Chapter 2: Professional Standards

Question 1

two sets of standards directly related to financial statements

Answer 1

GAAS (generally accepted auditing standards)

GAAP( generally accepted accounting principles)

Question 2

Audits of nonpublic companies

Answer 2

nonissuers– AICPA, SAS, and GAAS

Question 3

audits of public companies

Answer 3

issuers- PCAOB, developing their own standards

Question 4

Unconditional responsibility

Answer 4

auditor must comply with responsibilities in all cases where such a requirement is relevant

Question 5

presumptively mandatory responsibility

Answer 5

auditor must comply with requirement in all cases in which the requirement is relevant, except in rare circumstances when the auditor makes a judgement that it is necessary to depart from the standard

Question 6

responsibility to consider

Answer 6

auditor should consider: whether auditor follows depends on exercise of professional judgement in the circumstances

Question 7

standard unmodified opinion

Answer 7

good clean opinion conforms to GAAP, audit performed in accordance with GAAS

Question 8

unmodified with an emphasis of matter paragraph

Answer 8

paragraph included that refers to a matter appropriately presented or disclosed in the financial statements

Question 9

unmodified with an other matter paragraph

Answer 9

paragraph is included that refers to a matter other than those presented or disclosed in the financial statements in the auditor’s judgement is relevant to user’s understanding of the audit, the auditors responsibilities or the auditors report

Question 10

unmodified on group financial statements

Answer 10

unique circumstances involves situation in which two or more CPA firms are involved in the audit of components of group financial statements

Question 11

qualified opinion

Answer 11

financial statements are presented fairly in conformity with GAAP except for the effects of some matter

Question 12

adverse opinion

Answer 12

financial statements are not presented fairly in conformity with GAAP, material and pervasive

Question 13

disclaimer of opinion

Answer 13

due to scope limitation, the auditors were unable to obtain sufficient appropriate evidence on which to base the opinion and the auditor concludes that the possible effects on the financial statements of undetected misstatements if any could be both material and pervasive