Exam 12: Reports on Audited Financial Statements

When a circumstance-imposed scope limitation has a material but not pervasive effect on the sufficiency of the auditors' evidence,the auditors' report will

For each of the sentences or phrases below,indicate,by letter,in which section of the standard (unmodified)report on the entity's financial statements the sentence or phrase would appear. A. Introductory paragraph B. Management's Responsibility section C. Auditor's Responsibility section D. Opinion paragraph ___ 1. Our responsibility is to express an opinion on these financial statements based on our audits. ___ 2. The financial statements referred to above present fairly, in all material respects, the financial position of… ___ 3. We have audited the accompanying financial statements of… ___ 4. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. ___ 5. Management is responsible for the preparation and fair presentation of these financial statements…

Which of the following is true with respect to the auditors' report on summary financial statements?

Auditors would not normally issue a qualified opinion on the entity's financial statements when

If the auditors obtains sufficient appropriate evidence on the entity's accounts receivable balance by alternative procedures because it is impracticable to confirm accounts receivable,the opinion on the entity's financial statements should be unmodified and would

When updating the report on prior-years' financial statements presented in comparative form,the auditors' responsibility for the prior-years' financial statements is

Auditors will issue an adverse opinion when

Which of the following statements is not included in the Auditor's responsibility section of the standard (unmodified)report on the entity's financial statements?

When audited financial statements are presented in a document containing other information,the auditors should

During the year under audit,Forrest Corporation experienced significant losses due to a pervasive fraud scheme.Because of the lack of documentary evidence and inability to perform appropriate auditing procedures,the auditors were unable to determine the total amount of the loss.What type of report should the auditors issue?

The auditors have determined that there is substantial doubt about an entity's ability to continue as a going concern.When considering the appropriateness of management's disclosures and severity of the uncertainty,all of the following reports could be issued,except

When auditors lack independence,which of the following is true about the report on the entity's financial statements that should be issued?

Reference in a group auditors' report to the fact that part of the audit of group financial statements was performed by component auditors most likely would be an indication of

Which of the following scope limitations would ordinarily be of most concern to the auditors?

Under which of the following circumstances would a disclaimer of opinion on the entity's financial statements not be appropriate?

Harris is auditing the financial statements of Cole Corp.,an energy company.The FASB requires that these financial statements must be accompanied by supplementary mineral reserve information.If this required information is materially misstated,what type of report should Harris issue?

Which of the following best describes the auditors' responsibility when financial statements are presented in comparative format?

Which of the following situations would require auditors to add an other-matter paragraph to their report on comparative financial statements?

Below are two independent situations. A.Grinner and Greeter,CPAs,were engaged to perform an audit of the financial statements of Happy Inc.Happy's management would not allow Grinner and Greeter to confirm any of the accounts receivable.All other auditing procedures were performed as considered necessary by Grinner and Greeter and no issues were encountered.However,Grinner and Greeter were unable to satisfy themselves with regard to the balance in accounts receivable. B.Tick and Tie,CPAs,were performing their annual audit of Johnson Manufacturing Company.Johnson is currently being sued for $2,000,000 related to an alleged defective product that they sold to a customer.Johnson's legal counsel has told Tick and Tie that it is probable that Johnson will lose the suit and have to pay the entire $2,000,000.Johnson's management has included information in the footnotes about the lawsuit.However,they have not recorded any loss or liability in the income statement or balance sheet. Required: For each of the independent situations presented above,state what type of opinion should be issued on the company's financial statements.Briefly explain your rationale.Finally,state which paragraphs,if any,of the standard report would be modified.

Harris & Thompson were engaged to audit Smart Corp's comparative financial statements for the years ended December 31,Year 1 and Year 2.The Year 1 financial statements were presented in accordance with generally accepted accounting principles,but the Year 2 financial statements were determined to be materially misstated.As a result,Harris & Thompson should