Ch 15

When an auditor issues an adverse opinion, which of the following should be included in the opinion paragraph?

a. A reference to a separate paragraph that describes the reason for the adverse opinion.

An emphasis of a matter may result in which of the following?

a. An unqualified audit opinion with an explanatory paragraph.

In which one of the following instances would an auditor most likely issue a disclaimer of opinion?

a. Management will not sign a management representation letter.

Which of the following would not result in an unqualified audit report with an explanatory paragraph?

a. Scope limitation.

Which of the following requires that key audit matters (KAMs) be included in audit reports, effective for audits of financial statements for periods ending on or after December 15, 2016?

a. Standards issued by IAASB.

Which of the following statements regarding key audit matters (KAMs) is not correct?

a. The auditor issues a separate opinion on identified KAMs.

When management chooses to include information in its report on ICFR that is in addition to the information required to be provided, what should the auditor do?

a. The auditor will disclaim an opinion on that additional information.

Audit reports are designed to promote clear communication between the auditor and the financial statement user. Which of the following is not delineated in the audit report?

a. The experience level of the audit team.

In which one of the following instances would an auditor not issue a disclaimer of opinion?

a. There are significant misstatements in the financial statements.

In which one of the following instances would an auditor most likely issue an unqualified opinion without explanatory language?

a. There is an immaterial deviation from GAAP related to capitalizing repairs.

In which one of the following cases would an auditor most likely issue a qualified opinion?

a. There is one material departure from GAAP that affects only two accounts.

A client company has a history of negative cash flow trends and continuing losses. Which type of opinion will the auditor most likely issue?

a. Unqualified with explanatory language.

Adverse opinions can only be issued by auditors based on which of the following?

a. Violations of GAAP.

In which of the following situations would an auditor typically issue an unqualified opinion, but modify the audit report to include additional language?

a. An auditor would typically issue an unqualified opinion, but include additional language, in all of these situations.

Which of the following statements is true regarding the auditor's responsibilities related to reporting?

a. Auditors should obtain sufficient appropriate evidence to provide a reasonable basis for the opinion regarding the financial statements under audit.

The auditor of a large U.S. public company is conducting an integrated audit and has determined that a material weakness exists in the client's ICFR. Which of the following statements is true?

a. The auditor should express an adverse opinion on ICFR, even if no material misstatements were found in the financial statements.

As part of identifying CAMs, which of the following factors would an auditor consider when determining whether a matter involved especially challenging, subjective, or complex auditor judgment?

a. The auditor would consider all of these factors.

How would the auditor categorize a situation when the financial statements do not contain a note the auditor believes is necessary for fair presentation?

b. A departure from GAAP.

The opinion paragraph of the audit report for Schnook Co. states that the financial statements "do not present fairly." Which type of audit opinion is this?

b. Adverse.

When an auditor is faced with a material departure from GAAP that is pervasive, which of the following should the audit report contain?

b. An adverse opinion.

A justified departure from GAAP may result in which of the following?

b. An unqualified audit opinion with an explanatory paragraph.

If the auditor has no reservations about the fairness of the financial statements but believes there is a remote possibility that resolution of an uncertainty will have a material effect on the financial statements, which of the following would the auditor issue?

b. An unqualified opinion with no report modifications.

After an audit report is issued, the auditor discovers through a peer review that an important audit procedure has been omitted. In this case, what should the auditor do?

b. Determine whether the report can still be supported in light of the omitted procedure.

If the auditor failed to confirm receivables when that should have been done and it may be too late to confirm now, what should the auditor do?

b. Extend the previous work done on subsequent collections to help determine that the receivables existed and were properly valued at the balance sheet date.

Which of the following statements regarding the reporting of critical audit matters (CAMs) under PCAOB guidance is incorrect?

b. If no CAMs arose during the audit, the audit report should not contain any reference to CAMs.

Audit reporting standards for financial statement and integrated audits require auditors to provide which of the following?

b. Positive assurance.

Which of the following phrases should not be used when the auditor is qualifying the audit opinion?

b. Subject to.

What can a user of financial statements infer from an unqualified opinion on the financial statements?

b. The auditor has no reservations about the fairness of presentation.

When there is a restriction on the scope of the internal control over financial reporting (ICFR) engagement, what should the auditor do?

b. The auditor will either withdraw from the engagement or disclaim an opinion.

Which of the following is an instance where the auditor would add a paragraph in a report expressing an unqualified opinion?

b. There is serious doubt that the client can continue as a going concern.

If the auditor decides to draw attention to large related party transactions occurring in the financial statements of the client, which report will most likely be issued?

b. Unqualified opinion with an explanatory paragraph.

Tech Company has an uncertainty because of pending litigation. The auditor decided to issue a qualified opinion rather than an unqualified opinion. Which of the following factors most likely influenced this decision?

b. Adequacy of the disclosures.

Refer to the Why It Matters feature, "Situations Requiring a Modification to the Audit Report on ICFR." In which of the following situations would the auditor modify the audit report on ICFR?

b. The auditor concludes that management's report on ICFR is not complete or is improperly presented.

If it is discovered after the audit report is issued that the auditor failed to confirm receivables, which of the following statements is true?

b. The auditor should try to examine subsequent collections of accounts receivable to help determine whether the accounts receivables existed and whether they were properly valued at the balance sheet date.

Eagle Company's financial statements contain a departure from GAAP because, due to unusual circumstances, the statements would otherwise be misleading. Which of the following is descriptive of the type of audit report the auditor should provide?

b. Unqualified opinion, with a description of the departure in the audit report.

Which of the following is an example of the contents of an opinion paragraph found in an unqualified audit report?

c. "The financial statements referred to above present fairly..."

When an auditor lacks independence with respect to a client, which of the following should the auditor issue?

c. A disclaimer of opinion.

Which of the following is not a change included in PCAOB's new reporting standard AS 3101?

c. A new report title, "Report of Independent Registered Public Accounting Firm."

An audit of the Flagler Company, a diamond mining company, brings to light the fact that its equipment has been marked up to the owners' expectation of market values. Such a situation will most likely result in which type of opinion?

c. Adverse.

Which of the following is an example of circumstances that would not limit the audit scope?

c. Emphasis of an important matter.

According to the AICPA's audit reporting principles, which of the following is incorrect?

c. The auditor provides positive assurance that the financial statements are free of errors, either intentional or unintentional.

In which one of the following instances would an auditor most likely issue an adverse opinion?

c. There is a material dollar misstatement that is pervasive in the financial statements.

PCAOB guidance does not identify which of the following situations as one in which the auditor will modify the audit report on ICFR effectiveness?

c. When the annual report includes a copy of the annual certification pursuant to Section 302 of the Sarbanes-Oxley Act.

In which of the following situations would the auditor modify the audit report on ICFR?

c. When the auditor concludes that management's report on ICFR is not complete or is improperly presented.

Which of the following phrases should an auditor not use when qualifying the audit opinion?

c. Subject to

In which of the following situations would an auditor ordinarily issue an unqualified audit opinion without any report modifications?

c. When the auditor complies with only one set of auditing standards.

Which of the following statements is true regarding audit reporting?

d. All of the above statements are true.

If a client expensed the acquisition cost of some assets that should have been capitalized and depreciated over their useful lives, which of the following would be incorrect?

d. An explanatory paragraph should be modified to include language such as: "subject to the qualified act..."

Violations of GAAP resulting in qualified opinions affect the audit report through which of the following?

d. Both B and C.

The use of another CPA firm by an audit firm to perform part of the engagement on a client's subsidiary will require the audit firm to do which of the following?

d. Ensure the independence of the other CPA firm of the client.

In which of the following circumstances would an auditor be most likely to express an adverse opinion on a company's financial statements?

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

Which of the following statements is true when an omitted audit procedure is discovered after the audit report was issued?

d. All of these.

Which of the following statements is false regarding audit reporting?

d. None of these statements is false.

Which of the following would require other than an unqualified opinion?

d. The auditor is not independent.

Adverse opinions affect the audit report in which of the following ways?

e. All of the above.

Scope limitations resulting in disclaimers under U.S. auditing standards affect the standard audit report through which of the following?

e. All of the above.

Qualified opinions can only be issued by auditors for which of the following?

e. Either A or B.

Which of the following items would not be included in a PCAOB audit report that includes CAMs?

e. Indication as to whether management agreed that the matter was a CAM.

Disclaimers of opinion can only be issued by auditors based on which of the following?

Disclaimers of opinion can only be issued by auditors based on which of the following?