Question 1

Which of the following would cause the auditors to issue a report on the entity's financial statements other than a standard report?

Accepted Answer

A)  The financial statements present fairly the financial condition of the entity. 
B)  The entity omitted a necessary footnote from the financial statements. 
C)  There were no unusual issues related to the conduct of the audit. 
D)  The auditors do not need to highlight any entity transactions or events. 
A)  The financial statements present fairly the financial condition of the entity. 
B)  The entity omitted a necessary footnote from the financial statements. 
C)  There were no unusual issues related to the conduct of the audit. 
D)  The auditors do not need to highlight any entity transactions or events.

Question 2

An entity accomplished an early extinguishment of debt and the auditors believe that literal application of GAAP would cause recognition of a loss that would materially distort the financial statements and cause them to be misleading.Given these facts,the auditors would probably choose which reporting option?

Accepted Answer

A)  Explain the situation and issue an adverse opinion. 
B)  Explain the situation and issue a disclaimer of opinion. 
C)  Explain the situation and issue an unqualified opinion, relying on Rule 203 of the AICPA Code of Professional Conduct. 
D)  Issue the standard report. 
A)  Explain the situation and issue an adverse opinion. 
B)  Explain the situation and issue a disclaimer of opinion. 
C)  Explain the situation and issue an unqualified opinion, relying on Rule 203 of the AICPA Code of Professional Conduct. 
D)  Issue the standard report.

Question 3

For each of the following situations,indicate by letter the type of report most likely to be issued.
A.Unqualified opinion,no modification.
B.Unqualified opinion,explanatory paragraph for consistency.
C.Unqualified opinion,explanatory paragraph for Rule 203.
D.Unqualified opinion,explanatory paragraph for emphasis of a matter.
E.Unqualified opinion,explanatory paragraph for a going-concern uncertainty.
F.Qualified opinion.
G.Disclaimer of opinion
____ 1.The entity has a lawsuit pending against it.There is significant uncertainty about the outcome of the lawsuit,which could have a highly material impact on the viability of the entity.Management has provided adequate disclosure of the lawsuit in the footnotes accompanying the financial statements.
____ 2.The entity has a lawsuit pending against it and it is probable that the entity will lose the suit.Management has accrued the best estimate of the loss and provided adequate disclosure.It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern.
____ 3.The entity has a lawsuit pending against it and it is probable that the entity will lose the suit.Management has not accrued the best estimate of the loss but has provided information in the footnotes.It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern.
____ 4.Based on recent analysis of usage,the entity has changed the useful life of its office equipment from five to four years.This change is reflected in the depreciation amounts computed for the current year.
____ 5.The entity uses an accounting principle for a class of transactions that is not acceptable under current GAAP.The entity believes and the auditors concur that the financial statements would be misleading if GAAP were to be followed.

Accepted Answer

1.E or G,2

Question 4

For each of the following words and phrases from the auditors' standard report on the entity's financial statements,indicate by letter in which paragraph of the standard report they should appear:
A. Introductory
B. Scope
C. Opinion

Accepted Answer

1.B,2.C,3.

Question 5

A(n)____________________________ scope limitation represents a situation in which management refuses to permit auditors to perform certain auditing procedures or examine certain evidence.

Accepted Answer

The answer of A(n)____________________________ scope limitation represents a situation in...

Question 6

Which of the following statements is not included in the scope paragraph of the standard report on the entity's financial statements?

Accepted Answer

A)  "Our responsibility is to express an opinion on those financial statements.…" 
B)  "Those standards require that we plan and perform the audit...." 
C)  "We believe that our audit provides a reasonable basis for our opinion." 
D)  "An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements." 
A)  "Our responsibility is to express an opinion on those financial statements.…" 
B)  "Those standards require that we plan and perform the audit...." 
C)  "We believe that our audit provides a reasonable basis for our opinion." 
D)  "An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements."

Question 7

In which of the following circumstances would a qualified opinion not be appropriate?

Accepted Answer

A)  A scope limitation prevents the auditors from completing an important auditing procedure. 
B)  The entity has failed to properly disclose going-concern uncertainties. 
C)  An accounting principle at variance with generally accepted accounting principles is used. 
D)  The auditors lack independence with respect to the audited entity. 
A)  A scope limitation prevents the auditors from completing an important auditing procedure. 
B)  The entity has failed to properly disclose going-concern uncertainties. 
C)  An accounting principle at variance with generally accepted accounting principles is used. 
D)  The auditors lack independence with respect to the audited entity.

Question 8

Auditors' opinion begins with "We were engaged to audit ..." when auditors issue a(n)_______________________________________.

Accepted Answer

disclaimer

Question 9

When reporting under GAAS,certain statements are required in all auditors' reports ("explicit")and others are required only under certain conditions ("implicit").Which combination that follows correctly describes the auditors' responsibilities for reporting?

Accepted Answer

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

Question 10

When there is a material departure from GAAP,auditors may issue either an adverse opinion or disclaimer of opinion on the entity's financial statements.

Accepted Answer

A) True 
 B)False

Question 11

When a division of responsibility is noted in the auditors' report on group financial statements,the introductory paragraph would be modified.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  The inability to observe inventories because the auditors were appointed following the date of the financial statements. 
B)  Management's refusal to provide written representations to the auditors. 
C)  The inability to obtain confirmation of year-end balances from customers because of different billing dates. 
D)  The use of the work of component auditors in the audit of group financial statements. 
A)  The inability to observe inventories because the auditors were appointed following the date of the financial statements. 
B)  Management's refusal to provide written representations to the auditors. 
C)  The inability to obtain confirmation of year-end balances from customers because of different billing dates. 
D)  The use of the work of component auditors in the audit of group financial statements.

Question 13

Rule 203 allows auditors to issue an unqualified opinion on the entity's financial statements even when these financial statements contain a departure from an FASB standard.

Accepted Answer

A) True 
 B)False

Question 14

When a GAAP departure is pervasive,affecting numerous accounts and financial statement relationships,the auditors must issue a(n)_____________________________ opinion on the entity's financial statements.

Accepted Answer

The answer of When a GAAP departure is pervasive,affecting numerous...

Which of the following would cause the auditors to issue a report on the entity's financial statements other than a standard report?

For each of the following words and phrases from the auditors' standard report on the entity's financial statements,indicate by letter in which paragraph of the standard report they should appear: A. Introductory B. Scope C. Opinion

A(n)____________________________ scope limitation represents a situation in which management refuses to permit auditors to perform certain auditing procedures or examine certain evidence.

Which of the following statements is not included in the scope paragraph of the standard report on the entity's financial statements?

In which of the following circumstances would a qualified opinion not be appropriate?

Auditors' opinion begins with "We were engaged to audit ..." when auditors issue a(n)_______________________________________.

When reporting under GAAS,certain statements are required in all auditors' reports ("explicit")and others are required only under certain conditions ("implicit").Which combination that follows correctly describes the auditors' responsibilities for reporting?

When there is a material departure from GAAP,auditors may issue either an adverse opinion or disclaimer of opinion on the entity's financial statements.

When a division of responsibility is noted in the auditors' report on group financial statements,the introductory paragraph would be modified.

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

Rule 203 allows auditors to issue an unqualified opinion on the entity's financial statements even when these financial statements contain a departure from an FASB standard.

When a GAAP departure is pervasive,affecting numerous accounts and financial statement relationships,the auditors must issue a(n)_____________________________ opinion on the entity's financial statements.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 12: Reports on Audited Financial Statements

Which of the following would cause the auditors to issue a report on the entity's financial statements other than a standard report?

For each of the following words and phrases from the auditors' standard report on the entity's financial statements,indicate by letter in which paragraph of the standard report they should appear: A. Introductory B. Scope C. Opinion

A(n)____________________________ scope limitation represents a situation in which management refuses to permit auditors to perform certain auditing procedures or examine certain evidence.

Which of the following statements is not included in the scope paragraph of the standard report on the entity's financial statements?

In which of the following circumstances would a qualified opinion not be appropriate?

Auditors' opinion begins with "We were engaged to audit ..." when auditors issue a(n)_______________________________________.

When reporting under GAAS,certain statements are required in all auditors' reports ("explicit")and others are required only under certain conditions ("implicit").Which combination that follows correctly describes the auditors' responsibilities for reporting?

When there is a material departure from GAAP,auditors may issue either an adverse opinion or disclaimer of opinion on the entity's financial statements.

When a division of responsibility is noted in the auditors' report on group financial statements,the introductory paragraph would be modified.

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

Rule 203 allows auditors to issue an unqualified opinion on the entity's financial statements even when these financial statements contain a departure from an FASB standard.

When a GAAP departure is pervasive,affecting numerous accounts and financial statement relationships,the auditors must issue a(n)_____________________________ opinion on the entity's financial statements.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters