Question 1

Matters of governance interest that the auditor may wish to discuss with those charged with governance include:
A) any practical difficulties encountered in performing the audit.
B) the potential effect on the financial statements of any material risks and exposures.
C) expected modifications to the audit report.
D) all of the above.

Accepted Answer

All of the above are matters of governance interest that the auditor may wish to discuss with those charged with governance. Practical difficulties encountered in performing the audit may indicate a need for additional resources or changes in audit approach. The potential effect on the financial statements of any material risks and exposures may impact the overall financial picture of the organization, and modifications to the audit report may affect the reliability of the financial statements. As such, all of these matters are important for discussion with those charged with governance.

Question 2

An auditor may prepare or provide an opinion on information other than general purpose financial statement information, on all the following engagements except:
A) reports prepared in accordance with a special purpose framework.
B) reports on the component of the financial statements.
C) reports on the expected market value of the shares price for the following five years.
D) reports on compliance with contractual agreements.

Accepted Answer

An auditor can prepare or provide an opinion on reports prepared in accordance with a special purpose framework, reports on the component of the financial statements, reports on compliance with contractual agreements, and other information as agreed upon between the auditor and the client. However, an auditor cannot provide an opinion on the expected market value of shares price as it is an estimation and subject to market fluctuations.

Question 3

Identify quantitative and qualitative considerations that are taken into account when the auditor evaluatwhether misstatements either cause financial statements to be materially misstated or require additional disclosure.

Accepted Answer

The answer of Identify quantitative and qualitative considerations that are...

Question 4

Which of the following would not be included in an audit report?
A) The auditor's address
B) An introductory paragraph
C) The audit fee charged to the client
D) Management's responsibility for the financial statements

Accepted Answer

The audit fee charged to the client is not typically included in an audit report. The other options listed are common components of an audit report.

Question 5

Those charged with governance are accountable for ensuring that the entity achievits objectivwith regard to which of the following?
A) compliance with applicable laws
B) the reliability of financial reporting
C) both a and b
D) none of the above

Accepted Answer

Those charged with governance are accountable for ensuring that the entity achieves objectives related to both compliance with applicable laws and the reliability of financial reporting. This is because governance involves overseeing the management of the entity's operations to ensure that they are carried out effectively and efficiently while complying with relevant laws and regulations. Additionally, governance is responsible for ensuring that financial information is accurate, complete, and transparent so that stakeholders can make informed decisions about the entity.

Question 6

Explain the potential threats to independence relating to audit feand how an auditor can safeguard against these threats. CASE

Accepted Answer

The answer of Explain the potential threats to independence relating...

Question 7

Which of the following is not an area of disagreement with those charged with governance that may result in a modified audit opinion?
A) the acceptability of accounting policies selected
B) the terms of the audit engagement
C) the method of application of accounting policies
D) the adequacy of disclosures in the financial statements

Accepted Answer

The terms of the audit engagement are agreed upon before the audit begins and should not be a source of disagreement during the audit. The other options listed are common areas of disagreement with those charged with governance that may result in a modified audit opinion.

Question 8

What are examplof matters of governance interest that the auditor may wish to discuss with those charged with governance.

Accepted Answer

The answer of What are examplof matters of governance interest...

Question 9

Mark Danyluk, the partner in charge of the Bombardier Aerospace audit, was reviewing the work his team had completed. Bombardier is a Canadian company. They used to be involved in recreational equipment such as Ski-Doo snowmobiland Sea-Doo watercraft. Their Aerospace division, however, is probably their best known operating segment and is known as a leading manufacturer of commuter jets containing 50-100 seats. Bombardier's operations were by far the largest of the aerospace companiin Montreal and several of the new programs were very ambitious and very risky. It seemed to Mark that every review he performed had material misstatement possibilities. Mark was thinking that an audit of this magnitude was challenging his abilitiin evaluating what was sufficient and appropriate audit evidence. When Mark started the audit of the current year's operations, he was surprised with the events that took place in 2015 at the Bourget and Farnborough air shows. The anticipation for Bombardier's new CSeriaircraft turned out to be less than positive as other manufacturers seemed to pile up the orders. Airbus executivhad also been claiming for months that their company's introduction of a new engine option (NEO) for the A320 narrowbody voided the business case for the CSeries. Although Bombardier has been able to get commitments up to 100 aircraft, the company is only one-third of the way to its goal of 300 orders for the CSerischeduled service entry in late 2017. This also still leavBombardier 350 aircraft short of the salrequired for the project to break even. As Bombardier attempts to expand its aircraft product line into medium-sized aircraft (100-149 seats), it is entering a space that is getting very close to the market segment dominated by industry giants, Boeing and Airbus. While those companitend to focus on even larger aircraft, they may want to protect themselvby defending against Bombardier in the medium-sized aircraft segment because Bombardier could later expand into the lucrative large-aircraft segment. Bombardier's $3.4-billion bet on the market for narrow-bodied aircraft faca potential threat: a price war instigated by Boeing Co. and Airbus SAS. Mark Danyluk had an uneasy feeling about the viability of the Aerospace sector of the company's operations. Required:
a) Describe the factors that Mark Danyluk and his firm will have to consider in evaluating the sufficiency and appropriateness of audit evidence at Bombardier Aerospace.
b) What factors are relevant when management assesses the going concern issue at Bombardier?

Accepted Answer

The answer of Mark Danyluk, the partner in charge of...

Question 10

Explain why the global financial crisis has resulted in the number of potential and actual legal liability insurance claims and explain how auditors can deal with the risk of litigation in tough economic times.

Accepted Answer

The answer of Explain why the global financial crisis has...

Question 11

Material disagreements with management will result in either:
A) a qualified opinion or adverse opinion.
B) an emphasis of matter or adverse opinion.
C) an adverse opinion or an unqualified opinion.
D) an unqualified opinion or a qualified opinion.

Accepted Answer

Material disagreements with management about the financial statements typically result in either a qualified opinion, where the auditor disagrees with a specific aspect of the financial statements, or an adverse opinion, where the auditor believes the financial statements as a whole are not presented fairly.

Question 12

Explain the difference between management's and the auditor's responsibility for the financial statements.

Accepted Answer

The answer of Explain the difference between management's and the...

Question 13

Discuss the factors that are relevant when management is assessing the going concern assumption.

Accepted Answer

The answer of Discuss the factors that are relevant when...

Question 14

Demand for forensic accounting has grown following the collapsof Enron and Worldcom. Explain the important characteristics of forensic accountants and the main techniquthey use to investigate fraud.

Accepted Answer

The answer of Demand for forensic accounting has grown following...

Question 15

Explain the difference between type 1 and type 2 subsequent events and provide examplof each type of event.

Accepted Answer

The answer of Explain the difference between type 1 and...

Question 16

The auditor's report will not require a modified opinion where:
A) there is a disagreement with those charged with governance.
B) a limitation of scope of the engagement exists.
C) a significant uncertainty exists.
D) the financial statements are presented fairly.

Accepted Answer

The auditor's report will not require a modified opinion if the financial statements are presented fairly in all material respects. This means that the auditor has no reservations about the accuracy and completeness of the financial statements. A modified opinion would be required in situations such as a disagreement with those charged with governance, a limitation of scope, or a significant uncertainty.

Question 17

Indicate whether you agree or disagree with the following statements and explain your reasoning.
a) Steven Bischoff, the senior auditor at Martineau, Hellman and Nathan made the following statement to his audit team: "What constitutes sufficient appropriate audit evidence is a matter of judgment."
b) Metropolitan Poultry Company operates as a specialty food distributor. Gordon Atkins, auditor, has told his staff that the bankruptcy of a customer at year-end should not be considered a type 1 event.
c) Mississauga Ice Pucks auditor Dave Ganesh found an omission of a disclosure in the financial statements of the hockey team. He called this an error.
d) Stacey Kurvers was told by the client that a limitation in the scope of his work would require a modification to the audit report.

Accepted Answer

The answer of Indicate whether you agree or disagree with...

Question 18

An unqualified audit opinion with an emphasis of matter should be given where there is:
A) inconsistent other information.
B) additional disclosures with which the auditor concurs.
C) a subsequent event that results in a new auditor's report on revised financial statements.
D) all of the above.

Accepted Answer

The answer of An unqualified audit opinion with an emphasis...

Quiz 13: Completing and Reporting on the Audit

Matters of governance interest that the auditor may wish to discuss with those charged with governance include:

An auditor may prepare or provide an opinion on information other than general purpose financial statement information, on all the following engagements except:

Identify quantitative and qualitative considerations that are taken into account when the auditor evaluatwhether misstatements either cause financial statements to be materially misstated or require additional disclosure.

Which of the following would not be included in an audit report?

Those charged with governance are accountable for ensuring that the entity achievits objectivwith regard to which of the following?

Explain the potential threats to independence relating to audit feand how an auditor can safeguard against these threats. CASE

Which of the following is not an area of disagreement with those charged with governance that may result in a modified audit opinion?

What are examplof matters of governance interest that the auditor may wish to discuss with those charged with governance.

Explain why the global financial crisis has resulted in the number of potential and actual legal liability insurance claims and explain how auditors can deal with the risk of litigation in tough economic times.

Material disagreements with management will result in either:

Explain the difference between management's and the auditor's responsibility for the financial statements.

Discuss the factors that are relevant when management is assessing the going concern assumption.

Demand for forensic accounting has grown following the collapsof Enron and Worldcom. Explain the important characteristics of forensic accountants and the main techniquthey use to investigate fraud.

Explain the difference between type 1 and type 2 subsequent events and provide examplof each type of event.

The auditor's report will not require a modified opinion where:

An unqualified audit opinion with an emphasis of matter should be given where there is: