Question 1

The audit report date is the date the auditor completed audit procedures in the field.

Accepted Answer

A) True 
 B)False

Question 2

EPM,Inc.,is a private manufacturing company with a calendar year-end.Their financial statements include a balance sheet,a statement of income,statement of cash flows,and statement of stockholders' equity.For the most recent audit,Harrington and Perry,LLP,audited the 2011 and 2012 financial statements.The auditors completed all significant fieldwork on March 5,2013 and issued the audit report on March 16,2013.
Required:
Consider all the facts given and write the standard unqualified auditor's report,including all eight sections of the report.

Accepted Answer

Independent Auditor's Report
To the Boar

Question 3

Auditing standards for public companies are established by the:

Accepted Answer

A)  SEC. 
B)  FASB. 
C)  PCAOB. 
D)  IRS. 
A)  SEC. 
B)  FASB. 
C)  PCAOB. 
D)  IRS.

Question 4

The phrase "auditing standards generally accepted in the United States of America" can be found in the opinion paragraph of a standard,unqualified audit report for a non-public company.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 7

Which of the following statements are true for the audit report of a non-public entity?
I.The introductory paragraph states that management is responsible for the preparation and content of the financial statements.
II.The scope paragraph states that the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management.

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 8

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 9

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

Accepted Answer

A)  changes that affect comparability but not consistency require an explanatory paragraph. 
B)  items that materially affect the comparability of financial statements requires a disclaimer of opinion. 
C)  changes that affect consistency require an explanatory paragraph if they are material. 
D)  changes that involve either comparability or consistency only need to be mentioned in the footnotes. 
A)  changes that affect comparability but not consistency require an explanatory paragraph. 
B)  items that materially affect the comparability of financial statements requires a disclaimer of opinion. 
C)  changes that affect consistency require an explanatory paragraph if they are material. 
D)  changes that involve either comparability or consistency only need to be mentioned in the footnotes.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The introductory paragraph of the auditor's report states that the auditor is responsible for the preparation,presentation and opinion on financial statements.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  I only 
B)  II only 
C)  Either I or II. 
D)  Neither I nor II. 
A)  I only 
B)  II only 
C)  Either I or II. 
D)  Neither I nor II.

Question 13

The only modified unqualified opinion 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 14

When a company's financial statements contain a departure from GAAP with which the auditor concurs,the departure should be explained in:

Accepted Answer

A)  the scope paragraph. 
B)  an explanatory paragraph that appears before the opinion paragraph. 
C)  the opinion paragraph. 
D)  an explanatory paragraph after the opinion paragraph. 
A)  the scope paragraph. 
B)  an explanatory paragraph that appears before the opinion paragraph. 
C)  the opinion paragraph. 
D)  an explanatory paragraph after the opinion paragraph.

Question 15

For the report containing a disclaimer for lack of independence,the disclaimer is in the:

Accepted Answer

A)  second or scope paragraph. 
B)  third or opinion paragraph. 
C)  first and only paragraph. 
D)  fourth or explanatory paragraph. 
A)  second or scope paragraph. 
B)  third or opinion paragraph. 
C)  first and only paragraph. 
D)  fourth or explanatory paragraph.

Question 16

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

Accepted Answer

A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III

Question 17

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.

Accepted Answer

The three conditions requiring a departu

Question 18

An auditor should issue a qualified opinion with an explanatory paragraph whenever there is a material uncertainty affecting the financial statements.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Accepted Answer

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

Exam 3: Audit Reports

The audit report date is the date the auditor completed audit procedures in the field.

Auditing standards for public companies are established by the:

The phrase "auditing standards generally accepted in the United States of America" can be found in the opinion paragraph of a standard,unqualified audit report for a non-public company.

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

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:

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

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

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

The introductory paragraph of the auditor's report states that the auditor is responsible for the preparation,presentation and opinion on financial statements.

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

When a company's financial statements contain a departure from GAAP with which the auditor concurs,the departure should be explained in:

For the report containing a disclaimer for lack of independence,the disclaimer is in the:

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

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.

An auditor should issue a qualified opinion with an explanatory paragraph whenever there is a material uncertainty affecting the financial statements.

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

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

The Assurance Services Market

The Audit Standards Setting Process

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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 Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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