AUD1

Question 1

When an auditor of a nonissuer expresses an adverse opinion, the Opinion section should include…

Answer 1

a direct reference to a separate section disclosing the basis for the opinion

Question 2

Lawsuits that are “reasonably possible” require what?

Answer 2

disclosure only

Question 3

When does the auditor’s active responsibility stop?

Answer 3

the date of the auditor’s report

Question 4

For an auditor of an issuer, the CAM section, immediately follows/precedes what section?

Answer 4

immediately follows the Basis for Opinion section

Question 5

If a scope limitation effect is material and pervasive, what opinion does the aud issue?

Answer 5

Disclaimer of opinion

Question 6

An unjustified change in acct principle could result in a MM of the FS that would result in what?

Answer 6

qualified or adverse opinion

Question 7

A material but justified change in acct principle would result in what?

Answer 7

addition of an EOM paragraph to the unmodified opinion

Question 8

What does “Generally accepted auditing standards” mean or describe?

Answer 8

measures of the quality of the auditor’s performance

Question 9

What is the auditor’s responsibility regarding other info included in documents containing audited FS?

Answer 9

add a separate section (“Other Information”) which includes a disclaimer of opinion on other information

Question 10

When a FS misstatement is both material and pervasive…

Answer 10

Adverse Opinion

Question 11

a Critical Audit Matter is a matter that was what?

Answer 11

Communicated or required to be communicated to the audit committee & involves an especially challenging judgment made by the auditor

Question 12

a description of how the income tax basis differs from GAAP should be included where?

Answer 12

notes of the FS

Question 13

what type of info is the name of CEO & CFO? What are the required procedures?

Answer 13

Other information. Read information.

Question 14

what type of info are “Exhibits and FS Schedules” & what are the required procedures?

Answer 14

Required Supplementary Info. Apply limited procedures.

Question 15

Compliance with what is mandatory for all audit engagements?

Answer 15

GAAS

Question 16

What GAAS standards are used in the audits of nonissuers?

Answer 16

Statements on Auditing Standards (SASs) issued by the AICPA’s Auditing Standard’s Board (ASB)

Question 17

What GAAS standards are used in the audits of issuers?
Where are they mentioned in the report?

Answer 17

GAAP (U.S. or other applicable fin. rep. framework) –> Opinion.

PCAOB Auditing Standards –> Basis for Opinion.

Question 18

What are the steps in the audit process?

Answer 18

1. Accept engagement.
2. Assess risk & plan response.
3. Perform procedures & obtain evidence.
4. Form conclusions.
5. Reporting.

Question 19

What are the required sections for an Unmodified Opinion (Nonissuers)?

Answer 19

1. Opinion
2. Basis for Opinion.
   3a Responsibility of Mgmt for the FS (anywhere after 2nd section)
   3b Auditor’s Responsibility for the Audit of the FS (anywhere after 2nd section)

Question 20

In what section(s) of an Unmodified Opinion are the Auditing Standards referenced?

Answer 20

This is GAAS…
Basis for Opinion & Auditor’s Responsibilities

Question 21

In what section(s) of an Unmodified Opinion is the framework referenced?

Answer 21

This is GAAP….
Opinion & Mgmt’s Responsibility.

Question 22

What does GAAP & GAAS stand for?

Answer 22

Generally Accepted Accounting Principles.
Generally Accepted Auditing Standards.

Question 23

What is the auditor’s responsibility when their audit report is included in a document that contains other information?

Answer 23

Read the other information.

Question 24

Regarding pending lawsuits, when is accrual & disclosure required?

Answer 24

If loss is probable AND estimateable.

Question 25

If there is a material change on the auditor's report, what is required?

Answer 25

EOM paragraph that describes the change in acct principle and reference the entity's disclosure. Also keep it in all future reports until it's applied to all periods present.

Question 26

What are the terms for materially correct FS for nonissuers vs issuers?

Answer 26

Unmodified (non) vs Unqualified (issuers)

Question 27

What opinion is rendered if the auditor is unable to obtain SAAE to conclude the the FS are free of MM?

Answer 27

This is an audit issue (not FS issue). Modified opinion.

Question 28

If FS are misstated or unable to obtain SAAE, but it's not material => what opinion?

Answer 28

Unmodified (Unqualified)

Question 29

If the FS are MM but not it's pervasive => ?

Answer 29

Qualified opinion

Question 30

If we are unable to obtain SAAE & it is material, but not pervasive => what opinion?

Answer 30

Qualified opinion

Question 31

If the FS are MM and it's pervasive => what opinion?

Answer 31

Adverse Opinion

Question 32

If unable to obtain SAAE, and it's material and pervasive => what opinion?

Answer 32

Disclaimer of Opinion

Question 33

What does the auditor's report date show?

Answer 33

the final date of auditor responsibility (Becker outline says) the date that SAAE was obtained to support the aud's opinion

Question 34

Do Key Audit Matters get their own separate opinion & are they addressed? If so, where?

Answer 34

No, they do not get their own opinion. They're addressed in the context of the audit as a whole. They get their own section in proximity of the "Opinion" & "Basis for Opinion" section.

Question 35

CAM vs KAM

Answer 35

CAM —> issuers —> required in audit report (no cams then include a statement no cams were identified) KAM —> nonissuers —> engaged separately from the audit to report on KAMs (do not include in modified reports) Both are challenging areas that require a lot of judgment.

Question 36

What section of the auditor's report is excluded when issuing an adverse opinion?

Answer 36

- KAM (non)... should not include - CAM (issuers)... not required to include

Question 37

No opinion is expressed as a result of a material GAAS problem =>

Answer 37

Disclaimer of Opinion

Question 38

Where does an explanatory paragraph go in the report?

Answer 38

generally following the opinion paragraph when added to an unqualified report

Question 39

What are the 2 recognized subsequent events?

Answer 39

Settlement of Litigation (if litigation arose before the BS date) and Loss on an Uncollectible Receivable (ie. Customer's bankruptcy filing)

Question 40

Litigation arose after the BS date. Is this a recognized subsequent event?

Answer 40

Nope

Question 41

What are the 6 nonrecognized subsequent events THAT REQUIRE DISCLOSURE?

Answer 41

- Sale of Bond or capital stock - business combination - settlement of litigation (if it arose after BS date) - loss of plant or inventory due to fire or natural disaster - changes in fair value of assets or liabs or Forex rates - entering into significant commitments or contingent liabilities

Question 42

Auditor's responsibility for subsequent events

Answer 42

gather evidence related to subs. events up to the date of the auditor's report

Question 43

If the auditor believes the FS need to be revised to reflect a subsequent event & mgmt doesn't do it, auditor should express what opinion?

Answer 43

qualified or adverse

Question 44

What are the other comprehensive bases of accounting?

Answer 44

Cash, Tax, Regulatory, contractual, etc.

Question 45

If the opinion section is modified, what other section is automatically modified?

Answer 45

Basis for Opinion section

Question 46

A division of responsibility affects what section(s) of the report?

Answer 46

Opinion