Reporting Flashcards
When an uncertainty facing the firm relating to the possible future results of litigation filed against the client occurs, what audit report is likely to be used?
Unqualified with an emphasis-of-matter paragraph
T/F
For an unjustified accounting change, an auditor would express an unmodified opinion and add an emphasis-of-matter paragraph
FALSE
This will result in either a qualified or an adverse opinion
T/F
A material weakness in the internal control of a company will result in an unmodified opinion and add an emphasis-of-matter paragraph
FALSE
If ICs are not adequate, simply increase substantive testing so that the same coverage can be reached and a supported opinion can be made
If the auditor is unable to determine the amounts associated with an employee fraud scheme, what report should they issue?
A disclaimer of opinion
If management does not provide reasonable justification for a change in accounting principles, what report should the auditor issue?
A qualified or adverse opinion
When the client refuses to permit the auditor to confirm certain accounts receivable or to apply alternative procedures to verify their balances, what report should the auditor issue?
A disclaimer of opinion
When the CEO is unwilling to sign the management representation letter, what report should the auditor issue?
A disclaimer of opinion
An entity changed from the straight-line method to the declining balance method of depreciation for newly acquired assets. If the change is disclosed in the notes to the FSs, what report should the auditor issue?
An unmodified opinion
An auditor concludes that a client’s material illegal act has not been properly accounted for or disclosed. Depending on the materiality of the effect on the FSs, what report should the auditor issue?
Qualified or Adverse
If a publicly held company issues FSs that purport to present its financial position and results of operations but omits the statement of cash flows, what report should the auditor issue?
Qualified Opinion
Failure to include a statement of cash flows is considered a departure from GAAP
The auditor did not observe the entity’s physical inventory and is unable to become satisfied about its balance by other auditing procedures; what report should the auditor issue?
Qualified or Disclaimer
Scope limitation
Conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as a going concern are inadequately disclosed; what report should the auditor issue?
Qualified or Adverse
GAAP Departure
There has been a change in accounting principles that has a material effect on the comparability of the entity’s financial statements, what report should the auditor issue?
Unmodified with an Emphasis-of-Matter paragraph
Change in Acct Principles
The auditor is unable to apply necessary procedures concerning an investor’s share of an investee’s earnings recognized on the equity method, what report should the auditor issue?
Qualified or Disclaimer
Scope Limitation
There has been a material change between periods in accounting principles, what report should the auditor issue?
Unmodified with an Emphasis-of-Matter paragraph
Quarterly financial data required by the SEC has been omitted, what report should the auditor issue?
Unmodified with an Emphasis-of-Matter paragraph
The auditor wishes to emphasize an unusually important subsequent event, what report should the auditor issue?
Unmodified with an Emphasis-of-Matter paragraph
The auditor is unable to obtain audited financial statements of a consolidated investee, what report should the auditor issue?
Qualified or Disclaimer
Scope Limitation
T/F
You can issue a different opinion on the Balance Sheet and on the Income Statement
TRUE
You cannot have an opinion on the FS and then have a different opinion on one or two accounts or line items, the opinion has to cover the FS as a whole; however, you can have a different opinion on two different FSs
The auditor wishes to emphasize that the entity had significant RPTs, what report should the auditor issue?
Unmodified with an Emphasis-of-Matter paragraph
The auditor decides to make reference to the report of an auditor who audited a component of group financial statements, what report should the auditor issue?
Unmodified
The entity issues financial statements that present financial position and results of operations, but omits the statement of cash flows, what report should the auditor issue?
Qualified
The auditor has substantial doubt about the entity’s ability to continue as a going concern, but the circumstances are fully disclosed in the financial statements, what report should the auditor issue?
Unmodified with an Emphasis-of-Matter
Potentially Disclaimer
A client’s refusal to provide a written assertion in a Trust Services Engagement is most likely to result in which report?
Disclaimer
What SOC report is going to be used when the report needed is to be a restricted use report on controls at a service organization relevant to a user entity’s internal control over financial reporting
SOC 1
What SOC report is going to be used when the report needed is to be a restricted use report on controls at a service organization related to security, availability, processing integrity, confidentiality, and/or privacy?
SOC 2
What SOC report is going to be used when the report needed is to be a general use SysTrust report related to security, availability, processing integrity, confidentiality, and/or privacy?
SOC 3
An accountant examines a financial forecast that fails to disclose several significant assumptions used to prepare the forecast, what report should the auditor issue?
Adverse Opinion
When auditing an entity’s compliance with a major federal financial assistance program, the auditor detected noncompliance with requirements that have a material effect on the program; what report should the auditor issue?
Qualified or Adverse
T/F
an audit report of financial statements issued under the requirements of the Public Company Accounting Oversight Board should refer to the standards of the PCAOB
TRUE
T/F
an audit report of financial statements issued under the requirements of the Public Company Accounting Oversight Board should include a paragraph referring to the auditor’s report on compliance with laws and regulations.
FALSE
the report should refer to the auditor’s report on internal control, not on compliance with laws and regulations
T/F
If the FSs adequately disclose the financial difficulties for an entity with a going-concern, there is no need for the auditor to add an emphasis-of-matter paragraph further discussing this concern
FALSE
the audit report must include an emphasis-of-matter paragraph following the opinion paragraph, and must use the terms “going concern” and “substantial doubt.”
After considering an entity’s negative trends and financial difficulties, an auditor has substantial doubt about the entity’s ability to continue as a going concern. The auditor’s considerations relating to management’s plans for dealing with the adverse effects of these conditions most likely would include management’s plans to…
1) Bring in funds
2) Postpone significant expenditures
Under what circumstances would an auditor issue a report that omits any reference to consistency?
When there are no issues with consistency, for example, a change in accounting estimate
In auditing a not-for-profit entity that receives governmental financial assistance, the auditor has a responsibility to
Assess whether management has identified laws and regulations that have a direct and material effect on the entity’s financial statements.
If a client will not permit inquiry of outside legal counsel, the auditor’s report ordinarily will contain:
a disclaimer of opinion
For a PCAOB Standard 5 Audit of Internal Control, the auditor identified a material weakness as of December 31. What is the appropriate report?
Adverse
T/F
The following statement is included in a standard unqualified opinion on internal control over financial reporting performed under PCAOB requirements:
“The [company name] management and audit committee is responsible for maintaining effective internal control over financial reporting”
FALSE
The statement should be “management” not “management and audit committee”
T/F
When an examination has been performed on the effectiveness of entity’s internal control over financial reporting and a material weakness has been noted, the practitioner’s report should express an opinion on the subject matter to which the assertion relates as well as the assertion
FALSE
In this case the report is should be based directly on the subject matter and NOT upon the assertion
The following statement is most likely from what source?
“The objective of our audit is to express an unqualified opinion on the financial statements although it is possible that facts or circumstances encountered may preclude us from expressing an unqualified opinion.”
Auditor’s Engagement Letter
The following statement is most likely from what source?
“There has been no fraud involving management or employees who have significant roles in internal control.”
Management’s Representation Letter
T/F
The written communication regarding significant deficiencies and material weaknesses identified during the audit should include a paragraph describing management’s assertion concerning the effectiveness of internal control
FALSE
This is not required
T/F
In the management representation letter, management acknowledges their responsibility for the design of controls to detect fraud
TRUE
The following statement is most likely from what source?
No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements.
Management’s Representation Letter
The following statement is most likely from what source?
“Although we have not conducted a comprehensive, detailed search of our records, no other deposit or loan accounts have come to our attention except as noted below.”
Standard Financial Institution Confirmation Request
A client has requested the CPA to prepare a report on the application of accounting principles to a specific transaction. What statement should the CPA include in their report?
A statement that responsibility for the proper accounting treatment rests with the preparers of the financial statements.
An auditor determines that extreme doubt exists about the integrity of management and the representations obtained from management relating to the fairness of the financial statements and the completeness of the record of transactions. What report is most appropriate?
Disclaimer
If a subsequent event causes the financial statements to be adjusted, but no disclosure is made, what date should the audit report have?
The date sufficient appropriate audit evidence has been collected
When management does not provide reasonable justification for a change in accounting principle, how should the auditor report on the comparative financial statements
Give a qualified/modified opinion for each year the financial statements initially reflecting the change are presented
T/F
When there is insufficient audit evidence, the auditor should describe these limitations in a basis for modification paragraph, as well as in the auditor’s responsibility section and the opinion paragraph
TRUE
Compiled FSs for the PY presented in comparative form with audited FSs for the CY should be clearly marked to indicate their status. How else does an auditor need to document for this situation?
Either the report on the PY should be reissued to accompany the current period report OR The report on the current period should include as a separate paragraph a description of the responsibility assumed for the prior period’s financial statements
If management declines to present supplementary information required by the GASB, the auditor should issue
Unmodified opinion with an additional other-matter paragraph
This is because, although required, the supplementary information is not audited. Therefore this is not a GAAP departure which would render a qualified or adverse opinion
Letters for Underwriters typically give what kind of assurance
Negative assurance on unaudited interim financial information
Comfort Letters (Letters for Underwriters) are ordinarily signed by who?
The Client’s Independent Auditor
Comfort Letters (Letters for Underwriters) are ordinarily addressed to who?
Underwriters of Securities
When a financial forecast fails to disclose several significant assumptions used to prepare the forecast, what type of report should the auditor issue?
Adverse
T/F
SOC 2 reports are meant for management of service organizations, user entities, and certain other specified entities
TRUE
T/F
SOC2 reports are meant primarily to assist financial statement auditors
FALSE
SOC1 reports are meant primarily to assist financial statement auditors
T/F
SOC reports relate more directly to internal control over financial reporting
FALSE
They relate more directly to the SysTrust principles
T/F
A CPA can perform a review over compliance
FALSE
