Deck 4

Question 1

What report states “In our opinion, because of the significance of the matter discussed in the Basis of Adverse Opinion section of our report, the accompanying consolidated financial statements do no present fairly the financial position…”

Answer 1

Adverse Opinion

Question 2

What report states “ Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.”

Answer 2

Disclaimer of Opinion

Question 3

What report states “in our opinion, except for omission of information described in the Basis for Qualified Opinion section of our report…”

Answer 3

Qualified Opinion

Question 4

An auditor may issue a qualified opinion (or a disclaimer, depending on materiality). when there

Answer 4

1. lack of sufficient appropriate audit evidence
2. when there are restrictions on the scope of the audit

Question 5

What are two requirements crucial to achieve audit efficiency and effectiveness with a computer?

Answer 5

1. Identification of the appropriate audit tasks
2. Appropriate software to perform he selected audit tasks

Question 6

What is a the complete list of walkthrough procedures usually performed in an issuer’s integrated audit.

Answer 6

1. Inquiry
2. Observation
3. Inspection of relevant documentation
4. Reperformance of Controls

Question 7

When planning a sample for a test of controls, what type of relationship does assessing control risk too low have with sample size ?

Answer 7

The auditor’s allowable risk of assessing control risk too low has an inverse relationship with sample size when planning a sample for a test of controls.

FYI- The auditor’s allowable risk of assessing control risk too high is not a factor when planning a sample for a test of control.

Question 8

What type of relationship does sample size have with the tolerable misstatement?

Answer 8

The sample size used by the auditor has an inverse relationship with the tolerable misstatement. As the tolerable misstatement decreases, sample size must increase.

Question 9

What is a dual-purpose test?

Answer 9

A test of controls that is performed concurrently with a test of details on the same transaction.

The purpose of a test of controls is to evaluate the operating effectiveness of a control, whereas the purpose of a test of details is to support assertions or to detect material misstatements. A dual purpose test should be designed to accomplish both objectives.

Question 10

As the acceptable level of detection risk decreases, the assurance directly provided from test of controls should?

Answer 10

As the acceptable level of detection (the risk that an auditor will not detect a material misstatement that exists in an assertion) decreases, the assurance directly provided from substantive tests should increase. The level of detection risk will decline as the benefit of direct tests increase.