Audit SB 17
Matters that, in the auditor's professional judgment, were of most significance in the current period audit of financial statements are defined as ______ audit matters in nonpublic company audit reports.
Blank 1: key
Auditors should use separate _____ to describe emphasis-of-matter items and basis for modifications of the audit report.
Blank 1: paragraphs
The period of time required by the applicable financial reporting framework or, if no requirement exists, within one year after the date the financial statements are issued is referred to as _____ period of time.
Blank 1: reasonable
If the material misstatement is considered ______, an adverse opinion is appropriate.
pervasive
The decision on whether a scope limitation results in a qualified or disclaimer of opinion is whether misstatements or possible misstatements are both ___ and ___.
Blank 1: material Blank 2: pervasive
In a shared responsibility report, the ______ sections of the audit report are modified.
opinion auditor's responsibility
The title for an unmodified report for a nonpublic company must include the word ______ to describe the auditor's relationship to the client.
Blank 1: independent
When the financial statements are not fairly presented in conformity with generally accepted accounting principles, auditors issue a(n) _____ opinion.
Blank 1: adverse
Re-expressing or revising an audit opinion that was previously issued is referred to as _____ the report.
Blank 1: updating
True or false: An auditor is required to add an emphasis-of-matter paragraph for all uncertainties.
False
Significant risks ______ be considered key audit matters.
may or may not
When the auditors have obtained sufficient appropriate audit evidence to conclude that the financial statements, taken as a whole, are not materially misstated and there is no need to disclose additional information, they will issue a(n) _____ opinion.
Blank 1: unmodified or unqualified
True or false: CAM and KAM sections are optional when either an adverse or disclaimer of opinion is issued.
False
Sufficient appropriate audit evidence is obtained when ______.
all audit documentation has been reviewed the financial statements are prepared
When comparative financial statements are presented by the client company, the auditors' report should ______.
always cover all years presented
To evaluate consistent application of GAAP when reporting on only the current period, auditors should consider the current period under audit and the preceding ______.
period
Audit considerations for client-imposed limitations include ______.
the assessment of fraud risk determining whether or not to withdraw from the engagement
A major assumption underlying the inclusion of an emphasis-of-matter paragraph for an uncertainty is ______.
the matter is adequately disclosed in the notes
Match the form with the purpose. Instructions S-1 through S-11 10-Q 10-K
Registration statements for companies planning to issue securities to the public Quarterly filing of financial information unaudited but reviewed by auditors Annual filing of audited financial statements
In group financial statements, issues arise when one or more subsidiaries are audited by _____ auditors other than the group auditors.
Blank 1: component
When auditors have concern about a company's ability to continue as a(n) ____ _____ , they should consider whether management's plans for dealing with the conditions are likely to mitigate the problem.
Blank 1: going Blank 2: concern
Auditors issue a(n) adverse opinion when the deficiencies in the financial statements are both ____ and ____.
Blank 1: material Blank 2: pervasive
An identified and assessed risk of material misstatement that, in the auditors' judgment, requires special audit considerations are called ______ risks.
Blank 1: significant
Financial statements are generally presented in _____ form for the current year and one or more preceding years.
Blank 1: comparative
Group financial statements are those of a company that consists of more than one _____ (e.g. subsidiary).
Blank 1: component
True or false: A nonpublic company audit report is always signed with the name of the CPA firm, not the personal name of the CPA.
False
The date of the audit report is significant because ______.
auditors have a responsibility to perform procedures through that date
Disclosure of the engagement partner's name and certain information about other CPA firms that participated in the audit is required by PCAOB _____ _____.
Blank 1: Form Blank 2: AP
An unqualified audit report for a public company must include "Report of ____ ____ Public Accounting Firm" in the title.
Blank 1: Independent Blank 2: Registered
A qualified opinion is issued when auditors are unable to obtain sufficient appropriate audit evidence on which to base the opinion because of a(n) _____ limitation.
Blank 1: scope
In the United States, financial statements are most frequently prepared following the general-purpose framework of ______.
GAAP
Form AP must be filed with the PCAOB within ______ days of the date the audit report is first included in a document filed with the SEC.
35
Disclosure requirements come from pronouncements issued by ______.
FASB GASB
True or false: A situation involving an uncertainty may also involve a scope limitation.
True
An unmodified opinion with additional audit-related information included in the audit report is appropriate when ______.
a report is filed with comparative statements when there are predecessor auditors
To evaluate whether there is substantial doubt about a client's ability to continue as a going concern, auditors should ______.
consider results of audit procedures performed during the audit
When the report on a public company is qualified for a departure from GAAP, the modification involves ______.
adding an additional untitled paragraph after the opinion paragraph
CAM and KAM sections are omitted from audit reports when ______ issued.
adverse and disclaimer of opinions are
Conditions that may raise substantial doubt about the going-concern assumption include ______.
adverse financial ratios work stoppages legal proceedings
A material and pervasive departure from GAAP requires a basis for modification paragraph and a(n) ______.
adverse opinion
Audits that involve a modification for both a departure from GAAP and a scope limitation that together result in material and pervasive misstatements should result in a(n) ______.
adverse opinion
Key audit matters ______.
are selected from matters communicated to those charged with governance may be required to be included by law or regulation are included in the report based on the client's desire for disclosure
Financial statement disclosures regarding the firm's going concern status include all of the following except:
audit procedures performed to identify and review going concern status
For a change in accounting principle, the client must report in the note to the financial statements all of the following except the ______ the change.
auditor's approval of
The nature of an audit is outlined in the section called ______.
auditor's responsibility
Limitations on the scope of the audit may occur due to all of the following except ______.
auditor-imposed limitations
The PCAOB audit report for large public companies includes an additional paragraph indicating ______.
auditors also have issued a report on the client's internal control over financial reporting
Publicly owned companies are required to include ______ for each of the last two years in their annual reports.
balance sheets
For scope limitations that have a material but not pervasive effect on the financial statements, auditors should issue a report that includes modifications to the ______ sections.
basis for opinion opinion
Financial statements that cover one or more prior periods are called _____ financial statements.
comparative
Modified opinions are required when there is a ______.
departure from GAAP scope limitation
For each critical audit matter (CAM), the auditors must include in the audit report ______.
description of how the matter was addressed in the audit reference to the accounts and disclosures affected identification of the matter principal considerations that led the auditor to determine it is a CAM
Multiple uncertainties that cause the auditor to conclude it's not possible to form an opinion on the financial statements may make a(n) ______ opinion appropriate.
disclaimer of
PCAOB standards state that when a significant scope limitation is imposed by the client, the auditors should ordinarily issue a(n) ______ opinion.
disclaimer of
Auditors sometimes conclude that the financial statements are misstated. They should consider the materiality of the effects of any departure from GAAP to determine the appropriate type of audit report to issue. When the effects of the departures are ______, an unmodified opinion may be issued.
immaterial
The unmodified report is divided into sections with headings that include all of the following except ______.
introduction
The PCAOB requires that critical audit matters (CAMs) ______.
only be reported for the period being audited
When, after considering management's plans, substantial doubt about the company's going concern status does not remain, an Emphasis of Matter section ______.
may be added at the auditors' discretion
If substantial doubt regarding going concern status does not remain after considering management's plans, auditors ______ opinion.
may issue an unmodified
If substantial doubt regarding Going Concern status remains after considering management's plans, auditors ______ opinion.
may still issue an unmodified
The term "other-matter paragraph" is used by ______.
nonpublic companies only
The purpose of notes to financial statements is to ______.
properly disclose information required by GAAP
The term "explanatory paragraph" is used by __.
public companies only
An opinion that states the financial statements are presented in conformity with GAAP "except for" the effects of some matter is referred to as a(n) ______ opinion..
qualified
For financial statements that contain a material misstatement that is not pervasive, the appropriate audit opinion is ______.
qualified
If the auditors of a nonpublic company decide that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive, a(n) ______ opinion is appropriate.
qualified
If auditors have substantial doubt about a company's ability to continue as a going concern and management's disclosures are materially inadequate, appropriate audit opinions are a(n) ______.
qualified opinion adverse opinion
A lawyer who refuses to provide appropriate information for a case that has not yet been settled creates a(n) ______ for the auditor.
scope limitation
When, after considering management's plans, substantial doubt about the company's going concern status still remains, auditors ______ add a Going Concern section to the report.
should
Form 8-Ks are used to report ______.
significant events for a company
The nonpublic company audit report should be signed with the name of ______.
the CPA firm
Auditors must modify the audit report if ______.
the auditors are unable to obtain sufficient appropriate audit evidence there are material departures from GAAP there is a lack of consistency in the application of GAAP
Auditors evaluate changes in accounting principles to determine if ______.
the method of accounting for the effect of the change is in conformity with GAAP the newly adopted principle is generally accepted the disclosures related to the change are adequate
The unqualified audit report for audits of public companies should reference ______.
the standards of the PCAOB
Audit reports with an unmodified opinion for nonpublic companies could state that the audit was performed in accordance with AICPA generally accepted auditing standards, while the audit report for public companies refer to PCAOB standards. Both reports are modified if:
there are conditions, although not departures from GAAP, about which the readers of the financial statements should be informed.
For auditors that are reporting on two periods, consistency of GAAP application should be evaluated between the current period and the preceding ______.
two periods
A situation in which conclusive audit evidence concerning the ultimate outcome cannot be gathered because the outcome will occur in the future is called a(n):
uncertainty.
Group auditors that make no reference to the component auditors should issue a(n) ______.
unmodified report