Audit chapter 15

If the auditor believes that required disclosures of a significant nature are omitted from the financial statements under examination, the auditor should decide between issuing

A qualified opinion or an adverse opinion.

Which of the following audit opinions would most likely be issued if the financial statements are materially misstated due to misstatements in several account balances?

Adverse

Each of the following must be disclosed regarding a CAM that is identified by the auditor, except:

All of the above must be disclosed regarding a CAM identified by the auditor

Jones, CPA, is the group engagement partner who is auditing the consolidated financial statements of his client. Jones plans to refer to a component auditor's examination of the financial statements of a subsidiary company but does not wish to present the other CPA's audit report. Both Jones and the other CPA's audit reports have noted no exceptions to generally accepted accounting principles. Under these circumstances the opinion paragraph of Jones' consolidated audit report should express

An unmodified opinion.

An auditor is unable to obtain adequate audit evidence regarding several material account balances. Which of the following types of audit opinions would most likely be issued?

Disclaimer

Restrictions imposed by a client prohibit the observation of physical inventories, which account for an extremely significant portion of total assets (65%). Alternative audit procedures cannot be applied, although the auditor was able to examine satisfactory evidence for all other items in the financial statements. The auditor should issue a(n)

Disclaimer of opinion.

Under which of the following circumstances would the expression of a disclaimer of opinion be inappropriate?

Management does not provide reasonable justification for a change in accounting principles.

An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. If the entity's disclosures concerning this matter are adequate, the audit report may include a(n): Disclaimer of opinion (Yes or No), Qualified opinion (Yes or No)

No, No

The auditor is unable to reach a conclusion as to the propriety of management's representations due to management's inadequate record retention policies. The auditor will have to consider issuing a(n)

Qualified opinion or a disclaimer of opinion

An auditor's report included an additional paragraph disclosing that there is a difference of opinion between the auditor and the client for which the auditor believed an adjustment to the financial statements should be made. The auditor views the misstatement involved as material, but not so pervasively material as to make the overall financial statements misleading. The opinion paragraph of the auditor's report most likely expressed a(n)

Qualified opinion.

Which of the following will not result in modification of the auditor's report due to a scope limitation?

Reliance placed on the report of another auditor.

The auditor specifies the time period covered by the auditor's report in which paragraph of the standard unmodified audit report issued under AICPA standards?

Report on the Financial Statements

In their audit report for which of the following engagements would the auditor provide negative assurance?

Review of financial statements

When an auditor conducts an audit in accordance with generally accepted auditing standards and concludes that the financial statements are fairly presented in accordance with a basis of accounting such as the cash basis of accounting, the auditor should issue a(n)

Unmodified opinion with an emphasis-of-matter paragraph

After performing all necessary procedures a predecessor auditor reissues a prior-period report on financial statements at the request of the client without revising the original wording. The predecessor auditor should

Use the date of the previous report.

"In our opinion, because of the significance of the matter discussed in the previous paragraph, the consolidated financial statements referred to above do not present fairly the financial position of ABC Company and its subsidiaries as of December 31, 20X1"This is an example of which type of audit opinion?

adverse opinion

When issuing a modified audit opinion under AICPA standards, the auditor adds an explanatory paragraph _____________ the opinion paragraph in the auditor's report.

before

Which of the following types of audit opinions would most likely be issued when the auditor is unable to obtain adequate audit evidence regarding several material account balances?

disclaimer

An auditor discovers that a disclosure that is required under GAAP has not been made in the financial statements. According to AICPA standards, he or she should use an emphasis of a matter paragraph to draw attention to that disclosure.

false

For audits of public companies, the auditor's report is typically addressed to the management of the company.

false

If a previous auditor does not want his or her audit report from a prior period to be included in the current year filing, the auditor should re-audit the prior year financial statements and present the findings of their audit in the current year audit report.

false

If an engaged audit firm uses other audit firms that provide less than 5% of the total audit work performed, the identity of those other audit firms must be dislcosed to the public in the Form AP.

false

The auditor should indicate which auditing standards were followed in conducting the audit in the introductory paragraph of the auditor's report.

false

The following language was taken from an auditor's report on financial statements: "In our opinion, except for the possible effects of the matter described in the previous paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1" This is an example of an unqualified opinion.

false

The introductory paragraph of the AICPA's version of the auditor's report is always modified when the auditor issues a modified opinion.

false

Under PCAOB standards, auditors will be required to identify and disclose at least one Critical Audit Matter (CAM) for each audit engagement as part of the standard audit report.

false

When an auditor concludes that the financial statements are fairly stated in accordance with GAAP, he or she would issue a disclaimer of opinion.

false

When issuing a modified opinion under AICPA auditing standards, the auditor adds an explanatory paragraph AFTER the opinion paragraph in the audit report.

false

When providing negative assurance, the auditor states an opinion regarding the subject matter she evaluated.

false

When the auditor is unable to obtain adequate audit evidence regarding one material account balance for a non-pervasive issue, he would most likely issue an adverse opinion.

false

The AICPA requires that auditors disclose in the auditor's report how long they have served as the auditor to that particular client.

false (PCAOB)

Which of the following audit opinions would most likely be issued if the financial statements are materially misstated due to a misstatement in one particular account balance?

qualified

Which of the following audit opinions would most likely be issued if the financial statements are materially misstated, and the misstatements are not pervasive?

qualified

"In our opinion, except for the possible effects of the matter described in the previous paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1"This is an example of which type of audit opinion?

qualified opinion

During a review of financial statements, the auditor would NOT perform which of the following audit procedures?

substantive tests of transactions

An audit report that is reissued from a prior year is typically used when a different auditor audited the financial statements of the previous year.

true

An auditor has audited a client's financial statements for 5 consecutive years. The client presents 3 years worth of financial statements in the filing for comparative purposes. For the 2012 audit, the auditor expressed a qualified opinion due to a scope limitation on confirmation of receivables. In the 2013 audit, the auditor issued an unqualified opinion on the 2013 financial statements. When presenting the audit report for comparative financial statements (2011-2013), the auditor can change his or her opinion on the 2012 audit of financial statement to be an unqualified opinion if he or she desires.

true

Emphasis of matter paragraphs and other matter paragraphs are both included in the auditor's report after the opinion paragraph.

true

Other matter paragraphs are relevant to the user's understanding of the audit, the auditor's responsibilities, or to the auditor's report.

true

The auditor must explicitly state in their report whether or not they believe they have sufficient and appropriate audit evidence to provide a basis for their opinion under AICPA standards.

true

The following language was taken from the auditor's report on financial statements: "In our opinion, because of the significance of the matter discussed in the previous paragraph, the consolidated financial statements referred to above do not present fairly the financial position of ABC Company and its subsidiaries as of December 31, 20X1" This is an example of an adverse opinion.

true

When the auditor concludes that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, the auditor should add an emphasis of matter paragraph to his or her audit report.

true

Assuming the audited financial statements are presented fairly - in all material respects - and are in accordance with GAAP, which of the following audit opinions is most likely to be issued?

unqualified

When an auditor concludes that the financial statements are fairly stated in accordance with GAAP, he or she would issue which type of audit opinion?

unqualified

Which of the following audit opinions would most likely be issued if the financial statements contain an immaterial misstatement?

unqualified

Which of the following audit opinions would most likely be issued when the auditor is unable to obtain adequate audit evidence regarding one immaterial account balance?

unqualified