Notes from Mini Exam A1-A2

Question 1

what are the common reason for an auditor to reject a new client?

Answer 1

• client is unable/unwilling to provide FS needed by the auditor to complete the audit
• Management’s disregard for its responsibility to maintain an adequate internal control environment

except: if a potential client is unwilling to send a specific account confirmation due to a desire not to trouble customers, auditor can still perform alternative procedures to complete the audit

Question 2

In the planning stage, what should an auditor consider materiality of FS as a whole?

Answer 2

the smallest aggregate level of misstatement that could be considered material to ANY ONE of the FS

Question 3

what action should an auditor take if during the initial fieldwork phase, the auditor’s test of the client’s controls indicate that certain controls are not operating effectively?

Answer 3

the auditor should REVISE the preliminary risk assessment and MODIFY the planned audit procedures

Question 4

what opinion may an UNCERTAINTY result in?

Answer 4

ALL 4 opinions depending on situation
- Unmodified/unqualified: if management’s analysis is supported and properly recorded or disclosed
- Qualified/adverse: if the FS are materially misstated due to improper accounting for the uncertainty
- Qualified/disclaimer: if an uncertainty for which the auditor is unable to obtain sufficient & appropriate audit evidence

Question 5

what reason would an auditor express an unmodified opinion with an emphasis-of-matter paragraph?

Answer 5

• Only a justified change in accounting principle
• a justified change in accounting estimate does not require an emphasis-of-matter paragraph
• An unjustified change leads to a qualified or adverse opinion