AUD Final - 17

When items are identified that affect the going concern assumption, auditors must gather ____

evidence

An emphasis-of-matter paragraph always _______ the opinion paragraph.

follows

In addition to an emphasis-of-matter paragraph, auditors could issue a ____ in a going concern situation

disclaimer

The auditors decide not to make reference to the report of a component auditor that audited a portion of group financial statements.

unmodified - standard

Which of the following ordinarily involves the addition of an emphasis-of-matter paragraph to an audit report of a nonpublic company? A. A consistency modification. B. An adverse opinion. C. Part of the audit has been performed by component auditors. D. A qualified opinion.

A consistency modification.

Which of the following is least likely to result in inclusion of an additional paragraph being added to an audit report? A. The company is a component of a larger business enterprise. B. A risk or uncertainty. C. An unusually important significant event. D. A decision not to confirm accounts receivable.

A decision not to confirm accounts receivable; this is a scope problem not a financial statement problem

The client has changed from LIFO to FIFO for inventory valuation purposes; the auditors do not concur with this change. The effect is considered material and pervasive.

Adverse

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:

An emphasis-of-matter paragraph to the auditors' report.

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:

An improper type of reporting. This phrase does not give the reader of the report a clear-cut indication of the auditors' opinion. The phrase appears to modify the standard opinion paragraph, but is not forceful enough to constitute qualifying language.

An audit report for a public client indicates that the financial statements were prepared in conformity with:

Generally accepted accounting principles (United States).

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:

Not to be construed as a qualification, but rather as a division of responsibility between the two CPA firms.

The auditors believe that the financial statements have been presented in conformity with generally accepted accounting principles in all respects, except that a loss contingency that should be disclosed through a note to the financial statements is not included. While they consider this a material omission, they do not believe that it pervasively affects the financial statements.

Qualified; note wording "except for"

An audit report for a public client indicates that the audit was performed in accordance with:

Standards of the Public Company Accounting Oversight Board (United States)

The client has changed from LIFO to FIFO for inventory valuation purposes; the auditors concur with this change. The effect is considered material to the financial statements, although inventory is not a large part of total assets.

Unmodified—with an emphasis-of-matter paragraph.selected answer correct

A material departure from generally accepted accounting principles will result in auditor consideration of: A. Whether to issue a disclaimer of opinion rather than a qualified opinion. B. Nothing, because none of these opinions is applicable to this type of exception. C. Whether to issue an adverse opinion rather than a disclaimer of opinion. D. Whether to issue an adverse opinion rather than a qualified opinion.

Whether to issue an adverse opinion rather than a qualified opinion.

Auditors may add an emphasis-of-matter paragraph that refers to a matter that is _________ presented or disclosed.

appropriately

Client-imposed restrictions significantly limit the scope of the auditors' procedures, and they are unable to obtain sufficient appropriate audit evidence. The possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive.

disclaimer of opinion

Changes in accounting estimates ______ result in an explanatory paragraph.

do not

If substantial doubt about a going concern exists, an ______ paragraph is the most common resolution.

emphasis-of-matter

Auditors are ___ required to perform procedures specifically designed to test the going concern assumption

not

A going concern evaluation should include evaluation of ____ from the balance sheet data

one year

A going concern is to be evaluated for a period not to exceed _________ beyond the date of the financial statements.

one year

An emphasis-of-matter paragraph always follows the ___ paragraph

opinion