ch 18
Under the new PCAOB reporting standards, the _________ now presented first
opinion
Under PCAOB standards, when an auditor's opinion is based in part on the report of another auditor, explanatory language is added to the ______ paragraphs.
opinion; basis for opinion
When an auditor adds explanatory wording to the existing paragraphs of the report it is referred to as
Modified wording
When the audit has been performed in accordance with applicable auditing standards, the auditor has gathered sufficient evidence, and the auditor believes that the financial statements conform to GAAP a(n) __________ __________ financial statement audit report is issued
Standard unqualified
The principal auditor accepts full responsibility for the work done and conclusions drawn by other auditors when the ______.
audit report does not refer to the work of other auditors
The auditor's report does not refer to the work of other auditors when the principal auditor ______.
is satisfied as to the professional reputation and independence of the other auditor accepts full responsibility for the work done and conclusions drawn by other auditors
Under ASB standards, when an issue other than those presented or disclosed in the financial statements is relevant to understanding the audit, the auditor's responsibilities, or the auditor's report a(n) ______ ______ paragraph can be included in the audit report
other matter
Auditing standards use the term ____________________ to describe the potential effects of a scope limitation or departure from GAAP on the auditor's report.
pervasive
The portion of the consolidated financial statements audited by one independent auditor compared to another independent auditor is used to determine the designation as
principal auditor
When part of the audit has been completed by a separate, unaffiliated public accounting firm, the auditor for the parent company must be satisfied that he or she is the
principal auditor
For public companies, qualified and adverse opinions on financial statements are not accepted by ______.
the SEC
The new PCAOB reporting standards include ______.
the retention of the binary, pass/fair reporting approach a Basis of Opinion section laying out the key features of an audit more clearly
Under ASB standards, when an auditor makes reference in the audit report to an issue that has been appropriately presented or disclosed in the financial statements, the auditor is using a(n)
Emphasis of Matter paragraph
An intentional management error can be considered ___________ by the auditor regardless of the magnitude of the error.
material
If an auditor is not independent, the auditor ______.
must withdraw from the engagement or disclaim an opinion issues a two sentence report
The auditor's standard unqualified audit report for a public company contains the ______.
name and signature of firm "Opinion" section how long the auditor has served "Critical Audit Matters" section
An entity received a going concern report in 20X1. The auditor determines the substantial doubt regarding going concern has been removed in 20X2. The explanatory paragraph included in the prior year's audit report is ______.
not included with the auditor's report covering the comparative financial statements
Pervasive effects on the financial statements are those that ______ of the financial statements.
represent or could represent a substantial proportion include disclosures fundamental to users' understanding
A change from an inappropriate use or application of accounting principle in prior years to an acceptable accounting principle in the current year ______
requires an explanatory paragraph to highlight a lack of comparability requires the prior-period financial statements to be restated retroactively
Which of the following is included in the footnotes to the financial statements but does not require an explanatory paragraph in the auditor's report?
A change in accounting principle that does not have a material effect in the current year but is expected to have a material effect in future years
An auditor issues a qualified opinion when there is ______.
a specific departure from GAAP but overall the financial statements present fairly in conformity with GAAP a scope limitation
When the auditor is not required to audit management's assessment of internal control over financial reporting, the auditor must ______.
add an explanatory paragraph to the audit report
When there is a lack of consistency in the application of accounting principles due to accounting changes, an auditor ______.
adds an explanatory paragraph to a standard unqualified audit report
When a circumstance such as a fire restricts the scope of the engagement, ______.
alternative procedures can be used to gather sufficient appropriate evidence the auditor can issue a standard unqualified opinion
Changes that affect comparability but not consistency include a change in ______.
classification accounting estimate
Any matters arising from the audit of financial statements that are communicated or required to be communicated, to the audit committee, that relate to material financial statement accounts or disclosures and involved especially challenging, subjective, or complex auditor judgment are called
critical audit matter
If the other auditor's report is not a standard unqualified audit report, the principal auditor must _______
determine the nature of the departure and its significance explain how material departures affect the overall audit opinion
If a scope limitation is so significant that the auditor considers the financial statements taken as a whole to be unreliable, the auditor will likely issue a(n) ______ opinion.
disclaimer of
When the two opinions over internal control and over the financial statements are presented separately, ______.
each report must include an explanatory paragraph referring to the opinion expressed in the other report the reports must have the same date
Whenever the audit opinion is qualified, the opinion paragraph will include the words
except for
If the other auditor's report is not a standard unqualified audit report, the principal auditor must ______.
explain how material departures affect the overall audit opinion determine the nature of the departure and its significance
Under PCAOB standards ______
explanatory paragraphs are sometimes required but emphasis paragraphs are always optional
A change in accounting estimate is ______.
generally disclosed in a footnote but does not require an explanatory paragraph in the auditor's report
The PCAOB presumption is that in most audits the auditor will ______ CAM(s).
identify at least one
The PCAOB believes the new auditor's report will ______.
improve the quality of financial reporting provide more information and insight to stakeholders sharpen auditors' sense of professional skepticism in dealing with audit matters
An ASB audit report ______.
indicates the audit was conducted in accordance with generally accepted auditing standards
Auditors can add explanatory language to the standard unqualified audit report by ______.
inserting an additional explanatory paragraph adding explanatory wording to the existing paragraphs of the report
That an entity will continue as a going concern ______.
is evaluated by the auditor is assessed by management is a basic assumption of financial reporting
A PCAOB report ______.
is titled "Report of Independent Registered Public Accounting Firm"
If a departure from GAAP is pervasive and the financial statements taken as a whole do not fairly present the entity's financial position, results of operations, and cash flows in accordance with GAAP, the auditor should __.
issue an adverse opinion
When the auditor is not required to audit management's assessment of internal control over financial reporting, the auditor must add an explanatory paragraph in the Basis for Opinion section indicating ______.
no opinion on ICFR is being expressed the company was not required to have an audit of its ICFR
When an auditor is not independent, the reason(s) for the lack of independence should ______ ASB standards.
not be stated under PCAOB standards, but may be stated under
If an entity fails to disclose information in the financial statements or footnotes as required by GAAP, the auditor should ______.
provide the omitted information, if practicable, in the audit report issue a qualified or adverse audit report
In the CAM section of the audit report, a paragraph or table must ______.
refer to financial statement accounts and disclosures related to the CAM describe how each CAM was addressed in the audit explain how each matter was determined to be a CAM
When an auditor is not independent the auditor must disclaim an opinion ______.
regardless of the significance of the condition that caused the lack of independence
In order to be identified as a CAM, a matter must _______.
relate to accounts or disclosures that are material to the financial statements have involved especially challenging, subjective or complex auditor judgment
The auditor's standard unqualified audit report for a public company contains the ______.
report title the addressee audit report date "Basis for Opinion" section
An auditor issues a standard unqualified audit report when ______.
the auditor believes the financial statements conform to GAAP in all material respects sufficient evidence has been gathered by the auditor the audit has been performed in accordance with applicable auditing standards
An auditor adds an explanatory paragraph to a standard unqualified report on an entity's financial statements when ______.
the auditor decides to refer to the report of other auditors as the basis, in part, for the opinion the auditor references the report on the audit of internal control for public companies. there is substantial doubt about an entity's ability to continue as a going concern
When a client significantly restricts the scope of the engagement ______.
the auditor should consider disclaiming an opinion
An auditor is most likely to disclaim an opinion on an entity when ______.
the entity is experiencing immediate financial distress and a bankruptcy is impending
In identifying CAMS, auditors must take into account ______.
the nature and timing of significant unusual transaction transactions degree of auditor judgment related to areas that involved significant management judgment
An auditor may use a disclaimer of opinion when ______.
there is a lack of independence there is insufficient appropriate evidence to form an opinion
Management's going concern assessment is independently assessed by auditors ______.
to ensure management's assessment has been adequately conducted and disclosed
If an entity fails to disclose information in the financial statements or footnotes as required by GAAP, the auditor should provide the omitted information ______.
unless the omission is the statement of cash flows
When the auditor concludes there is substantial doubt about the entity's ability to continue as a going concern and management has adequately disclosed the financial problems, the auditor will typically express a(n)
unqualified
Auditors express a qualified or adverse opinion for departures from GAAP including ______.
use of an unacceptable accounting principle an unjustified change in accounting principle inadequate disclosure