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A1 Flashcards

Audit Reports

1
Q

The phrase “generally accepted accounting principles” is a term that:

A

encompasses the conventions, rules, and procedures necessary to define US accepted accounting practice at a particular time.

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2
Q

What provides the most authoritative guidance for the auditor of a nonissuer?

A

general guidance provided by a statement on Auditing standards. Auditors are required to comply with SASs and should be prepared to justify a departure from it.

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3
Q

Which provides guidance on how SASs should be applied in specific situations, but are not the most authoritative guidance for the auditor of a nonissuer?

A

AICPA audit and accounting guides and SASs interpretations.

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4
Q

What provides the most authoritative guidance for the auditor of an issuer?

A

general guidance provided by public company accounting oversight board auditing standards

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5
Q

In order to obtain reasonable assurance, the auditor must: (4)

A
  1. plan the work and properly supervise any assistants, 2. determine and apply appropriate material levels, 3. identify and assess risks of material misstatement, whether due to error of fraud 4. obtain sufficient appropriate audit evidence
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6
Q

The responsibilities of an auditor are: (3)

A

Competence and capability, independent and ethical, and professional skepticism

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7
Q

If an audit is conducted in accordance with two sets of auditing standards, then the auditor should:

A

add an additional language to the Auditor’s responsibility paragraph to state that the audit was conducted in accordance with both sets of standards

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8
Q

True or False: In certain audit engagements, the auditor may be required to comply with the International Standards on auditing in addition to GAAS even if the audit is conducted in the USA

A

True

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9
Q

An adoption of sound accounting policies is who’s responsibility?

A

managements

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10
Q

What are the auditor’s responsibilities regarding the financial statements:

A

to express an opinion on the financial statements based on the audit

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11
Q

What is a compilation engagement?

A

when an auditor drafts an entity’s financial statements based on information from managements financial system

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12
Q

Corroborating managements explanations is an example of the application of professional skepticism because:

A

the auditor is obtaining additional support rather than simply accepting the explanation as given

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13
Q

Why is inquiring of last years engagement personnel of managements integrity not relevant to the current year audit?

A

the auditor should consider that fraud might occur regardless of any past experience with an entity. Assessment of last years management integrity performed last year isn’t relevant to this year

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14
Q

The auditor must obtain sufficient _______ audit evidence to afford a ______ basis for the opinion

A

appropriate, reasonable

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15
Q

Define reasonable assurance

A

a high, but not absolute, level of assurance to allow an auditor to detect a material misstatement

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16
Q

Basic ethical characteristics and professional qualities embodied in the ethical requirements of the profession (3)

A

objectivity, independence, integrity

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17
Q

Define professional skepticism

A

a questioning mind and a critical assessment of audit evidence. Recognizing that circumstances may exist that cause the financial statements to be materially misstated

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18
Q

What opinion would the auditor give if there is a material departure from GAAP because of unusual circumstances that has been effectively argued by the client?

A

unmodified opinion with an emphasis of matter paragraph

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19
Q

What opinions should the auditor give if they conclude the clients illegal act has a material effect on the financial statements that hasn’t been accounted for or enclosed?

A

qualified or adverse opinion. Depends on pervasiveness

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20
Q

the applicable guidance used on the engagement: Examination of a Year 2 management discussion and analysis for a public company

A

Statements on standards for attestation engagements (SSAE). key words: examination, MD&A

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21
Q

the applicable guidance used on the engagement: Preparation for Year 1 FS for a nonissuer

A

Statements on standards for accounting and review services

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22
Q

the applicable guidance used on the engagement: review the quarterly FS for a public company

A

Public Company Accounting Oversight board auditing standards

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23
Q

What is an emphasis of matter paragraph used for?

A

in certain circumstances to add additional communications to the auditor’s report without modifying the opinion. (The client has appropriately reported it in the financial statements.)

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24
Q

What is the Introductory paragraph in the auditor’s report called?

A

Report on the Financial statements

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25
Q

What is included in the introductory paragraph in the auditor’s report?

A

states the name of the company under audit, nature of the engagement (audit), financial statements being audited (BS, IS, cash flows, Etc.), the dates covered by each financial statement

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26
Q

The auditor’s responsibility to express an opinion of the entity’s financial statements is included in what paragraph of the auditor’s report?

A

Auditor’s responsibility paragraph. The first sentence.

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27
Q

Management’s responsibility is stated where in the auditor’s report?

A

Managements responsibility paragraph

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28
Q

Who should the auditor always address the auditor’s report to?

A

the entity who engages them (hires).

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29
Q

A CPA’s audit includes:

A

evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates by management, as well as evaluating the overall presentation of the financial statements. This is included in the auditor’s responsibilities paragraph.

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30
Q

What describes the earliest date for an auditor’s report?

A

the date the auditor has obtained sufficient appropriate audit evidence to support the opinion.

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31
Q

When is the final assembly of the audit file completed?

A

up to 45 to 60 days after the audit report release date

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32
Q

True or False: Audit documentation may be completed after date of the audit report

A

True. Generally administrative documentation. for Example: sort or cross referencing papers.

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33
Q

What is the audit opinion: Auditor is unable to obtain audited financial statements supporting the entities investment in a foreign affiliate

A

qualified or disclaimer of opinion because of scope limitations.

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34
Q

What is the audit opinion: Auditor wishes to emphasis an accounting change effecting the comparability of this years and last years FS

A

unmodified opinion with an emphasis of matter paragraph

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35
Q

What is the audit opinion: Entity declines to present a statement of cash flows with its balance sheet and related statements of income and earnings

A

qualified opinion due to inadequate exposure

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36
Q

Is a reference to the PCAOB or GAAP in the auditor’s report explicit or assumed?

A

explicit

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37
Q

Where should references of the PCAOB be in the auditor’s report?

A

in the Basis of opinion paragraph

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38
Q

Where should references of GAAP be in the auditor’s report?

A

Opinion of the FS section

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39
Q

Is the references of GAAS required in the auditor’s report?

A

No

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40
Q

AICPAs definition of fair representation

A

reflecting the underlying transactions of a company in a manner that represents the financial statements within a range of acceptable limits

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41
Q

Define an unmodified opinion

A

the financial statements are presented fairly, in all material respects.

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42
Q

What is GAAPs rule on using different inventory methods to obtain an unmodified opinion?

A

GAAP allows a company to use different methods for costing different inventories as long as the methods are disclosed

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43
Q

When is an opinion qualified because of a lack of consistency? (consistency standard)

A

The consistency standard refers to changes in application of accounting practices between periods, affecting the comparability of the financial statements

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44
Q

Basic element of an independent auditor’s report regarding what the audit involves

A

the report states that an audit involves performing procedures to obtain audit evidence about the amounts and disclosures of the financial statements

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45
Q

Consistency of application of accounting principles: explicit or implicit in the auditor’s report? What if there is a lack of consistency?

A

Implicit. If there’s a lack of consistency then the auditor must report it in an emphasis of matter paragraph

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46
Q

What is meant by the term GAAS?

A

measures the quality of audit performance

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47
Q

What three things are at the end of the auditor’s report?

A

Auditor’s signature, Auditor’s city and state, date of the audit report

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48
Q

When is an adverse opinion issued?

A

when the FS are not presented in accordance with GAAP

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49
Q

What opinion is given when information about substantial doubt with regard to the company’s ability to continue as a going concern is presented to the auditor?

A

unmodified opinion with an emphasis of matter paragraph

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50
Q

When an auditor of a nonissue qualifies an opinion because of inadequate exposure, the auditor should describe the nature of the omission in a separate paragraph and modify:

A

auditor’s responsibility paragraph to refer to the qualified opinion and modify opinion paragraph by adding an “except for” statement

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51
Q

If a public company omits its statement of cash flows (inadequate disclosure), the auditor must give a(n) ______ opinion

A

qualified.

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52
Q

Departure from GAAP opinions:

A

qualified and adverse

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53
Q

Scope limitation opinions:

A

qualified and disclaimer of opinion

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54
Q

When an auditor expresses an adverse opinion, the opinion paragraph should include:

A

a direct reference to a separate paragraph disclosing the basis for the opinion. “In the auditor’s opinion, because of the significant matters described in the basis for adverse opinion paragraph, the financial statement’s are”

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55
Q

“The substantive reasons for the financial statements being misleading” are discussed where in the auditor’s report giving an adverse opinion?

A

in the basis for the adverse opinion paragraph preceding the opinion paragraph

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56
Q

When inadequate disclosure has a material but not pervasive effect on the financial statements, the auditor’s opinion should state:

A

in our opinion, except for the omission of the information described in the basis for qualified opinion paragraph

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57
Q

The statement “do not present fairly” would be used in a(n) _________ opinion

A

adverse

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58
Q

To be in conformity of GAAP:

A

there must be adequate disclosures of all material matters including the financial statements and supporting footnotes

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59
Q

Explain material and pervasive

A

material departure from GAAP that is neither necessary nor justified by the client. results in adverse opinion.

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60
Q

When may an auditor express a disclaimer of opinion?

A

when the auditor is unable to obtain sufficient appropriate audit evidence on which to base an opinion

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61
Q

Inadequate disclosure of a material party related transaction would result in a(n) _______or______ opinion

A

qualified or adverse

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62
Q

When should an auditor express an:

  1. unmodified opinion
  2. qualified opinion (on the financial statements)
  3. adverse opinion
  4. disclaimer of opinion
  5. qualified opinion (audit issues)
A
  1. when an auditor obtains sufficient appropriate audit evidence and concludes that the financial statements are presented fairly.
  2. when an auditor obtains sufficient appropriate audit evidence and concludes that misstatements are material but not pervasive to the FS
  3. when an auditor obtains sufficient appropriate audit evidence and concludes that misstatements are material and pervasive to the FS
  4. when an auditor is unable to obtain sufficient appropriate audit evidence on which to base an opinion, and the auditor concludes the possible effects on the FS of undetected misstatements could be material and pervasive
  5. when there are restrictions on the scope of the audit and the auditor is unable to determine if there is a material misstatement
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63
Q

Lack of evidence to support management’s assertions results in a(n) ______ or _______ opinion

A

qualified or disclaimer of opinion

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64
Q

when an auditor of a nonissuer qualifies his or her opinion because of a scope limitation, such as the inability to confirm accounts receivable, the wording in the opinion paragraph should indicate that:

A

the qualification pertains to the possible effects on the financial statements NOT the scope limitation

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65
Q

When a disclaimer of opinion is issued because of lack of audit evidence, what should be disclosed in the audit report? what paragraphs?

A

lack of evidence should be disclosed in the auditor’s responsibility paragraph and discussed in an additional paragraph before the opinion paragraph. This paragraph should be titled Basis of Disclaimer of Opinion.

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66
Q

If the auditor is unable to form an opinion on a new client’s opening inventory balances the auditor will issue what opinions for each of these statements:

  1. income statement
  2. statement of cash flows
  3. statement of shareholder equity
  4. balance sheet
A
  1. disclaimer of opinion
  2. disclaimer of opinion
  3. disclaimer of opinion
  4. unmodified or qualified opinion on the closing balance sheet only.
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67
Q

if the auditor lacks independence with respect to an audit client, auditor must issue a(n) _______ opinion

A

disclaimer

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68
Q

the inability to obtain audited financial statements of a consolidated investee represents a(n):

A

scope limitation

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69
Q

when an independent CPA is associated with the FS of a public company but hasn’t audited or reviewed statements, the appropriate form of report to be issued must include a(n):

A

disclaimer of opinion

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70
Q

when a qualified opinion results from an inability to obtain sufficient appropriate audit evidence, the situation should be described in:

A

a basis for qualified opinion paragraph preceding the opinion paragraph and should be referred to in the opinion paragraph

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71
Q

Why must an auditor disclaim an opinion of the income statement because they cannot verify the beginning inventory for the year?

A

because the auditor isn’t able to verify COGS during the year

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72
Q

When disclaiming an opinion because of scope limitations, the auditor should indicate what? what paragraphs?

A

in a separate paragraph indicate the reasons that the audit didn’t comply with GAAS. The auditor’s responsibility paragraph is revised to mention the disclaimer. The opinion paragraph sates that no opinion is expressed.

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73
Q

inadequate disclosure of necessary information is a(n):

A

departure from GAAP

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74
Q

a scope limitation is a departure from:

A

generally accepted auditing standards

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75
Q

restrictions on the scope of the audit:

A

timing of the work, the inability to obtain sufficient appropriate audit evidence, or an inadequacy in the accounting records (may require the auditor to qualify or disclaim an opinion.)

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76
Q

compilation report

A

a report related to a non-public entity

77
Q

significant deficiencies in the design and operating of an entity’s internal control will require the auditor to:

A

increase the risk of material misstatement and will likely result in modifications to the nature, timing, and extent of the auditor’s testing

78
Q

Financial statements prepared on an entity’s income tax basis are:

A

special purpose framework financial statements

79
Q

an auditor is unable to determine if management’s estimate of the effects of future events is reasonable, and the effect is believed to be material. The auditor should express a(n):

A

qualified opinion or disclaimer of opinion (a scope limitation involving a recorded uncertainty)

80
Q

When a disclaimer of opinion is issued, the beginning of the intro paragraph is changed from _____ to _____.

A

“We have audited” to “We were engaged to audit”

81
Q

A scope limitation big enough to preclude an unmodified opinion always will result when management:

A

refuses to accept responsibility for the fair presentation of the FS

82
Q

Examples of events that need to be included in an emphasis of matter paragraph in the auditor’s report, which would refer to a related footnote

A

Subsequent events, sale of a discontinued operation, the pro forma effects of a business combination

83
Q

For a company’s FS to be presented fairly in conformity with the applicable framework, it is required that the principles: (3)

A
  1. be appropriate in the circumstances for the company
  2. Reflect transactions in a manner that presents the financial statements within a range of acceptable limits
  3. present information in the financial statements that is classified and summarized in a reasonable manner
84
Q

If an accounting change has no material effect on the financial statements in the current year, but the change is reasonably certain to have a material effect in later years, the change should be:

A

disclosed in the notes to the FS of the current year. (because there’s no material effect modifying the opinion isn’t necessary)

85
Q

If an auditor believes that there is a probable likelihood of a material loss results from an uncertainty that is sufficiently supported and disclosed, what opinion is issued?

A

unmodified opinion. NO emphasis of matter paragraph because it is already disclosed.

86
Q

How does an auditor report a material weakness of internal control?

A

report to management and those charged with governance.

87
Q

If an uncertainty is disclosed, does the auditor report it an emphasis of matter paragraph in the auditor’s report?

A

No, it is not required as long as it is properly disclosed

88
Q

How would an auditor report the company having significant transactions with related parties?

A

in an emphasis of matter paragraph with an unmodified opinion

89
Q

When a company changes accounting methods, which has a material effect on comparability, what would the emphasis of matter paragraph state?

A
  1. identify the nature of the change

2. refer to the FS note that discusses the change in detail

90
Q

If a contingent liability is probable, but not estimable, it is:

A

disclosed in the footnotes of FS

91
Q

synonym for preceding

A

go before, in front of

92
Q

The auditor’s concurrence with a change in GAAP is explicit or implicit?

A

implicit

93
Q

Does a change in accounting estimate (a change in the useful life of an asset) effect comparability of FS between periods?

A

No it is accounted for prospectively

94
Q

If a departure from GAAP is justified, the auditor issues:

A

unmodified opinion with an emphasis of matter paragraph

95
Q

Basic order of the auditor’s report:

A

Introduction, Managements responsibility, auditor’s responsibility, opinion, emphasis of matter, other matter

96
Q

Words describing the percentages of revenues and assets audited by other auditors are proper in:

A

dividing responsibility

97
Q

The group engagement partner’s report includes statements about each partners responsibility where?

A

auditor’s responsibility paragraph

98
Q

If the re-issued report is not revised and no significant changes have occurred that would affect the prior FS then the date of the report should be:

A

the date of the prior-period report

99
Q

Why would the group engagement partner express an opinion on the financial statements taken as a whole without making reference to the audit of the component auditor?

A

If the group engagement partner is satisfied with the independence and professional reputation of the component auditor

100
Q

Reference to a component auditor indicates:

A

division of responsibility of the audits of the components of the overall FS

101
Q

Why would an auditor dual date a report?

A

if a material subsequent event has occurred. It is not used for reissuing a report.

102
Q

When the group engagement auditor accepts responsibility for the work performed by a component auditor, the group engagement auditor must:

A

contact the component auditor and review the audit program and working papers pertaining to the component

103
Q

when the auditor decides to make reference to the audit of a component auditor as a basis for the auditor’s opinion, would an emphasis of matter paragraph be necessary?

A

No, however, the auditor would modify her report

104
Q

If the financial statements of a prior period have been audited by a predecessor auditor whose report isn’t presented, the successor auditor should indicate in an other matter paragraph that: (3)

A
  1. the FS of the prior period were audited by another auditor
  2. the date of the previous report
  3. the type of report issued by the predecessor auditor, and if the report was modified, the substantive reasons therefor
  4. the nature of any emphasis of matter, other matter, or explanatory paragraph included in the previous report
105
Q

The only time a successor auditor may name the predecessor auditor:

A

only if the predecessor auditor’s practice was acquired or merged with that of the successor auditor

106
Q

Before reissuing the prior year’s audit report on the FS of a former client, the auditor should:

A
  1. read the FS of the current period
  2. compare the prior period information that the auditor reported on with the FS to be presented for comparative purposes
  3. obtain letters of representation from management of the former client and from the successor auditor.
107
Q

The representation letter from management to the predecessor auditor should indicate:

A

whether any of management’s previous representations should be modified and whether there have been any subsequent events that would effect the previous FS

108
Q

The representation letter from the successor auditor to the predecessor auditor should indicate:

A

whether the successor auditor’s audit disclosed any issues of material nature that might effect the previous FS

109
Q

When a successor auditor doesn’t present the predecessor auditor’s report, the successor should:

A

indicate in an other matter paragraph that the predecessor auditor expressed an unmodified opinion on prior years FS

110
Q

When audited FS are presented in comparative form with unaudited FS from the prior year, the auditor should either:

A

reissue her report on the unaudited statements OR include a separate paragraph in the current year report describing the responsibility assumed for the unaudited statements.

111
Q

the auditor’s updated report on the prior year’s FS should:

A

express an unmodified opinion with an emphasis of matter paragraph (following the opinion paragraph) added to the report

112
Q

A former client requests a predecessor auditor to reissue the prior year’s audit report in connection with the issuance of comparative FS by the client. What is the predecessor auditor’s responsibility?

A

predecessor auditor should read the current report, compare it with the previous report, and obtain a letter of representation from the successor auditor when deciding to reissue the prior year audit report.

113
Q

When is it ok for an auditor to disclaim an opinion on the overall FS but report that a piece of the FS (current assets) are fairly stated? When is it not ok?

A

It is ok when the auditor creates a separate audit report on the specific piece of the FS that is fairly stated.

It is not ok if the auditor mentions it in the overall FS report. It might overshadow the disclaimer.

114
Q

An audit of a single FS is permitted under:

A

US GAAS

115
Q

An audit of a single FS can be performed as:

A

a separate audit or in conjunction with an audit of the complete set of FS

116
Q

The auditor may only audit the company’s balance sheet if:

A

the auditor obtains an understanding of the purpose for which the single FS is prepared, the intended users, the opinion for the complete FS, and the steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances

117
Q

if the auditor is engaged to provide an opinion on the complete FS and on accounts receivable for a company, and the completed FS receive a qualified opinion due to accounts receivable being materially understated, what opinion would the auditor issue for the accounts receivable report?

A

adverse

118
Q

When does the auditor’s active responsibility to inquire on possible subsequent events end?

A

the date of the auditor’s report

119
Q

If a subsequent event is found to be material, creditors are relying on the FS, and the board of directors doesn’t force management to make an adjustment, then the auditor would:

A

no longer allow the audit report to be associated with the FS

120
Q

Regarding subsequent events, The auditor is only responsible for information that existed at the:

A

audit report date

121
Q

If the auditor chooses to use the later date for the report, this means:

A

the auditor’s responsibility extends for all subsequent events to the later date

122
Q

Adjustments or disclosures made after the original report date require the auditor to either:

A

dual date or extend the date of the auditor’s report

123
Q

when an auditor issues a report that is dual dated for a subsequent event occurring after the original date of the auditor’s report, but before issuance of the related FS, the auditor’s responsibility for events occurring subsequent to the original report date is:

A

limited to the specific event referenced.

124
Q

Conditions that didn’t exist at year end but arose after year end are Type 2 (nonrecognized) subsequent events that must be:

A

disclosed to keep the FS from being misleading

125
Q

What are the 2 types of subsequent events?

A

Type 1: (recognized) require adjustment of FS

Type 2: (non recognized) require disclosure in the footnotes

126
Q

GAAP requires an accrual for a loss contingency for an unfavorable judgement that:

A

can be estimated and is probable.

127
Q

When information accompanying the basis financial statements has been subjected to auditing procedures, the auditor may include in the auditor’s report an opinion that the info:

A

is fairly stated in all material respects in relation to the financial statements as a whole. the statement would appear in an other matter paragraph following the opinion paragraph. the information may be included in a separate report other than the opinion report

128
Q

If the auditor discovers a material inconsistency in other info accompanying the audited FS, the FS do not require revision, and the client refuses to eliminate or revise the inconsistency, the auditor should first:

A

communicate the matter to those charged with governance.

129
Q

If the auditor discovers a material inconsistency in other info accompanying the audited FS, the FS do not require revision, and the client refuses to eliminate or revise the inconsistency, the auditor should first communicate the matter to those charged with governance, then consider: (3)

A
  1. revising the report to include an other-matter paragraph describing the material inconsistency
  2. withholding the use of the report
  3. withdrawing from the engagement and consulting with the legal consul
130
Q

For additional supplementary information required by the FASB, the auditor should:

A

apply certain limited procedures to the information and add other matter paragraph to the FS audit report

131
Q

When audited FS are presented in a client’s document containing other information , the auditor should:

A

read the other information to determine that it is consistent with the audited FS

132
Q

If management (of a governmental body) declines to present info required by GASB, the auditor should issue a(n)

A

unmodified opinion with an other matter paragraph

133
Q

An annual shareholders’ report includes audited FS and contains supplementary info required by GAAP. Is it allowed for the auditor to report on such information?

A

Yes, provided the auditor performs sufficient audit procedures to determine whether the info is fairly stated, in all material respects, in relation to the FS

134
Q

When the audit engagement includes reporting on selected financial data, the report prepared by the auditor should:

A

be limited to the data that was obtained from the FS

135
Q

An auditor shouldn’t sign a preprinted report that includes statements that are inconsistent with the auditor’s responsibility. Instead:

A

the form should be revised or a separate, more accurate report should be attached

136
Q

According to FASB, regarding supplementary information, the auditor is required:

A

to perform limited procedures on required supplementary info

137
Q

The quarterly data required by SEC Regulation S-K have been omitted. What must be included in the auditor’s report?

A

The report must include a statement indicating that the company has not presented such data

138
Q

A reporting accountant may report on the application of the requirements of an applicable financial reporting framework to a proposed future transaction as long as the transaction involves:

A

the facts and circumstances of a specific entity.

139
Q

The reporting accountant’s written report on the application of an applicable financial reporting framework should include: (10)

A
  1. an identification of the specific entity involved
  2. a brief description of the nature of the engagement
  3. a statement that the engagement was performed in accordance with AICPA standards
  4. a description of the specific transactions
  5. a statement of the relevant facts, circumstances, assumptions, and source of info
  6. a statement describing the appropriate application of the requirements of the applicable financial reporting framework to the specific transaction or type of report
  7. a statement that the preparers of the FS are responsible for proper accounting treatment
  8. a statement that any difference in facts, circumstances or assumptions presented may change the report
  9. a separate paragraph restricting its use to specific parties
  10. a statement indicating that the reporting accountant is not independent (if appropriate)
140
Q

In an audit of FS prepared in accordance with a financial reporting framework generally accepted in another country, the auditor should obtain:

A
  1. an understanding of the applicable legal responsibilities involved if the auditor plans to use the form and content of the auditor’s report of another country.
  2. an understanding or the applicable legal responsibilities involved if the auditor plans to use the form and content of the auditor’s report
141
Q

The reporting accountant’s report on the application of the requirements of an applicable reporting framework should include a statement that says:

A

should any facts or circumstances differ from those presented to the reporting accountant, the accountant’s report may change

142
Q

The use of the reporting accountant’s report on the application of the requirements of an applicable financial reporting framework is restricted to:

A

“specified parties” which may include management, board of directors

143
Q

The reporting accountant’s report on the application of the requirements of an applicable reporting framework should state that the engagement was performed in accordance with:

A

AICPA standards

144
Q

When issuing a report on the application of the requirements of an applicable financial reporting framework to a specific transaction, the reporting CPA should:

A

consult with the continuing CPA to obtain info relevant to the transaction. If the reporting accountant decides it is unnecessary to consult with the continuing accountant, then she must document the reasons for not consulting

145
Q

When FS are prepared in accordance with a financial reporting framework generally accepted in the parents country and are for use only in that country, the auditor may report using either:

A

a US style report modified to report on the financial reporting framework of the parent’s country OR the report form of the parent’s country

146
Q

The report options for FS prepared for use in a foreign country depend upon the intended distribution. The auditor should therefor:

A

obtain written representations from management regarding the purpose and uses of the FS

147
Q

When reporting on FS prepared in conformity with a basis of accounting other than GAAP, the auditor should include an emphasis of matter paragraph that states:

A

that the special purpose framework is a basis of accounting other than GAAP

148
Q

FS prepared in accordance with a comprehensive basis of accounting other than GAAP that are not suitably titled require:

A

a qualified opinion with a basis for modification paragraph

149
Q

An auditor’s report on financial statements prepared on the cash receipts and disbursements basis of accounting should include: (3)

A
  1. paragraph that expresses the auditor’s opinion on whether the FS are presented fairly, in all material respects, in conformity with the basis described
  2. the audit was conducted in accordance with US GAAS
  3. paragraph that states the basis and refers to the note to the FS that describe the basis
150
Q

A report using the special purpose framework required by the regulatory agency would be issued and include:

A
  1. an opinion paragraph that contains an opinion on the special purpose FS and a reference to the special purpose framework used to prepare FS
  2. an other matter paragraph restricting the use of the auditor’s report
151
Q

An auditor’s report would be designated a report on compliance when it is issued in connection with:

A

compliance with aspects of regulatory requirements related to audited FS

152
Q

A report on compliance in connection with audited FS provides:

A

only negative assurance on compliance

153
Q

A review report should be issued:

A

in connection with a limited review of interim financial information of a public company

154
Q

Non GAAP statements should be suitably titled. For example, instead of an income statement, an appropriate cash basis FS title might be:

A

statement of revenues collected and expenses paid

155
Q

Under US GAAP, Statement of operations is another term for what?

A

income statement

156
Q

The “Statement of Activities” is the title used for:

A

not-for-profit organizations statements of revenues and expenses

157
Q

An income statement prepared in accordance with a regulatory basis of accounting could be entitled:

A

statement of income-regulatory basis

158
Q

A special purpose framework is a financial basis of accounting other than GAAP that includes:

A

a cash basis, tax basis, regulatory basis, and contractual basis

159
Q

The title of the OCBOA report should be:

A

Independent Auditor’s report

160
Q

A description of how the income tax basis differs from GAAP should be included in:

A

the notes of the FS

161
Q

An auditor’s special report on FS prepared in conformity with the cash basis of accounting should include an emphasis of matter paragraph after the opinion paragraph that:

A

refers to the note to the FS that describes the basis of accounting

162
Q

When issuing a disclaimer in the auditor’s report of a nonissuer, what paragraphs have to be modified?

A

intro, auditor’s responsibility, basis for opinion, opinion,

163
Q

If the group engagement CPA gives the component CPA responsibility over their audit and mentions them then which paragraphs in the audit report are modified?

A

auditor’s responsibility, opinion paragraph,

164
Q

What are the required procedures for required supplementary information?

A

apply limited procedures

165
Q

In the annual report of the companies audited FS, the names of the CEO and CFO are what type of information?

A

other information

166
Q

Quarterly results required by SEC, not GAAP are what type of information?

A

required supplementary information

167
Q

When the auditor finds a discrepancy between the audited FS and other info, the auditor should first notify:

A

management

168
Q

When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that:

A

the qualification pertains to the possible effects on the financial statements (not to the scope limitation itself)

169
Q

The report options for FS prepared for use in a foreign country depend upon the intended distribution. The auditor should therefore:

A

obtain written representations from management regarding the purpose and uses of the FS

170
Q

_______ is defined as the date after which existing documentation must not be deleted, and additions to the documentation file

A

documentation completion date

171
Q

________ is used to define the beginning of the retention period

A

report release date

172
Q

The predecessor auditor permits the successor auditor to review the predecessor’s audit documentation relating to matters:

A

of continuing accounting and auditing significance

173
Q

Does the predecessor auditor permit the successor auditor to review the predecessor’s audit documentation relating to: contingencies? why?

A

yes, they have continuing significance as they may continue to affect the current year FS (either by remaining as contingencies or by being resolved)

174
Q

Does the predecessor auditor permit the successor auditor to review the predecessor’s audit documentation relating to: balance sheets?

A

yes

175
Q

Assembling the FS of a nonissuer based on the assumptions of the entity’s management without expressing any assurance is:

A

a compilation engagement that falls under SSARS

176
Q

the auditor is (required/not required) to perform a subsequent events review as part of an audit

A

required

177
Q

______ is one of fourteen standard audit procedures which are used in an audit as risk assessment procedures, tests of controls, or substantive tests

A

a subsequent events review

178
Q

Any evidence gathered after the balance sheet date and up to the date of the audit report, can impact:

A

the valuation of the client’s assets and liabilities on the balance sheet date

179
Q

The group engagement partner should always make inquiries regarding the independence and professional reputation of the component auditor. inability to become satisfied in this regard would constitute a ________, resulting in a ____ opinion

A

scope limitation, qualified or disclaimer opinion

180
Q

if the group engagement partner is satisfied the the component auditors work and trusts the competence and capability, then:

A

the auditor could assume the responsibility of the component auditor’s work and give no reference in the report

181
Q

the auditor’s report should include reference to the United States as the country of origin for:

A

GAAS and GAAP

182
Q

when info accompanies audited FS in a client-prepared document, the auditor is required to read the info. If such info is materially inconsistent with the FS and the FS do not require revision, the auditor should:

A

request that the info be revised (letter of transmittal document managment (in case))

183
Q

A special purpose framework is a financial basis of accounting other than GAAP that includes:

A

cash basis, tax basis, regulatory basis, and contractual basis

184
Q

subsequently discovered facts that lead to a change in an audit opinion may be presented in:

A

emphasis of matter or other matter paragraph

185
Q

when a specific element is SE, auditor should perform procedures necessary to express an opinion about the BS as well because:

A

the interrelationship between SE and BS accounts

186
Q

The requirement to audit the income statement and balance sheet exists when the auditor is asked to express an opinion on an element that is or based on:

A

net income

187
Q

an incomplete presentation that is otherwise in accordance with GAAP is considered:

A

a type of single FS.

188
Q

when the auditor reports on an incomplete presentation that is otherwise in accordance with GAAP, the auditor’s report should:

A
  • include emphasis of matter paragraph that states the purpose for which the presentation is prepared and refers to the notes in the FS that describes the basis of the presentation
  • indicates that the presentation is not intended to be complete presentation of the entity’s assets, liabilities, revenues or expenses
189
Q

If the other component auditor’s opinion is qualified, but the subject of the qualification is not material in relation to the overall consolidated statements, main auditor need not:

A

make reference to the qualification in its report.

Audit (7 decks)

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