Term
1 An audit report is ordinarily dated on the date
A) Of the client's year-end.
B) Risk assessment procedures are completed.
C) The auditors have obtained sufficient appropriate audit evidence.
D) The audit report is issued. |
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Definition
| C) The auditors have obtained sufficient appropriate audit evidence. |
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Term
2 Which of the following is true regarding the notes to financial statements prepared following GAAP?
A) Notes are not required, but are typically included by all companies.
B) Notes are not required, since they only give additional information contained in the financial statements.
C) Notes are an integral part of the financial statements.
D) Notes are not encompassed in the auditors' opinion of the financial statements since they are supplementary information. |
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Definition
| C) Notes are an integral part of the financial statements. |
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Term
3 In a financial statement audit, an auditor would express an unmodified opinion with an emphasis of matter paragraph added to the audit report for:
A) Either an unjustified accounting change or an unjustified departure from generally accepted accounting principles.
B) An unjustified accounting change.
C) An unjustified departure from generally accepted accounting principles.
D) Neither an unjustified accounting change nor an unjustified departure from generally accepted accounting principles. |
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Definition
| D) Neither an unjustified accounting change nor an unjustified departure from generally accepted accounting principles. |
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Term
4 In which of the following conditions is an unmodified audit opinion least likely?
A) The auditor believes that the client is unlikely to remain a going concern.
B) The auditor believes that inventory is valued following a method that is not considered GAAP.
C) The audit was conducted with no circumstance imposed scope limitations.
D) GAAP were not consistently applied from year to year. |
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Definition
| B) The auditor believes that inventory is valued following a method that is not considered GAAP. |
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Term
5 CPA Firm A qualifies as the group auditor. However, since Firm A did not have the resources, it hired CPA Firm B to audit a subsidiary of the client located in Bolivia. If Firm A is willing to take responsibility for the work of Firm B, which type of audit report is Firm A most likely to issue?
A) Unmodified—standard report.
B) Unmodified with emphasis of a matter paragraph.
C) Qualified with a basis for modification paragraph.
D) Disclaimer of opinion. |
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Definition
| A) Unmodified—standard report. |
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Term
6 If a company's financial statements violate GAAP for an immaterial item which is expected to become material in the future, then the audit opinion the company will likely receive is:
A) Unmodified—standard report.
B) Unmodified with an emphasis of matter paragraph.
C) Qualified.
D) Adverse. |
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Definition
| A) Unmodified—standard report. |
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Term
7 In performing an audit, a client was found to have changed the estimated useful life of its assets. The auditors believe that the change in useful lives is realistic. The appropriate report is:
A) Unmodified—standard report.
B) Unmodified with an emphasis of matter paragraph.
C) Qualified.
D) Disclaimer. |
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Definition
| A) Unmodified—standard report. |
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Term
8 Which of the following conditions is most likely to result in auditor consideration of issuing a going concern modification?
A) A decrease in profitability as compared to the previous year.
B) A loss contingency related to a lawsuit.
C) Default on a loan agreement.
D) A material related party transaction. |
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Definition
| C) Default on a loan agreement. |
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Term
9 Which statement is correct concerning a disclaimer of opinion and an adverse opinion?
A) A disclaimer of opinion indicates that the auditor has not been able to gather enough evidence to render an opinion on the financial statements, while an adverse opinion indicates that the financial statements are materially misstated.
B) A disclaimer of opinion indicates that the financial statements are materially misstated, while an adverse opinion indicates that the auditor has not been able to gather enough evidence to render an opinion on the financial statements.
C) The opinions are generally equivalent, except an adverse opinion includes a going concern paragraph.
D) Adverse opinions indicate that the financial statements are materially misstated, while a disclaimer indicates that the financial statements are "so wrong" that no opinion can be given. |
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Definition
| A) A disclaimer of opinion indicates that the auditor has not been able to gather enough evidence to render an opinion on the financial statements, while an adverse opinion indicates that the financial statements are materially misstated. |
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Term
10 When a company has a probable and material loss contingency, and the company has accrued the loss in the financial statements, the appropriate audit opinion is ordinarily which of the following?
A) Adverse opinion.
B) Qualified opinion.
C) Standard unmodified opinion.
D) Unmodified opinion with an emphasis of matter paragraph. |
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Definition
| C) Standard unmodified opinion. |
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Term
11 A departure from GAAP with a material effect on the financial statements is most likely to result in a(n):
A) Disclaimer of opinion.
B) Qualified opinion.
C) Standard unmodified opinion.
D) Unmodified opinion with an emphasis of matter paragraph. |
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Definition
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Term
12 Issuance of a going concern modification relates most directly to which of the following terms?
A) More likely than not.
B) Probable.
C) Reasonably possible.
D) Substantial doubt. |
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Definition
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Term
13 In which circumstance would an auditor be most likely to express an adverse opinion?
A)The chief executive officer refuses the auditor access to minutes of the board of directors' meetings.
B) Tests of controls show that the client's internal control is so poor that it cannot be relied upon.
C) The financial statements are not in conformity with the FASB standards regarding the capitalization of leases.
D) Information comes to the auditor's attention that raises a question about the client's ability to continue as a going concern. |
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Definition
| C) The financial statements are not in conformity with the FASB standards regarding the capitalization of leases. |
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Term
14 Addition of an "emphasis of matter" paragraph to what remains an unmodified opinion is least likely for which of the following situations?
A) Related party transactions.
B) Scope limitation.
C) A large subsequent event.
D) An uncertainty. |
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Definition
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