chapter 12 - audit

Which of the following statements is not true with respect to the auditor's report on ICFR?

The report will be dated as of the date of the financial statements

Which of the following situations would not ordinarily require auditors to modify the Opinion on the Financial Statements section of the report on the financial statements of an issuer?

A change from one generally accepted accounting principle to another

When auditors wish to issue an unqualified opinion but highlight that the entity changed its method of accounting for software development costs, they would most appropriately identify the change in accounting method in which of the following?

An explanatory paragraph

Which of the following is not included in the standard report on the financial statements?

An explanatory paragraph commenting on the effect of economic conditions on the entity

If audit teams are unable to apply an auditing procedure to an account balance or class of transactions and the impact has a material effect on the audit, the audit team should first

Attempt to determine whether alternative auditing procedures are available and can be applied

Which of the following is not true with respect to the audit examinations and reports for issuers and non-issuers?

Auditors are required to express an opinion on internal control in the audit of non-issuers but not in the audit of issuers

If auditors examine all years presented in comparative form, which of the following best describes their responsibility for prior years' financial statements in their current report?

Auditors should consider whether information has come to their attention that might affect their previous opinion on the prior years' financial statements

Which of the following sections of the standard report on the financial statements of an issuer would be modified in response to a material departure from GAAP?

Basis for Opinion (yes), Auditor's Responsibilities (no)

Which report would not be appropriate for a public accounting firm to provide on the ICFR for issuers?

Disclaimer of opinion - significant deficiencies exist

Which of these situations would require auditors to include an explanatory paragraph about consistency to an unqualified opinion?

Entity changed its inventory costing method from FIFO to LIFO

In the standard audit report under GAAS, certain conclusions are required to be stated in the report ("explicit") while other conclusions are implied ("implicit"). Which combination that follows correctly describes the auditors' conclusions as explicit or implicit?

GAAP (explicit), Consistency (implicit), Going concern (implicit), Opinion (explicit)

When a predecessor auditor has examined comparative financial statements and that report is not presented with the successor auditor's report, the successor auditor should

Indicate that comparative year(s) were examined by the predecessor auditor and disclose the type of opinion issued

A material weakness in ICFR is a situation in which

It is reasonably possible that a material misstatement would not be detected on a timely basis

The audit team found that the entity has not capitalized a material amount of leases in the financial statements. When considering the materiality of this departure from GAAP, the auditors would choose between which reporting options?

Qualified opinion or adverse opinion

When financial statements are presented in comparative form and another firm audited the prior years' financial statements (but the other firm's report is not presented with the financial statements), the auditor's report on the current year financial statements should

Refer to the report and type of opinion issued by the other firm on the period year's financial statements

If the opinion issued on prior years' financial statements is no longer appropriate and financial statements are presented in comparative form, the auditors' current report should

Reference the type of opinion issued on the prior years' financial statements and indicate that the current opinion on these financial statements differs from that expressed in the prior years

When component auditors are involved in the audit of group financial statements, the group auditors may issue a report that

Refers to the component auditors, describes the extent of the component auditors' work, and expresses an unmodified opinion

If the auditors decide to present separate reports on the entity's financial statements and ICFR in the audit of an issuer, which of the following should be modified to refer to the other report?

Report on Financial Statements (yes), Report on ICFR (yes)

In which of the following instances would a qualified opinion be an appropriate option (Assuming no other issues have been encountered)?

Scope Limitation (yes), Audit of Group Financial Statements (no)

How is the auditors' responsibility for expressing the opinion on financial statements disclosed in the standard report for an issuer?

Stated explicitly in the Opinion on the Financial Statements section

Which of the following information would be included in the Basis for Opinion section of the auditors' report on ICFR if the report is presented separately from the auditors' report on the entity's financial statements of an issuer?

Statements identifying the responsibility of the auditors and management for ICFR

Under which of the following conditions can a disclaimer of opinion never be issued?

The audit team has determined that the entity uses the NIFO (next-in, first-out) inventory costing method

Which of the following would not be addressed in a separate (emphasis) paragraph?

The financial statement effects of a material departure from GAAP

Which of the following is not an element or statement included in the Basis for Opinion Section of a standard (unmodified) report on the financial statements of an issuer?

The tenure of the auditor

R. Wolfe became the new auditor for Royal Corporation, succeeding C. Mason, who audited the financial statements last year. Wolfe needs to report on Royal's comparative financial statements and should disclose in the report an explanation about another auditors having audited the prior year

To describe the prior audit and the opinion but not name Mason as the predecessor auditor

The audit team determined that the entity is suffering financial difficulty and its going- concern status is seriously in doubt. Assuming that the entity adequately disclosed this matter in the financial statements, the auditors must choose between which of the following report alternatives?

Unqualified opinion with a reference to going-concern or disclaimer of opinion