Mod 5 Wrong Answers Flashcards
An auditor may issue an opinion on a balance sheet only and doesn’t need to…
Include an emphasis of matter paragraph in their report
Substantial doubt about the entity’s ability to continue as a going concern leads to either…
An unmodified report with an emphasis of matter paragraph
Or disclaimer of opinion
A management plan that an auditor would positively consider when a question concerning an entity’s ability to continue as a going concern exists is…
Increasing equity ownership, because it will bring in more funds
To overcome financial difficulties
A management plan that an auditor would not consider when a question concerning an entity’s ability to continue as a going concern exists is…
Reducing lines of credit, because this will not provide sufficient
Funds
Postponing expenditures for research and development may…
Mitigate entity’s going concern situation
With a going concern issue there is no guarantee that discussions with lenders…
Will lead to restructuring and loan agreements
A change in the useful life of assets is a change of estimate, and a change of estimate…
Does not result in a consistency modification
Management’s lack of responsible justification for a change in accounting principle is…
A departure from GAAP
An unjustified accounting change will result in either…
A qualified or adverse opinion, no emphasis of matter paragraph
would result
Material weakness will ordinarily result ( in terms of reporting) in…
No report modification
Change in accounting principles leads to…
An unmodified opinion with an emphasis of matter paragraph
Added to the report
Inadequate disclosure of a going concern issue is…
A departure from GAAP
Identify the information included in the opinion paragraph of an auditor’s report that is qualified due to a major inadequacy in the computerized accounting records
Opinion paragraph indicates exception is due to possible effects
On financial statements
When the opinion paragraph of an auditor’s report is qualified due to a major inadequacy in the computerized accounting records there is no indication that…
There is inadequate disclosure of necessary information
When an auditor makes reference to the report of another auditor there is…
No additional paragraph added to the report
What type of auditor’s report should be issued when financial statements of an entity that follows GASB standards include a justified departure from GAAP?
Unmodified opinion, including separate emphasis of matter
Paragraph explaining departure from GAAP
The predecessor auditor should obtain a representation letter from…
Both management and the successor auditor
AU-C 720, states that if a material inconsistency exists and the client refuses to revise the other information the auditor should…
Include an emphasis of matter paragraph that explains the
Inconsistency
AU-C 720, states that if a material inconsistency exists and the client refuses to revise the other information. Financial statements in this circumstance are…
Not misstated
Identify a situation where the auditor’s report would refer to a basis of accounting other than GAAP under AU-C
Reports on compliance with aspects of regulatory requirements
Related to audited financial statements
as special purpose financial reporting frameworks
The objective of a review of financial information is to…
Provide a basis for reporting on whether material modification
Should be made to conform with GAAP
An accountant’s review report is not part of…
The registration statement within the meaning of Section 11 of
The Securities Act of 1933
In regards to an independent accountant’s review report on interim financial information presented in a registered statement, under certain conditions an accountant is…
Required to update the report
Circumstances which lead to a modification of an interim report include…
Departure from GAAP
Circumstances which lead to a modification of an interim report consists of departure from GAAP, which includes…
Inadequate disclosure
What 3 situations would ordinarily not cause a modification of a review report?
1 uncertainty
2 lack of consistency
3 reference to another accountant (not considered a modification)
Professional standards require that a review report include…
A description of procedures performed
For a review report information was…
Reviewed, not examined, in accordance with standards of PCAOB
Determine the circumstance under which an auditor may report on summary financial statements that are derived from complete audited financial statements.
Report may be issued when information in summary financial statements is fairly stated in all material respects in relation to FS
Summary financial statements need not be…
Distributed with the complete financial statements
Determine the appropriate reference to an independent accountant
In a prospectus (relating to an SEC registration statement) that includes a statement about the auditor’s involvement with the independent audit report.
AU-C 920 indicates that the independent accountant is…
An expert in auditing and accounting
In a comfort letter, auditors provide…
An opinion as to whether the audited financial statements
Comply in form with the accounting requirements of the SEC
Negative assurance concerning whether the entity’s internal control procedures operated as designed during the period is…
Not provided in the comfort letter
What is an auditor’s reporting responsibility when asked by a prospective client to render an opinion on the application of accounting principles to a specific transaction?
AU-C 915 indicates that The report must include a statement that…
any difference in the facts, circumstances or assumptions presented may change the report as well as various other disclosures
an auditor is asked by a prospective client to render an opinion on the application of accounting principles to a specific transaction.
The report need not indicate it is…
For management use only
Suitable criteria may be…
Available publicly in the CPA’s report
Suitable criteria may be included with…
The subject matter or in the assertion
In an agreed upon procedure the specified party does not…
Take responsibility for sufficiency of procedures
The agreed upon procedures report provides…
Procedures performed and findings
The agreed upon procedures report does not provide…
Limited assurance
Attestation standards explicitly exclude…
Expert witness work
Attestation standards include…
2) what should be noted?
The compilation of a financial projection
2) in most areas compilations are not included in Attestation
Standard coverage
In the area of prospective financial statements, Attestation standards have coverage of…
Prospective financial statement forecasts and objectives
Identify the type of general use prospective financial statement on which the accountant may appropriately report.
Financial forecasts are considered prospective financial statements
And their are appropriate for general use
Financial projections are only appropriate for…
The party preparing them or for third parties with whom the
Responsible party is negotiating directly
What do Attestation standards indicate are embodied assertions in MD&A?4
1 consistency with financial statements
2 occurrence
3 completeness
4 presentation and disclosure
Reliability is…
Not an embodied assertion in MD&A
When management has properly disclosed an instance of material noncompliance, AT 601 states that the opinion should…
2) AT 601 requires the CPA’s report to…
be qualified or adverse
2) relate directly to the subject matter when the opinion is modified
Scope of a governmental (yellow book) audit in addition to financial statements, such an audit may include consideration of…3
1 program results
2 compliance with laws and regulations
3 economy and efficiency
Performing an audit in accordance with government auditing standards (yellowbook) is required to report on…
Scope of auditor’s testing of internal controls
In a financial statement audit conducted in accordance with Government Auditing Standards (the Yellow Book) the auditor…
Issues a report on compliance with laws and internal control
And a report on financial information
Government Auditing Standards (yellow book) require documentation of…
Supervisory review before the report is issued
The AICPA Accounting and Audit Guide, Audits of State and Local Governmental Units, requires the…
Communication of weaknesses that are material in relation to
The federal financial assistance program
What is an auditor’s responsibility when auditing a not for profit entity that receives governmental assistance?
AU-C 806 requires that the auditor…
Assess whether management has identified laws and regulations
That have a direct and material effect on the entity’s FS
According to AU-C 806, in the auditor’s assessment of a not for profit the receives governmental financial assistance, the CPA…
Does not express an opinion on the entity’s continued eligibility
For governmental financial assistance
