor performed. 
A)  qualified. 
B)  unchanged. 
C)  deleted. 
D)  expanded to identify the additional procedures which the auditor performed.

Question 6

The standard unmodified opinion audit report for a nonpublic entity must

Accepted Answer

A)  have a report title that includes the word "CPA." 
B)  be addressed to the company's stockholders and creditors. 
C)  be dated. 
D)  include an explanatory paragraph. 
A)  have a report title that includes the word "CPA." 
B)  be addressed to the company's stockholders and creditors. 
C)  be dated. 
D)  include an explanatory paragraph.

Question 7

Section 404(b) of the Sarbanes Oxley Act requires that the auditor of a public company attest to management's report on the efficiency of internal controls over financial reporting.

Accepted Answer

A) True 
 B)False

Question 8

The phrase "auditing standards generally accepted in the United States of America" can be found in the auditor's opinion paragraph of a standard unmodified opinion report for a nonpublic company.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is false concerning the principal CPA firm's alternatives when issuing a report when another CPA firm performs part of the audit?

Accepted Answer

A)  Issue a joint report signed by both CPA firms. 
B)  Make no reference to the other CPA firm in the audit report, and issue the standard unqualified opinion. 
C)  Make reference to the other auditor in the report by using modified wording (a shared opinion or report). 
D)  A qualified opinion or disclaimer, depending on materiality, is required if the principal auditor is not willing to assume any responsibility for the work of the other auditor. 
A)  Issue a joint report signed by both CPA firms. 
B)  Make no reference to the other CPA firm in the audit report, and issue the standard unqualified opinion. 
C)  Make reference to the other auditor in the report by using modified wording (a shared opinion or report). 
D)  A qualified opinion or disclaimer, depending on materiality, is required if the principal auditor is not willing to assume any responsibility for the work of the other auditor.

Question 10

When a pervasive scope limitation exists,

Accepted Answer

A)  a disclaimer of opinion rather than a qualified opinion is generally required. 
B)  the auditor's responsibility paragraph is modified to indicate that the auditor was not able to obtain sufficient appropriate evidence to express an audit opinion. 
C)  sections of the auditor's responsibility paragraph are eliminated to avoid stating anything that might lead readers to believe that other parts of the financial statements might be fairly stated. 
D)  all of the above. 
A)  a disclaimer of opinion rather than a qualified opinion is generally required. 
B)  the auditor's responsibility paragraph is modified to indicate that the auditor was not able to obtain sufficient appropriate evidence to express an audit opinion. 
C)  sections of the auditor's responsibility paragraph are eliminated to avoid stating anything that might lead readers to believe that other parts of the financial statements might be fairly stated. 
D)  all of the above.

Question 11

Indicate which change(s) would require an explanatory paragraph in the audit report.

Accepted Answer

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

Question 12

Changes in reporting entities, such as the inclusion of an additional company in combined financial statements, affect comparability but not consistency, and therefore do not require an explanatory paragraph in the audit report.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  adverse opinion. 
B)  disclaimer of opinion. 
C)  unqualified opinion. 
D)  qualified opinion. 
A)  adverse opinion. 
B)  disclaimer of opinion. 
C)  unqualified opinion. 
D)  qualified opinion.

Question 14

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 15

With regards to critical audit matters as defined by the PCAOB, the auditor would likely consider what type(s) of issues that involved "especially challenging, subjective, or complex auditor judgment" matters?
 Name at least three specific matters.

Accepted Answer

• the auditor's assessment of the risks

Question 16

Financial statement users are typically more concerned with an unmodified report with explanatory paragraphs than they are with a disclaimer of opinion.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  the PCAOB. 
B)  a reasonable user of the financial statements. 
C)  an accountant. 
D)  the SEC. 
A)  the PCAOB. 
B)  a reasonable user of the financial statements. 
C)  an accountant. 
D)  the SEC.

Question 18

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 19

The first step to be followed when deciding the appropriate audit report in a given set of circumstances is to

Accepted Answer

A)  decide the appropriate type of report for the condition. 
B)  write the report. 
C)  determine whether any conditions exist requiring a departure from a standard unmodified opinion audit report. 
D)  decide the materiality for each condition. 
A)  decide the appropriate type of report for the condition. 
B)  write the report. 
C)  determine whether any conditions exist requiring a departure from a standard unmodified opinion audit report. 
D)  decide the materiality for each condition.

Question 20

Which of the following are changes that affect the comparability of financial statements but not the consistency and therefore, do not have to be included in the auditor's report?

Accepted Answer

A)  error corrections not involving principles 
B)  changes in accounting estimates 
C)  variations in the format and presentation of financial information 
D)  all of the above 
A)  error corrections not involving principles 
B)  changes in accounting estimates 
C)  variations in the format and presentation of financial information 
D)  all of the above

Exam 3: Audit Reports

PCAOB auditing standards require the disclosure of the audit engagement partner's name and other accounting firms participating in the audit engagement in the audit report.

Whenever an auditor issues a qualified report, he or she must use the term "except for " in the opinion paragraph.

The appropriate audit report date for a standard unmodified opinion audit report for a nonpublic entity should be

When an adverse opinion is issued, a scope paragraph would be

The standard unmodified opinion audit report for a nonpublic entity must

Section 404(b) of the Sarbanes Oxley Act requires that the auditor of a public company attest to management's report on the efficiency of internal controls over financial reporting.

The phrase "auditing standards generally accepted in the United States of America" can be found in the auditor's opinion paragraph of a standard unmodified opinion report for a nonpublic company.

Which of the following is false concerning the principal CPA firm's alternatives when issuing a report when another CPA firm performs part of the audit?

When a pervasive scope limitation exists,

Indicate which change(s) would require an explanatory paragraph in the audit report.

Changes in reporting entities, such as the inclusion of an additional company in combined financial statements, affect comparability but not consistency, and therefore do not require an explanatory paragraph in the audit report.

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

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

With regards to critical audit matters as defined by the PCAOB, the auditor would likely consider what type(s) of issues that involved "especially challenging, subjective, or complex auditor judgment" matters? Name at least three specific matters.

Financial statement users are typically more concerned with an unmodified report with explanatory paragraphs than they are with a disclaimer of opinion.

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

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.

The first step to be followed when deciding the appropriate audit report in a given set of circumstances is to

Which of the following are changes that affect the comparability of financial statements but not the consistency and therefore, do not have to be included in the auditor's report?

The Demand for Audit and Other Assurance Services

The CPA Profession

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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