Question 1

Which of the following is not one of the principal auditor's alternatives when issuing a report if a different auditor performed part of the audit?
A) Make no reference to the other auditor in the audit report, and issue the standard unmodified opinion.
B) A qualified opinion or disclaimer, depending on materiality, is required if the principal auditor is not willing to assume any responsibility for the work of the other auditor.
C) Make reference to the other auditor in the report by using modified wording (a shared opinion or report).
D) Issue a joint report signed by both auditors.

Accepted Answer

Joint reports signed by both auditors are not a common practice in the context of audits where different auditors perform parts of the audit. The principal auditor typically either assumes full responsibility for the work, makes reference to the other auditor without sharing responsibility, or modifies the opinion based on the inability to assume responsibility for the other auditor's work. Joint reports imply equal responsibility and collaboration throughout the audit process, which is not the scenario described.

Question 2

If a client'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):
A) 'except for' qualified opinion.
B) unmodified opinion.
C) disclaimer.
D) adverse opinion.

Accepted Answer

When uncertainties concerning future events that are not reasonably estimable are adequately disclosed in a client's financial statements, the auditor can still issue an unmodified opinion, as the disclosure meets the necessary financial reporting framework requirements.

Question 3

Indicate which changes would require an emphasis of a matter paragraph in the audit report.

Accepted Answer

The answer of Indicate which changes would require an emphasis...

Question 4

Indicate which changes would require an emphasis of a matter paragraph in the audit report.

Accepted Answer

The answer of Indicate which changes would require an emphasis...

Question 5

Indicate which changes would require an emphasis of a matter paragraph in the audit report.

Accepted Answer

The answer of Indicate which changes would require an emphasis...

Question 6

The reasons for expressing a qualified opinion due to a departure from IFRS are expressed in a paragraph:
A) either preceding or following the opinion paragraph, depending on materiality.
B) following the opinion paragraph.
C) preceding the management responsibility paragraph.
D) following the auditor's responsibility paragraph.

Accepted Answer

The answer of The reasons for expressing a qualified opinion...

Question 7

In which situation would the auditor be choosing between a qualified opinion and an adverse opinion?
A) Lack of full disclosure required by footnotes.
B) The auditor lacks independence.
C) A circumstance- imposed scope restriction.
D) A client- imposed scope restriction.

Accepted Answer

A qualified opinion or an adverse opinion is considered when there is a lack of full disclosure required by footnotes, as this impacts the fair presentation of the financial statements.

Question 8

When an auditor encounters a situation involving more than one of the conditions requiring a departure from a standard unmodified report, the auditor should modify his or her opinion for each condition unless one has the effect of neutralizing the others. In which of the following situations would the auditor not include more than one modification in the report?
A) There is a material scope limitation, and the auditor is not independent.
B) There is a substantial doubt about the company's ability to continue as a going concern, and information about the causes of the uncertainties is not adequately disclosed in a footnote.
C) There is a material IFRS violation, and the auditor is not independent.
D) There is a material scope limitation, and there is substantial doubt about the company's ability to continue as a going concern.

Accepted Answer

If an auditor is not independent, they cannot issue an audit report on the financial statements. Independence is a fundamental principle that must be maintained for the audit to be valid. In situation A, the lack of independence is a fundamental issue that precludes the auditor from issuing any audit opinion, making the scope limitation irrelevant in this context.

Question 9

Discuss why an audit report does not offer absolute assurance that financial statements give and True and fair picture of a company's financial position.

Accepted Answer

The answer of Discuss why an audit report does not...

Question 10

In certain circumstances, an auditor will issue an unmodified report, but the wording will differ from that of a standard unmodified report. Discuss circumstances when an auditor would issue an unmodified report with an explanatory paragraph or modified wording.

Accepted Answer

The answer of In certain circumstances, an auditor will issue...

Question 11

Describe the standard unmodified audit report. Specify the ten parts of the report, and then discuss the contents of each part.

Accepted Answer

The answer of Describe the standard unmodified audit report. Specify...

Question 12

Outline the three stage process for deciding the appropriate audit report to issue.

Accepted Answer

The answer of Outline the three stage process for deciding...

Question 13

Describe an auditor's responsibilities in respect of the information in documents accompanying audited financial statements.

Accepted Answer

The answer of Describe an auditor's responsibilities in respect of...

Question 14

Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-Bashir Corporation carries its property, plant, and equipment accounts at current market values. Current market values exceed historical cost by a highly material amount, and the effects are pervasive throughout the financial statements.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Accepted Answer

Bashir Corporation's practice of carrying property, plant, and equipment at current market values, when it significantly and pervasively affects the financial statements, deviates from the generally accepted accounting principles (GAAP). This deviation leads to the financial statements not being presented fairly in all material respects. Therefore, an adverse opinion is appropriate as it indicates that the financial statements do not accurately reflect the company's financial position.

Question 15

Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-Management of Bashir Corporation refuses to allow you to observe, or make, any counts of inventory. The recorded book value of inventory is highly material.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Accepted Answer

When management refuses to allow the auditor to observe inventory counts, and the inventory is highly material to the financial statements, the auditor cannot obtain sufficient appropriate audit evidence regarding inventory balances. This limitation on the scope of the audit prevents the auditor from forming an opinion on the financial statements as a whole. Therefore, the appropriate action is to disclaim an opinion.

Question 16

Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-You were unable to confirm accounts receivable with Bashir's customers. However, because of detailed sales and cash receipts records, you were able to perform reliable alternative audit procedures.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Accepted Answer

When alternative audit procedures are reliable and can compensate for the inability to confirm accounts receivable directly, issuing a standard unmodified audit report is appropriate because the auditor was able to obtain sufficient appropriate audit evidence regarding the accounts receivable balance.

Question 17

Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-One week before you complete auditing procedures in the field, you discover that the audit manager on the Bashir engagement owns a material amount of Bashir's common stock.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Accepted Answer

The audit manager's ownership of a material amount of the client's stock represents a significant independence impairment. This situation compromises the audit's objectivity, leading to the necessity of disclaiming an opinion due to the inability to assure independence in the audit process.

Question 18

Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-You relied upon another auditing firm to perform part of the audit. Although you were the principal auditor, the other firm audited a material portion of the financial statements. You wish to refer to the other firm in your report.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Accepted Answer

When a principal auditor decides to refer to the work of another auditor in their report, the appropriate action is to issue an unmodified opinion with modified wording. This modification is to acknowledge the portion of the audit conducted by the other firm and does not imply any qualifications or adverse findings regarding the audited financial statements.

Question 19

Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-You have substantial doubt about Bashir's ability to continue as a going concern.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Accepted Answer

The answer of Assume you are the partner in charge...

Question 20

Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-Bashir Corporation changed its method of computing depreciation in 2012. You concur with the change and the change is properly disclosed in the financial statement footnotes.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Accepted Answer

The change in accounting principle is properly disclosed and you concur with it, so an unmodified opinion is appropriate, but an emphasis of matter paragraph is added to highlight the change.

Quiz 1: The Demand for Audit, Cpa Profession, Audit Reports and Other Assurance Services

Which of the following is not one of the principal auditor's alternatives when issuing a report if a different auditor performed part of the audit?

If a client'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) :

Indicate which changes would require an emphasis of a matter paragraph in the audit report.

Indicate which changes would require an emphasis of a matter paragraph in the audit report.

Indicate which changes would require an emphasis of a matter paragraph in the audit report.

The reasons for expressing a qualified opinion due to a departure from IFRS are expressed in a paragraph:

In which situation would the auditor be choosing between a qualified opinion and an adverse opinion?

Discuss why an audit report does not offer absolute assurance that financial statements give and True and fair picture of a company's financial position.

In certain circumstances, an auditor will issue an unmodified report, but the wording will differ from that of a standard unmodified report. Discuss circumstances when an auditor would issue an unmodified report with an explanatory paragraph or modified wording.

Describe the standard unmodified audit report. Specify the ten parts of the report, and then discuss the contents of each part.

Outline the three stage process for deciding the appropriate audit report to issue.

Describe an auditor's responsibilities in respect of the information in documents accompanying audited financial statements.