atg 457 final - chapter 17

a scope restriction is least likely to result in an

adverse opinion

which type of audit opinion is likely issued if going concern is an issue but the client has appropriately disclosed this in the footnotes?

unmodified with emphasis of the matter

a client has changed the estimated useful life of a group of assets. does this impact the audit report? *change in estimate not change in method*

unqualified

a client has not followed GAAP with regard to its leases, amounts are immaterial, what type of report is issued?

unqualified

which of the following is least likely to result in an Emphasis of Matter section being added to an unmodified auditor's report on the financial statements of a nonpublic client that sells jewelry through a retail store?

use of an unacceptable method to value inventory with results that differ materially from GAAP

the term "we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion" in an audit report is:

used in a disclaimer of opinion

a material departure from GAAP will result in auditor consideration of:

whether to issue an adverse opinion rather than a qualified opinion

a nonpublic company's change in accounting principles that the auditors believe is not justified is likely to result in which of the following types of audits?

- qualified: yes - unmodified with emphasis-of-matter: no

ordinarily, a public company's audit report must be addressed to:

- shareholders: yes - board of directors: yes

is lack of required disclosure a departure from GAAP? what kind of opinion is issued?

- yes, misstates the financial statements - unmodified ?

which of the following is limited to matters communicated or required to be communicated to those charged with governance (e.g., the audit committee)?

- key audit matters: yes - critical audit matters: yes

what 3 types of opinions can result from scope restrictions?

- qualified - disclaimer - adverse

what types of audit opinions are appropriate when financial statements are materially and pervasively misstated?

- qualified: no - adverse: yes

When the matter is properly disclosed in the financial statements of a nonpublic company, 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: no - unmodified with an additional paragraph: yes

which of the following accounting changes requires an Emphasis of Matter section regarding consistency in a nonpublic company auditors' report?

a change from LIFO to FIFO for inventory valuation purposes

which of the following is least likely to result in an additional paragraph being added to an audit report?

a decision not to confirm accounts receivable

which audit reports contains a basis for modification? (3 types)

modified opinion - qualified - adverse - disclaimer

if auditors choose to not test client controls in a certain area of the audit, does that impact the audit report?

no

the auditors who wish to draw reader attention to a financial statement not disclosure on significant transactions with related parties should disclose this fact in...

an emphasis-of-matter paragraph to the auditors' report

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 improper type of reporting

in determining key audit matters, the auditors are least likely to consider:

areas in which most transactions are considered routine

the auditors' report should be dated as of the date the:

auditors have accumulated sufficient appropriate evidence

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

an audit report for a public client indicates that the financial statements were prepared in conformity with:

generally accepted accounting PRINCIPLES

scope restrictions

imposed by circumstances due to nature of audit imposed by client

when an auditor of financial statements has substantial doubt about an entity's ability to continue as a going concern, the auditor most likely would express a qualified or adverse opinion if:

information about the entity's ability to continue as a goin concern is NOT disclosed in the financial statements

critical audit matters are most likely to include those matters that...

involve challenging, subjective, or complex auditor judgement

when financial statements of a nonpublic company are affected by a material departure from generally accepted accounting principles, the auditors should:

issue an "except for" qualification or an adverse opinion

when an auditor does NOT confirm material accounts receivable, but is satisfied by the application of alternative auditing procedures, she normally should:

issue an unmodified opinion with no reference to this omission

an audit report on a public company is least likely to include a section title:

key audit matters

a client has not followed GAAP with regard to its leases, amounts are material but not pervasive, what type of report is issued?

qualified

a client left a required financial statement out of their audited financial statements, what type of audit report is required?

qualified - departure from GAAP

the term "except for" is used in what kind of opinion?

qualified opinion

GAAP departures result in what kind of opinion?

qualified or adverse

an audit report for a public client indicated that the audit was performed in accordance with...

standards of the public company accounting oversight board (united states)

is the word independent in an audit report?

yes in the title

does the letter of inquiry, sent to the client's attorney, assist with the assessment of going concern?

yes - they can help with lawsuits and other things that may inhibit the company from continuing operations

which of the following circumstances generally results in the issuance of a report that includes an opinion that is modified?

the auditor is unable to obtain the financial records of a foreign subsidiary which is material to the client

if audited financial statements include a balance sheet and an income statement, but do not include a statement of cash flows:

the auditors should issue a qualified report for the departure from generally accepted accounting principles

which of the following is least likely to be included in a nonpublic company audit report with an unmodified opinion?

the name of the engagement partner

a client changes the depreciation method and management and the auditor agree, what type of report is issued?

unmodified with emphasis of matter