Audit 16 & 17 quizzes
Which of the following is least likely to be considered a substantive procedure relating to payroll? (1) Investigate fluctuations in salaries, wages, and commissions. (2) Test computations of compensation under profit sharing for bonus plans. (3) Test commission earnings. (4) Test whether employee time reports are approved by supervisors.
4
A change in accounting principles that the auditors believe is not justified is likely to result in which of the following types of audit opinions? Unmodified with Qualified Emphasis-of-Matter (1) Yes Yes (2) Yes No (3) No Yes (4) No No
2
Which of the following is least likely to result in inclusion of an emphasis-of-matter paragraph in an audit report? (1) The company is a component of a larger business enterprise. (2) An unusually important significant event. (3) A decision not to confirm accounts receivable. (4) A risk or uncertainty.
3
. The auditors who wish to draw reader attention to a financial statement note disclosure on significant transactions with related parties should disclose this fact in: (1) An emphasis-of-matter paragraph to the auditors' report. (2) A footnote to the financial statements. (3) The body of the financial statements. (4) The "summary of significant accounting policies" section of the financial statements.
1
An audit client has refused to allow the auditors to perform a presumptively mandatory auditing procedure and there are no other effective alternate procedures available. The circumstance would normally result in the issuance of: 1. A disclaimer of opinion 2. A standard unmodified report with a qualified scope paragraph 3. An unmodified report with an emphasis-of-matter paragraph 4. an adverse opinion
1
In an audit report on combined financial statements, reference to the fact that a portion of the audit was performed by a component auditor is: (1) Not to be construed as a qualification, but rather as a division of responsibility between the two CPA firms. (2) Not in accordance with generally accepted auditing standards. (3) A qualification that lessens the collective responsibility of both CPA firms. (4) An example of a dual opinion requiring the signatures of both auditors.
1
Which of the following ordinarily involves the addition of an emphasis-of-matter paragraph to an audit report? (1) A consistency modification. (2) An adverse opinion. (3) A qualified opinion. (4) Part of the audit has been performed by component auditors.
1
An audit report for a public client indicates that the audit was performed in accordance with: (1) Generally accepted auditing standards (United States). (2) Standards of the Public Company Accounting Oversight Board (United States). (3) Generally accepted accounting principles (United States). ( 4) Generally accepted accounting principles (Public Company Accounting Oversight Board).
2
The auditors' report should be dated as of the date the: (1) Report is delivered to the client. (2) Auditors have accumulated sufficient evidence. (3) Fiscal period under audit ends. (4) Peer review of the working papers is completed.
2
. What type or types of audit opinion are appropriate when financial statements are materially and pervasively misstated? Qualified Adverse (1) Yes Yes (2) Yes No (3) No Yes (4) No No
3
A material departure from generally accepted accounting principles will result in auditor consideration of: (1) Whether to issue an adverse opinion rather than a disclaimer of opinion. (2) Whether to issue a disclaimer of opinion rather than a qualified opinion. (3) Whether to issue an adverse opinion rather than a qualified opinion. (4) Nothing, because none of these opinions is applicable to this type of exception
3
When the matter is properly disclosed in the financial statements, the likely result of substantial doubt about the ability of the client to continue as a going concern is the issuance of which of the following audit opinions? Unmodified with Qualified Emphasis-of-Matter (1) Yes Yes (2) Yes No (3) No Yes (4) No No
3
Which of the following events occurring on January 5, 20X2, is most likely to result in an adjusting entry to the 20X1 financial statements? (1) A business combination. (2) Early retirement of bonds payable. (3) Settlement of litigation. (4) Plant closure due to a strike.
3
. Assume that the opinion paragraph of an auditors' report begins as follows: "With the explanation given in Note 6, . . . the financial statements referred to above present fairly. . ." This is: (1) An unmodified opinion. (2) A disclaimer of opinion. (3) An "except for" opinion. (4) An improper type of reporting.
4
A basis for modification paragraph in the audit of the financial statements of a nonpublic company: 1. Has a section title: Emphasis-of-matter 2. Is presented after the opinion paragraph 3. Must be included in all nonpublic company audits 4. Is only included with qualified, adverse, or disclaimers of opinion
4
As a result of analytical procedures, the independent auditors determine that the gross profit percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditors should: (1) Express an opinion that is qualified due to the inability of the client company to continue as a going concern. (2) Evaluate management's performance in causing this decline. (3) Require note disclosure. 4) Consider the possibility of a misstatement in the financial statements.
4
When a client declines to disclose essential information in the financial statements or notes the auditor of the financial statements should: 1. Issue a disclaimer of opinion because the client has interfered with the auditor's function of assessing the adequacy of disclosure 2. Issue an unmodified opinion, but inform the reader by including the omitted information in the audit report 3. Provide the information in the report, if practicable, and qualify the opinion because of a limitation on the scope of the audit 4. Provide the information in the audit report, if practicable, and qualified the opinion because of a departure from GAAP
4
An auditor's decision concerning whether or not to "dual date" the audit report is based upon the auditor's willingness to: 1. Accept responsibility for year-end adjusting entries 2. extend auditing procedures 3. assume responsibility for all events subsequent to the issuance of the auditor's report 4. Permit inclusion of a note caption: event (unaudited) subsequent to the date of the auditor's report
2
The date the auditor grans the client permission to use the audit report in connect with the financial statement is the: 1. report cutoff date 2. last day of significant field work 3. report release date 4. representation date
3
The search for unrecorded liabilities for a public company includes procedures usually performed through the: (1) Day the audit report is issued. (2) End of the client's year. (3) Date of the auditors' report. (4) Date the report is filed with the SEC.
3
The term "except for" in an audit report is: 1. Used in adverse opinion 2. No longer considered appropriate 3. Used in a qualified opinion 4. Used in an unmodified opinion when an emphasis of matter paragraph is address
3
Which of the following auditing procedures is ordinarily performed last? 1. Reading of the minutes 2. Confirming accounts payable 3. Testing of the purchasing function 4. Obtaining a management representation letter
4
Which of the following is most likely to be considered a Type 1 subsequent event? (1) A business combination completed after year-end, but for which negotiations began prior to year-end. (2) A strike subsequent to year-end due to employee complaints about working conditions which originated two years ago. (3) Customer checks deposited prior to year-end, but determined to be uncollectible after year-end. (4) Introduction of a new line of products after year-end for which major research had been completed prior to year-end.
3
Which of the following material events occurring subsequent to the balance sheet would require an adjustment to the financial statements before they could be issued? 1. Major purchase of a business which is expected to double the sales volume 2. Loss of a plant as a result of a flood 3. Sale of long-term debt or capital stock 4. Settlement of litigation in excess of the recorded liability
4
Which of the following procedures is most likely to be included near completion of an audit? (1) Obtain an understanding of internal control. (2) Confirmation of receivables. (3) Observation of inventory. (4) Perform analytical procedures.
4
Which of the following would be most likely to be an appropriate addressee for an audit report: 1. the CFO 2. a third party who requested a copy of the audit report 3. The president of the corporation 4. the shareholders
4
Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next: (1) Notify the board of directors that the auditor's report must no longer be associated with the financial statements. (2) Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information. (3) Request that management disclose the effects of the newly discovered information by adding a footnote to subsequently issued financial statements. (4) Issue revised pro forma financial statements taking into consideration the newly discovered information.
2
A possible loss, stemming from past events that will be resolved as to existence and amounts, is referred to as a(n): (1) Analytical process. (2) Loss contingency. (3) Probable loss. (4) Unasserted claim.
2
Under which of the following set of circumstances might the auditors disclaim an opinion? 1 . the financial statements contain a departure from GAAP, the effect of which is material 2. There are significant scope limitation ion the audit 3. there has been a material change between periods in the method of application and accounting principles 4. the group auditors make reference to the report of component auditor who audited a subsidiary
2
The unmodified standard report of a nonpublic company does not explicitly state: 1. an audit includes assessing the accounting principles used. 2. the auditors believe that the audit provides a reasonable basis for their opinion 3. The financial statements are the responsibility of the company's management 4. the audit was conducted in accordance with the accounting principles generally accepted in the USA
2
An audit report for a public client indicates that the financial statements were prepared in conformity with: (1) Generally accepted auditing standards (United States). (2) Standards of the Public Company Accounting Oversight Board (United States). (3) Generally accepted accounting principles (United States). (4) Generally accepted accounting principles (Public Company Accounting Oversight Board).
3
With respect to issuance of an audit report which is dual dated for subsequent event occurring after the completion of field work but before the issuance of the auditors'' report the auditor's responsibility for event occurring subsequent to the date of the audit report: 1. Limited to the specific events referred to 2. Limited to all events occurring through the date of the issuance report 3. Extended to include all event occurring through the date of submission of the report to the client 4. Extended to include all event occurring until the date of the last subsequent event referred to
1
An auditor accepted an engagement to audit the 20X8 financial statements of EFG Corporation and began the fieldwork on September 30, 20X8. EFG gave the auditor the 20X8 financial statements on January 17, 20X9. The auditor completed the audit on February 10, 20X9, and delivered the report on February 16, 20X9. The client's representation letter normally would be dated: (1) December 31, 20X8. (2) January 17, 20X9. (3) February 10, 20X9. (4) February 16, 20X9.
3
Auditors should perform audit procedures relation to subsequent events: 1. For a reasonable period after year end 2. Through Year end. 3. Through the date of the audit report. 4. Through the issuance of the audit report
3