reporting

Question 1

In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion?

Answer 1

The financial statements fail to disclose information that is required by generally accepted accounting principles.

Question 2

When the auditor reissues a report of the financial statements, the responsibility of the auditor with respect to the reissued report is which of the following?

The auditor:

Answer 2

obtain a representation letter from the successor auditor.

Question 3

The practitioner’s report on agreed-upon procedures on an entity’s compliance with specified requirements should include which of the following?

Answer 3

Identification of the responsible party

Question 4

Wolf is auditing an entity’s compliance with requirements governing a major federal financial assistance program in accordance with Government Auditing Standards. Wolf detected noncompliance with requirements that have a material effect on the program. Wolf’s report on compliance should express:

Answer 4

a qualified or adverse opinion

Question 5

Restrictions imposed by a retail entity that is a new client prevent an auditor from observing any physical inventories. These inventories account for 40% of the entity’s assets. Alternative auditing procedures cannot be applied due to the nature of the entity’s records. Under these circumstances, the auditor should express:

Answer 5

a disclaimer of opinion.

Question 6

After considering management’s plans, an auditor concludes that there is substantial doubt about a client’s ability to continue as a going concern for a reasonable period of time. The auditor’s responsibility includes:

Answer 6

considering the adequacy of disclosure about the client’s possible inability to continue as a going concern.

Question 7

When unaudited financial statements of a nonissuer are presented in comparative form with audited financial statements in the subsequent year, the unaudited financial statements should be clearly marked to indicate their status and:

Answer 7

the report on the unaudited financial statements should be reissued or the report on the audited financial statements should include a separate paragraph describing the responsibility assumed for the unaudited financial statements

Question 8

A client has capitalizable leases but refuses to capitalize them in the financial statements. Which of the following reporting options does an auditor have if the amounts pervasively distort the financial statements?

Answer 8

Adverse opinion

Question 9

Due to a scope limitation, an auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor’s report included a statement that the current asset portion of the entity’s balance sheet was fairly stated. The inclusion of this statement is:

Answer 9

not appropriate because it may tend to overshadow the auditor’s disclaimer of opinion.

Question 10

n which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion?

Answer 10

Conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as a going concern are inadequately disclosed.

Question 11

An auditor issued an audit report that was dual dated for a subsequent event occurring after the original date of the auditor’s report but before issuance of the related financial statements. The auditor’s responsibility for events occurring subsequent to the original report date was:

Answer 11

limited to the specific event referenced.

Question 12

What is the most likely source of the following statement as an emphasis of matter?

“As discussed in Note 14 to the financial statements, the Company has had numerous dealings with businesses controlled by, and people who are related to, the officers of the Company.”

Answer 12

Auditor’s report

Question 13

Which of the following factors most likely would affect an auditor’s judgment about the nature and extent of the audit documentation?

Answer 13

The risk of material misstatement of the assertion, account, or transaction class

Question 14

A CPA is required to comply with the provisions of the Statements on Standards for Attestation Engagements when engaged to:

Answer 14

provide assurance on investment performance statistics prepared by an investment company on established criteria.

Question 15

A practitioner may perform an agreed-upon procedures engagement on prospective financial statements provided that which of the following is met?

Answer 15

The prospective financial statements include a summary of significant assumptions.

Question 16

Which of the following items should be included in prospective financial statements issued in an attestation engagement performed in accordance with the Statements on Standards for Attestation Engagements (SSAEs)?

Answer 16

All significant assumptions used to prepare the financial statements

Question 17

If an auditor is unable to obtain sufficient appropriate audit evidence to support management’s assertions about the nature of a matter involving an uncertainty and its presentation or disclosure in the financial statements, the auditor should:

Answer 17

consider the need to express a qualified opinion or to disclaim an opinion because of a scope limitation.

Question 18

In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion?

Answer 18

The financial statements fail to disclose information that is required by generally accepted accounting principles.

Question 19

When reporting on comparative financial statements, an auditor ordinarily should change the previously issued opinion of the prior year’s financial statements if the:

Answer 19

prior year’s financial statements are restated to conform with an applicable financial reporting framework.

Question 20

Which of the following is a required procedure that an auditor must perform when complying with AU-C 945, Auditor Involvement with Exempt Offering Documents?

Answer 20

Perform a subsequent events review from the date of the financial statement auditor’s report through the date of the exempt offering

Question 21

The practitioner’s examination report on compliance should include which of the following?

Answer 21

A statement that the practitioner believes the examination provides a reasonable basis for his or her opinion

Question 22

Which of the following is a primary objective of AU-C 945, Auditor Involvement with Exempt Offering Documents?

Answer 22

Determine whether information included or incorporated by reference in exempt offering documents could undermine the credibility of the financial statements and related auditor’s report

Question 23

The auditor’s report on internal controls and compliance with laws and regulations in accordance with Government Auditing Standards (the “Yellow Book”), is required to include:

the scope of the auditor's testing of internal controls.
uncorrected misstatements that were determined by management to be immaterial.

Answer 23

I only

Question 24

When an entity changes its method of accounting for income taxes, which has a material effect on comparability, the auditor should refer to the change in an emphasis-of-matter paragraph added to the audit’s report. In addition to indicating that the matter does not modify the opinion, this paragraph should describe the change and:

Answer 24

provide a reference to the entity’s disclosure.

Question 25

Which of the following types of engagements is not permitted under the professional standards for reporting on an entity’s compliance?

Answer 25

Reviewing compliance with specified requirements

Question 26

Payroll Data Co. (PDC) processes payroll transactions for a retailer. Cook, CPA, is engaged to express an opinion on management’s description of PDC’s system and suitability of the design of controls. PDC’s system is relevant to the retailer’s internal control, so Cook’s report may be useful in providing the retailer’s independent auditor with information necessary to plan a financial statement audit. Cook’s report should:

Answer 26

contain a disclaimer of opinion on the operating effectiveness of PDC’s controls

Question 27

An accountant who accepts an engagement to compile a financial projection most likely would make the client aware that the:

Answer 27

engagement does not include an evaluation of the support for the assumptions underlying the projection.

Question 28

Accepting an engagement to compile a financial projection most likely would be inappropriate if the projection is to be distributed to:

Answer 28

potential stockholders in an offering statement.

Question 29

Which of the following statements extracted from a client’s lawyer’s letter concerning litigation, claims, and assessments most likely would cause the auditor to request clarification?

Answer 29

“I believe that the plaintiff will have problems establishing any liability.

Question 30

An entity’s income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts. The auditor most likely could have detected this by

Answer 30

performing analytical procedures designed to disclose differences from expectations.