Exam 3: Audit Reports

The phrase "generally accepted accounting principles" can be found in the opinion paragraph of a standard unqualified report.

In auditing the long-term investments account, Arens, CPA, is unable to obtain audited financial statements for an investee located in a foreign country. Levine concludes sufficient appropriate audit evidence regarding this investment cannot be obtained. For each of the following situations below, identify the appropriate opinion type and report modification by selecting a choice from the appropriate tables below.

Changes of an accounting estimate requires the auditor to issue a modified unqualified audit report with a consistency paragraph is inserted after the opinion paragraph.

When the auditor determines the financial statements are fairly stated and then determines that the auditor lacks independence, the auditor should issue:

No reference is made in the auditor's report to other auditors who perform a portion of the audit when: I. The other auditor audited an immaterial portion of the audit. II. The other auditor is well known or closely supervised by the principle auditor. III. The principle auditor has thoroughly reviewed the work of the other auditor.

The standard unqualified audit report for public entities includes the following three paragraphs:

Whenever the client imposes restrictions on the scope of the audit, the auditor should be concerned that management may be trying to prevent discovery of misstatements. In such cases, the auditor will likely issue a:

The final step in the auditor's decision process is to write the audit report.

Items that materially affect the comparability of the financial statements generally require disclosure in the footnotes.

Most auditors believe that financial statements are "presented fairly" when the statements are in accordance with GAAP, and that it is also necessary to:

Items that materially affect the comparability of financial statements generally require disclosure in the footnotes. If the client refuses to properly disclose the item, the auditor will most likely issue:

There are three conditions necessitating a departure from an unqualified audit report. Name, discuss and state the appropriate audit report for each of these three conditions.

When the auditor cannot perform procedures and the amounts are so material that a disclaimer of opinion is required, the:

Materiality is essential when an auditor considers his/her determination of the appropriate report for a given set of circumstances.

Indicate which changes would require an explanatory paragraph in the audit report.

Audit reports issued for financial statements of a private company should refer to generally accepted auditing standards in the scope paragraph.

If the balance sheet of a company is dated December 31, 2011, the audit report is dated February 8, 2012, and both are released on February 15, 2012, this indicates that the auditor has searched for subsequent events that occurred up to:

After the balance sheet date but prior to issuance of the auditor's report the auditor learns that the client's facility in a foreign country has been expropriated. Management refuses to disclose this information in a financial statement footnote or present pro-forma data as to the effect of the event. The auditor should:

The audit report date is the date the auditor completed audit procedures in the field.

A lack of independence will override any other scope limitations and requires a disclaimer of opinion.