Question 1

If management fails to provide adequate justification for a change from one generally accepted accounting principle to another,the auditors should

Accepted Answer

A) Add an additional paragraph and express a qualified or an adverse opinion on the entity's financial statements for lack of conformity with generally accepted accounting principles. 
B) Disclaim an opinion on the entity's financial statements because of uncertainty. 
C) Disclose the matter in an additional paragraph but not modify the opinion paragraph on the entity's financial statements. 
D) Neither modify the opinion on the entity's financial statements nor disclose the matter because both principles are generally accepted accounting principles. 
A) Add an additional paragraph and express a qualified or an adverse opinion on the entity's financial statements for lack of conformity with generally accepted accounting principles. 
B) Disclaim an opinion on the entity's financial statements because of uncertainty. 
C) Disclose the matter in an additional paragraph but not modify the opinion paragraph on the entity's financial statements. 
D) Neither modify the opinion on the entity's financial statements nor disclose the matter because both principles are generally accepted accounting principles.

Question 2

In which of the following situations would auditors ordinarily choose between expressing a qualified opinion or an adverse opinion on the entity's financial statements?

Accepted Answer

A) The auditors did not observe the entity's physical inventory and are unable to become satisfied as to its balance by other auditing procedures. 
B) The financial statements fail to disclose information that is required by generally accepted accounting principles. 
C) The auditors are asked to report only on the entity's balance sheet and not on the other basic financial statements. 
D) Events disclosed in the financial statements cause the auditors to have substantial doubt about the entity's ability to continue as a going concern. 
A) The auditors did not observe the entity's physical inventory and are unable to become satisfied as to its balance by other auditing procedures. 
B) The financial statements fail to disclose information that is required by generally accepted accounting principles. 
C) The auditors are asked to report only on the entity's balance sheet and not on the other basic financial statements. 
D) Events disclosed in the financial statements cause the auditors to have substantial doubt about the entity's ability to continue as a going concern.

Question 3

When disclaiming an opinion due to a client-imposed scope limitation,auditors should describe the nature of the scope limitation in an additional paragraph and modify the

Accepted Answer

A) Introductory paragraph 
B) Introductory paragraph and Auditor's Responsibility section 
C) Introductory paragraph,Auditor's Responsibility section,and opinion paragraph 
D) Auditor's Responsibility section and opinion paragraph 
A) Introductory paragraph 
B) Introductory paragraph and Auditor's Responsibility section 
C) Introductory paragraph,Auditor's Responsibility section,and opinion paragraph 
D) Auditor's Responsibility section and opinion paragraph

Question 4

What is the major difference between a reissued report and an updated report?

Accepted Answer

A) An updated report considers information that has come to their attention since the date of the original report,while a reissued report does not consider this information. 
B) An updated report can be presented along with the entity's financial statements,but a reissued report cannot be presented along with the entity's financial statements. 
C) An updated report will express a different opinion on the prior years' financial statements that that originally expressed by the auditors,while a reissued report will express the same opinion. 
D) An updated report will not express an opinion other than an unmodified opinion,while a reissued report can express an unmodified opinion,qualified opinion,adverse opinion,or disclaimer of opinion. 
A) An updated report considers information that has come to their attention since the date of the original report,while a reissued report does not consider this information. 
B) An updated report can be presented along with the entity's financial statements,but a reissued report cannot be presented along with the entity's financial statements. 
C) An updated report will express a different opinion on the prior years' financial statements that that originally expressed by the auditors,while a reissued report will express the same opinion. 
D) An updated report will not express an opinion other than an unmodified opinion,while a reissued report can express an unmodified opinion,qualified opinion,adverse opinion,or disclaimer of opinion.

Question 5

Situations in which auditors provide additional copies of a previous issued report or grant entities permission to use a previously issued report in a document containing financial statements after its original date are known as

Accepted Answer

A) Additional use reports 
B) Reissued reports 
C) Subsequent use reports 
D) Updated reports 
A) Additional use reports 
B) Reissued reports 
C) Subsequent use reports 
D) Updated reports

Question 6

The auditors conclude that an entity's illegal act,which has a material effect on the financial statements,has not been properly accounted for or disclosed.Depending on the overall materiality and pervasiveness of the effect of this illegal act on the financial statements,the auditors should express either a(n)

Accepted Answer

A) Adverse opinion or a disclaimer of opinion. 
B) Qualified opinion or an adverse opinion. 
C) Disclaimer of opinion or an unmodified opinion with a separate emphasis-of-matter paragraph. 
D) Unmodified opinion with a separate emphasis-of-matter paragraph or a qualified opinion. 
A) Adverse opinion or a disclaimer of opinion. 
B) Qualified opinion or an adverse opinion. 
C) Disclaimer of opinion or an unmodified opinion with a separate emphasis-of-matter paragraph. 
D) Unmodified opinion with a separate emphasis-of-matter paragraph or a qualified opinion.

Question 7

Which of the following statements is not included in the Auditor's Responsibility section of the standard (unmodified)report?

Accepted Answer

A) "In accordance with accounting principles generally accepted in the United States of America." 
B) "We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion." 
C) "An audit also includes evaluating the appropriateness of accounting policies used…." 
D) "Those standards require that we plan and perform the audit to obtain reasonable assurance..." 
A) "In accordance with accounting principles generally accepted in the United States of America." 
B) "We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion." 
C) "An audit also includes evaluating the appropriateness of accounting policies used…." 
D) "Those standards require that we plan and perform the audit to obtain reasonable assurance..."

Question 8

The auditors' report on the entity's financial statements included an additional paragraph disclosing a difference of opinion between the auditors and the entity for which the auditors believed an adjustment to the financial statements should be made.The opinion paragraph of the auditors' report should express a(n)

Accepted Answer

A) Unmodified opinion. 
B) Qualified opinion citing a departure from generally accepted accounting principles. 
C) Qualified opinion citing a scope limitation and lack of specific evidence. 
D) Disclaimer of opinion. 
A) Unmodified opinion. 
B) Qualified opinion citing a departure from generally accepted accounting principles. 
C) Qualified opinion citing a scope limitation and lack of specific evidence. 
D) Disclaimer of opinion.

Question 9

Carson,LLP audited Best Corporation's financial statements for the year ended December 31,Year 1.On February 15,Year 3,Carson gave Best permission to reissue the report previously issued on and dated March 1,Year 2.When is the cutoff date for Carson's responsibility on the reissued report?

Accepted Answer

A) December 31,Year 1. 
B) March 1,Year 2. 
C) December 31,Year 2. 
D) February 15,Year 3. 
A) December 31,Year 1. 
B) March 1,Year 2. 
C) December 31,Year 2. 
D) February 15,Year 3.

Question 10

If financial statements contain a material but non-pervasive departure from generally accepted accounting principles,the auditors should render a(n)

Accepted Answer

A) Qualified opinion with reference to departure. 
B) Adverse opinion with scope limitation reference. 
C) Adverse opinion with reference to departure. 
D) Disclaimer of opinion. 
A) Qualified opinion with reference to departure. 
B) Adverse opinion with scope limitation reference. 
C) Adverse opinion with reference to departure. 
D) Disclaimer of opinion.

Question 11

Listed below are words and phrases from the auditors' standard (unmodified)report on the entity's financial statements.For each of the words and phrases indicate by letter in which paragraph of the standard (unmodified)report they should appear:
A.Introductory paragraph
B.Management Responsibility section
C.Auditor's Responsibility section
D.Opinion paragraph
1___.Audit provides a reasonable basis for an opinion.2___.The financial statements present fairly,in all material respects.3___.Auditors' responsibility is to express an opinion.4___.Auditors perform the audit to obtain reasonable assurance.5___.Financial statements are in accordance with accounting principles generally accepted in the United States of America.6___.Responsibility of the entity's management for the financial statements.7___.Results of its operations and its cash flows.8___.Conducted our audits in accordance with the auditing standards generally accepted in the United States of America.9___.Management is responsible for the design,implementation,and maintenance of internal control.10___.We have audited the accompanying financial statements.

Accepted Answer

1.C,2.D,3.

Question 12

Auditors most likely would issue a disclaimer of opinion on the entity's financial statements because of

Accepted Answer

A) Inadequate disclosure of material information. 
B) The omission of the Statement of Cash Flows. 
C) A material departure from generally accepted accounting principles. 
D) Management's refusal to furnish written representations. 
A) Inadequate disclosure of material information. 
B) The omission of the Statement of Cash Flows. 
C) A material departure from generally accepted accounting principles. 
D) Management's refusal to furnish written representations.

Question 13

An auditor may report on summary financial statements that are derived from a complete set of audited financial statements only if the auditor

Accepted Answer

A) Expresses an unmodified opinion on the audited financial statements from which the summary financial statements are derived. 
B) Indicates whether the information is fairly stated in all material respects in relation to the complete financial statements. 
C) Determines that the summary financial statements include all the disclosures necessary for the complete set of financial statements. 
D) Presents the summary financial statements in comparative form with the prior years' summary financial statements. 
A) Expresses an unmodified opinion on the audited financial statements from which the summary financial statements are derived. 
B) Indicates whether the information is fairly stated in all material respects in relation to the complete financial statements. 
C) Determines that the summary financial statements include all the disclosures necessary for the complete set of financial statements. 
D) Presents the summary financial statements in comparative form with the prior years' summary financial statements.

Question 14

When an entity will not permit inquiry of outside legal counsel,the auditors' report on the entity's financial statements will ordinarily contain a(n)

Accepted Answer

A) Disclaimer of opinion. 
B) Qualified opinion referencing a departure from generally accepted accounting principles. 
C) Unmodified opinion with an additional paragraph. 
D) Adverse opinion. 
A) Disclaimer of opinion. 
B) Qualified opinion referencing a departure from generally accepted accounting principles. 
C) Unmodified opinion with an additional paragraph. 
D) Adverse opinion.

Question 15

In which of the following should an auditors' report refer to the lack of consistency when there is a change in accounting principle that is significant?

Accepted Answer

A) The Auditor's Responsibility section. 
B) The opinion paragraph. 
C) An emphasis-of-matter paragraph following the opinion paragraph. 
D) An emphasis-of-matter paragraph before the opinion paragraph. 
A) The Auditor's Responsibility section. 
B) The opinion paragraph. 
C) An emphasis-of-matter paragraph following the opinion paragraph. 
D) An emphasis-of-matter paragraph before the opinion paragraph.

Question 16

Zag Co.issues financial statements that present financial position and results of operations,but Zag omits the related statement of cash flows.Zag would like to engage Brown,CPA,to audits its financial statements without the statement of cash flows although Brown's access to all of the information underlying the basic financial statements would not be limited.Under the circumstances,Brown most likely would

Accepted Answer

A) Add an other-matter paragraph to the standard (unmodified)report that justifies the omission. 
B) Refuse to accept the engagement as proposed because of the client-imposed scope limitation. 
C) Explain to Zag that the omission requires a qualification of the auditors' opinion. 
D) Prepare the statement of cash flows as an accommodation to Zag and express an unmodified opinion. 
A) Add an other-matter paragraph to the standard (unmodified)report that justifies the omission. 
B) Refuse to accept the engagement as proposed because of the client-imposed scope limitation. 
C) Explain to Zag that the omission requires a qualification of the auditors' opinion. 
D) Prepare the statement of cash flows as an accommodation to Zag and express an unmodified opinion.

Question 17

Green,CPA,was engaged to audit the financial statements of Essex Co.after its fiscal year had ended.The timing of Green's appointment and the start of field work made confirmation of accounts receivable by direct communication with the customers not feasible.However,Green applied other procedures and was satisfied as to the reasonableness of the account balances.Green's auditors' report most likely contained a(n)

Accepted Answer

A) Unmodified opinion. 
B) Unmodified opinion with an emphasis-of-matter paragraph. 
C) Qualified opinion due to a scope limitation. 
D) Qualified opinion due to a departure from generally accepted auditing standards. 
A) Unmodified opinion. 
B) Unmodified opinion with an emphasis-of-matter paragraph. 
C) Qualified opinion due to a scope limitation. 
D) Qualified opinion due to a departure from generally accepted auditing standards.

Question 18

Charlie Company's comparative financial statements include the financial statements of the prior year that were audited by predecessor auditors whose report on those financial statements is not presented.If the predecessor's report was qualified,the successor auditors should

Accepted Answer

A) Indicate in their report the substantive reasons for the qualification issued by the predecessor auditors. 
B) Request the entity to reissue the predecessor's report on the prior years' statements. 
C) Issue an updated comparative report on the entity's financial statements,indicating the involvement of component auditors. 
D) Express an opinion only on the current-year's financial statements and make no reference to the prior years' financial statements or opinion. 
A) Indicate in their report the substantive reasons for the qualification issued by the predecessor auditors. 
B) Request the entity to reissue the predecessor's report on the prior years' statements. 
C) Issue an updated comparative report on the entity's financial statements,indicating the involvement of component auditors. 
D) Express an opinion only on the current-year's financial statements and make no reference to the prior years' financial statements or opinion.

Question 19

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

Accepted Answer

A) Involvement of component auditors in the audit of the group financial statements. 
B) The portion of the group statements audited by the component auditors not being considered material. 
C) Group auditors' recognition of the component auditors' competence,reputation,and professional certification. 
D) Different opinions the auditors are expressing on the components of the financial statements that each audited. 
A) Involvement of component auditors in the audit of the group financial statements. 
B) The portion of the group statements audited by the component auditors not being considered material. 
C) Group auditors' recognition of the component auditors' competence,reputation,and professional certification. 
D) Different opinions the auditors are expressing on the components of the financial statements that each audited.

Question 20

In each of the circumstances listed below,indicate,by appropriate letter,which of the following types of opinions should be rendered on the entity's financial statements?
A.Unmodified
B.Qualified
C.Adverse
D.Disclaimer
1___.Departure from generally accepted accounting principles that is material but not pervasive.2___.Going-concern uncertainties that may have a material (but not pervasive)effect on the financial statements.3___.Emphasis of a matter,no GAAP departure.4___.Material,but not pervasive,scope limitation.5___.Material and pervasive departure from GAAP.

Accepted Answer

The answer of In each of the circumstances listed below,indicate,by...

If management fails to provide adequate justification for a change from one generally accepted accounting principle to another,the auditors should

In which of the following situations would auditors ordinarily choose between expressing a qualified opinion or an adverse opinion on the entity's financial statements?

When disclaiming an opinion due to a client-imposed scope limitation,auditors should describe the nature of the scope limitation in an additional paragraph and modify the

What is the major difference between a reissued report and an updated report?

Situations in which auditors provide additional copies of a previous issued report or grant entities permission to use a previously issued report in a document containing financial statements after its original date are known as

Which of the following statements is not included in the Auditor's Responsibility section of the standard (unmodified)report?

Carson,LLP audited Best Corporation's financial statements for the year ended December 31,Year 1.On February 15,Year 3,Carson gave Best permission to reissue the report previously issued on and dated March 1,Year 2.When is the cutoff date for Carson's responsibility on the reissued report?

If financial statements contain a material but non-pervasive departure from generally accepted accounting principles,the auditors should render a(n)

Auditors most likely would issue a disclaimer of opinion on the entity's financial statements because of

An auditor may report on summary financial statements that are derived from a complete set of audited financial statements only if the auditor

When an entity will not permit inquiry of outside legal counsel,the auditors' report on the entity's financial statements will ordinarily contain a(n)

In which of the following should an auditors' report refer to the lack of consistency when there is a change in accounting principle that is significant?

Charlie Company's comparative financial statements include the financial statements of the prior year that were audited by predecessor auditors whose report on those financial statements is not presented.If the predecessor's report was qualified,the successor auditors should

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

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 Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

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Exam 12: Reports on Audited Financial Statements

If management fails to provide adequate justification for a change from one generally accepted accounting principle to another,the auditors should

In which of the following situations would auditors ordinarily choose between expressing a qualified opinion or an adverse opinion on the entity's financial statements?

When disclaiming an opinion due to a client-imposed scope limitation,auditors should describe the nature of the scope limitation in an additional paragraph and modify the

What is the major difference between a reissued report and an updated report?

Situations in which auditors provide additional copies of a previous issued report or grant entities permission to use a previously issued report in a document containing financial statements after its original date are known as

Which of the following statements is not included in the Auditor's Responsibility section of the standard (unmodified)report?

Carson,LLP audited Best Corporation's financial statements for the year ended December 31,Year 1.On February 15,Year 3,Carson gave Best permission to reissue the report previously issued on and dated March 1,Year 2.When is the cutoff date for Carson's responsibility on the reissued report?

If financial statements contain a material but non-pervasive departure from generally accepted accounting principles,the auditors should render a(n)

Auditors most likely would issue a disclaimer of opinion on the entity's financial statements because of

An auditor may report on summary financial statements that are derived from a complete set of audited financial statements only if the auditor

When an entity will not permit inquiry of outside legal counsel,the auditors' report on the entity's financial statements will ordinarily contain a(n)

In which of the following should an auditors' report refer to the lack of consistency when there is a change in accounting principle that is significant?

Charlie Company's comparative financial statements include the financial statements of the prior year that were audited by predecessor auditors whose report on those financial statements is not presented.If the predecessor's report was qualified,the successor auditors should

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

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 Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters