Ch. 2 & 17

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

A. A consistency modification

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: A. An emphasis-of-matter paragraph to the auditors' report. B. A footnote to the financial statements. C. The body of the financial statements. D. The "summary of significant accounting policies" section of the financial statements.

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

When the auditors discover that an audit client has committed an illegal act they will ordinarily report it to the: A. Audit committee of the company being audited. B. Securities and Exchange Commission on Form 8-M. C. Justice Department of the U.S. government. D. American Institute of Certified Public Accountants Division of Professional Ethics.

A. Audit committee of the company being audited

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? A. Qualified B. Unmodified with Emphasis-of-matter C. Both D. Neither

A. Qualified

Which of the following is not included in an integrated audit report on the financial statements of a public company? A. The report states that the audit was performed in accordance with AICPA standards. B. The report indicates that the financial statements are the responsibility of management. C. The report indicates that the auditors have also audited the effectiveness of the company's internal control. D. The report is signed in the name of the CPA firm.

A. The report states that the audit was performed in accordance with AICPA standards

Which type of opinion? --Auditors have obtained sufficiently appropriate evidence to conclude that the financial statements are not materially misstated A. Unmodified opinion B. Adverse opinion C. Disclaimer of opinion D. Unqualified opinion with an Emphasis-of-matter paragraph

A. Unmodified opinion

Which of the following circumstances requires the auditor to include an other-matter paragraph in the audit report? A. When the financial statements are accompanied by required supplementary information. B. When there is a matter appropriately disclosed in the financial statements but which the auditor believes is of such importance as to be fundamental to users' understanding of the financial statements. C. When the report of a component auditor is being relied upon in an audit of consolidated financial statements. D. When a scope limitation prevents the auditor from obtaining sufficient appropriate audit evidence regarding the results of operations.

A. When the financial statements are accompanied by required supplementary information

What type or types of audit opinion are appropriate when financial statements are materially and pervasively misstated? A. Qualified B. Adverse C. Both D. Neither

B. Adverse

Which type of opinion? --A material misstatement is considered pervasive A. Unmodified opinion B. Adverse opinion C. Disclaimer of opinion D. Unqualified opinion with an Emphasis-of-matter paragraph

B. Adverse opinion

Which type of opinion? --The client has elected to not follow GAAP A. Unmodified opinion B. Adverse opinion C. Disclaimer of opinion D. Unqualified opinion with an Emphasis-of-matter paragraph

B. Adverse opinion

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

B. Auditors have accumulated sufficient evidence

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

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

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? A. Qualified B. Unmodified with Emphasis-of-matter C. Both D. Neither

B. Unmodified with Emphasis-of-matter

Which of the following is not a type of auditors' opinion? A. Unmodified. B. Qualified. C. Advisory. D. Disclaimer.

C. Advisory

Which type of opinion? --Auditors determine that the possible effects on the financial statements of the inability to obtain sufficient evidence (i.e. a scope limitation) could be both material and pervasive. A. Unmodified opinion B. Adverse opinion C. Disclaimer of opinion D. Unqualified opinion with an Emphasis-of-matter paragraph

C. Disclaimer of opinion

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

C. Generally accepted accounting principles (United States).

Which of the following is not explicitly included in a standard report for a nonpublic company? A. The CPA's opinion that the financial statements comply with generally accepted accounting principles. B. That generally accepted auditing standards were followed during the audit. C. That internal control of the client was satisfactory. D. An identification of the financial statements audited.

C. That internal control of the client was satisfactory

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

C. Whether to issue an adverse opinion rather than a qualified 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: A. An unmodified opinion. B. A disclaimer of opinion. C. An "except for" opinion. D. An improper type of reporting.

D. An improper type of reporting

Under which of the following circumstances would a disclaimer of opinion be appropriate? A. The auditor believes management's estimates of the useful lives of key assets are unreasonable, but management refuses to change the estimates. B. Management does not provide reasonable justification for a change in accounting principles. C. The auditor believes, with evidence, that the chief executive officer has committed material fraud. D. The chief executive officer is unwilling to sign the management representation letter.

D. The chief executive officer is unwilling to sign the management representation letter

An adverse opinion is most likely to be included in an audit report when: A. A standard unmodified opinion is necessary. B. A public company is involved. C. A client refuses to allow an auditor to perform a particular procedure. D. The financial statements depart from GAAP.

D. The financial statements depart from GAAP

Which type of opinion? --Auditors have doubt about a company's ability to continue as a going concern A. Unmodified opinion B. Adverse opinion C. Disclaimer of opinion D. Unqualified opinion with an Emphasis-of-matter paragraph

D. Unqualified opinion with an Emphasis-of-matter paragraph

T/F When the scope of the audit is restricted by the client, the auditors should issue an adverse opinion.

False