CH 18

True or false: Auditors explicitly consider auditor subjectivity when determining what matters should be considered CAMs.

True (This must be considered in terms of applying audit procedures to address the matter and in evaluating results.)

True or false: When an auditor reports on an entity's compliance with certain contractual agreements or regulatory requirements, the auditor uses the words "In our opinion...." in the audit report

False (Only negative assurance is provided "nothing came to our attention....")

True or false: Prior period statements received a qualified or adverse opinion because the entity did not follow GAAP. If the entity conforms to GAAP in the current year and restates the prior-period results, the auditor must still express a qualified opinion on the restated prior-period financial statements if they are presented with the current period statements as comparatives.

False (The auditor should express an unmodified opinion of the restated prior-period financial statements.)

True or false: The auditor's opinions on the financial statements and on the effectiveness of internal control must be presented in two separate reports with the same dates.

False (The opinions may be presented in two separate reports or one combined report.)

An auditor issues a qualified opinion when there is _____. a scope limitation a specific departure from GAAP but overall the financial statements present fairly in conformity with GAAP insufficient appropriate evidence a GAAP departure that materially affects the financial statements overall such that the statements are not fairly presented a lack of independence

a scope limitation a specific departure from GAAP but overall the financial statements present fairly in conformity with GAAP

Changes that affect comparability but not consistency include a change in _____. accounting estimate classification reporting entity accounting principle

accounting estimate classification

explanatory paragraphs are sometimes required but emphasis paragraphs are always optional _____. not mention internal control over financial reporting in the audit report qualify his or her audit opinion with an expect for add an explanatory paragraph to the audit report

add an explanatory paragraph to the audit report

Special purpose financial statements prepared under a(n) _____ basis comply with an agreement between the entity and one or more third parties other than the auditor.

contractual

Whenever the audit opinion is qualified, the opinion paragraph will include the words _____ ____.

except for

An ASB audit report ______. indicates the audit was conducted in accordance with generally accepted auditing standards contains an opinion on the effectiveness of the entity's internal control over financial reporting is titled "Report of Independent Registered Public Accounting Firm"

indicates the audit was conducted in accordance with generally accepted auditing standards

A GAAP departure that is seen as _____ but not _____ will generally result in an qualified opinion.

material, pervasive

For public companies registered with the SEC, the financial statements ____. must have a clean audit opinion can have a qualified audit opinion with explanation can have a qualified or an adverse audit opinion as long as the entity corrects the issue in the next year's filing

must have a clean audit opinion

If an auditor is not independent, the auditor ____. must describe any audit procedures performed must withdraw from the engagement or disclaim an opinion must state the reason(s) for the lack of independence issues a two sentence report

must withdraw from the engagement or disclaim an opinion issues a two sentence report

When an auditor reports on an entity's compliance with certain contractual agreements or regulatory requirements, the auditor provide _____ _____ as to the entity's compliance with the requirements.

negative assurance

Under PCAOB standards, when an auditor's opinion is based in part on the report of another auditor, explanatory language is added to the _____ paragraphs. opinion management's responsibility scope basis for opinion

opinion basis for opinion

Under ASB standards, when an issue other than those presented or disclosed in the financial statements is relevant to understanding the audit, the auditor's responsibilities, or the auditor's report a(n) _____ - _____ paragraph can be included in the audit report.

other matter

A predecessor auditor should obtain a letter of representations from the current-year, successor auditor when the predecessor auditor ____. indicates material items were discovered in the prior year that require disclosure in the current year will not reissue a report to be included with the current-year financial statements plans to reissue a report on the financial statements of prior periods presented for comparative purposes

plans to reissue a report on the financial statements of prior periods presented for comparative purposes

When an entity has changed auditors, the _____ auditor can reissue, at the request of the entity, the report on the financial statements of prior periods when those prior period statements are presented for comparative purposes.

predecessor

The portion of the consolidated financial statements audited by one independent auditor compared to another independent auditor is used to determine the designation as _____ auditor.

principal

When part of the audit has been completed by a separate, unaffiliated public accounting firm, the auditor for the parent company must be satisfied that he or she is the _____ auditor.

principal

If an entity fails to disclose information in the financial statements or footnotes as required by GAAP, the auditor should issue a(n) _____ or ____ audit opinion report.

qualified, adverse

If the financial statements are materially affected by a departure from GAAP, the auditor should express a(n) _____ or ____ opinion, depending on the pervasiveness of the misstatement.

qualified, adverse

Pervasive effects on the financial statements are those that ______ of the financial statements. represent or could represent a substantial proportion include disclosures fundamental to users' understanding are confined to specific elements, accounts, or items

represent or could represent a substantial proportion include disclosures fundamental to users' understanding

An inability to collect sufficient appropriate evidence is considered a(n): departure from GAAP lack of auditor independence lack of auditor competence scope limitation

scope limitation

The nature and magnitude of the potential effects of the financial statement area that the auditor was unable to examine and its significance to the overall financial statements should be considered in the assessment of a(n) _____ ____

scope limitation

When the audit has been performed in accordance with applicable auditing standards, the auditor has gathered sufficient evidence, and the auditor believes that the financial statements conform to GAAP a(n) _____ _____ financial statement audit report is issued.

standard unqualified

When an entity has a departure from GAAP judged to be immaterial by the auditor, the auditor will most likely issue a(n) _____. opinion qualified for a scope limitation standard unqualified opinion disclaimer of opinion opinion qualified for a GAAP departure

standard unqualified opinion

When an auditor is engaged to report on ____, the auditor must audit the entire set of financial statements. stockholders' equity rentals or royalties net income special purpose framework financial statements provision for income taxes

stockholders' equity net income

If prior-period financial statements have been audited but the predecessor's report will not be included, the successor auditor indicates in an explanatory paragraph immediately following the opinion paragraph ____. that users or the current audit report must refer to the report issued by the predecessor auditor for more information that the prior period financial statements were audited by other auditors the date, and the type of report issued by the predecessor auditor the assumption of responsibility for the prior period statements

that the prior period financial statements were audited by other auditors the date, and the type of report issued by the predecessor auditor

For public companies, qualified and adverse opinions on financial statements are not accepted by ____. the SEC state corporation commissions the IRS investors and creditors

the SEC

An auditor issues a standard unqualified audit report when _____. the auditor has received payment for services rendered in order to issue the audit report the audit has been performed in accordance with applicable auditing standards the auditor believes the financial statements conform to GAAP in all material respects sufficient evidence has been gathered by the auditor

the audit has been performed in accordance with applicable auditing standards the auditor believes the financial statements conform to GAAP in all material respects sufficient evidence has been gathered by the auditor

When an entity issues comparative financial statements, _______. two separate audit reports must be issued and dated the audit report must be dual dated to encompass the ending of both audits the audit report is the date of the most recently completed audit

the audit report is the date of the most recently completed audit

When a circumstance such as a fire restricts the scope of the engagement _____. the auditor should disclaim an opinion the auditor can issue a standard unqualified opinion the auditor must issue a qualified opinion with explanatory paragraph alternative procedures can be used to gather sufficient appropriate evidence

the auditor can issue a standard unqualified opinion alternative procedures can be used to gather sufficient appropriate evidence

Management's going concern assessment is independently assessed by auditors _____. to ensure management's assessment has been adequately conducted and disclosed and included as part of the audit report to provide extra assurance to financial statement users that the company will not go bankrupt

to ensure management's assessment has been adequately conducted and disclosed

Under PCAOB standards, when multiple firms participate in an audit, the principal auditor must disclose the other firms that participated _____ referenced in the audit report. only if they are only if they are not whether or not they are

whether or not they are

Any matters arising from the audit of financial statements that are communicated or required to be communicated, to the audit committee, that relate to material financial statement accounts or disclosures and involved especially challenging, subjective, or complex auditor judgment are called ____ ____ matters.

Critical Audit

When would an auditor be most likely to issue an unqualified opinion and add a discussion of the change in an explanatory paragraph? When there is a departure from GAAP that is not confined to specific elements, accounts, or items of the financial statements. When there is a client-imposed scope limitation. When an entity makes a change in accounting principle and the auditor concurs with the change.

When an entity makes a change in accounting principle and the auditor concurs with the change.

A disclaimer of opinion is not an option when there is _____. substantial doubt about an entity's ability to continue as a going concern a known departure from GAAP a circumstance-imposed scope limitation

a known departure from GAAP

The PCAOB presumption is that in most audits the auditor will ____ CAM(s). identify at least one identify multiple not identify any

identify at least one

If an entity's disclosures with respect to its ability to continue as a going concern are inadequate, the result could be for the auditor to _____. disclaim an opinion on the entity issue a qualified opinion issue an adverse opinion issue an unqualified opinion with an explanatory paragraph

issue a qualified opinion issue an adverse opinion

When a scope limitation exists but overall the financial statements present fairly due in conformity with GAAP the auditor will _____. issue a qualified opinion issue an adverse opinion explain the impact of the faulty accounting use the word "except for" in the report issue an unqualified opinion with explanation

issue a qualified opinion use the word "except for" in the report

True or false: When a correction to a material misstatement in previously issued financial statements is made, the auditor is not required to mention the misstatement in the current year report.

False (An explanatory paragraph to highlight a lack of comparability is required.)

Under the new PCAOB reporting standards, the _____ section of the report is now presented first.

Opinion

When the financial statements do not present fairly due to a GAAP departure that materially affects the financial statements overall the auditor will issue a(n) _____ .

adverse

The principal auditor accepts full responsibility for the work done and conclusions drawn by other auditors when the ______. auditor determines the other auditors were not independent of the entity audit report does not refer to the work of other auditors audit report refers to the work of other auditors other auditors did not conduct the majority of the audit work

audit report does not refer to the work of other auditors

The PCAOB anticipates that the audit report's new emphasis on _____ or _____ audit matters will enhance auditor communication and thus improve the quality of financial reporting.

critical, key

In identifying CAMS, auditors must take into account _____. degree of auditor judgment related to areas that involved significant management judgment management's assessment of significant risks of material misstatement the nature and timing of significant unusual transaction transactions

degree of auditor judgment related to areas that involved significant management judgment the nature and timing of significant unusual transaction transactions

If an entity is experiencing immediate financial distress and a bankruptcy is impending, the auditor will generally _____. issue an adverse opinion issue an unqualified opinion with an explanatory paragraph issue a qualified opinion disclaim an opinion on the entity

disclaim an opinion on the entity

If a departure from GAAP is pervasive and the financial statements taken as a whole do not fairly present the entity's financial position, results of operations, and cash flows in accordance with GAAP, the auditor should _____. resign from the engagement and consult legal counsel issue an audit opinion that includes the words "except for" issue an adverse opinion disclaim an opinion on the financial statements

issue an adverse opinion

Auditing standards use the term _____ to describe the potential effects of a scope limitation or departure from GAAP on the auditor's report.

pervasive

The new PCAOB reporting standards include ____. reporting the opinion section last an implicit statement that the auditor is independent separate disclosure of critical audit matters a clearer description of management and auditor responsibilities

separate disclosure of critical audit matters a clearer description of management and auditor responsibilities

Which of the following is included in the footnotes to the financial statements but does not require an explanatory paragraph in the auditor's report? Accounting for a major subsidiary using the equity method in 20X1 and consolidating the subsidiary's and parent's financial statements in 20X2. A change in accounting principle that does not have a material effect in the current year but is expected to have a material effect in future years A departure from GAAP that is not confined to specific elements, accounts, or items of the financial statements.

A change in accounting principle that does not have a material effect in the current year but is expected to have a material effect in future years

The new PCAOB reporting standards include ____. a Basis of Opinion section a reduction of information related to management's responsibilities laying out the key features of an audit more clearly the retention of the binary, pass/fair reporting approach

a Basis of Opinion section laying out the key features of an audit more clearly the retention of the binary, pass/fair reporting approach

Circumstances that likely will result in an audit opinion that departs from an unqualified opinion include _____. important events that occurred after the balance sheet date. a departure from GAAP a scope limitation lack of auditor independence significant related-party transactions that are appropriately disclosed

a departure from GAAP a scope limitation lack of auditor independence

The procedures applied are more extensive when ____. a separate engagement is performed on an element, account, or item the element, account, or item is being considered as part of an audit of overall financial statements a special purpose framework is used to account for an element, account, or item

a separate engagement is performed on an element, account, or item

When the auditor is not required to audit management's assessment of internal control over financial reporting, the auditor must ____. add an explanatory paragraph to the audit report not mention internal control over financial reporting in the audit report qualify his or her audit opinion with an expect for

add an explanatory paragraph to the audit report

Auditors can add explanatory language to the standard unqualified audit report by _____. omitting the opinion paragraph or the introductory paragraph, but not both adding explanatory wording to the existing paragraphs of the report inserting an additional explanatory paragraph

adding explanatory wording to the existing paragraphs of the report inserting an additional explanatory paragraph

When there is a lack of consistency in the application of accounting principles due to accounting changes, an auditor _____. adds an explanatory paragraph to a standard unqualified audit report issues an adverse report on the entity's financial statements issues a qualified audit report stating "except for the change in accounting method described in Note XX" disclaims an opinion on the current year financial statements due to a lack of consistency

adds an explanatory paragraph to a standard unqualified audit report

When the financial statements do not present fairly due to a GAAP departure that materially affects the financial statements overall, the audit will issue a(n) _____ opinion. disclaimer of adverse qualified with explanation

adverse

The auditor is required to read the other information and consider whether such information is consistent with the information in the audited financial statements when _____. prior-period financial statements have been audited and the predecessor's report will be included with the current-year statements an entity publishes documents that contain other information in addition to the audited financial statements prior-period financial statements have been audited but the predecessor's report will not be included

an entity publishes documents that contain other information in addition to the audited financial statements

Under ASB standards ____. both emphasis-of-matter and other-matter paragraphs are sometimes required both emphasis-of-matter and other-matter paragraphs are always optional emphasis-of-matter paragraphs are sometimes required but other-matter paragraphs are always optional other-matter paragraphs are sometimes required but emphasis-of-matter paragraphs are always optional

both emphasis-of-matter and other-matter paragraphs are sometimes required

Before reissuing a report on the financial statements of prior periods which will be presented for comparative purposes, a predecessor auditor should ____. compare the prior-period financial statements on which the predecessor reported with the current-year statements on which the successor will report read the current-period financial statements provide a letter of representations to the current-year, successor auditor indicate to the successor auditor whether any material items were discovered in the prior year

compare the prior-period financial statements on which the predecessor reported with the current-year statements on which the successor will report read the current-period financial statements

When an entity has changed auditors, the predecessor auditor can reissue, at the request of the entity, the report on the financial statements of prior periods when those prior period statements are presented for comparative purposes. The predecessor auditor must ____. participate in the current year audit in order to determine if the report still applies provide a letter of representation to the current-year, successor auditor determine if the previously issued reports are still appropriate

determine if the previously issued reports are still appropriate

If the other auditor's report is not a standard unqualified audit report, the principal auditor must _____. not issue an unqualified audit opinion determine the nature of the departure and its significance always refer to the departure in his or her audit report explain how material departures affect the overall audit opinion

determine the nature of the departure and its significance explain how material departures affect the overall audit opinion

If a scope limitation is so significant that the auditor considers the financial statements taken as a whole to be unreliable, the auditor will likely issue a(n) ____ opinion. qualified adverse disclaimer of

disclaimer of

When there is a known departure from GAAP, a(n) ____ opinion is not an option. qualified disclaimer of adverse

disclaimer of

When there is a lack of auditor independence the auditor _____. issues an unqualified opinion with explanation issues a qualified opinion that identifies the specific areas where independence is lacking issues an adverse opinion disclaims an opinion

disclaims an opinion

When the two opinions over internal control and over the financial statements are presented separately, _____. each report must include an explanatory paragraph referring to the opinion expressed in the other report each report must contain the same type of opinion either unqualified, qualified, or adverse each engagement must use the same audit staff and refer to this consistency within the report the reports must have the same date

each report must include an explanatory paragraph referring to the opinion expressed in the other report the reports must have the same date

An auditor may choose to draw attention to significant transactions with related parties or unusually important subsequent events by adding a(n) _____ paragraph to the auditor's report.

emphasis

Under ASB standards, when an auditor makes reference in the audit report to an issue that has been appropriately presented or disclosed in the financial statements, the auditor is using a(n) ____ -of- _____ paragraph.

emphasis of matter

Under PCAOB standards ____ both explanatory and emphasis paragraphs are sometimes required both explanatory and emphasis paragraphs are always optional emphasis paragraphs are sometimes required but explanatory paragraphs are always optional explanatory paragraphs are sometimes required but emphasis paragraphs are always optional

explanatory paragraphs are sometimes required but emphasis paragraphs are always optional

An auditor issued a qualified opinion on prior-period financial statements due to lack of conformity with GAAP. The entity has fixed the issue in the current year and appropriately restated the prior-period financial statements. If the restated prior period statements are presented with the current statements as comparatives, the auditor should ____. include an explanatory paragraph immediately before the opinion paragraph express an unmodified opinion on the restated financial statements disclose that the previously issued financial statements have been corrected and restated not mention that the updated audit opinion is different than the original opinion

express an unmodified opinion on the restated financial statements disclose that the previously issued financial statements have been corrected and restated

A change in accounting estimate is ____. described in an explanatory paragraph in the auditor's report considered a departure from GAAP that is not confined to specific elements, accounts, or items of the financial statements generally disclosed in a footnote but does not require an explanatory paragraph in the auditor's report

generally disclosed in a footnote but does not require an explanatory paragraph in the auditor's report

In order to be identified as a CAM, a matter must _____. be one that has or will be communicated to the chief executive officer have involved especially challenging, subjective or complex auditor judgment relate to accounts or disclosures that are material to the financial statements

have involved especially challenging, subjective or complex auditor judgment relate to accounts or disclosures that are material to the financial statements

When other information in a document containing audited financial statements is materially inconsistent with information appearing in the financial statements the auditor must ____. disclaim an opinion of the financial statements ensure the financial statements included with the other information are marked "Unaudited" include an explanatory paragraph in the audit report

include an explanatory paragraph in the audit report

When required supplementary information (RSI) is omitted to departs materially from the requirements of the applicable financial reporting framework the auditor must _____. disclaim an opinion of the financial statements include an explanatory paragraph in the audit report issue an adverse opinion make no mention of RSI in the audit report

include an explanatory paragraph in the audit report

Generally, the materiality in an audit of an element, account, or item is set in relation to the ____. individual element, account or item financial statements taken as a whole related elements, accounts, or items

individual element, account or item

An error was judged to be material by the auditor even though it did not rise to conventional levels of materiality in quantitative terms. This was likely because the error was _____. intentional due to lack of auditor independence due to carelessness accidental

intentional

That an entity will continue as a going concern ______. refers to a period of time not to exceed two years from the date of the financial statements being audited is assessed by management is evaluated by the auditor is a basic assumption of financial reporting

is assessed by management is evaluated by the auditor is a basic assumption of financial reporting

A PCAOB report ______. indicates the audit was conducted in accordance with generally accepted auditing standards recommends but does not mandate the disclosure of CAMs is titled "Report of Independent Registered Public Accounting Firm"

is titled "Report of Independent Registered Public Accounting Firm"

An entity is issuing comparative financial statements. In prior years, the auditor expressed a standard unmodified report. This year the entity has inappropriately not capitalized certain lease obligations. The auditor should _____. re-audit the prior years' financial statements to ensure the accounting for leases complies with GAAP issue a report similar to a qualified report for a GAAP departure clarifying the departure only affects the current year's statements withdraw from the engagement due to the entity's lack of conformity with GAAP issues a qualified report for a GAAP departure for both the current year and prior years

issue a report similar to a qualified report for a GAAP departure clarifying the departure only affects the current year's statements

If an entity makes a change in accounting principle and the auditor concurs with the change, the auditor will _____. issue a qualified opinion and add a discussion of the change in an explanatory paragraph issue an unqualified opinion and add a discussion of the change in an explanatory paragraph qualify the report and indicate that the financial statements present fairly except for the effects of the change in accounting principle

issue an unqualified opinion and add a discussion of the change in an explanatory paragraph

When an auditor is engaged to report only on specific parts of financial statements to ensure compliance with the provisions of a contract or agreement, the auditor _____. uses an introductory paragraph that is identical to the one used for a standard unmodified report references the financial statements as a whole in the scope paragraph limits the distribution of the report to the parties who are part of the contract

limits the distribution of the report to the parties who are part of the contract

An auditor disclaimed an opinion on the prior period financial statements but was able to conduct the current year audit without limitations. In this case the auditor ____. must issued a qualified opinion for this year's statements that explains the prior limitation may issue an unmodified opinion on both this year's and last year's statements may issue an unmodified opinion on this year's statements

may issue an unmodified opinion on this year's statements

Generally, the procedures applied in an audit of an element, account, or item are ____ than if the same information were considered part of an audit of the overall financial statements. no different less extensive more extensive

more extensive

When an auditor is not independent, the reason(s) for the lack of independence should _____ ASB standards. be stated under both PCAOB and not be stated under PCABOB or be stated under PCAOB standards, but should not be stated under not be stated under PCAOB standards, but may be stated under

not be stated under PCAOB standards, but may be stated under

An entity received a going concern report in 20X1. The auditor determines the substantial doubt regarding going concern has been removed in 20X2. The explanatory paragraph included in the prior year's audit report is _____. not included with the auditor's report covering the comparative financial statements included in the report for both the 20X1 and 20X2 for consistency included in the report for 20X1, but is not included for 20X2

not included with the auditor's report covering the comparative financial statements

A change in accounting principle that does not have a material effect in the current year but which is expected to have a material effect in future years is _____. described in an explanatory paragraph in the auditor's report considered a departure from GAAP that is not confined to specific elements, accounts, or items of the financial statements not mentioned in the auditor's report

not mentioned in the auditor's report

The PCAOB believes the new auditor's report will ____ . provide more information and insight to stakeholders sharpen auditors' sense of professional skepticism in dealing with audit matters enhance communication between management and investors improve the quality of financial reporting

provide more information and insight to stakeholders sharpen auditors' sense of professional skepticism in dealing with audit matters improve the quality of financial reporting

If an entity fails to disclose information in the financial statements or footnotes as required by GAAP, the auditor should ____. provide the omitted information, if practicable, in the audit report amend the financial statements to include the omitted information, if practicable issue a qualified or adverse audit report

provide the omitted information, if practicable, in the audit report issue a qualified or adverse audit report

When an auditor reports on an entity's compliance with certain contractual agreements or regulatory requirements, the auditor _____. uses the words "In our opinion" in the report provides negative assurance only expresses an affirmative opinion about the entity's compliance uses a statement that in applying procedures "nothing came to the auditor's attention"

provides negative assurance only uses a statement that in applying procedures "nothing came to the auditor's attention"

With regard to other information in documents containing audited financial statements, the auditor is required to ____. take responsibility for information that is not financial in nature read the other information consider whether such information is consistent with the information in the audited financial statements perform audit procedures to corroborate the other information

read the other information consider whether such information is consistent with the information in the audited financial statements

When an auditor is engaged to report only on specific parts of financial statements, the scope paragraph of the audit report ____. states management's responsibilities with respect to the specific account references the specific account being audited limits the distribution of the report to the parties who are part of the contract references the financial statements as a whole

references the specific account being audited

A change from an inappropriate use or application of accounting principle in prior years to an acceptable accounting principle in the current year _____. requires an explanatory paragraph to highlight a lack of comparability means that the auditor cannot issue an unqualified opinion on the current year financial statements is considered a change in accounting principle or method of application requires the prior-period financial statements to be restated retroactively

requires an explanatory paragraph to highlight a lack of comparability requires the prior-period financial statements to be restated retroactively

When a client significantly restricts the scope of the engagement ____. the auditor should consider disclaiming an opinion the audit fee should be adjusted since less work will be performed alternative procedures must be used to gather sufficient appropriate evidence the auditor should issue a qualified opinion with explanation

the auditor should consider disclaiming an opinion

When the auditor is not required to audit management's assessment of internal control over financial reporting, the auditor must add an explanatory paragraph in the Basis for Opinion section indicating _____. the company was not required to have an audit of its ICFR no opinion on ICFR is being expressed the auditor takes no responsibility as related to ICFR

the company was not required to have an audit of its ICFR no opinion on ICFR is being expressed

When an entity issues comparative financial statements, the date on the auditor's report is normally ____. the date of the most recently completed audit dual dated for the date of the first and most recent completed audits the date of the first completed audit

the date of the most recently completed audit

An auditor is most likely to disclaim an opinion on an entity when _____. there is substantial doubt about the entity's ability to continue as a going concern and the financial problems are adequately disclosed the entity is experiencing immediate financial distress and a bankruptcy is impending there is substantial doubt about the entity's ability to continue as a going concern and the financial problems are not adequately disclosed

the entity is experiencing immediate financial distress and a bankruptcy is impending

The principal auditor is sharing responsibility for the audit report with others auditors when _____. there is no reference to the other auditors in the audit report the other auditors lack independence from the entity being audited there is a reference to the other auditors in the audit report

there is a reference to the other auditors in the audit report

An auditor may use a disclaimer of opinion when ____. there is insufficient appropriate evidence to form an opinion there is a specific departure from GAAP but overall the financial statements present fairly in conformity with GAAP the financial statements do not present fairly due to a GAAP departure that materially affects the financial statements overall there is a lack of independence

there is insufficient appropriate evidence to form an opinion there is a lack of independence

An auditor adds an explanatory paragraph to a standard unqualified report on an entity's financial statements when _____. there is substantial doubt about an entity's ability to continue as a going concern there is a scope limitation resulting from an inability to collect sufficient appropriate evidence there is a lack of independence of the auditor the auditor decides to refer to the report of other auditors as the basis, in part, for the opinion the auditor references the report on the audit of internal control for public companies.

there is substantial doubt about an entity's ability to continue as a going concern the auditor decides to refer to the report of other auditors as the basis, in part, for the opinion the auditor references the report on the audit of internal control for public companies.

A immaterial scope limitation will normally result in a(n) _____. disclaimer of opinion standard unqualified opinion with an explanatory paragraph qualified opinion unqualified opinion

unqualified opinion

Auditors express a qualified or adverse opinion for departures from GAAP including _____. use of an unacceptable accounting principle an unjustified change in accounting principle inadequate disclosure management-imposed scope limitations

use of an unacceptable accounting principle an unjustified change in accounting principle inadequate disclosure

The auditor's standard unqualified audit report for a public company contains the _____. "Opinion" section how long the auditor has served "Critical Audit Matters" section breakdown of fees billed to the client name and signature of firm

"Opinion" section how long the auditor has served "Critical Audit Matters" section name and signature of firm

True or false: When an entity issues comparative financial statements, the auditor can express a standard unmodified report on prior years' financial statements but qualify the opinion on the current-year financial statements

True (When comparative financial statements are issued, the auditor need not issue the same opinion on all years presented.)

The auditor's report does not refer to the work of other auditors when the principal auditor _____. accepts full responsibility for the work done and conclusions drawn by other auditors is satisfied as to the professional reputation and independence of the other auditor shares responsibility for the audit report with other auditors

accepts full responsibility for the work done and conclusions drawn by other auditors is satisfied as to the professional reputation and independence of the other auditor

Materiality not a factor when considering ____. work performed by other auditors scope limitations departures from GAAP auditor independence

auditor independence

Unmodified or unqualified opinions both refer to a(n) _____ audit opinion.

clean

The auditor's standard unqualified audit report implies that the _____ of the financial statements is not materially affected by inconsistent use of accounting principle.

comparability

A fundamental principle of accounting is that financial statements should be _____ between periods.

comparable

Auditing standards define special purpose financial statements are those prepared under a(n) ______ basis. contractual IFRS cash tax regulatory

contractual cash tax regulatory

In the CAM section of the audit report, a paragraph or table must _____. explain how each matter was determined to be a CAM refer to financial statement accounts and disclosures related to the CAM name the audit partner who assessed CAM describe how each CAM was addressed in the audit

explain how each matter was determined to be a CAM refer to financial statement accounts and disclosures related to the CAM describe how each CAM was addressed in the audit

An intentional management error can be considered _____ by the auditor regardless of the magnitude of the error.

material

When an auditor adds explanatory wording to the existing paragraphs of the report it is referred to as _____ wording.

modified

When an auditor is not independent the auditor must disclaim an opinion _____. only if the factors impacting independence are pervasive only if the condition that caused the lack of independence is material regardless of the significance of the condition that caused the lack of independence

regardless of the significance of the condition that caused the lack of independence

Which of the following are example of an element, account, or item for which an auditor can perform a separate engagement? Net income Royalties Stockholders' equity Profit participation Provision for income taxes

Royalties Profit participation Provision for income taxes

True or false: An entity received a going concern report in 20X1. The auditor determines the substantial doubt regarding going concern has been removed in 20X2. The explanatory paragraph included in the prior year's audit report is not included with the auditor's report covering the comparative financial statements

True (The paragraph can be omitted once the doubt about going concern has been removed.)

When the other auditor's report is not a standard, unqualified report, the principal auditor _____ refer to to the departure in his or her report. may or may not have to is always required is never required

may or may not have to

The successor auditor includes an explanatory paragraph indicating that the prior period financial statements were audited along with the date and type of report issued when the ____. successor auditor takes responsibility for the prior-year financial statements predecessor's report is being reissued with the current report predecessor's report will not be included with the current report

predecessor's report will not be included with the current report

The auditor's standard unqualified audit report for a public company contains the _____. report title the addressee name of the engagement partner audit report date "Basis for Opinion" section

report title the addressee audit report date "Basis for Opinion" section

A "clean" opinion is also called a(n) ______ opinion. unmodified qualified modified unqualified

unmodified unqualified

When the auditor concludes there is substantial doubt about the entity's ability to continue as a going concern and management has adequately disclosed the financial problems, the auditor will typically express a(n) _____ opinion.

unqualified