Plan to audit the transactions during the next engagement
An uncertainty that should not lead to a qualified opinion. A material scope restriction requiring a qualification of the audit opinion. A matter that the auditor wishes to emphasize and that does not lead to a qualified audit opinion.
10. The auditor issued a qualified opinion covering the financial statements of Client A for the year ended . The reason for the qualification was a departure from GAAP. In presenting comparative statements for the years ended financial statements to correct the previous departure from GAAP. The auditor’s 2005 report on the and comparative financial statements will a. Express unqualified opinions on both the 2004 and 2005 financial statements. b. Express a qualified opinion on the 2004 financial statements and an unqualified opinion on the 2005 statements. c. Retain the qualified opinion covering the 2004 statements, but add an explanatory paragraph describing the correction of the prior departure from GAAP. d. 11. An auditor may reasonably issue an “except for” qualified opinion for a. b. c. d.
12. Soon after Boyd’s audit report was issued, Boyd learned of certain related party transactions that occurred during the year under audit. These transactions were not disclosed in the notes to the financial statements. Boyd should a. b. Recall all copies of the audited financial statements. c. Ask the client to disclose the transactions in subsequent interim statements. d. Determine whether the lack of disclosure would affect the auditor’s report. 13. An auditor includes an explanatory paragraph in an otherwise unqualified report in order to emphasize that the entity being reported on is a subsidiary of another business enterprise. The inclusion of this paragraph a. Is appropriate and would not negate the unqualified opinion. b. Is a qualification. c. Is a violation of generally accepted reporting standards if this information is disclosed in footnotes to the financial statements. d. Necessitates a revision of the opinion paragraph to include the phrase “with the foregoing explanation.” 14. Which of the following best describes the auditor’s responsibility for “other information” included in the annual report to stockholders which contains financial statements and the auditor’s report? a. The auditor has no obligation to read the “other information.” b. The auditor has no obligation to corroborate the “other information,” but should read the “other information” to determine whether it is materially inconsistent with the financial statements. c. The auditor should extend the examination to the extent necessary to verify the “other information.” d. The auditor must modify the auditor’s report to state that the “other information is unaudited” or “not covered by the auditor’s report.” 15. In which of the following circumstances would an auditor be most likely to express an adverse opinion? a. The statements are not in conformity with the ASC Statements regarding the capitalization of leases. b. Information comes to the auditor’s attention that raises substantial doubt about the entity’s ability to continue in existence. c. The chief executive officer refuses the auditor access to minutes of board of directors’ meetings. d. Control tests show that the entity’s internal control is so poor that the financial records cannot be relied upon.
Render qualified audit opinions for both 2004 and 2005 financial statements given the 2005 carryover effect of the 2004 error
When a principal auditor ination, the principal auditor’s report should always indicate clearly, in the introductory, scope, and opinion paragraphs, the a. Magnitude of the portion of the financial statements examined by the other auditor. Division of responsibility. Disclaimer of responsibility concerning the portion of the financial statements examined by the other auditor. Name of the other auditor. The independent auditor refers to both GAAP and GAAS when writing the standard audit report. These terms are mentioned as follows: a b c d Scope Paragraph GAAP GAAS GAAP GAAS Opinion Paragraph GAAS GAAP GAAP GAAS 18. Which of the following best describes the reference to the expression “taken as a whole” in the fourth generally accepted auditing standard of reporting? It applies equally to a complete set of financial statements and to an individual financial statement.