Quiz based on Auditing and Assurance Services 14e by Arens
Include the word “independent.”
Indicate if the auditor is a CPA
Indicate if the auditor is a proprietorship, partnership, or incorporated.
Indicate the type of audit opinion issued.
No Yes Yes
No No Yes
Yes Yes No
Yes No No
To identify that the type of opinion issued is unqualified.
To identify the financial statements audited and the dates and time periods covered by the report.
To indicate the CPA followed applicable audit standards.
To indicate all the financial statements are in accordance with GAAP.
Discover all errors and/or irregularities.
Discover material errors and/or irregularities.
Conform to generally accepted accounting principles.
Obtain reasonable assurance whether the statements are free of material misstatement.
The last day of the fiscal period.
The date on which the financial statements were filed with the Securities and Exchange Commission.
The last date on which users may institute a lawsuit against either client or auditor.
The last day of the auditor’s responsibility for the review of significant events that occurred subsequent to the date of the financial statements.
The financial statements have not been prepared in accordance with GAAP.
The scope of the audit has been restricted by circumstances beyond either the client’s or auditor’s control.
The auditor has lost independence.
The scope of the audit has been restricted.
Some parts of the financial statements are materially misstated or misleading.
The financial statements would be found to be materially misstated if an investigation were performed.
The auditor is not independent.
The overall financial statements are so materially misstated that they do not present fairly the financial position or results of operations and cash flows in conformity with GAAP.
Adverse opinion.
Qualified opinion.
Unqualified opinion.
Disclaimer of opinion.
A combined report on financial statements and internal control over financial reporting.
Separate reports on financial statements and internal control over financial reporting.
Either a or b.
Neither a nor b.
The use of other auditors.
Material uncertainties.
Substantial doubt about the audited company (or the entity) continuing as a going concern.
Lack of consistent application of GAAP.
Included in the scope paragraph.
Included in the opinion paragraph.
Included in a separate paragraph in the report.
Included in the introductory paragraph.
Yes No Yes
No Yes Yes
No Yes No
Yes Yes No
Management refused to allow the auditor to confirm significant accounts receivable for which there were no alternative procedures performed.
Management decided not to allow the auditor to confirm significant accounts receivable, but the auditor obtained sufficient appropriate evidence by examining subsequent cash receipts.
The audit partner’s dependent child received a gift of 100 shares of a client’s stock for her birthday from a grandparent.
Management has determined that fixed assets should be reported in the balance sheet at their replacement values rather than historical costs. The auditors do not concur.
The responsibility of the auditor.
The responsibility of management.
The joint responsibility of management and the auditor.
None of the above.
The responsibility of the auditor.
The responsibility of management.
The joint responsibility of management and the auditor.
None of the above.
Both are in the introductory paragraph.
Both are in the scope paragraph.
Both are in the opinion paragraph.
None of the above are true.
December 31, 2009.
January 1, 2010
February 8, 2010
February 15, 2010.
Inherent limitations paragraph.
Description paragraph.
Opinion paragraph.
Each of the above paragraphs is included.
Does not know if the financial statements are presented fairly.
Does not believe the financial statements are presented fairly.
Believes the financial statements are presented fairly.
Believes the financial statements are presented fairly “except for” a specific aspect of them.
An adverse opinion.
A disclaimer of opinion.
Either a qualified opinion or an adverse opinion.
Either a qualified opinion or an unqualified opinion with modified wording.
If the client requests it.
Only if it is highly material.
Only if it is material but not highly material.
In all cases.
Disclaimer of opinion.
Adverse opinion.
Qualified opinion.
Unqualified report, a qualification of scope and opinion, or a disclaimer, depending on materiality.
A client’s lawsuit against another company which claims the other company has infringed on its patent.
Loss of major customers
Significant recurring operating losses.
Working capital deficiencies.
May issue either an unqualified or a qualified opinion.
Must issue an adverse opinion with “except for” in the opinion paragraph.
May issue an unqualified opinion.
Must issue a qualified opinion with “except for” in the opinion paragraph.
No report title is included on the report.
A one-paragraph audit report is issued.
The only reason cited for issuing the disclaimer is the lack of independence.
All of the above are correct.
Disclaimer.
Adverse opinion.
Unqualified opinion.
Qualified opinion.
Change in accounting principle, such as a change from LIFO to FIFO.
Change in reporting entity, such as the inclusion of an additional company in combined financial statements.
Change in an estimate, such as a decrease in the life of an asset for depreciation purposes.
Correction of errors by changing from non-GAAP to GAAP.
A disclaimer.
An unqualified opinion.
A qualified opinion.
An adverse opinion.
Six months from the date of the financial statements.
One year from the date of the financial statements.
Six months from the date of the audit report.
One year from the date of the audit report.
A scope limitation prevents the auditor from completing an important audit procedure.
The auditor’s report refers to the work of a specialist.
The auditor lacks independence with respect to the audited entity.
An accounting principle at variance with GAAP is used.
The scope paragraph.
An explanatory paragraph that appears before the opinion paragraph.
The opinion paragraph.
An explanatory paragraph after the opinion paragraph.
Explicitly Explicitly
Explicitly Implicitly
Implicitly Explicitly
Implicitly Implicitly
Must not refer to the examination of the other auditor.
Must refer to the examination of the other auditor.
May refer to the examination of the other auditor.
May refer to the examination of the other auditor, in which case Gregory must include in the auditor’s report on the consolidated financial statements a qualified opinion with respect to the examination of the other auditor.
No reference to consistency.
A reference to a prior period adjustment in the opinion paragraph.
An explanatory paragraph that justifies the change and explains the impact of the change on reported net income.
An explanatory paragraph explaining the change.
Positive assurance on the financial statements and on the effectiveness of internal control over financial reporting.
Positive assurance on the financial statements and negative assurance on the effectiveness of internal control over financial reporting.
Limited assurance on the financial statements and on the effectiveness of internal control over financial reporting.
There is no guidance on what level of assurance to provide.
Disclaimer of opinion in all cases.
Qualification of both scope and opinion in all cases.
Disclaimer of opinion whenever materiality is in question.
Qualification of both scope and opinion whenever materiality is in question.
The client’s financial statements are prepared using the cash basis.
The client’s financial statements are prepared using the accrual basis.
The CPA has been retained to audit only the current assets.
The CPA has been retained to review the internal control system, not the financial statements.
Compilation report.
Review report.
Audit report.
Special audit report based on a basis of accounting other than GAAP.
The client valued ending inventory by using the replacement cost method.
The client valued ending inventory by using the Next-In-First-Out (NIFO) method.
The client valued ending inventory at selling price rather than historical cost.
The client valued ending inventory by using the First-In-First-Out (FIFO) method, but showed the replacement cost of inventory in the Notes to the Financial Statements.
The auditor is required to issue a disclaimer of opinion in the event of a material uncertainty.
The auditor is required to issue a disclaimer of opinion in the event of a going concern problem.
The auditor is required to issue a disclaimer of opinion for a material uncertainty and for a going concern problem.
The auditor has the option, but is not required, to issue a disclaimer of opinion for a material uncertainty or for a going concern problem.
Agreed upon after the client’s balance sheet date.
Where the client won’t allow the auditor to confirm receivables for fear of offending its customers
Where the auditor doesn’t have enough staff to satisfactorily audit all of the client’s foreign subsidiaries.
Where the client is going through Chapter 11 bankruptcy.
Inform the reader that disclosure is not adequate, and to issue an adverse opinion.
Inform the reader that disclosure is not adequate, and to issue a qualified opinion.
Present the information in the audit report and issue an unqualified or qualified opinion.
Present the information in the audit report and to issue a qualified or an adverse opinion.
Arise as a result of an incomplete audit.
Arise when the financial statements are not “presented fairly.”
Meet the criteria of a complete audit with satisfactory results.
Meet the criteria of a complete audit but with unsatisfactory results.
Emphasis of a matter.
Reports involving other auditors.
Auditor disagrees with client’s departure from GAAP.
Lack of consistent application of GAAP.
Issue a joint report signed by both CPA firms.
Make no reference to the other CPA firm in the audit report, and issue the standard unqualified opinion.
Make reference to the other auditor in the report by using modified wording (a shared opinion or report)
A qualified opinion or disclaimer, depending on materiality, is required if the principal auditor is not willing to assume any responsibility for the work of the other auditor.
The correction of an error in the prior year’s financial statements resulting from a mathematical mistake in capitalizing interest.
A change in the estimate of provisions for warranty costs.
The change from the cost method to the equity method of accounting for investments in common stock.
A change in depreciation method which has no effect on current year’s financial statements but is certain to affect future years.
There is a material scope limitation, and the auditor is not independent.
There is a material GAAP violation, and the auditor is not independent.
There is a material scope limitation, and there is substantial doubt about the company’s ability to continue as a going concern.
There is a substantial doubt about the company’s ability to continue as a going concern, and information about the causes of the uncertainties is not adequately disclosed in a footnote.
Yes Yes
No No
Yes No
No Yes
Yes Yes
No No
Yes No
No Yes
Yes Yes
No No
Yes No
No Yes
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