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Auditing, Last 20 Questions Ch 17

20 Questions
Finance Quizzes & Trivia

This is the last 20 questions of ch 17. there hard as frozen shit.

Questions and Answers
  • 1. 
    . In which of the following circumstances would an auditor be most likely to express an adverse opinion?
    • A. 

      The statements are not in conformity with the FASB Statements regarding the capitalization of leases

    • B. 

      Information comes to the auditor's attention that raises substantial doubt about the entity's ability to continue in existence.

    • C. 

      The chief executive officer refuses the auditor access to minutes of board of directors' meetings

    • D. 

      Tests of controls show that the entity's internal control is so poor that it can not be relied upon

  • 2. 
    An auditor's report on comparative financial statements should be dated as of the date of the
    • A. 

      A) Issuance of the report.

    • B. 

      B) Completion of the auditor's most recent field work.

    • C. 

      C) Latest financial statements being reported on.

    • D. 

      D) Last related-party transaction disclosed in the statements.

  • 3. 
    • A. 

      A) A change in accounting estimate.

    • B. 

      B) A change from an unacceptable accounting principle to a generally accepted one.

    • C. 

      C) Correction of an error not involving a change in accounting principle.

    • D. 

      D) A change in classification.

  • 4. 
    64. If the principal auditor decides to make reference to the other auditor's audit, the introductory paragraph must specifically indicate the:
    • A. 

      Magnitude of the portion of the financial statements examined by the other auditor.

    • B. 

      B) Name of the other auditor.

    • C. 

      C) Name of the consolidated subsidiary examined by the other auditor.

    • D. 

      D) Type of opinion expressed by the other auditor.

  • 5. 
    When the auditor is unable to determine the amounts associated with the illegal acts of client personnel because of an inability to obtain adequate evidence, the auditor should issue a(an):
    • A. 

      A) "Subject to" qualified opinion.

    • B. 

      B) Disclaimer of opinion.

    • C. 

      C) Adverse opinion.

    • D. 

      D) Unqualified opinion with a separate explanatory paragraph.

  • 6. 
    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. 

      May accept the engagement because such engagements merely involve limited reporting objectives

    • B. 

      May accept the engagement but should disclaim an opinion because of an inability to apply the procedures considered necessary

    • C. 

      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

  • 7. 
    When financial statements of a prior period are presented on a comparative basis with financial statements of the current period, the continuing auditor is responsible for:
    • A. 

      A) Expressing dual dated opinions.

    • B. 

      Updating the report on the previous financial statements only if there has not been a change in the opinion

    • C. 

      Updating the report on the previous financial statements only if the previous report was qualified and the reasons for the qualification no longer exist

    • D. 

      Updating the report on the previous financial statements regardless of the opinion previously issued.

  • 8. 
    . 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:
    • A. 

      A) Referred to in the auditor's report for the current year.

    • B. 

      B) Disclosed in the notes to the financial statements of the current year.

    • C. 

      C) Disclosed in the notes to the financial statements and referred to in the auditor's

    • D. 

      D) Treated as a subsequent event.

  • 9. 
    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:
    • A. 

      A) The reasons why the predecessor auditor's report is not presented.

    • B. 

      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. 

      D) The type of opinion expressed by the predecessor auditor.

  • 10. 
    Morgan, CPA, is the principal 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 other auditor, as well as the quality of the other auditor's audit. With respect to Morgan's report on the consolidated financial statements, taken as a whole, Morgan:
    • A. 

      A) Must not refer to the audit of the other CPA.

    • B. 

      B) Must refer to the audit of the other CPA.

    • C. 

      C) May refer to the audit of the other CPA.

    • D. 

      May refer to the audit of the other CPA, 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 other CPA.

  • 11. 
    The principal auditor is satisfied with the independence and professional reputation of the other auditor who has audited a subsidiary. To indicate the division of responsibility, the principal auditor should modify:
    • A. 

      A) The introductory, scope, and opinion paragraphs of the report.

    • B. 

      B) Only the scope paragraph of the report.

    • C. 

      C) Only the opinion paragraph of the report.

    • D. 

      D) Only the opinion paragraph of the report and include an explanatory paragraph.

  • 12. 
    The fourth reporting standard requires the auditor's report to contain either an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. The objective of the fourth standard is to prevent:
    • A. 

      A) The CPA from reporting on one basic financial statement and not the others.

    • B. 

      Misinterpretations regarding the degree of responsibility that the auditor is assuming.

    • C. 

      The CPA from expressing different opinions on each of the basic financial statements

    • D. 

      Management from reducing its final responsibility for the basic financial statements.

  • 13. 
    Doe, an independent auditor, was engaged to perform an audit of the financial statements of Ally Incorporated one month after its fiscal year had ended. Although the inventory count was not observed by Doe, and accounts receivable were not confirmed by direct communication with debtors, Doe was able to gain satisfaction by applying alternative auditing procedures. Doe's audit report will probably contain
    • A. 

      A) A standard unqualified opinion.

    • B. 

      B) An unqualified opinion and an explanatory paragraph.

    • C. 

      C) Either a qualified opinion or a disclaimer of opinion.

    • D. 

      D) An "except for" qualification.

  • 14. 
    . A limitation on the scope of the audit sufficient to preclude an unqualified opinion will always result when management
    • A. 

      Asks the auditor to report on the balance sheet and not on the other basic financial statements.

    • B. 

      B) Refuses to permit its lawyer to respond to the letter of audit inquiry.

    • C. 

      Discloses material related party transactions in the notes to the financial statements

    • D. 

      D) Knows that confirmation of accounts receivable is not feasible.

  • 15. 
    An independent auditor has concluded that a 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):
    • A. 

      A) Unqualified opinion with an appropriate explanatory paragraph.

    • B. 

      B) "Except for" qualified opinion.

    • C. 

      C) Standard unqualified opinion.

    • D. 

      D) Adverse opinion.

  • 16. 
    52. In which of the following circumstances would an adverse opinion be appropriate?
    • A. 

      A) The auditor is not independent with respect to the enterprise being audited.

    • B. 

      B) The statements are not in conformity with generally accepted accounting

    • C. 

      The statements are not in conformity with generally accepted accounting principles regarding pension plans

    • D. 

      A client-imposed scope limitation prevents the auditor from complying with generally accepted auditing standards.

  • 17. 
    For a particular entity's financial statements to be presented fairly in conformity with generally accepted accounting principles, it is not required that the principles selected
    • A. 

      A) Be appropriate in the circumstances for the particular entity.

    • B. 

      Reflect transactions in a manner that presents the financial statements within a range of acceptable limits.

    • C. 

      Present information in the financial statements that is classified and summarized in a reasonable manner

    • D. 

      D) Be applied on a basis consistent with those followed in the prior year.

  • 18. 
    Which of the following representations does an auditor make explicitly and which implicitly when issuing an unqualified opinion on public company financial statements?
    • A. 

      A) Explicitly Explicitly

    • B. 

      B) Implicitly Implicitly

    • C. 

      C) Implicitly Explicitly

    • D. 

      D) Explicitly Implicitly

  • 19. 
    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:
    • A. 

      A) Only the current year under audit.

    • B. 

      B) Either one or both years at the option of the auditors.

    • C. 

      C) Each of the two years plus the preceding year.

    • D. 

      D) Each of the years in the two-year period.

  • 20. 
    . Which of the following will not result in qualification of the auditors' report due to a scope limitation?
    • A. 

      A) Restrictions imposed by the client.

    • B. 

      B) Reliance placed upon the report of other auditors.

    • C. 

      C) Inability to obtain sufficient competent evidential matter.

    • D. 

      D) Inadequacy in the accounting records.