Question 1

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 2

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 3

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

Question 4

If an accounting change has no material effect on the financial statements in the current year, but the change is reasonably certain to have a material effect in later years, the change should be:

Accepted Answer

A)  Referred to in the auditor's report for the current year. 
B)  Disclosed in the notes to the financial statements of the current year. 
C)  Disclosed in the notes to the financial statements and referred to in the auditor's report for the current year. 
D)  Treated as a subsequent event. 
A)  Referred to in the auditor's report for the current year. 
B)  Disclosed in the notes to the financial statements of the current year. 
C)  Disclosed in the notes to the financial statements and referred to in the auditor's report for the current year. 
D)  Treated as a subsequent event.

Question 5

When the auditors are unable to comply with generally accepted auditing standards, they should issue an opinion that is unmodified, but include an additional emphasis-of-matter paragraph in the report.

Accepted Answer

A) True 
 B)False

Question 6

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 the basis for a 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 a modification paragraph since the reason therefore since that reason will be included in the notes to the statements. 
A)  Express an adverse opinion with the basis for a 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 a modification paragraph since the reason therefore since that reason will be included in the notes to the statements.

Question 7

An audit client has refused to allow the auditors to perform a presumptively mandatory auditing procedure and there are no other effective alternate procedures available. The circumstance would normally result in the issuance of:

Accepted Answer

A)  A disclaimer of opinion. 
B)  An adverse opinion. 
C)  A standard unmodified opinion with a qualified scope paragraph. 
D)  An unmodified report with an emphasis-of-matter paragraph. 
A)  A disclaimer of opinion. 
B)  An adverse opinion. 
C)  A standard unmodified opinion with a qualified scope paragraph. 
D)  An unmodified report with an emphasis-of-matter paragraph.

Question 8

An independent auditor has concluded that substantial doubt remains about a client's ability to continue as a going concern, but the client's financial statements have properly disclosed all of its solvency problems. The auditor would probably issue a(an):

Accepted Answer

A)  Unmodified opinion with an appropriate emphasis-of-matter paragraph. 
B)  "Except for" qualified opinion. 
C)  Standard unmodified opinion. 
D)  Adverse opinion. 
A)  Unmodified opinion with an appropriate emphasis-of-matter paragraph. 
B)  "Except for" qualified opinion. 
C)  Standard unmodified opinion. 
D)  Adverse opinion.

Question 9

Which of the following will result in emphasis-of-matter as to consistency in the auditor's report, regardless of whether the item is fully disclosed in the financial statements?

Accepted Answer

A)  A change in accounting estimate. 
B)  A change from an unacceptable accounting principle to a generally accepted one. 
C)  Correction of an error not involving a change in accounting principle. 
D)  A change in classification. 
A)  A change in accounting estimate. 
B)  A change from an unacceptable accounting principle to a generally accepted one. 
C)  Correction of an error not involving a change in accounting principle. 
D)  A change in classification.

Question 10

When reporting on comparative financial statements where the financial statements of the prior period have been examined by a predecessor auditor whose report is not presented, the successor auditor should indicate in the report:

Accepted Answer

A)  The reasons why the predecessor auditor's report is not presented. 
B)  The identity of the predecessor auditor who examined the financial statements of the prior year. 
C)  Whether the predecessor auditor's review of the current year's financial statements revealed any matter that might have a material effect on the successor auditor's opinion. 
D)  The type of opinion expressed by the predecessor auditor. 
A)  The reasons why the predecessor auditor's report is not presented. 
B)  The identity of the predecessor auditor who examined the financial statements of the prior year. 
C)  Whether the predecessor auditor's review of the current year's financial statements revealed any matter that might have a material effect on the successor auditor's opinion. 
D)  The type of opinion expressed by the predecessor auditor.

Question 11

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 12

If financial statements contain a material departure from generally accepted accounting principles, the auditors usually should issue a disclaimer of opinion.

Accepted Answer

A) True 
 B)False

Question 13

When the auditor is unable to determine the amounts associated with noncompliance with a law by client personnel due to a scope limitation, the auditor should issue a(an):

Accepted Answer

A)  Standard unmodified opinion. 
B)  Disclaimer of opinion. 
C)  Adverse opinion. 
D)  Unmodified opinion with a separate emphasis-of-matter paragraph. 
A)  Standard unmodified opinion. 
B)  Disclaimer of opinion. 
C)  Adverse opinion. 
D)  Unmodified opinion with a separate emphasis-of-matter paragraph.

Question 14

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor:

Accepted Answer

A)  May accept the engagement. 
B)  May accept the engagement but must disclaim an opinion because of an inability to apply the procedures considered necessary. 
C)  Should refuse the engagement because there is a client-imposed scope limitation. 
D)  Should refuse the engagement because of a departure from generally accepted auditing standards. 
A)  May accept the engagement. 
B)  May accept the engagement but must disclaim an opinion because of an inability to apply the procedures considered necessary. 
C)  Should refuse the engagement because there is a client-imposed scope limitation. 
D)  Should refuse the engagement because of a departure from generally accepted auditing standards.

Question 15

A change that the auditor agrees with from one generally accepted accounting principle to another generally accepted accounting principle that has a pervasive effect on net income usually results in an adverse opinion by the auditors.

Accepted Answer

A) True 
 B)False

Question 16

After considering an entity's negative trends and financial difficulties, an auditor has substantial doubt about the entity's ability to continue as a going concern. The auditor's considerations relating to management's plans for dealing with the adverse effects of these conditions most likely would include management's plans to:

Accepted Answer

A)  Increase current dividend distributions. 
B)  Reduce existing lines of credit. 
C)  Increase ownership equity. 
D)  Purchase assets formerly leased. 
A)  Increase current dividend distributions. 
B)  Reduce existing lines of credit. 
C)  Increase ownership equity. 
D)  Purchase assets formerly leased.

Question 17

A public company's financial statements should be prepared following standards of the Public Company Accounting Oversight Board.

Accepted Answer

A) True 
 B)False

Question 18

When there is a significant question about a company's ability to remain a going concern, the report issued is usually unmodified with an emphasis-of-matter paragraph.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following representations does an auditor make explicitly and which implicitly when issuing an unqualified opinion on a public company's financial statements? $$\begin{array} { | c | c | c | } 
\hline & \text { Conformiy with PCAOB Standards } & \text { Adequacy of disclosure } \
\hline \text { A. } & \text { Explicitly } & \text { Explicitly } \
\hline \text { B. } & \text { Implicitly } & \text { Implicitly } \
\hline \text { C. } & \text { Implicitly } & \text { Explicitly } \
\hline \text { D. } & \text { Explicitly } & \text { Implicitly } \
\hline
\end{array}$$

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 20

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.

The term "except for" in an audit report 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:

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

If an accounting change has no material effect on the financial statements in the current year, but the change is reasonably certain to have a material effect in later years, the change should be:

When the auditors are unable to comply with generally accepted auditing standards, they should issue an opinion that is unmodified, but include an additional emphasis-of-matter paragraph in the report.

An audit client has refused to allow the auditors to perform a presumptively mandatory auditing procedure and there are no other effective alternate procedures available. The circumstance would normally result in the issuance of:

An independent auditor has concluded that substantial doubt remains about a client's ability to continue as a going concern, but the client's financial statements have properly disclosed all of its solvency problems. The auditor would probably issue a(an):

Which of the following will result in emphasis-of-matter as to consistency in the auditor's report, regardless of whether the item is fully disclosed in the financial statements?

When reporting on comparative financial statements where the financial statements of the prior period have been examined by a predecessor auditor whose report is not presented, the successor auditor should indicate in the 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:

If financial statements contain a material departure from generally accepted accounting principles, the auditors usually should issue a disclaimer of opinion.

When the auditor is unable to determine the amounts associated with noncompliance with a law by client personnel due to a scope limitation, the auditor should issue a(an):

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor:

A change that the auditor agrees with from one generally accepted accounting principle to another generally accepted accounting principle that has a pervasive effect on net income usually results in an adverse opinion by the auditors.

A public company's financial statements should be prepared following standards of the Public Company Accounting Oversight Board.

When there is a significant question about a company's ability to remain a going concern, the report issued is usually unmodified with an emphasis-of-matter paragraph.

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

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

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

Filters

Exam 17: Auditors Report

The term "except for" in an audit report 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:

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

If an accounting change has no material effect on the financial statements in the current year, but the change is reasonably certain to have a material effect in later years, the change should be:

When the auditors are unable to comply with generally accepted auditing standards, they should issue an opinion that is unmodified, but include an additional emphasis-of-matter paragraph in the report.

An audit client has refused to allow the auditors to perform a presumptively mandatory auditing procedure and there are no other effective alternate procedures available. The circumstance would normally result in the issuance of:

An independent auditor has concluded that substantial doubt remains about a client's ability to continue as a going concern, but the client's financial statements have properly disclosed all of its solvency problems. The auditor would probably issue a(an):

Which of the following will result in emphasis-of-matter as to consistency in the auditor's report, regardless of whether the item is fully disclosed in the financial statements?

When reporting on comparative financial statements where the financial statements of the prior period have been examined by a predecessor auditor whose report is not presented, the successor auditor should indicate in the 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:

If financial statements contain a material departure from generally accepted accounting principles, the auditors usually should issue a disclaimer of opinion.

When the auditor is unable to determine the amounts associated with noncompliance with a law by client personnel due to a scope limitation, the auditor should issue a(an):

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor:

A change that the auditor agrees with from one generally accepted accounting principle to another generally accepted accounting principle that has a pervasive effect on net income usually results in an adverse opinion by the auditors.

A public company's financial statements should be prepared following standards of the Public Company Accounting Oversight Board.

When there is a significant question about a company's ability to remain a going concern, the report issued is usually unmodified with an emphasis-of-matter paragraph.

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

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

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

Filters