ACC 450 Ch 17 Practice Qs

What type or types of audit opinion are appropriate when financial statements are materially and pervasively misstated: Qualified Adverse Yes Yes Yes No No Yes No No

No Yes

An audit report for a public client indicates that the audit was performed in accordance with: Generally accepted auditing standards (United States). Standards of the Public Company Accounting Oversight Board (United States). Generally accepted accounting principles (United States). Generally accepted accounting principles (Public Company Accounting Oversight Board).

Standards of the Public Company Accounting Oversight Board (United States).

Which of the following ordinarily involves the addition of an emphasis-of-matter paragraph to an audit report? A consistency modification. An adverse opinion. A qualified opinion. Part of the audit has been performed by component auditors.

A consistency modification.

Which of the following is least likely to result in inclusion of an emphasis-of-matter paragraph in an audit report? The company is a component of a larger business enterprise. An unusually important significant event. A decision not to confirm accounts receivable. A risk or uncertainty.

A decision not to confirm accounts receivable.

An audit client has refused to allow the auditors to perform a generally accepted auditing procedure and there are no other effective alternate procedures available. The circumstance would normally result in the issuance of: An adverse opinion. A disclaimer of opinion. A standard unmodified opinion with a qualified scope paragraph. An unmodified report with an emphasis of matter paragraph.

A disclaimer of opinion.

An auditor's report on comparative financial statements should be dated as of the date of the: Issuance of the report. Accumulation of sufficient appropriate audit evidence. Last related-party transaction disclosed in the statements. Latest financial statements being reported on.

Accumulation of sufficient appropriate audit evidence.

A scope restriction is least likely to result in a(an): Standard unmodified opinion. Qualified opinion. Adverse opinion. Disclaimer of opinion.

Adverse opinion

Assume that the opinion paragraph of an auditors' report begins as follows: "With the explanation given in Note 6, . . . the financial statements referred to above present fairly. . ." This is: An unmodified opinion. A disclaimer of opinion. An "except for" opinion. An improper type of reporting.

An improper type of reporting.

The auditors' report should be dated as of the date the: Report is delivered to the client. Auditors have accumulated sufficient evidence. Fiscal period under audit ends. Peer review of the working papers is completed.

Auditors have accumulated sufficient evidence.

When the auditor is unable to determine the amounts associated with noncompliance with a law by client personnel, the auditor should issue a(an): Disclaimer of opinion. Adverse opinion. Unmodified opinion with a separate emphasis of matter paragraph. Standard unmodified opinion.

Disclaimer of opinion.

An audit report for a public client indicates that the financial statements were prepared in conformity with: Generally accepted auditing standards (United States). Standards of the Public Company Accounting Oversight Board (United States). Generally accepted accounting principles (United States). Generally accepted accounting principles (Public Company Accounting Oversight Board).

Generally accepted accounting principles (United States).

A basis for modification paragraph is ordinarily placed: Based on the auditor's judgment either before or after the opinion section. Within the "Auditor's Responsibility" section of the audit report. After the opinion section. Preceding the opinion section.

Preceding the opinion section.

When a client declines to disclose essential information in the financial statements or notes, the auditor of the financial statements should: Provide the information in the audit report, if practicable, and qualify the opinion because of a limitation on the scope of the audit. Provide the information in the audit report, if practicable, and qualify the opinion because of a departure from GAAP. Issue a disclaimer of opinion because the client has interfered with the auditor's function of assessing the adequacy of disclosure. Issue an unmodified opinion, but inform the reader by including the omitted information in the audit report.

Provide the information in the audit report, if practicable, and qualify the opinion because of a departure from GAAP.

A change in accounting principles that the auditors believe is not justified is likely to result in which of the following types of audit opinions? Qualified Unmodified with Emphasis-of-Matter Yes Yes Yes No No Yes No N

Yes No

The auditors who wish to draw reader attention to a financial statement note disclosure on significant transactions with related parties should disclose this fact in: An emphasis-of-matter paragraph to the auditors' report. A footnote to the financial statements. The body of the financial statements. The "summary of significant accounting policies" section of the financial statements.

An emphasis-of-matter paragraph to the auditors' report.

Doe, an independent auditor, was engaged to perform an audit of the financial statements of Ally Incorporated one month after its fiscal year had ended. Although the inventory count was not observed by Doe, and accounts receivable were not confirmed by direct communication with debtors, Doe was able to obtain sufficient appropriate audit evidence by applying alternative auditing procedures. Doe's audit report will probably contain: An "except for" qualification. A standard unmodified opinion. An unmodified opinion and an emphasis of matter paragraph. Either a qualified opinion or a disclaimer of opinion.

A standard unmodified opinion.

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor: Should refuse the engagement because there is a client-imposed scope limitation. May accept the engagement. May accept the engagement but must disclaim an opinion because of an inability to apply the procedures considered necessary. Should refuse the engagement because of a departure from generally accepted auditing standards.

May accept the engagement.

Morgan, CPA, is the group auditor for a multinational corporation. Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation. Morgan is satisfied with the independence and professional reputation of the component auditor, as well as the quality of the component auditor's audit. With respect to Morgan's report on the consolidated financial statements, taken as a whole, Morgan: May refer to the audit of the component auditor. Must refer to the audit of the component auditor. Must not refer to the audit of the component auditor. May refer to the audit of the component auditor, in which case Morgan must include in the audit report on the consolidated financial statements a qualified opinion with respect to the audit of the component auditor.

May refer to the audit of the component auditor.

When the matter is properly disclosed in the financial statements, the likely result of substantial doubt about the ability of the client to continue as a going concern is the issuance of which of the following audit opinions? Qualified Unmodified with Emphasis-of-Matter Yes Yes Yes No No Yes No No

No Yes

In an audit report on combined financial statements, reference to the fact that a portion of the audit was performed by a component auditor is: Not to be construed as a qualification, but rather as a division of responsibility between the two CPA firms. Not in accordance with generally accepted auditing standards. A qualification that lessens the collective responsibility of both CPA firms. An example of a dual opinion requiring the signatures of both auditors.

Not to be construed as a qualification, but rather as a division of responsibility between the two CPA firms.

In which of the following circumstances would an auditor of financial statements be most likely to express an adverse opinion? The chief executive officer refuses the auditor access to minutes of board of directors' meetings. Information comes to the auditor's attention that raises substantial doubt about the entity's ability to continue in existence. The statements are not in conformity with FASB requirements regarding the capitalization of leases. Tests of controls show that the entity's internal control is so poor that it can not be relied upon.

The statements are not in conformity with FASB requirements regarding the capitalization of leases.

When reporting on comparative financial statements where the financial statements of the prior period have been examined by a predecessor auditor whose report is not presented, the successor auditor should indicate in the report: The type of opinion expressed by the predecessor auditor. Whether the predecessor auditor's review of the current year's financial statements revealed any matter that might have a material effect on the successor auditor's opinion. The identity of the predecessor auditor who examined the financial statements of the prior year. The reasons why the predecessor auditor's report is not presented

The type of opinion expressed by the predecessor auditor.

A material departure from generally accepted accounting principles will result in auditor consideration of: Whether to issue an adverse opinion rather than a disclaimer of opinion. Whether to issue a disclaimer of opinion rather than a qualified opinion. Whether to issue an adverse opinion rather than a qualified opinion. Nothing, because none of these opinions is applicable to this type of exception.

Whether to issue an adverse opinion rather than a qualified opinion.