Question 1

Which of the following is incorrect concerning scope limitations?

Accepted Answer

A) If client imposed,the auditor should be concerned about the client trying to prevent discovery of a material misstatement. 
B) An unqualified opinion can result if auditors can perform alternative procedures and are satisfied that the information is fairly stated. 
C) The most common circumstance imposed scope restriction is due to the client changing their auditors. 
D) The most common circumstance imposed scope limitation is when the auditor is appointed after the balance sheet date.

Question 2

A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles.The auditor's report on the financial statements of the year of the change should include

Accepted Answer

A) no reference to consistency. 
B) a reference to a prior period adjustment in the opinion paragraph. 
C) an explanatory paragraph that justifies the change and explains the impact of the change on reported net income. 
D) an explanatory paragraph explaining the change.

Question 3

When a qualified opinion is issued,an explanatory paragraph is added immediately after the opinion paragraph to explain the nature of the qualification that affects the opinion.

Accepted Answer

A) True 
 B)False

Question 4

In the scope paragraph of the audit report issued for financial statements of a nonpublic company,the auditor expresses an opinion about the internal controls of the company.

Accepted Answer

A) True 
 B)False

Question 5

The introductory paragraph of the auditor's report states that the auditor is responsible for the preparation,presentation and opinion on financial statements.

Accepted Answer

A) True 
 B)False

Question 6

When the client fails to include information that is necessary for the fair presentation of financial statements in the body of the statements or in the footnotes,

Accepted Answer

A) it is the auditor's responsibility to present the information in the audit report. 
B) the auditor should issue a qualified or an adverse opinion. 
C) the qualification is put in an added paragraph preceding the opinion. 
D) all of the above

Question 7

Which of the following is not explicitly stated in the standard unmodified opinion audit report?

Accepted Answer

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

Question 8

A restriction on the scope of the auditor's examination requires

Accepted Answer

A) a qualifying paragraph to be included in the introduction. 
B) a qualifying paragraph preceding the opinion paragraph. 
C) a disclaimer opinion. 
D) a basis for a qualified opinion paragraph.

Question 9

A qualified opinion audit report is issued when all auditing conditions have been met,no significant misstatements have been discovered,and it is the auditor's opinion that the financial statements are fairly stated in accordance with GAAP.

Accepted Answer

A) True 
 B)False

Question 10

When a pervasive scope limitation exists,

Accepted Answer

A) a disclaimer of opinion rather than a qualified opinion is generally required. 
B) the auditor's responsibility paragraph is modified to indicate that the auditor was not able to obtain sufficient appropriate evidence to express an audit opinion. 
C) sections of the auditor's responsibility paragraph are eliminated to avoid stating anything that might lead readers to believe that other parts of the financial statements might be fairly stated. 
D) all of the above

Question 11

To emphasize the fact that the auditor is independent,a typical addressee of the audit report could be

Accepted Answer

A)   
B)   
C)   
D)

Question 12

The management's responsibility section of the standard unmodified opinion audit report for a nonpublic company states that the financial statements are

Accepted Answer

A) the responsibility of the auditor. 
B) the responsibility of management. 
C) the joint responsibility of management and the auditor. 
D) none of the above.

Question 13

If the scope restriction imposed by the client is so material that the overall fairness of the financial statements is in question,the auditor should issue a(n)

Accepted Answer

A) standard unmodified opinion. 
B) disclaimer of opinion. 
C) adverse opinion. 
D) unmodified opinion with revised wording in the scope paragraph.

Question 14

An audit provides a guarantee that a material misstatement will not exist in the financial statements.

Accepted Answer

A) True 
 B)False

Question 15

A pervasive exception is one that affects different parts of the financial statements.

Accepted Answer

A) True 
 B)False

Question 16

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.

Accepted Answer

The answer of There are three conditions necessitating a departure...

Question 17

If the phrase "except for" is present in the opinion paragraph of the audit report,the auditor has issued a(n)

Accepted Answer

A) adverse opinion. 
B) disclaimer of opinion. 
C) unqualified opinion. 
D) qualified opinion.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The separate report on internal control over financial reporting

Accepted Answer

A) cannot contain a cross-reference to the auditor's report on the financial statements. 
B) includes a paragraph that addresses the inherent limitations of internal controls. 
C) is addressed to the PCAOB. 
D) includes a scope paragraph which refers to the framework used to evaluate internal controls.

Question 20

All of the following are causes for the addition of an explanatory paragraph under both AICPA and PCAOB standards except for

Accepted Answer

A) emphasis of a matter. 
B) reports involving other auditors. 
C) lack of consistent application of generally accepted accounting principles. 
D) auditor agrees with a departure from promulgated accounting principles.

Exam 3: Audit Reports

Which of the following is incorrect concerning scope limitations?

A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles.The auditor's report on the financial statements of the year of the change should include

When a qualified opinion is issued,an explanatory paragraph is added immediately after the opinion paragraph to explain the nature of the qualification that affects the opinion.

In the scope paragraph of the audit report issued for financial statements of a nonpublic company,the auditor expresses an opinion about the internal controls of the company.

The introductory paragraph of the auditor's report states that the auditor is responsible for the preparation,presentation and opinion on financial statements.

When the client fails to include information that is necessary for the fair presentation of financial statements in the body of the statements or in the footnotes,

Which of the following is not explicitly stated in the standard unmodified opinion audit report?

A restriction on the scope of the auditor's examination requires

A qualified opinion audit report is issued when all auditing conditions have been met,no significant misstatements have been discovered,and it is the auditor's opinion that the financial statements are fairly stated in accordance with GAAP.

When a pervasive scope limitation exists,

To emphasize the fact that the auditor is independent,a typical addressee of the audit report could be

The management's responsibility section of the standard unmodified opinion audit report for a nonpublic company states that the financial statements are

If the scope restriction imposed by the client is so material that the overall fairness of the financial statements is in question,the auditor should issue a(n)

An audit provides a guarantee that a material misstatement will not exist in the financial statements.

A pervasive exception is one that affects different parts of the financial statements.

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.

If the phrase "except for" is present in the opinion paragraph of the audit report,the auditor has issued a(n)

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

The separate report on internal control over financial reporting

All of the following are causes for the addition of an explanatory paragraph under both AICPA and PCAOB standards except for