Question 1

The unqualified opinion audit report for public entities includes the following three paragraphs:
A)introductory,scope and management's responsibility.
B)materiality,scope and report.
C)introductory,scope and opinion.
D)scope,fieldwork and conclusion.

Accepted Answer

The unqualified opinion audit report for public entities includes an introductory paragraph that introduces the report and identifies the entity being audited, a scope paragraph that describes the objectives of the audit and the work performed to achieve those objectives, and an opinion paragraph that presents the auditor's opinion on the financial statements of the entity. This format is reflected in option C, which includes an introductory paragraph, a scope paragraph, and an opinion paragraph. Options A, B, and D do not accurately reflect the standard format for an unqualified opinion audit report for public entities.

Question 2

Financial statement users are normally much more concerned about a disclaimer than an unmodified opinion audit report that contains an additional-emphasis-of-matter paragraph.

Accepted Answer

A disclaimer indicates that the auditor could not obtain sufficient evidence to express an opinion on the financial statements, which is a serious concern for users. An unmodified opinion audit report with an additional-emphasis-of-matter paragraph may simply highlight a significant matter that the auditor wants to draw attention to, but the overall opinion on the financial statements is still unmodified.

Question 3

The phrase "accounting principles generally accepted in the United States of America" can be found in the opinion paragraph of a standard unmodified opinion report.

Accepted Answer

This phrase is typically included in the opinion paragraph of a standard unmodified opinion report in the United States.

Question 4

The scope paragraph of the auditor's responsibility section of the audit report issued for financial statements of a nonpublic company should refer to auditing standards generally accepted in the United States of America.

Accepted Answer

This statement is true. The scope paragraph of the auditor's responsibility section should refer to auditing standards generally accepted in the United States of America, as well as any additional requirements specific to the engagement or the company being audited. This information provides users of the audit report with an understanding of the procedures performed by the auditor and the level of assurance provided by the audit.

Question 5

When analyzing the various types of audit reports,
A)the unmodified opinion with an emphasis-of-matter paragraph is the most common type of report.
B)companies will generally make the appropriate changes to their accounting records to avoid a qualification by the auditor.
C)management is more concerned about a qualified report than a disclaimer report.
D)an adverse report is issued when the auditor is unable to form an opinion on the financial statements.

Accepted Answer

Companies strive to receive an unmodified opinion, and will typically make necessary changes in their accounting records to avoid a qualified report.

Question 6

The phrase "auditing standards generally accepted in the United States of America" can be found in the opinion paragraph of a standard unmodified opinion report for a nonpublic company.

Accepted Answer

The answer of The phrase "auditing standards generally accepted in...

Question 7

Users of the financial statements rely on the auditor's report because of the absolute assurance the report provides.

Accepted Answer

The auditor's report provides reasonable assurance, not absolute assurance, that the financial statements are free from material misstatements. While it is an important source of information for users of financial statements, it is not a guarantee of accuracy or completeness of the financial information presented.

Question 8

There are four conditions that must be met before an auditor can issue a standard unmodified opinion audit report for the audit of a private company.Please discuss each of these five conditions.

Accepted Answer

The answer of There are four conditions that must be...

Question 9

The introductory paragraph of the auditor's report states that the auditor is responsible for the preparation,presentation and opinion on financial statements.

Accepted Answer

The introductory paragraph of the auditor's report states that the responsibility for the preparation and presentation of financial statements lies with the management, while the auditor's responsibility is to express an opinion on those financial statements.

Question 10

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?
I. A combined report on financial statements and internal control over financial reporting
II. Separate reports on financial statements and internal control over financial reporting
A)I only
B)II only
C)either I or II
D)neither I nor II

Accepted Answer

The auditor can choose to issue either a combined report on financial statements and internal control over financial reporting or separate reports on financial statements and internal control over financial reporting for a public company. The choice will depend on the specific circumstances of the audit engagement.

Question 11

The audit report is normally addressed to the company's president or chief executive officer.

Accepted Answer

The audit report is typically addressed to the shareholders or the board of directors of the company, not directly to the president or chief executive officer.

Question 12

The standard unmodified audit report
A)is sometimes called a clean opinion.
B)can be issued only with an explanatory paragraph.
C)can be issued if only a balance sheet and income statement are included in the financial statements.
D)is sometimes called a disclaimer report.

Accepted Answer

The standard unmodified audit report is also known as a clean opinion as it indicates that the financial statements are presented fairly in all material respects and without any significant exceptions. No explanatory paragraph or disclaimer is included in this type of report.

Question 13

The audit report date is the date the auditor completed audit procedures in the field.

Accepted Answer

The audit report date is the date the auditor completed audit procedures in the field and is included on the audit report.

Question 14

An auditor will issue a disclaimer when he concludes that the financial statements are not fairly presented.

Accepted Answer

A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence to form an opinion on the financial statements, not when they conclude that the statements are not fairly presented.

Question 15

The phrase "Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material error" is included in the auditor's opinion section of an audit report.

Accepted Answer

The answer of The phrase "Those standards require that we...

Question 16

The date of the auditor's report is indicative of the last day of the auditor's responsibility for the review of significant events occurring after the balance sheet date.

Accepted Answer

The date of the auditor's report is typically the last day of the auditor's responsibility for the review of significant events that occurred after the balance sheet date. This means that any events that occur after the auditor's report date would not be taken into consideration by the auditor in their review.

Question 17

What category of audit report will be issued if the auditor concludes that the financial statements are not fairly presented?
A)disclaimer
B)qualified
C)standard unmodified opinion
D)adverse

Accepted Answer

If the auditor concludes that the financial statements are not fairly presented, an adverse audit report will be issued. This type of report indicates that the financial statements are materially misstated and do not accurately reflect the financial position of the company.

Question 18

An audit of historical financial statements most commonly includes the
A)balance sheet,statement of retained earnings,and the statement of cash flows.
B)income statement,the statement of cash flows,and the statement of net working capital.
C)statement of cash flows,balance sheet,and the statement of retained earnings.
D)balance sheet,income statement,statement of cash flows,and the statement of changes in stockholders' equity.

Accepted Answer

A complete audit of historical financial statements typically includes examination of the balance sheet, income statement, statement of cash flows, and the statement of changes in stockholders' equity. This provides a comprehensive view of the financial performance, position, and changes in equity of the company.

Question 19

Auditing standards for public companies are established by the
A)SEC.
B)FASB.
C)PCAOB.
D)IRS.

Accepted Answer

Auditing standards for public companies are established by the Public Company Accounting Oversight Board (PCAOB). The SEC oversees and enforces these standards, but the PCAOB is responsible for creating and updating them. The FASB sets accounting standards, not auditing standards. The IRS does not have authority over auditing standards for public companies.

Question 20

In the scope paragraph of the audit report issued for financial statements of a nonpublic company,the auditor expresses an opinion about the internal controls of the company.

Accepted Answer

The scope paragraph of an audit report for a nonpublic company only expresses an opinion on the financial statements, not the internal controls. However, the auditor may still assess and report on the effectiveness of the company's internal controls as a separate engagement.

Quiz 3: Audit Reports

The unqualified opinion audit report for public entities includes the following three paragraphs: