Exam 15: Audit Reports

The phrase "substantial doubt about the company's ability to continue as a going concern" is used in an unqualified opinion with an additional paragraph explaining the auditor's conclusions regarding the going concern assumption.

When management chooses to include information in its report on ICFR that is in addition to the information required to be provided,what should the auditor do?

The audit report is usually written but,in certain circumstances,can be in the form of a verbal presentation to the audit committee.

Adverse opinions Under what circumstances would an auditor issue an adverse opinion?

If the auditor decides to draw attention to large related party transactions occurring in the financial statements of the client,which report will most likely be issued?

Restrictions on the scope of the audit whether imposed by the client or circumstances may require the auditor to issue either a qualified or an adverse opinion.

The auditor is only concerned about the aggregate internal control deficiencies when determining the appropriate opinion on internal control over financial reporting (ICFR).

Bacon,CPAs,is the principal auditor for Martin Industries,a U.S.public company.However,Bacon decides to refer to the work of Hsu and Wen,CPAs,who audited a wholly owned subsidiary of the entity and issued an unqualified opinion. REQUIRED: Which type of audit report would you suggest be issued this year and why?

The failure of a client to include a statement of cash flows will result in the issuance of a disclaimer of opinion by the auditor.

A CPA has completed an audit of the financial statements of a long-haul trucking company for the year ended December 31,20Y8.Prior to 20Y8,the company depreciated its trucks over 10 years.However,during 20Y8,the company determined that a more realistic estimated life for its trucks was 8 years and computed the 20Y8 depreciation on the basis of the revised estimate.The CPA is satisfied that the 8-year estimate is reasonable,but the change will have a material effect on the comparability of the company's financial statements.The company adequately disclosed the change in estimated useful lives of its trucks and the effect of the change on 20Y8 income in a note to the financial statements. REQUIRED: Which type of audit report would you suggest be issued on the 20Y8 financial statements and why?

A CPA is engaged in the audit of financial statements of a large manufacturer with branch offices that are widely dispersed.This CPA is not able to count the substantial undeposited cash receipts at the close of business on the last day of the fiscal year at all branches.As an alternative to this procedure to verify the accurate cutoff of cash receipts,the CPA observes that deposits in transit as shown on the year-end bank reconciliation appeared as credits on the bank statement on the first business day of the New Year.Based on this,the auditor was satisfied as to the cutoff of cash receipts. REQUIRED: Which type of audit report would you suggest be issued this year and why?

When financial statements contain generally accepted accounting principles in the current year that are different from the generally accepted accounting principles used in the preceding year,the auditor will typically make mention of it in the report.

For a client with serious going concern issues,the auditor has to make a choice between issuing an unqualified audit report with an explanatory paragraph or a disclaimer.

When an auditor issues an adverse opinion,which of the following should be included in the opinion paragraph?

Which of the following is an example of circumstances that would not limit the audit scope?

The audit report delineates the responsibility of client management and that of the audit firm.

Audit reporting standards for financial statement and integrated audits require auditors to provide which of the following?

If scope limitations that are not client-imposed exist and make it impossible for the auditor to form an opinion,the auditor should render an adverse opinion.

IAASB standards require disclosure of key audit matters (KAMs)related to five specific topics.

Critical audit matters (CAMs)include matters that are material to the financial statements but do not relate to accounts or disclosures.