Auditing standards require that the audit report must be titled and that the title must:
include the word "independent
The purpose of the introductory paragraph in the standard unqualified report is:
to identify the financial statements audited and the dates and time periods covered by the report.
The scope paragraph of the standard unqualified audit report states that the audit is designed to:
obtain reasonable assurance whether the statements are free of material misstatement.
The audit report date on a standard unqualified report indicates:
he last day of the auditor's responsibility for the review of significant events that occurred subsequent to the date of the financial statements.
As a result of management's refusal to permit the auditor to physically examine inventory, the auditor has not accumulated sufficient appropriate evidence to conclude whether financial statements are stated in accordance with GAAP. The auditor must
the scope of the audit has been restricted
An adverse opinion is issued when the auditor believes
the overall financial statements are so materially misstated that they do not present fairly the financial position or results of operations and cash flows in conformity with GAAP.
If a misstatement is immaterial to the financial statements of the entity for the current period, but is expected to have a material effect in future periods, it is appropriate to issue a(n):
Whenever an auditor issues an audit report for a public company, the auditor can choose to issue a report in which of the following forms?
A combined report on financial statements and internal control over financial reporting. B) Separate reports on financial statements and internal control over financial reporting.
When determining whether an exception is "highly material," the extent to which the exception affects different elements of the financial statements must be considered. This concept is called
If an auditor performs an audit of a public company, the scope paragraph should make reference to which standards?
Standards issued by the PCAOB (U.S.).
If an auditor performs an audit of a private company, the scope paragraph should make reference to which standards
U.S. generally accepted auditing standards.
Examples of unqualified opinions which contain modified wording (without adding an explanatory paragraph) include
the use of other auditors.
A CPA may wish to emphasize specific matters regarding the financial statements even though an unqualified opinion will be issued. Normally, such explanatory information is:
included in a separate paragraph in the report.
Conditions requiring a departure from an unqualified audit report include all but which of the following?
Management decided not to allow the auditor to confirm significant accounts receivable, but the auditor obtained sufficient appropriate evidence by examining subsequent cash receipts
The introductory paragraph of the standard audit report states that the financial statements are:
the responsibility of management.
The introductory paragraph of the standard audit report states that the auditor is:
responsible for the opinion on the financial statements.
26) PCAOB Auditing Standard No.2 requires the audit of internal control over financial reporting to be integrated with:
the audit of the financial statements
Whenever an auditor issues a qualified opinion, the implication is that the auditor
believes the financial statements are presented fairly "except for" a specific aspect of them.
The dollar amount of some misstatements cannot be accurately measured. For example, if the client were unwilling to disclose an existing lawsuit, the auditor must estimate the likely effect on
users of the financial statements
The necessity to issue a disclaimer of opinion may arise because of
a severe limitation on the scope of the audit. B) a lack of independence between the auditor and client
When the auditor determines the financial statements are fairly stated and then determines that the auditor lacks independence, the auditor should issue:
a disclaimer of opinion.
If the auditor lacks independence, a disclaimer of opinion must be issued
in all cases
Misstatements must be compared with some measurement base before a decision can be made about materiality. A commonly accepted measurement base includes
total assets. B) working capital. C) net income.
When comparing misstatements with a measurement base, the auditor must consider the pervasiveness of the misstatement. Of the following examples, the most pervasive misstatement is
understatement of inventory.
Whenever there is a scope restriction, the appropriate response is to issue a(n):
unqualified report, a qualification of scope and opinion, or a disclaimer, depending on materiality
Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?
A client's lawsuit against another company which claims the other company has infringed on its patent.
The client has presented all required financial statements with the exception of the statement of cash flows. The auditor has completed the audit and is satisfied that all other statements are presented fairly. The auditor:
must issue a qualified opinion with "except for" in the opinion paragraph
When a client has not applied GAAP consistently from the prior year to the current year, the auditor does not concur with the appropriateness of the change, and the change in GAAP has a
Items that materially affect the comparability of financial statements generally require disclosure in the footnotes. If the client refuses to properly disclose the item, the auditor will most likely issue:
a qualified opinion
When there is uncertainty about a company's ability to continue as a going concern, the auditor's concern is the possibility that the client may not be able to continue its operations or meet its obligations for a "reasonable period of time." For this purpose, a reasonable period of time is
one year from the date of the financial statements.
When the auditor concludes that there is substantial doubt about the entity's ability to continue as a going concern, the appropriate audit report would be
a disclaimer of opinion. B) an unqualified opinion with an explanatory paragraph.
Sarbanes-Oxley requires auditors of a public company to audit a company's financial statements and attest to management's report on the effectiveness of internal control over financial reporting. What type of assurance does the auditor provide in this report?
Positive assurance on the financial statements and on the effectiveness of internal control over financial reporting.
The most common case in which conditions beyond the client's and auditor's control cause a scope restriction is an engagement:
C) where the auditor doesn't have enough staff to satisfactorily audit all of the client's foreign subsidiaries.
Brown Co.'s financial statements adequately disclose uncertainties that concern future events, the outcome of which are not reasonably estimable. The auditor's report should include a(n):
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