Question 1

The unmodified standard audit report of a nonpublic company does not explicitly state that:

Accepted Answer

A) The financial statements are the responsibility of the company's management. 
B) The audit was conducted in accordance with accounting principles generally accepted in the United States of America. 
C) The auditors believe that the audit provides a reasonable basis for their opinion. 
D) An audit includes assessing the accounting principles used. 
A) The financial statements are the responsibility of the company's management. 
B) The audit was conducted in accordance with accounting principles generally accepted in the United States of America. 
C) The auditors believe that the audit provides a reasonable basis for their opinion. 
D) An audit includes assessing the accounting principles used.

Question 2

Which of the following would be most likely to be an appropriate addressee for an audit report?

Accepted Answer

A) The shareholders of the corporation whose financial statements were examined. 
B) A third party who requested that a copy of the audit report be sent to her. 
C) The president of the corporation whose financial statements were examined. 
D) The chief financial officer. 
A) The shareholders of the corporation whose financial statements were examined. 
B) A third party who requested that a copy of the audit report be sent to her. 
C) The president of the corporation whose financial statements were examined. 
D) The chief financial officer.

Question 3

If group auditors make no reference to component auditors whose work they have relied on as a part of the basis for their report,the group auditors:

Accepted Answer

A) Are not required to investigate the professional reputation of the component auditors. 
B) Are issuing an inappropriate report. 
C) Are assuming responsibility for the work of the component auditors. 
D) Are issuing a qualified opinion. 
A) Are not required to investigate the professional reputation of the component auditors. 
B) Are issuing an inappropriate report. 
C) Are assuming responsibility for the work of the component auditors. 
D) Are issuing a qualified opinion.

Question 4

For a continuing audit client,when a complete set of financial statements is presented on a comparative basis for two years,the auditors' opinion would refer to:

Accepted Answer

A) Only the current year under audit. 
B) Either one or both years at the option of the auditors. 
C) Each of the two years plus the preceding year. 
D) Each of the years in the two-year period. 
A) Only the current year under audit. 
B) Either one or both years at the option of the auditors. 
C) Each of the two years plus the preceding year. 
D) Each of the years in the two-year period.

Question 5

Which of the following procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

Accepted Answer

A) Performing cutoff tests of sales transactions with customers with long-standing receivable balances. 
B) Evaluating the entity's procedures for identifying and recording related party transactions. 
C) Inspecting title documents to verify whether any real property is pledged as collateral. 
D) Inquiring of the entity's legal counsel about litigation, claims, and assessments. 
A) Performing cutoff tests of sales transactions with customers with long-standing receivable balances. 
B) Evaluating the entity's procedures for identifying and recording related party transactions. 
C) Inspecting title documents to verify whether any real property is pledged as collateral. 
D) Inquiring of the entity's legal counsel about litigation, claims, and assessments.

Question 6

Which of the following is least likely to result in an emphasis-of-matter paragraph being added to an unmodified auditor's report on the financial statements of a client that sells jewelry through a retail store?

Accepted Answer

A) A decision by the auditor to emphasize that the client is a part of a larger organization. 
B) Reliance placed upon a specialist to evaluate the diamonds. 
C) A change from FIFO to specific identification accounting for inventory. 
D) A question as to whether the client will be able to remain a going concern. 
A) A decision by the auditor to emphasize that the client is a part of a larger organization. 
B) Reliance placed upon a specialist to evaluate the diamonds. 
C) A change from FIFO to specific identification accounting for inventory. 
D) A question as to whether the client will be able to remain a going concern.

Question 7

Which of the following is not a difference between the audit report of a nonpublic and public company?

Accepted Answer

A) The public company report includes the word "Registered" in the title. 
B) The public company report refers to standards of the PCAOB. 
C) The public company report has an additional paragraph referring to the client's fraud prevention procedures. 
D) The public company report is shorter. 
A) The public company report includes the word "Registered" in the title. 
B) The public company report refers to standards of the PCAOB. 
C) The public company report has an additional paragraph referring to the client's fraud prevention procedures. 
D) The public company report is shorter.

Question 8

A client imposed scope limitation will generally result in a disclaimer of opinion,regardless of whether sufficient appropriate audit evidence is gathered using alternative procedures.

Accepted Answer

A) True 
 B)False

Question 9

The Rotter Company changed accounting principles in 20X4 from those followed in 20X3.The auditor believes that the new principles are not in conformity with GAAP,and therefore that the 20X4 financial statements are misleading due to pervasive misstatements.The change (including its dollar effect)has been described in the notes to the 20X4 statements,which are being presented by themselves.Under these circumstances,in reporting on the 20X4 financial statements,the auditor should:

Accepted Answer

A) Express an adverse opinion with a basis for modification paragraph disclosing the reason (the accounting change) for the opinion. 
B) Express an unmodified opinion with an emphasis-of-matter paragraph and disclose the accounting change from 20X3 and its effect on the financial statements. 
C) Disclaim an opinion and explain all of the reasons therefore. 
D) Express an adverse opinion regarding the 20X4 financial statements, without a basis for modification paragraph since the reason therefore since that reason will be included in the notes to the statements. 
A) Express an adverse opinion with a basis for modification paragraph disclosing the reason (the accounting change) for the opinion. 
B) Express an unmodified opinion with an emphasis-of-matter paragraph and disclose the accounting change from 20X3 and its effect on the financial statements. 
C) Disclaim an opinion and explain all of the reasons therefore. 
D) Express an adverse opinion regarding the 20X4 financial statements, without a basis for modification paragraph since the reason therefore since that reason will be included in the notes to the statements.

Question 10

The term "except for" in an audit report is:

Accepted Answer

A) Used in an adverse opinion. 
B) No longer considered appropriate. 
C) Used in a qualified opinion 
D) Used for an unmodified opinion when an emphasis-of-matter paragraph is added. 
A) Used in an adverse opinion. 
B) No longer considered appropriate. 
C) Used in a qualified opinion 
D) Used for an unmodified opinion when an emphasis-of-matter paragraph is added.

Question 11

A client has changed the salvage values of a number of its fixed assets.The auditors believe that the salvage values are realistic.The appropriate report on the financial statements is:

Accepted Answer

A) Standard unmodified. 
B) Unmodified with explanatory language as to consistency. 
C) Qualified for consistency. 
D) Disclaimer. 
A) Standard unmodified. 
B) Unmodified with explanatory language as to consistency. 
C) Qualified for consistency. 
D) Disclaimer.

Question 12

When an auditor of financial statements has substantial doubt about an entity's ability to continue as a going concern,the auditor most likely would express a qualified opinion if

Accepted Answer

A) The effects of the adverse financial conditions are likely to be negative. 
B) Information about the entity's ability to continue as a going concern is not disclosed in the financial statements. 
C) Management has no plans to reduce or delay future expenditures. 
D) Negative trends and recurring operating losses appear to be irreversible. 
A) The effects of the adverse financial conditions are likely to be negative. 
B) Information about the entity's ability to continue as a going concern is not disclosed in the financial statements. 
C) Management has no plans to reduce or delay future expenditures. 
D) Negative trends and recurring operating losses appear to be irreversible.

Question 13

Which of the following accounting changes requires an emphasis-of-matter paragraph regarding consistency in the auditors' report?

Accepted Answer

A) A change in the estimated useful lives of a class of fixed assets. 
B) A write-off of a patent because future benefits do not appear to exist. 
C) A change from the straight line method of depreciation to an accelerated method for a class of fixed assets. 
D) A change in calculating bad debt expense from one percent to two percent of credit sales. 
A) A change in the estimated useful lives of a class of fixed assets. 
B) A write-off of a patent because future benefits do not appear to exist. 
C) A change from the straight line method of depreciation to an accelerated method for a class of fixed assets. 
D) A change in calculating bad debt expense from one percent to two percent of credit sales.

Question 14

A basis for modification paragraph is ordinarily placed:

Accepted Answer

A) Within the "Auditor's Responsibility" section of the audit report. 
B) Preceding the opinion section. 
C) After the opinion section. 
D) Based on the auditor's judgment either before or after the opinion section. 
A) Within the "Auditor's Responsibility" section of the audit report. 
B) Preceding the opinion section. 
C) After the opinion section. 
D) Based on the auditor's judgment either before or after the opinion section.

Question 15

If the predecessor auditors do not reissue their audit report on comparative financial statements the successor auditors should:

Accepted Answer

A) Express a qualified opinion on the comparative financial statements audited by the predecessor auditors. 
B) Reproduce the predecessor auditors' report and include it with the new set of financial statements. 
C) Have the client omit the comparative financial statements. 
D) Refer to the report of the predecessor auditors. 
A) Express a qualified opinion on the comparative financial statements audited by the predecessor auditors. 
B) Reproduce the predecessor auditors' report and include it with the new set of financial statements. 
C) Have the client omit the comparative financial statements. 
D) Refer to the report of the predecessor auditors.

Question 16

Morgan,CPA,is the group auditor for a multinational corporation.Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation.Morgan is satisfied with the independence and professional reputation of the component auditor,as well as the quality of the component auditor's audit.With respect to Morgan's report on the consolidated financial statements,taken as a whole,Morgan:

Accepted Answer

A) Must not refer to the audit of the component auditor. 
B) Must refer to the audit of the component auditor. 
C) May refer to the audit of the component auditor. 
D) May refer to the audit of the component auditor, in which case Morgan must include in the audit report on the consolidated financial statements a qualified opinion with respect to the audit of the component auditor. 
A) Must not refer to the audit of the component auditor. 
B) Must refer to the audit of the component auditor. 
C) May refer to the audit of the component auditor. 
D) May refer to the audit of the component auditor, in which case Morgan must include in the audit report on the consolidated financial statements a qualified opinion with respect to the audit of the component auditor.

Question 17

When an adverse opinion is expressed,the opinion paragraph should include a direct reference to:

Accepted Answer

A) A note to the financial statements which discusses the basis for the opinion. 
B) The Auditor's Responsibility section of the audit report which discusses the basis for the opinion rendered. 
C) A separate paragraph (section) which discusses the basis for the opinion rendered. 
D) The consistency in the application of generally accepted accounting principles. 
A) A note to the financial statements which discusses the basis for the opinion. 
B) The Auditor's Responsibility section of the audit report which discusses the basis for the opinion rendered. 
C) A separate paragraph (section) which discusses the basis for the opinion rendered. 
D) The consistency in the application of generally accepted accounting principles.

Question 18

An auditor's report on comparative financial statements should be dated as of the date of the:

Accepted Answer

A) Issuance of the report. 
B) Accumulation of sufficient appropriate audit evidence. 
C) Latest financial statements being reported on. 
D) Last related-party transaction disclosed in the statements. 
A) Issuance of the report. 
B) Accumulation of sufficient appropriate audit evidence. 
C) Latest financial statements being reported on. 
D) Last related-party transaction disclosed in the statements.

Question 19

If audited financial statements include a balance sheet and an income statement,but do not include a statement of cash flows:

Accepted Answer

A) The auditors may still issue an unmodified opinion. 
B) The auditors should issue a qualified report for the departure from generally accepted accounting principles. 
C) The auditors should issue a qualified report indicating a scope limitation in that no statement of cash flows is presented. 
D) The auditors should disclaim an opinion on the overall financial statements. 
A) The auditors may still issue an unmodified opinion. 
B) The auditors should issue a qualified report for the departure from generally accepted accounting principles. 
C) The auditors should issue a qualified report indicating a scope limitation in that no statement of cash flows is presented. 
D) The auditors should disclaim an opinion on the overall financial statements.

Question 20

When evaluating the results of audit tests,materiality depends upon both the dollar amount and the nature of the item.

Accepted Answer

A) True 
 B)False

The unmodified standard audit report of a nonpublic company does not explicitly state that:

Which of the following would be most likely to be an appropriate addressee for an audit report?

If group auditors make no reference to component auditors whose work they have relied on as a part of the basis for their report,the group auditors:

For a continuing audit client,when a complete set of financial statements is presented on a comparative basis for two years,the auditors' opinion would refer to:

Which of the following procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

Which of the following is least likely to result in an emphasis-of-matter paragraph being added to an unmodified auditor's report on the financial statements of a client that sells jewelry through a retail store?

Which of the following is not a difference between the audit report of a nonpublic and public company?

A client imposed scope limitation will generally result in a disclaimer of opinion,regardless of whether sufficient appropriate audit evidence is gathered using alternative procedures.

The term "except for" in an audit report is:

A client has changed the salvage values of a number of its fixed assets.The auditors believe that the salvage values are realistic.The appropriate report on the financial statements is:

When an auditor of financial statements has substantial doubt about an entity's ability to continue as a going concern,the auditor most likely would express a qualified opinion if

Which of the following accounting changes requires an emphasis-of-matter paragraph regarding consistency in the auditors' report?

A basis for modification paragraph is ordinarily placed:

If the predecessor auditors do not reissue their audit report on comparative financial statements the successor auditors should:

When an adverse opinion is expressed,the opinion paragraph should include a direct reference to:

An auditor's report on comparative financial statements should be dated as of the date of the:

If audited financial statements include a balance sheet and an income statement,but do not include a statement of cash flows:

When evaluating the results of audit tests,materiality depends upon both the dollar amount and the nature of the item.

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of CPAS

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property Plant and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Probability-Proportion-To-Size Sampling

Filters

Exam 17: Auditors Report

The unmodified standard audit report of a nonpublic company does not explicitly state that:

Which of the following would be most likely to be an appropriate addressee for an audit report?

If group auditors make no reference to component auditors whose work they have relied on as a part of the basis for their report,the group auditors:

For a continuing audit client,when a complete set of financial statements is presented on a comparative basis for two years,the auditors' opinion would refer to:

Which of the following procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

Which of the following is least likely to result in an emphasis-of-matter paragraph being added to an unmodified auditor's report on the financial statements of a client that sells jewelry through a retail store?

Which of the following is not a difference between the audit report of a nonpublic and public company?

A client imposed scope limitation will generally result in a disclaimer of opinion,regardless of whether sufficient appropriate audit evidence is gathered using alternative procedures.

The term "except for" in an audit report is:

A client has changed the salvage values of a number of its fixed assets.The auditors believe that the salvage values are realistic.The appropriate report on the financial statements is:

When an auditor of financial statements has substantial doubt about an entity's ability to continue as a going concern,the auditor most likely would express a qualified opinion if

Which of the following accounting changes requires an emphasis-of-matter paragraph regarding consistency in the auditors' report?

A basis for modification paragraph is ordinarily placed:

If the predecessor auditors do not reissue their audit report on comparative financial statements the successor auditors should:

When an adverse opinion is expressed,the opinion paragraph should include a direct reference to:

An auditor's report on comparative financial statements should be dated as of the date of the:

If audited financial statements include a balance sheet and an income statement,but do not include a statement of cash flows:

When evaluating the results of audit tests,materiality depends upon both the dollar amount and the nature of the item.

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of CPAS

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property Plant and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Probability-Proportion-To-Size Sampling

Filters