All of the following phrases would be found in the standard unmodified audit report for a private company except:
-in our opinion, the financial
... [Show More] statements referred to above are correct, in all material respects.
-management is responsible for the preparation and fair presentation of the financial statements.
-standards require that we plan and perform the audit to obtain reasonable assurance.
-we believe the audit evidence we have obtained is sufficient and appropriate.
in our opinion, the financial statements referred to above are correct, in all material respects.
In a public company audit, the audit report is addressed to the:
-the board of directors and shareholders.
-audit committee
-the SEC
-the CEO and CFO
the board of directors and shareholders
If a client has a going concern issue that has been properly disclosed in the notes, the auditor should:
-Issue an unmodified report and add an emphasis-of-matter paragraph after the opinion paragraph to highlight the going concern issue
-Issue a qualified report and add an emphasis-of-matter paragraph before the opinion paragraph to highlight the going concern issue
-Issue an unmodified report and add an emphasis-of-matter paragraph before the opinion paragraph to highlight the going concern issue
-Issue a qualified report and add an emphasis-of-matter paragraph after the opinion paragraph to highlight the going concern issue
Issue an unmodified report and add an emphasis-of-matter paragraph after the opinion paragraph to highlight the going concern issue
All of the following are examples of a change in accounting principle except:
-a change from an acceptable accounting method to a newly adopted accounting principle
-a change in an accounting estimate
-a change from one acceptable accounting principle to another acceptable accounting principle
-a change in the method of application of an acceptable accounting principle
a change in an accounting estimate
An emphasis-of-matter paragraph is used with an unmodified opinion when:
-there is a disagreement with those charge with governance regarding the selection of accounting policies
-an extreme limitation of the scope of the audit exists
-a significant uncertainty exists that should be brought to the financial statements user's attention
-a client has an unjustified change in accounting principle
a significant uncertainty exists that should be brought to the financial statements user's attention
When the audit opinion is based in part on the work of another auditor, all of the following changes are made to the standard unmodified audit report except:
-the portion of the audit conducted by the component auditor is stated in the report
-an emphasis-of-matter paragraph is added after the opinion paragraph
-the auditor's responsibility paragraph has added working stating the other auditors completed a portion of the audit
-the opinion paragraph references the other auditors
an emphasis-of-matter paragraph is added after the opinion paragraph
Which of the following is an example of a modified opinion?
-a going concern emphasis-of-matter paragraph
-a consistency emphasis-of-matter paragraph
-a qualified opinion
-a reference to the audit of component auditors
a qualified opinion
If the auditor encounters a material scope limitation and cannot obtain sufficient appropriate audit evidence regarding the fair presentation of the financial statements, what type of report would be issued?
-An unmodified opinion with an emphasis-of-matter paragraph
-A qualified or adverse opinion
-A qualified or disclaimer of opinion
-No report can be issued
a qualified or disclaimer of opinion
If an auditor becomes aware after the date of the auditor's report but before the financial statements are issued, of a fact that may materially affect the financial statements, the first step the auditor should take is to:
-determine if the financial statements need to be revised
-discuss the matter with management and, if appropriate, those charged with governance
-make the appropriate adjustments to the financial statements
-alert the appropriate regulatory body
discuss the matter with management and, if appropriate, those charged with governance
The dual dating of an audit report means:
-the release date of the financial statements was after the completion of fieldwork
-a subsequent event occurred
-the auditors extended their responsibility period to include the release date of the financial statements
-the auditors performed audit procedures regarding a specific event that was after the end of fieldwork
the auditors performed audit procedures regarding a specific event that was after the end of fieldwork
If auditors identify only one material weakness in a client's internal control system, the appropriate report to issue is a(n):
-unqualified opinion with an emphasis-of-matter paragraph
-qualified opinion
-disclaimer of opinion
-adverse opinion
adverse opinion
An unqualified audit report must state that all of the following have been evaluated by the auditors, EXCEPT
-likelihood of the occurrence of fraud in the financial statements
-accounting principles used by management
-significant estimates made by management
-overall presentation of the financial statements
likelihood of the occurrence of fraud in the financial statements
What is the difference between an unmodified opinion and a modified opinion?
-An unmodified opinion is also known as a qualified opinion whereas a modified opinion is also known as an adverse opinion
-An unmodified opinion may include a pervasive scope limitation and a modified opinion may not
-An unmodified opinion may include one or more material misstatements and a modified opinion may include one or more immaterial misstatements
-An unmodified opinion states that the financial statements are presented fairly in accordance with the applicable financial framework, and a modified opinion finds they are not
An unmodified opinion states that the financial statements are presented fairly in accordance with the applicable financial framework, and a modified opinion finds they are not
Auditor Margarita concludes that the financial statements are presented fairly, in all material respects, and in accordance with the applicable financial reporting framework, though she did find an immaterial scope limitation that was not pervasive. What type of opinion has she rendered?
-unaudited opinion
-modified opinion
-unmodified opinion
-adverse opinion
unmodified opinion
Auditor Alfonso has gathered sufficient appropriate audit evidence, evaluated uncorrected misstatements, and completed the required communications with those charged with governance. His final step is to
-schedule a meeting with the audit committee
-file the financial statements with the SEC
-prepare and issue the independent auditor's report
-shred the audit documentation
prepare and issue the independent auditor's report
Downtown Stores Inc. intends to change from operating leases to capitalized leases to comply with changes in accounting standards. This would be considered a change in
-accounting principle
-lease estimate
-accounting standard
-accounting estimate
accounting principle
The private pharmaceutical Proforma Company is dependent on one recently developed drug for much of its current revenue. A new scientific study has identified previously unknown and dangerous side effects of the drug, and industry observers expect a court challenge to the drug's legal status. Proforma refuses to properly disclose a going concern issue in the notes as required. An auditor should do which of the following?
-Modify the opinion
-Report concerns to the independent audit committee of the board of directors
-None of these answer choices are correct
-Withdraw from the engagement
Modify the opinion
You are an auditor for Bigger Warehouses, who recently completed an acquisition of Smaller Group Inc. Smaller Group represents a material amount of the financial statements for Bigger. As the group engagement partner, you decide to reference the work done by the auditor for a Smaller Group. Because you referenced the work of this component audit, which of the following statements is correct?
-You are assuming responsibility for the work of the component auditor and your opinion is based solely on the report of the component auditors.
-You are not assuming responsibility for the work of the component auditor and your opinion is not based solely on the report of the component auditors.
-You are assuming responsibility for the work of the component auditor and your opinion is not based solely on the report of the component auditors.
-You are not assuming responsibility for the work of the component auditor and your opinion is based solely on the report of the component auditors.
You are not assuming responsibility for the work of the component auditor and your opinion is not based solely on the report of the component auditors. (Wrong)
Which of the following statements is INCORRECT regarding using the work of another auditor for the audits of private companies?
A :
If the subsidiary audited by the component auditor is an immaterial amount of the group financial statements, the group engagement partner typically decides to reference the work completed by the component auditor in the audit report.
B :
If more than one component auditor was used to audit multiple subsidiaries, then the portion audited by all component auditors can be aggregated together and expressed as a single dollar amount or percentage.
C :
The group engagement partner must decide whether to make reference to the audit of a component auditor in the auditor's report on the group financial statements.
D :
When reference is made to a component auditor, the auditor's responsibility paragraph is modified to include a portion of the group financial statements that were audited by the component auditor.
If the subsidiary audited by the component auditor is an immaterial amount of the group financial statements, the group engagement partner typically decides to reference the work completed by the component auditor in the audit report.
During the audit of Chesterfield Fine Wines, the auditors determine that the company has miscalculated the depreciation for some recently purchased major distillery equipment. The auditors find this to be a material, but not pervasive, departure from GAAP. Which type of audit opinion should be issued?
A :
disclaimer
B :
qualified
C :
unmodified
D :
adverse
Disclaimer (Wrong)
During the audit of Chesterfield Fine Wines, the auditors determine that the company is using an unacceptable inventory valuation method that amounts to a pervasively material departure from GAAP. Which type of audit opinion should be issued?
-unmodified
-qualified
-adverse
-disclaimer
adverse
During the audit of Chesterfield Fine Wines, the auditors determine that certain necessary accounting records were destroyed in a recent fire at Chesterfield's headquarters. The auditors find this to be a material, but not pervasive, scope limitation. Which type of audit opinion should be issued?
A :
unmodified
B :
qualified
C :
adverse
D :
disclaimer
qualified
During the audit of Chesterfield Fine Wines, the auditors determine that Chesterfield management will not give the auditors access necessary to confirm a completed inventory count. The auditors find this to be a pervasively material scope limitation. Which type of audit opinion should be issued?
A :
qualified
B :
unmodified
C :
adverse
D :
disclaimer
disclaimer
Which of the following statements is INCORRECT regarding subsequently discovered facts?
A :
Auditors must determine if the new information is reliable, material, and if it existed at the date of the auditor's report.
B :
If a revision of the financial statements is necessary, auditors should inquire of management as to how management will address the situation in the financial statements, either through adjustment and disclosure or only disclosure.
C :
If management revises the financial statements, auditors do not need to perform audit procedures on the changes made by management.
D :
AU-C 560 and AS 2905 state the first step is to discuss the matter with the appropriate level of management and, if appropriate, those charged with governance.
If management revises the financial statements, auditors do not need to perform audit procedures on the changes made by management.
What is the difference between a subsequent event and a subsequently discovered fact?
A :
A subsequent event does not require auditors to perform any audit procedures after the date of the financial statements, whereas a subsequently discovered fact does.
B :
A subsequent event occurs between the end of fieldwork date and the report release date, whereas a subsequently discovered fact occurs before the end of fieldwork date.
C :
A subsequent event is discovered after the report release date and a subsequently discovered fact is discovered before the report release date.
D :
A subsequent event is discovered before the report release date and a subsequently discovered fact is discovered after the report release date.
A subsequent event is discovered before the report release date and a subsequently discovered fact is discovered after the report release date.
What is an auditor's responsibility with regard to subsequently discovered facts?
A :
Auditors are responsible for subsequently discovered facts, both before and after the report release date.
B :
Auditors have no responsibility for subsequently discovered facts after the report release date unless the client determines that routine auditing procedures should have uncovered the facts during the period of the financial statement.
C :
Subsequently discovered facts become known only after the report release date so auditors have no responsibility to deal with them.
D :
Auditors are only responsible for subsequently discovered facts that become known before the end of fieldwork date.
Auditors are responsible for subsequently discovered facts, both before and after the report release date.
An audit that combines the financial statement audit with an audit of the effectiveness of ICFR is defined as
A :
dual
B :
integrated
C :
comprehensive
D :
concurrent
integrated
Auditor Candace has identified an internal control exception related to revenues during an audit of Flying Rug Company. What must Candace do to determine if this is a control deficiency, a significant deficiency, or a material weakness?
A :
consult management's legal counsel
B :
request an opinion from the AICPA
C :
consult the auditor's legal counsel
D :
use her professional judgment
use her professional judgement
Which statement is most correct regarding the opinion on internal controls over financial reporting (ICFR)?
A :
The opinion is only modified if one or more material weaknesses in ICFR are identified.
B :
The opinion is only modified if one or more material misstatements are identified.
C :
The opinion is modified if one or more material weaknesses in ICFR are identified or there is a restriction on the scope of the auditor's work.
D :
The opinion is only modified if there is a restriction on the scope of the auditor's work.
The opinion is modified if one or more material weakness in ICFR are identified or there is a restriction on the scope of the auditor's work
CPA Anya is considering whether to accept a compilation agreement. Which statement regarding the conditions she must meet is INCORRECT?
A :
The only requirement is for Anya to read the financial statements and determine whether they appear to be appropriate in form and free from obvious material misstatements based on her knowledge of the financial reporting framework.
B :
Anya is required to be independent.
C :
Anya does not perform any procedures to verify or corroborate the client's accounting records.
D :
If Anya is not independent, it must be disclosed in the compilation report.
Anya is required to be independent
CPA Hernandez is considering whether to accept a review engagement from a small private company that offers counseling services to high school students who are applying to colleges. Which statement is INCORRECT regarding the conditions he must meet?
A :
The financial reporting framework selected by management must be acceptable in the circumstances.
B :
Hernandez must obtain an agreement from management that it acknowledges its responsibility for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework.
C :
Hernandez is required to be independent.
D :
Management must agree to provide a representation letter at the conclusion of the review engagement that confirms Hernandez's representations made during the review.
Management must agree to provide a representation letter at the conclusion of the review engagement that confirms Hernandez's representations made during the review [Show Less]