Exam 18: Reports on Audited Financial Statements

When the audited financial statements of the prior year are presented together with those of the current year, the continuing auditor's report should cover

If the principal auditor decides to make reference to the other auditor's examination, the introductory paragraph must specifically indicate the

When the entity fails to include information that is necessary for the fair presentation of financial statements in the body of the statements or in the related footnotes, it is the responsibility of the auditor to present the information, if practicable, in the auditor's report and express a(n)

Cravens was asked to perform the first audit of a wholesale business that does not maintain perpetual inventory records. Cravens has observed the current inventory but has not observed the physical inventory at the previous year-end date and concludes that the opening inventory balance, which is not auditable, is a material factor in the determination of cost of goods sold for the current year. Cravens will probably

The auditor's best course of action with respect to "other financial information" included in an annual report containing the auditor's report is to

What is an auditor's responsibility for supplementary information, such as segment information, that is outside the basic financial statements, but required by the FASB?

Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?

An auditor's report on financial statements prepared in accordance with a basis of accounting other than generally accepted accounting principles should include all of the following except:

In connection with the examination of the consolidated financial statements of Mott Industries, Frazier, CPA, plans to refer to another CPA's examination of the financial statements of a subsidiary company. Under these circumstances, Frazier's report must disclose

Which of the generally accepted auditing standards of reporting would not normally apply to special reports such as cash basis statements?

A change in accounting estimate is an example of an accounting change that affects comparability and requires an explanatory/emphasis-of-matter paragraph in the audit report.

An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the entity refuses to revise or eliminate the material inconsistency, the auditor may

Abbot, CPA, as principal auditor for consolidated financial statements, is using a qualified report of another auditor. Abbot does not consider the qualification material relative to the consolidated financial statements and Abbot is willing to accept responsibility for the work of the other auditor. What recognition, if any, must Abbot make in his report to the report of the other audit?

A basic assumption that underlies financial reporting is that an entity will continue as a going concern.

When comparative financial statements are presented, the fourth standard of reporting, which refers to financial statements "taken as a whole," should be considered to apply to the financial statements of the

An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. If the entity's financial statements adequately disclose its financial difficulties, the auditor's report is required to include an explanatory/emphasis-of-matter paragraph that specifically uses the phrase(s)

In an engagement to express an opinion on one or more specified elements, accounts, or items of a financial statement, the auditor can generally audit only those specified elements and not the entire set of financial statements. However, the auditor is required to audit the entire set of financial statements if the elements specified include

Identify the special purpose framework used in each of the following situations. 1. A real estate company reports to its partners on the basis used to complete the income tax return. 2. A company has its financial statements prepared on a price-level adjusted basis as required by its lender. 3. An insurance company reports in compliance with the rules of a state insurance commission. 4. A partnership reports on revenues received and expenses paid. What modifications must be made to the standard auditor's report for these situations?

Which of the following would be considered a change that does not affect consistency?

The adverse effects of events causing an auditor to believe there is substantial doubt about an entity's ability to continue as a going concern would most likely be mitigated by evidence relating to the