Question 1

When there is uncertainty about a company's ability to continue as a going concern, the auditor's concern is the possibility that the client may not be able to continue its operations or meet its obligations for a "reasonable period of time." For this purpose, a reasonable period of time is considered not to exceed:

Accepted Answer

A)  six months from the date of the financial statements.
B)  one year from the date of the financial statements.
C)  six months from the date of the audit report.
D)  one year from the date of the audit report.E) C) and D)
F) B) and C)

Question 2

Which of the following scenarios does not result in a qualified opinion?

Accepted Answer

A)  A scope limitation prevents the auditor from completing an important audit procedure.
B)  Circumstances exist that prevent the auditor from conducting a complete audit.
C)  The auditor lacks independence with respect to the audited entity.
D)  An accounting principle at variance with GAAP is used.E) None of the above
F) A) and D)

Question 3

Examples of unqualified opinions which contain modified wording (without adding an explanatory paragraph) include:

Accepted Answer

A)  the use of other auditors.
B)  material uncertainties.
C)  substantial doubt about the audited company (or the entity) continuing as a going concern.
D)  lack of consistent application of GAAP.E) A) and C)
F) B) and C)

Question 4

The appropriate audit report date for a standard nonqualified audit report for a non-public entity should be the:

Accepted Answer

A)  date the financial statements are given to the Board of Directors.
B)  date of the financial statements.
C)  date the auditor completed the auditing procedures in the field.
D)  60 days after the date of the financial statements as required by the SEC.E) A) and B)
F) All of the above

Question 5

Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?

Accepted Answer

A)  The entity is suing a competitor for a minor patent infringement.
B)  The entity has lost a major customer.
C)  The entity has significant recurring operating losses.
D)  The entity has working capital deficiencies.E) All of the above
F) B) and D)

Question 6

When the client fails to make adequate disclosure in the body of the statements or in the related footnotes, it is the responsibility of the auditor to:

Accepted Answer

A)  inform the reader that disclosure is not adequate, and to issue an adverse opinion.
B)  inform the reader that disclosure is not adequate, and to issue a qualified opinion.
C)  present the information in the audit report and issue an unqualified or qualified opinion.
D)  present the information in the audit report and to issue a qualified or an adverse opinion.E) C) and D)
F) A) and B)

Question 7

Financial statement users are typically more concerned with an unqualified report with explanatory paragraphs than they are with a disclaimer of opinion.

Accepted Answer

A) True 
 B)False

Question 8

The date of the auditor's report is indicative of the last day of the auditor's responsibility for the review of significant events occurring after the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 9

EPM, Inc., is a private manufacturing company with a calendar year-end.Their financial statements include a balance sheet, a statement of income, statement of cash flows, and statement of stockholders' equity.For the most recent audit, Harrington and Perry, LLP, audited the 2011 and 2012 financial statements.The auditors completed all significant fieldwork on March 5, 2013 and issued the audit report on March 16, 2013.
Required:
Consider all the facts given and write the standard unqualified auditor's report, including all eight sections of the report.

Accepted Answer

Independent Auditor's Report
To the Boar...

Question 10

An auditor should issue a qualified opinion with an explanatory paragraph whenever there is a material uncertainty affecting the financial statements.

Accepted Answer

A) True 
 B)False

Question 11

An auditor can express a qualified opinion due to a:

Accepted Answer

A)   
B)   
C)   
D)   E) B) and D)
F) A) and D)

Question 12

Section 404(b)of the Sarbanes Oxley Act requires that the auditor of a public company attest to management's report on the efficiency of internal controls over financial reporting.

Accepted Answer

A) True 
 B)False

Question 13

The standard audit report for non-public entities refers to GAAS and GAAP in which sections?

Accepted Answer

A)   
B)   
C)   
D)   E) A) and B)
F) B) and D)

Question 14

The scope paragraph of the auditor's responsibility section of the audit report issued for financial statements of a non-public company should refer to generally accepted auditing standards .

Accepted Answer

A) True 
 B)False

Question 15

The phrase "auditing standards generally accepted in the United States of America" can be found in the opinion paragraph of a standard, unqualified audit report for a non-public company.

Accepted Answer

A) True 
 B)False

Question 16

Changes in reporting entities, such as the inclusion of an additional company in combined financial statements, affect comparability but not consistency, and therefore do not require an explanatory paragraph in the audit report.

Accepted Answer

A) True 
 B)False

Question 17

All of the following would require an emphasis of matter paragraph except for:

Accepted Answer

A)  the existence of material related party transactions.
B)  the lack of auditor independence.
C)  important events occurring subsequent to the balance sheet date.
D)  material uncertainties disclosed in the footnotes.E) B) and D)
F) B) and C)

Question 18

Which of the following requires recognition in the auditor's opinion as to consistency?

Accepted Answer

A)  The correction of an error in the prior year's financial statements resulting from a mathematical mistake in capitalizing interest.
B)  A change in the estimate of provisions for warranty costs.
C)  The change from the cost method to the equity method of accounting for investments in common stock.
D)  A change in depreciation method which has no effect on current year's financial statements but is certain to affect future years.E) B) and C)
F) B) and D)

Question 19

The management's responsibility section of the standard audit report for a non-public company states that the financial statements are:

Accepted Answer

A)  the responsibility of the auditor.
B)  the responsibility of management.
C)  the joint responsibility of management and the auditor.
D)  none of the above.E) B) and C)
F) A) and D)

Question 20

Misstatements must be compared with some measurement base before a decision can be made about materiality.A commonly accepted measurement base includes:

Accepted Answer

A)  net income.
B)  total assets.
C)  working capital.
D)  all of the above.E) B) and C)
F) All of the above

Exam 3: Audit Reports

Changes in reporting entities, such as the inclusion of an additional company in combined financial statements, affect comparability but not consistency, and therefore do not require an explanatory paragraph in the audit report.

Correct Answer
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The standard audit report for non-public entities refers to GAAS and GAAP in which sections?

Correct Answer
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An auditor can express a qualified opinion due to a:

Correct Answer
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Which of the following scenarios does not result in a qualified opinion?

Correct Answer
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An auditor should issue a qualified opinion with an explanatory paragraph whenever there is a material uncertainty affecting the financial statements.

Correct Answer
verified

When the client fails to make adequate disclosure in the body of the statements or in the related footnotes, it is the responsibility of the auditor to:

Correct Answer
verified

The appropriate audit report date for a standard nonqualified audit report for a non-public entity should be the:

Correct Answer
verified

Examples of unqualified opinions which contain modified wording (without adding an explanatory paragraph) include:

Correct Answer
verified

Section 404(b)of the Sarbanes Oxley Act requires that the auditor of a public company attest to management's report on the efficiency of internal controls over financial reporting.

Correct Answer
verified

The management's responsibility section of the standard audit report for a non-public company states that the financial statements are:

Correct Answer
verified

Correct Answer
verified
Independent Auditor's Report
To the Boar...
View Answer

The date of the auditor's report is indicative of the last day of the auditor's responsibility for the review of significant events occurring after the balance sheet date.

Correct Answer
verified

The scope paragraph of the auditor's responsibility section of the audit report issued for financial statements of a non-public company should refer to generally accepted auditing standards .

Correct Answer
verified

Misstatements must be compared with some measurement base before a decision can be made about materiality.A commonly accepted measurement base includes:

Correct Answer
verified

Which of the following requires recognition in the auditor's opinion as to consistency?

Correct Answer
verified

All of the following would require an emphasis of matter paragraph except for:

Correct Answer
verified

Financial statement users are typically more concerned with an unqualified report with explanatory paragraphs than they are with a disclaimer of opinion.

Correct Answer
verified

Correct Answer
verified

Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?

Correct Answer
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The phrase "auditing standards generally accepted in the United States of America" can be found in the opinion paragraph of a standard, unqualified audit report for a non-public company.

Correct Answer
verified

Exam 3: Audit Reports

Changes in reporting entities, such as the inclusion of an additional company in combined financial statements, affect comparability but not consistency, and therefore do not require an explanatory paragraph in the audit report.

Correct AnswerverifiedShow Answer

The standard audit report for non-public entities refers to GAAS and GAAP in which sections?

Correct AnswerverifiedShow Answer

An auditor can express a qualified opinion due to a:

Correct AnswerverifiedShow Answer

Which of the following scenarios does not result in a qualified opinion?

Correct AnswerverifiedShow Answer

An auditor should issue a qualified opinion with an explanatory paragraph whenever there is a material uncertainty affecting the financial statements.

Correct AnswerverifiedShow Answer

When the client fails to make adequate disclosure in the body of the statements or in the related footnotes, it is the responsibility of the auditor to:

Correct AnswerverifiedShow Answer

The appropriate audit report date for a standard nonqualified audit report for a non-public entity should be the:

Correct AnswerverifiedShow Answer

Examples of unqualified opinions which contain modified wording (without adding an explanatory paragraph) include:

Correct AnswerverifiedShow Answer

Section 404(b)of the Sarbanes Oxley Act requires that the auditor of a public company attest to management's report on the efficiency of internal controls over financial reporting.

Correct AnswerverifiedShow Answer

The management's responsibility section of the standard audit report for a non-public company states that the financial statements are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIndependent Auditor's ReportTo the Boar...View AnswerShow Answer

The date of the auditor's report is indicative of the last day of the auditor's responsibility for the review of significant events occurring after the balance sheet date.

Correct AnswerverifiedShow Answer

The scope paragraph of the auditor's responsibility section of the audit report issued for financial statements of a non-public company should refer to generally accepted auditing standards .

Correct AnswerverifiedShow Answer

Misstatements must be compared with some measurement base before a decision can be made about materiality.A commonly accepted measurement base includes:

Correct AnswerverifiedShow Answer

Which of the following requires recognition in the auditor's opinion as to consistency?

Correct AnswerverifiedShow Answer

All of the following would require an emphasis of matter paragraph except for:

Correct AnswerverifiedShow Answer

Financial statement users are typically more concerned with an unqualified report with explanatory paragraphs than they are with a disclaimer of opinion.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?

Correct AnswerverifiedShow Answer

The phrase "auditing standards generally accepted in the United States of America" can be found in the opinion paragraph of a standard, unqualified audit report for a non-public company.

Correct AnswerverifiedShow Answer

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Independent Auditor's Report
To the Boar...
View Answer

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