A1 - Audit Reports Flashcards
What provides the most authoritative guidance for auditors of an “issuer” and “nonissuer”?
Issuer - PCAOB AS
Non issuer - Statement on Auditing Standards
Generally accepted auditing standards are;
A) rules acknowledged by accounting profession because of universal application
B) pronouncements issued by Auditing Standards board
C) measures of the quality of auditors performance
D) procedures to be used to gather evidence to support financial statements
C) measures of the quality of auditors performance
Auditor of a nonissuer must conduct the audit in accordance with:
ASB or PCAOB standards?
Accounting Standards Board standards
U.S. GAAP means
Convections, rules, and procedures necessary to define US accepted accounting principles at a particular time in US
Auditors responsibility with respect to Statements on Auditing Standards:
Auditor is generally required to follow the guidance provided by the standards, and should be able to justify any departures
When PCAOB auditing standards indicate that an auditor “could” perform a specific procedure, how should the auditor decide on how to perform ?
A) comparing PCAOB standard with related AICPA standards
B) exercising professional judgement
C) Soliciting input from issuer audit committee
D) evaluating whether audit is likely to be inspected by PCAOB
B) exercising professional judgement
What are examples of “Professional Skepticism?”
- Designing auditing procedures to obtain more reliable evidence in support of FS assertion
-obtaining corroboration of management’s explanation through consultation
- using 3rd party confirmation to provide support
-any review or further investigative work in the “current year”
In audit engagements, an auditor may be required to comply with auditing requirements in addition to GAAS. Auditor may conduct with
A) both GAAS and Gov’t auditing standards (GAGAS)
B) either GAAS as issued by AICPA or PCAOB, but not both
C) only GAAS or PCAOB, but not auditing standards of another jurisdiction or country
D) International Standards on auditing
A) both GAAS and Gov’t auditing standards (GAGAS)
which of the following identifies a requirement for audit evidence?
A) appropriate
B) adequate
C) reasonable
D) disconfirming
A) appropriate
Which opinion to express if the financial statements fail to disclose information that is required by GAAP?
A) adverse opinion or disclaimer of opinion
B) qualified opinion or adverse opinion
C) disclaimer of opinion or unmodified opinion with emphasis of matter
D) unmodified opinion with other matter paragraph or qualified opinion
B) qualified opinion or adverse opinion
When forming an opinion on FS, auditor is “most likely” to:
- evaluate accounting estimates made by management are reasonable
- financial statements provide adequate disclosures to understand material events
- terminology used on FS is appropriate
Purpose of GAAP, a “modified opinion” refers to:
Qualified opinion - yes or no
Unmodified opinion with emphasis of matter paragraph - yes or no
Qualified - YES
Unmodified - NO
Modified opinions include a qualified, adverse or a disclaimer of opinion
Emphasis of matter paragraph is not modified with respect to matter emphasized
When would an auditor “Most likely” modify the audit opinion?
If they conclude that the financial statements as a whole are materially misstated
When a FS misstatement is “Material, but not pervasive”, the auditor should issue;
A) unmodified opinion
B) qualified opinion
C) adverse opinion
D) disclaimer opinion
B) qualified opinion
Which term identifies a requirement for audit evidence?
A) appropriate
B) reasonable
C) disconfirming
D) adequate
A) appropriate
When FS contain a departure from US GAAP because of being misleading, the opinion would be
A) unmodified
B) qualified
C) adverse
D) qualified or adverse, depending on pervasiveness
A) unmodified, because the FS is not materially misstated
Opinion paragraph in auditors report for “nonissuer” should include:
Identify the applicable financial reporting framework and its origin
Which section of the auditors report does the non issuer communicate the nature of the engagement and specific FS covered
A) scope
B) basis of opinion
C) opinion
D) emphasis of matter
C) opinion
If client does not make proposed entries that are immaterial, and wants to issue report on unadjusted numbers. How to present FS?
FS is free from material misstatement, and no disclosure is required in the notes of the FS
Auditors responsibility to express an opinion on the FS of a nonissuer under US auditing standards:
A) implicitly represented in auditors report
B) explicitly represented in auditors responsibility paragraph
C) explicitly represented in basis for opinion paragraph of the auditors report
D) explicitly represented in emphasis of matter paragraph of auditors report
B) explicitly represented in auditors responsibility paragraph
The meaning of “explicitly” and “implicitly”
Explicitly: clearly stated
Implicitly: assumed
What best describes an “emphasis of matter” paragraph?
Used to highlight a matter that is fundamental to the user’s understanding of the financial statements
A CPA’s report on audited FS under auditing standards is appropriate with:
-Management’s responsibility for FS
-Evaluating appropriateness of accounting policies
-Significant estimates made by management
Which is a basic element of auditors report under U.S auditing standards?
A) disclosures provide reasonable assurance that FS are free of material misstatement
B) auditor evaluated overall internal controls
C) audit includes evaluating reasonableness of significant accounting estimates made by management
D) FS are consistent with those of prior period
C) audit includes evaluating reasonableness of significant accounting estimates made by management