Audit Reports Flashcards
When financial statements contain a departure from GAAP because, due to unusual circumstances, the statements would otherwise be misleading, the auditor should explain the unusual circumstances in a separate paragraph and express an opinion that is
A. Unmodified.
B. Qualified.
C. Adverse.
D. Qualified or adverse, depending on materiality
A - When strict adherence to GAAP would result in misleading financial statements, the auditor may issue an unmodified opinion accompanied by an emphasis-of-matter paragraph describing the GAAP departure
If an auditor is satisfied that there is only a remote likelihood of a loss resulting from the resolution of a matter involving an uncertainty, the auditor should express a(n)
A. Unmodified opinion.
B. Unmodified opinion with a separate emphasis-of-matter paragraph.
C. Qualified opinion or disclaimer of opinion, depending upon the materiality of the loss.
D. Qualified opinion or disclaimer of opinion, depending on whether the uncertainty is adequately disclosed
A - If there is only a remote likelihood of a loss resulting from an uncertainty, GAAP does not require adjustment or disclosure. The auditor should express an unmodified opinion
For an entity’s financial statements to be presented fairly in conformity with generally accepted accounting principles, the principles selected should
A. Be applied on a basis consistent with those followed in the prior year.
B. Be approved by the Auditing Standards Board or the appropriate industry subcommittee.
C. Reflect transactions in a manner that presents the financial statements within a range of acceptable limits.
D. Match the principles used by most other entities within the entity’s particular industry
C
When adding an alert to restrict the auditor’s report, the auditor should place the alert
A. In the introductory paragraph of the auditor’s report.
B. In the Auditor’s Responsibility section of the auditor’s report.
C. In a paragraph preceding the opinion paragraph.
D. In a paragraph at the end of the auditor’s report
D
An independent accountant’s report is based on a review of interim financial information.
If this report is presented in a registration statement, a prospectus should include a statement clarifying that the
A. Accountant’s review report is not a part of the registration statement within the meaning of the Securities Act of 1933.
B. Accountant assumes no responsibility to update the report for events and circumstances occurring after the date of the report.
C. Accountant’s review was performed in accordance with standards established by the Financial Accounting Standards Board.
D. Accountant obtained corroborating evidence to determine whether material modifications are needed for such information to conform with GAAP
A - The SEC requires that, when an auditor’s review report on interim financial information is included in a registration statement, the prospectus must include a statement indicating that the accountant’s review report is not a part of the registration statement within the meaning of the Securities Act of 1933
The objective of a review of interim financial information of a public entity is to provide the accountant with a basis for
A. Determining whether the prospective financial information is based on reasonable assumptions.
B. Expressing a limited opinion that the financial information is presented in conformity with the applicable financial reporting framework.
C. Deciding whether to perform substantive audit procedures prior to the balance sheet date.
D. Reporting whether material modifications should be made for such information to conform with the applicable financial reporting framework
D - The objective of a review of interim financial information is to provide the accountant with a basis for reporting whether material modifications should be made for such information to conform to the applicable financial reporting framework
Which of the following procedures ordinarily should be performed when an independent accountant conducts a review of interim financial information under AICPA Professional Standards?
A. Verify changes in key account balances.
B. Read the minutes of meetings of those charged with governance.
C. Inspect the open purchase order file.
D. Perform cutoff tests for cash receipts and disbursements
B
