A1

the ultimate outcome of the litigation cannot be presently be determined

unmodified without eom **cannot even remotely determine the contingency

when an independent CPA assists in preparing the financial statements of a publicly held entity. but has not audited or reviewed them, the cpa should issue a disclaimer of opinion

read the financial statements for obvious material misstatements **only required to do that

accompany report has a material inconsistency with the f/s, the f/s is okay, auditor should

request that the client revise the letter of transmittal

be aware of subsequent events that provide evidence concerning conditions that did not exist at the year end because

require disclosure to keep the financial statements from being misleading

which of the following procedures would an auditor most likely perform prior to the balance sheet date

review detail and test significant travel and entertainment expneses *letter to client's legal counsel is sent on the balance sheet date or after

in which situations should pell make reference to smith's audit under US GAAS

-group auditor is unable to review component audit documentation. **the group engagement partner makes references in the audit report to the work of component auditor when the group engagement partner is UNABLE to review the component's audit documentation.

eom

1. describe and locate in the f/s 2. does not change audit opinon 3. after the opin 4. heading

going concern

1. disclaimer or qualified only if- there is no adequate disclosure 2. eom only if- substantial doubt and there is adequate disclosure

for which of the following events would an auditor issue a report that omits any reference to consistency

a change in the useful life to calculate the provision for depreciation expense ** change in accounting estimate is accounted for prospectively and does not affect the comparability. eom when change in principle, going concern, subsequent event, special purpose

group auditor does not wish to assume responsibility for the work of the other CPA, who previously issued an unmodified opinion

a division of responsibility affects the Auditor's responsibility and opinion paragraph BUT does NOT require opinion paragraph

group auditor does not wish to assume responsibility for the work of other CPA, who previously issued a qualified opinion on the sub f/s. material to sub but not material to the whole.

a division of responsibility affects the Auditor's responsibility and opinion paragraph BUT does NOT require opinion paragraph if the component is qualified, but NOT material to the whole. don't make references!

which of the following statement correctly defines reasonable assurance

a high but not absolute level of assurance to allow auditor to detect material misstatements

which of the following statement is a basic element of the auditor's report under u.s. auditing standards

an audit includes evaluating significant estimates made by management *the correct statement is standards required that we PLAN and PERFORM the audit to obtain reasonable assurance that the f/s are free of material misstatement

a subsequent event requiring adjustment to the year 1 financial statement occurred on april 10 y2. not to dual date. completes on april 24th y2. oridnarily should

april 24

for a particular entity's financial statements to be presented fiarly in conformrity with the applicable financial reporting framework not required that the principles selected

be applied on a basis consistnt with those followed in the prior year *as long as it is properly accounted and disclosed

in certain audit engagements, the auditor may be required to comply with auditing requirements in addition to GAAS. the auditor may conduct the audit in accordance with

both GAAs and GAGAS

which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern

cash flow from operating is negative **negative cash flows from operating activities most likely would cause an auditor to have substantial doubt reduce R&D is a way to mitigate going concern

in which of the following situations would an auditor ordinarly choose btween expressing a qualified opinion or an adverse opinion

conditions that cause the auditor to have substantive doubt about the entity's ability to continue as a going concern **inadequate disclosure of the substantial doubt about an entity's ability to contintue

cpa has been asked to issue a writtent report on the application of the requirements of an applicable financial reporting framework to specific transaction by an entity that is audited by another CPA. accept but should

consult with the continuing CPA to obtain information relevant to the transaction **must consult reporting cpa.

audit report

does not include the cpa's assessment of sampling risk factors

the group auditor decides not to refer to the component auditor who audited a subsidiary of the group auditor client. in this situation, this group auditor most likely would

determine the type of work to be preformed by the group auditor on the financial information of the component **the group auditor should determine the type of work to be performed on the financial information of the component if assumes the responsibilities

a cpa has not audited or reviewed such statements the appropriate form of report to be issued is

disclaimer of opinion

when management does not provide reasonable jusitification that a change in accounting principle is presented and it presents comparative financial statements, the auditor should express a qualified opinion

each year that the financial statements initially reflecting the change are presented - no reasonable justification that a change is accordance. qualifed on each year if justified- eom

unjustified accounting change

except for opinion

how does an auditor make the following representation when issuing the auditors report on comparative financial statement

explicitly- obtaining evidence that is sufficient and appropriate implied- consistency with application of accounting principles

when financial statements inlcude supplementary information which is outside the basic financial statements but required by GAAP, the auditor may choose any of the following options EXCEPT

express negative assruance on the ifnormation **never negative assruance on supplementary information

component auditor audited 27% and 29% of the business. and in our opinion as it relates to the amounts included for whole is based solely on the report

indicate division of responsbility

after issuing an auditor's report an auditor has no obligation to make continuing inquiries concerning audited f/s unless

information that existed at the report date and may affect the report comes to the auditors attention

the group engagement partner could justify the decision of not reference to component when the group auditor

is satisfied with the independence and professional reputation of the component auditor ** reference only if 1. no restricted use, 2. accordance with GAAS

in dual dating, the auditor responsibility for events occuring after original ARD was

limited to the specific event referenced

which of the following items would most likely require an adjustment to the f/s for the year ended dec 31 y1

loss uncollectible trade receivable recorded in year 1 from a customer that declared bankruptcy in year 2 * because of bankruptcyy of the customer requires an adjustment loss due to natural disaster does not require adjustments

substantial doubt about an entity's ability continue as a going concern would most likely be mitigated by evidence relating to the

marketability of assets that management plans to sell **management demonstrated that the company could reamin in operation

if group auditor assumes everything

no change to anything

the outcome of the litigation cannot be reasonable estimated by management. cpa believes there is a reasonable possibility of loss. the loss is adequately disclosed in the notes to f/s

no need to modify the independent auditor's report for an uncertaintiy that is ADEQUATELY disclosed

the group auditor least likely reference to the component auditor

the component auditor was retained by the group auditor and under group auditors guidance and control

scope limitation so issued a qualified opinion, the opinon paragraph of the auditor's should state that the qualification pertains

the possible effects on the financial statements **describe the possible effects to the f/s when going concern, independence, scope limitation in disclaimer

which of the following is true regarding the audit report for an issuer

the report should include references to PCAOB and GAAP

eom

there is substantial doubt about the entity's ability to continue as a going concern **eom 1. substantial doubt about going concern 2. justified change in accounting principle 3. subsequent led to a change 4. special fr framework disclaim 1. going concern uncertaintiy 2. scope limit 3. independence

an unjustified accounting change a material weakness in internal control

unjustified accounting change- may cause issue a qualified or adverse opinon material weakness- reported to management and governance

a loss probably will occur when pending litigation is resolved. management is unable to make a reasonable estimate. and management does not make an accural

unmodified opinon **disclosed in the footnotes.