Types of Reports III

Question 1

What does the introductory paragraph of the auditor’s report describe?

Answer 1

It identifies the financial statements and period(s) under audit

Note: The auditor’s responsibility section describes the nature of the audit

Question 2

What purpose does the FASB Accounting Standards Codification serve?

Answer 2

It serves as the source of authoritative guidance issued by the FASB which applies to public and nonpublic nongovernmental entities

Note: All such guidance is equally authoritative

Question 3

Where in the financial statements would a separate statement of changes in equity be included?

Answer 3

This statement would be included in the;

• Introductory paragraph of the report but need not be reported on separately in the opinion paragraph

Question 4

How many sentences are included in the standard opinion paragraph?

Answer 4

The opinion paragraph presents the auditor’s conclusion; and

• Contains One sentence

Question 5

What does “Presented fairly” means in regards to the financial statements?

Answer 5

This means the financial statements as a whole are free from material misstatement whether due to fraud or error

Question 6

What type of opinion should be expressed if a newly adopted accounting principle is not generally accepted;

• but the effect of the change is not so significant that it overshadows the financial statements as a whole?

Answer 6

The auditor should express an;

• Qualified Opinion

Question 7

Where in the auditor’s report should the explanatory paragraph describing a qualified opinion based on a scope limitation or insufficient evidence be placed?

Answer 7

This explanation should be described in a;

• Basis for Qualified Opinion paragraph preceding (i.e. comes before) the Opinion paragraph

Question 8

Fill in the Blank:

“Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with _________ generally accepted in the United States of America”

Answer 8

Accounting Principles

Question 9

Fill in the Blank:

“this includes the design, implementation, and maintenance of ___________ relevant to the preparation and fair presentation of consolidated financial statements”

Answer 9

Internal Control

Question 10

Fill in the Blank:

“Our responsibility is to express an opinion on these consolidated financial statements based on _______ “

Answer 10

Our Audits

Question 11

Fill in the Blank:

“An audit also includes evaluating ________ of accounting policies used and the reasonableness of significant _______ made by management”

Answer 11

The appropriateness; Accounting Estimates

Question 12

Fill in the Blank:

“In our opinion, except for _______ of the matter described in the Basis for Qualified Opinion paragraph, the consolidated financial statements referred to above present fairly, in all _______ “

Answer 12

The effects; material respects