CHAP 15

Eagle Company's financial statements contain a depar-ture from GAAP because, due to unusual circumstances, the statements would otherwise be misleading. Which of the following is descriptive of the type of audit report the auditor should provide? a.Unqualified opinion, with no mention of the depar-ture in the auditor's report. b.Unqualified opinion, with a description of the departure in the audit report. c.Either a or b d.Neither a nor b

B

Report Modifications

Emphasis of matter Audit participants Inconsistent Departure Going concern Restatement

All audit reports issued under the guidance of ISA 701, Communicating Key Audit Matters in the Independent Auditor's Report, will include one or more KAMs

F

ISA 701, Communicating Key Audit Matters in the Indepen-dent Auditor's Report, mandates the order of presentation of KAMs

F

If after the audit report was issued, the auditor discovers that an important audit procedure was not performed, SOX requires that the auditor file a Form 8-K with the SEC.

F

If an auditor conducts an audit in accordance with mul-tiple auditing standards in their entirety, the auditor can only mention one set of standards in the audit report.

F

If an auditor decides to include additional language in the audit report because of concerns about the cli-ent's ability to remain a going concern, the additional language should include the terms material doubtandgoing concern

F

If the auditor is conducting an integrated audit, the auditor must provide both opinions in the same report.

F

International auditing standards generally permit the auditor to refer to other auditors in the auditor's report, while the U.S. auditing standards allow this reference only if required by law or regulation

F

The auditor issues an adverse opinion on ICFR if the client has one or more significant deficiencies in ICFR

F

The auditor should provide an audit report on the finan-cial statements only if the audit opinion indicates that the financial statements are fairly stated in all material respects.

F

When the auditor issues a disclaimer because of a lack of independence, the audit report must state the lack of independence, and must describe the reasons for the lack of independence.

F

Qualified opinion

Inadequate disclosure, risk and uncertainty, change in acct principle

Condition for unqualified

No material misstatement Adequate disclosure Necessary procedure Going concern Independence

An example of a situation in which the auditor discovers omitted procedures after the audit report was issued would be one in which the auditor failed to confirm receivables, and this fact comes to light as part of an internal review program

T

The auditor should provide the audit opinion in a written report.

T

The primary reason for issuing an adverse audit opinion is that the client's financial statements contain a pervasive and material unjustified departure from GAAP

T

Under guidance issued by the PCAOB in 2017, the audit report should include a statement indicating how long the audit firm has served as the company's auditor

T

If it is discovered after the audit report is issued that the auditor failed to confirm receivables, which of the follow-ing statements istrue? a.The auditor should try to examine subsequent col-lections of accounts receivable to help determine whether the accounts receivables existed and whether they were properly valued at the balance sheet date. b.The auditor must resign immediately. c.The auditor must notify the SEC immediately. d.The auditor must notify users of the financial statements immediately.

A

Which of the following statements is true regarding the auditor's responsibilities related to reporting? a.Auditors should obtain sufficient appropriate evi-dence to provide a reasonable basis for the opinion regarding the financial statements under audit. b.The audit opinion relates only to the client's financial statements, and does not relate to the required foot-note disclosures. c.If the auditor has reservations about the fairness of presentation of the financial statements, the auditor does not need to provide the reason for this reserva-tion, but needs to only state that the financial state-ments are not fairly presented. d.All of the above statements are true

A

In which of the following situations would an auditor ordinarily issue an unqualified audit opinion without any report modifications? a.The auditor wishes to emphasize that the client had significant related party transactions. b.The auditor complies with only one set of auditing standards c.The client issues financial statements that present financial position and results of operations, but omits the statement of cash flows. d.The auditor has substantial doubt about the cli-ent's ability to continue as a going concern, and the circumstances are fully disclosed in the financial statements

B

Refer to the Why It Matters feature "Situations Requiring a Modification to the Audit Report on ICFR." In which of the following situations would the auditor modify the audit report on ICFR? a.The auditor identifies multiple unrelated significant deficiencies in ICFR. b.The auditor concludes that management's report on ICFR is not complete or is improperly presented. c.The unaudited financial statements did not contain any misstatements. d.The auditor would modify the audit report on ICFR in all of the above situations.

B

The auditor of a large U.S. public company is conducting an integrated audit and has determined that a material weakness exists in the client's ICFR. Which of the follow-ing statements is true? a.The auditor is required to issue an adverse opinion on the financial statements .b.The auditor should express an adverse opinion on internal controls only if a material misstatement was found in the financial statements .c.The auditor should express an adverse opinion on ICFR, even if no material misstatements were found in the financial statements. d.The auditor is not required to express an opinion on internal controls.

C

Which of the following items would not be included in a PCAOB audit report that includes CAMs? a.Identification of the CAM. b.Description of the principal considerations that led the auditor to determine that the matter is a CAM. c.Indication as to whether management agreed that the matter was a CAM. d.Description of how the CAM was addressed in the audit. e.Reference to the relevant financial statement accounts or disclosures.

C

Which of the following phrases should an auditor not use when qualifying the audit opinion? a.With the exception of b.Except for c.Subject to d.Any of the above phrases would be appropriate.

C

Which of the following would require other than an unqualified opinion? a.The client has prepared its financial statements using IFRS as the financial reporting framework. b.The auditor has complied with the auditing stan-dards of both the AICPA and the IAASB. c.The auditor is not independent. d.The auditor believes that the client will remain a going concern for a reasonable period of time

C

As part of identifying CAMs, which of the following factors would an auditor consider when determining whether a matter involved especially challenging, sub-jective, or complex auditor judgment? a.The auditor's assessment of the risks of material misstatement, including significant risks. b.The nature and timing of significant unusual trans-actions and the extent of audit effort and judgment related to requisite transactions. c.The degree of auditor subjectivity in applying audit procedures to address the matter or in evaluating the results of those procedures. d.The auditor would consider all of the above factors

D

In which of the following situations would an auditor typically issue an unqualified opinion, but modify the audit report to include additional language? a.The client has changed an accounting principle, has reasonable justification for the change, and has followed GAAP in accounting for and disclosing the change. b.The auditor has substantial doubt about the client being a going concern. c.The client has had significant transactions with related parties that the auditor wants to emphasize. d.An auditor would typically issue an unqualified opinion, but include additional language, in all of the above situations.

D

Tech Company has an uncertainty because of pend-ing litigation. The auditor decided to issue a qualified opinion rather than an unqualified opinion. Which of the following factors most likely influenced this decision? a.Inconsistent application of GAAP. b.Inability to estimate the amount of loss. c.The client's lack of experience with such litigation. d.Adequacy of the disclosures.

D

Which of the following statements is false regarding audit reporting? a.Auditing standards require auditors to provide positive assurance—that is, an explicit statement as to whether the financial statements are presented fairly. b.The auditor should provide an opinion in accordance with the auditor's findings or state that an opinion cannot be expressed. c.The auditor's opinion should state whether the finan-cial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. d.None of the above statements are false.

D

Which of the following statements is true when an omitted audit procedures is discovered after the audit report was issued? a.After the audit report has been issued, the auditor may discover that an important audit procedure was not performed. b.Such an omission may be discovered when audit documentation is reviewed as part of an external or internal review program c.The auditor should decide whether the previously issued audit report can still be supported in light of the omitted procedures. d.All of the above.

D

Other

Qualified opinion Adverse opinion Disclaimer of opinion

CAM

Timing: large june, small dec Disclosure: identify, principal, how, reference