Final Exam - Part 1 (WRITTEN)

Question 1

PROBLEM 1: Identify the TIMING and METHOD for the following Audit Communication (MATCHING)

Engagement Letter

Answer 1

BEFORE engagement

Written

Question 2

PROBLEM 1: Identify the TIMING and METHOD for the following Audit Communication (MATCHING)

Acceptance Letter (signed copy of the engagement letter)

Answer 2

BEFORE engagement

Written

Question 3

PROBLEM 1: Identify the TIMING and METHOD for the following Audit Communication (MATCHING)

Attorney Letter Response

Answer 3

Near date of the auditor’s reports

Written

Question 4

PROBLEM 1: Identify the TIMING and METHOD for the following Audit Communication (MATCHING)

Written Representations

Answer 4

Date of the auditor’s reports (audit completion date)

Written

Question 5

PROBLEM 1: Identify the TIMING and METHOD for the following Audit Communication (MATCHING)

Internal Control Deficiencies

Answer 5

PRIOR to audit report release date (for public entities) or within 60 DAYS (for large nonpublic entities)

Written

Question 6

PROBLEM 1: Identify the TIMING and METHOD for the following Audit Communication (MATCHING)

Communications with individuals charged with governance

Answer 6

AFTER audit

Oral or Written

Question 7

PROBLEM 1: Identify the TIMING and METHOD for the following Audit Communication (MATCHING)

Management Letter

Answer 7

AFTER audit

Oral or Written

Question 8

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Going Concern

Answer 8

NOT MODIFIED

Question 9

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Change in accounting principle

Answer 9

NOT MODIFIED

Question 10

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Uncertainties

Answer 10

NOT MODIFIED

Question 11

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Group financial statements

Answer 11

NOT MODIFIED

Question 12

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Stand-alone balance sheet

Answer 12

NOT MODIFIED

Question 13

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Qualified Opinion

Answer 13

MODIFIED

Question 14

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Adverse Opinion

Answer 14

MODIFIED

Question 15

PROBLEM 2: For the following reports, identify whether they are MODIFIED or NOT MODIFIED

Disclaimer of Opinion

Answer 15

MODIFIED

Question 16

PROBLEM 3.1: What are the TWO CONDITIONS for UNQUALIFIED OPINION?

Answer 16

1. No GAAP Departure - f/s are considered free from material misstatements
2. NO SCOPE LIMITATIONS (GAAS)

Question 17

PROBLEM 3.2: What is the SIGNIFICANCE of an audit report date?

Answer 17

The auditors have accumulated sufficient appropriate audit evidence in order to express an audit opinion (usually last day of fieldwork)

Question 18

PROBLEM 3.3: Explain the TWO TYPES of a “QUALIFIED” audit opinion

Answer 18

1. GAAP Departure - material, not pervasive
2. Scope Limitation (GAAS) - circumstance or client imposed; material, not pervasive

Question 19

PROBLEM 3.4: Explain an “ADVERSE” audit opinion

Answer 19

“Financial Statements are NOT fairly presented”
GAAP Departure - material and pervasive

Question 20

PROBLEM 3.5: Explain a “DISCLAIMER” audit opinion

Answer 20

“Auditors DO NOT express an opinion on the financial statements”
GAAS Departure - material and pervasive