Auditing - Chapters 16 and 17

The aggregated misstatement in the financial statements is made up of: Factual Misstatements - Projected Misstatements - Judgmental Misstatements (1)Yes -Yes -Yes (2)Yes -Yes- No (3)No -Yes -No (4)No -Yes -Yes

(1)Yes -Yes -Yes

The auditors have calculated the total uncorrected identified misstatements as $445,000; materiality for the audit is $450,000. The client has declined to record the related journal entries. In this situation it is most likely that the auditors will:

Perform additional audit procedures to reduce audit risk to an appropriately low level.

Which of the following is lease likely to result in an adverse opinion?

Limitation in the scope of the audit.

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 audit opinions? (Qualified - Unmodified with emphasis of matter) 1) Yes - Yes 2) Yes - No 3) No - Yes 4) No - No

2) Yes - No

Which of the following subsequent events might require an adjustment to the client's financial statements?

A major customer declares bankruptcy causing a material receivable to be uncollectable.

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.

When auditing the statement of cash flows, which of the following would an auditor not expect to be a source of receipts and payments?

Capitalization

As a result of analytical procedures, the independent auditors determine that the gross profit percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditors should:

Consider the possibility of a misstatement in the financial statements.

When an auditor of a nonpublic company has concluded there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time beyond the date the financial statements will be released (1/26/X2), the auditor's responsibility includes:

Considering the adequacy of disclosure about the entity's possible inability to continue as a going concern.

Which of the following summarized the threshold at which auditors are required to request management to record any identified factual misstatements that are:

Other than trivial

Which of the following procedures is most likely to be included near completion of an audit?

Performing analytical procedures

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 practical, and qualify the opinion because of a departure from GAAP

Which of the following ledger accounts would be least likely to be analyzed in detail by auditors?

Supplies expense

Regulation S-X governs the form and content of financial statements filed with the SEC.

True

Which of the following is least likely to result in an emphasis-of-matter paragraph 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

A material departure from generally accepted accounting principles will result in auditor consideration of:

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

An auditor will ordinarily examine invoices from lawyers primarily in order to:

Identify possible unasserted litigation, claims, and assessments