Auditing Final Part 2
This is for chapter 17 the final part of the auditing segment. This will be awesome i can not wait.
- 1.1. Audit reports should be dated the date on which the financial statements are issued.
- A.
T
- B.
F
- 2.When the auditors are unable to comply with generally accepted auditing standards, they should issue an opinion that is unqualified, but include an additional explanatory paragraph in the report.
- A.
T
- B.
F
- 3.When evaluating the results of audit tests, materiality depends upon both the dollar amount and the nature of the item
- A.
T
- B.
F
- 4.. A public company's financial statements should be prepared following standards of the Public Company Accounting Oversight Board
- A.
T
- B.
F
- 5.If financial statements fail to disclose a material fact, the auditors may disclose the information in an explanatory paragraph and issue an unqualified opinion on the statements.
- A.
T
- B.
F
- 6.If financial statements contain a material departure from generally accepted accounting principles, the auditors usually should not issue an unqualified opinion
- A.
T
- B.
F
- 7.A "very material" change from one generally accepted accounting principle to another generally accepted accounting principle usually results in an adverse opinion by the auditors.
- A.
T
- B.
F
- 8.When there is a significant question about a company's ability to remain a going concern, the report issued is usually unqualified with an explanatory paragraph.
- A.
T
- B.
F
- 9.9. A client imposed scope limitation will generally result in a disclaimer of opinion.
- A.
T
- B.
F
- 10.Regulation S-X governs the form and content of financial statements filed with the SEC.
- A.
T
- B.
F
- 11.11. Which of the following is not explicitly included in an audit report? .
- A.
A statement that he auditor believes that his or her audit provides a reasonable basis for expressing negative assurance.
- B.
A statement that the auditor's responsibility is to express an opinion on the financial statements
- C.
C) A statement that the financial statements in the report are the responsibility of management.
- D.
D) A title with the word "independent."
- 12.When an auditor has concluded there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time beyond the current financial statement date (9/30/X1), the auditor's responsibility includes
- A.
Preparing prospective financial information to verify whether management's plans can be effectively implemented
- B.
Projecting conditions and events from one year prior to this year's date (9/30/X0) to 9/30/X1.
- C.
Issuing an adverse or negative assurance opinion, depending upon materiality, due to the possible effects on the financial statements
- D.
Considering the adequacy of disclosure about the entity's possible inability to continue as a going concern
- 13.When an auditor issues an adverse opinion an explanatory paragraph is added. In addition, which, if any, paragraphs to the report are modified?
- A.
A) Yes No Yes
- B.
B) No Yes Yes
- C.
C) No No Yes
- D.
D) No No No
- 14.When an auditor issues a qualified report due to a scope limitation an explanatory paragraph is added. In addition, which, if any, paragraphs to the report are modified? Introductory Scope Opinion
- A.
A) Yes Yes Yes
- B.
B) Yes No Yes
- C.
C) No Yes Yes
- D.
D) No Yes No
- 15.When an auditor issues an unqualified report, but adds an emphasis of a matter paragraph to the report, which, if any, paragraphs to the report are modified? Introductory Scope Opinion
- A.
When an auditor issues an unqualified report, but adds an emphasis of a matter paragraph to the report, which, if any, paragraphs to the report are modified? Introductory Scope Opinion
- B.
B) No Yes Yes
- C.
C) No No Yes
- D.
D) No No No
- 16.16. An explanatory paragraph relating to a scope limitation should be placed.
- A.
A) After the opinion paragraph.
- B.
B) Prior to the opinion paragraph.
- C.
C) Either before or after the opinion paragraph.
- D.
D) An audit report modified for a scope limitation does not include an explanatory paragraph
- 17.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:
- A.
A) Increase current dividend distributions.
- B.
B) Reduce existing lines of credit.
- C.
C) Increase ownership equity.
- D.
D) Purchase assets formerly leased.
- 18.When a CPA does not confirm material accounts receivable, but is satisfied by the application of alternative auditing procedures, she normally should:
- A.
Issue an unqualified opinion, but disclose elsewhere in the report this departure from a customary procedure.
- B.
Issue an unqualified opinion with no reference to this omission but be prepared to defend the action
- C.
Issue a qualified opinion or a disclaimer, depending on the materiality of the receivables
- D.
D) Issue an adverse opinion.
- 19.When a client declines to disclose essential information in the financial statements or notes, the CPA should:
- A.
) Provide the information in the audit report, if practicable, and qualify the opinion because of a limitation on the scope of the audit.
- B.
Provide the information in the audit report, if practicable, and qualify the opinion because of a departure from GAAP.
- C.
Issue a disclaimer of opinion because the client has interfered with the auditor's function of assessing the adequacy of disclosure.
- D.
Issue an unqualified opinion, but inform the reader by including the omitted information in the audit report
- 20.Firm A has performed most of the audit of Consolidated Company's financial statements and qualifies as the principal auditor. CPA Firm B did the remainder of the work. Firm A wishes to assume full responsibility for Firm B's work. Which of the following statements is correct?
- A.
A) Such assumption of responsibility violates the profession's standards.
- B.
In such circumstances, when appropriate requirements have been met, Firm A should issue a standard unqualified opinion on the financial statements
- C.
In such circumstances, when appropriate requirements have been met, Firm A should issue an unqualified opinion on the financial statements but should make appropriate reference to Firm B in the audit report.
- D.
CPA firm A should normally qualify its audit report on the basis of the scope limitation involved when another CPA firm is involved
- 21.Which of the following is most accurate with respect to a CPA's responsibility in considering a going concern question on audits?
- A.
Perform analytical procedures aimed particularly at assessing whether bankruptcy is probable.
- B.
B) Issue a report with a "going concern" modification when failure is at least reasonably probable.
- C.
Based on audit procedures performed, assess whether there is substantial doubt about the entity's ability to continue as a going concern.
- D.
Determine that related uncertainties are properly disclosed and make no mention in the audit report
- 22.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. 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:
- A.
Express an adverse opinion with an explanatory paragraph disclosing the reason (the accounting change) for the opinion
- B.
Express an unqualified opinion with an explanatory paragraph and disclose the accounting change from 20X3 and its effect on the financial statements
- C.
C) Disclaim an opinion and explain all of the reasons therefore.
- D.
Express an adverse opinion regarding the 20X4 financial statements, without an explanatory paragraph disclosing the reason therefore since it will be included in the notes to the statements.
- 23.When financial statements are affected by a material departure from generally accepted accounting principles, the auditors should:
- A.
A) Issue an unqualified report with an explanatory paragraph.
- B.
B) Withdraw from the engagement.
- C.
C) Issue an "except for" qualification or an adverse opinion.
- D.
D) Issue an "except for" qualification or a disclaimer of opinion.
- 24.. Which of the following accounting changes requires explanatory language regarding consistency in the auditors' report?
- A.
A) A change in the estimated useful lives of a class of fixed assets.
- B.
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
- 25.25. The first paragraph of a standard unqualified audit report is referred to as the:
- A.
A) Introductory paragraph.
- B.
B) Scope paragraph.
- C.
C) Opinion paragraph.
- D.
D) Explanatory paragraph.
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