All of the following are causes for the addition of an explanatory paragraph except for: Select one: a. auditor agrees with a departure from promulgated accounting principles. b. lack of consistent application of generally accepted accounting principles c. reports involving other auditors. d. emphasis of a matter

All of the following are causes for the addition of an explanatory paragraph except for: Select one: a. auditor agrees with a departure from promulgated accounting principles. b. lack of consistent application of generally accepted accounting principles c. reports involving other auditors. d. emphasis of a matter

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter15: Audit Reports On Financial Statements

Section: Chapter Questions

Problem 29MCQ

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The accounting and auditing literature discusses several different types of accounting changes. For each of the changes listed below (a. through c.), indicate whether the auditor should add a paragraph to the audit report, assuming that the change had a material effect on the financial statements and was properly justified, accounted for, and disclosed. Assume that the organization is a U.S. non-public company. a. Change from one GAAP to another GAAP b. Change in accounting estimate not affected by a change in accounting principle c. Change in accounting estimate affected by a change in accounting principle d. Correction of an error c. Change from non-GAAP to GAAP (a special case of correction of an error)
When financial statements are affected by a material departure from generally accepted accounting principles, the auditors should: Withdraw from the engagement. Issue an unmodified opinion with a basis for modification paragraph. Issue an "except for" qualification or a disclaimer of opinion. Issue an "except for" qualification or an adverse opinion.
If in the auditor’s judgment, management’s use of the going concern basis of accounting in the preparation of the financial statements is inappropriate: A. The auditor will give a disclaimed of opinion. B. The auditor shall express an adverse opinion. C. The auditor shall express an unmodified opinion with a separate section. D. The auditor shall express a qualified opinion.
Examples of unmodified opinions which contain modified wording (without adding anemphasis-of-matter paragraph) include A. lack of consistent application of GAAP. B. substantial doubt about the audited company (or the entity) continuing as a going concern C. the lack of consistent application of generally accepted accounting principles. D. reports involving other auditors
Which of the following is not a condition before an auditor may add Emphasis of Matter paragraph in the auditor’s report?a. Matter is already fully disclosed in the financial statements.b. No material misstatement exists.c. Not result to modification of opinion.d. Be placed immediately after the opinion.
if an auditor's report does not make a statement regarding the adequacy of informative disclosure in the financial statements with which he is associated, the reader can conclude that the A. Financial statements are presented fairly, in all material respects in comformity with generally accepted accounting principles provided all other requirements have been metB. Auditor has not followd generally accepted auditing standardsC. Auditor is expressing a qualified opinionD. Auditor is expressing an adverse opinion
In the auditor's judgement, management's use of going concerm basis of accounting is appropriate, material uncertainty has not been adequately disclosed in a note to the financial statements. What form of audtor's report should be issued? Oa Aqualified opinion on the basis of material misstatement Ob.Aqualified opinion on the basis of insufficient audit evidence Oc An unqualifed opinion with a "Material uncertainty relating to going concem section
When a client’s financial statements contain a material departure from an FASB Statementon Accounting Standards and the public accounting firm believes the departure is necessaryto ensure that the statements are not misleading,a. The public accounting firm must qualify the auditors’ report for a departure from GAAP.b. The public accounting firm can explain why the departure is necessary and then give anunmodified opinion paragraph in the auditors’ report.c. The public accounting firm must give an adverse auditors’ report.d. The public accounting firm can give the standard unmodified auditors’ report with anunmodified opinion paragraph
In the auditor's judgement, management's use of going concerm basis of accounting is appropriate, material uncertainty has not been adequately disclosed in a note to the financial statements. What form of audtor's report should be issued? Oa Aqualified opinion on the basis of material misstatement Ob.Aqualified opinion on the basis of insufficient audit evidence Oc An unqualifed opinion with a "Material uncertainty relating to going concem section O Adverse opinion
What type of opinion is issued by the auditor on the financial statements when there is some limitation on the scope of the audit or when one or more items in the financial statements are not presented in accordance with applicable accounting principles?
Which item regarding an Emphasis of Matter paragraph is true? a. The auditor will use the E of M to restrict distribution of the audit report. b. The auditor will use the E of M when the client has corrected an error in the previous financial statements. c. An E of M will be used when a material error exists in the current financial statements. d. The E of M paragraph is usually located immediately before the opinion paragraph. e. The E of M paragraph would be used to discuss a client's change in the method to estimate bad debts.
When financial statements contain a departure from GAAP because, due to unusual circumstances, the statements would otherwise be misleading, the auditor should explain the unusual circumstances in a separate paragraph and express an opinion that is....... Select one: a. Adverse. b. Qualified. c. Qualified or adverse, depending on materiality. " d. Unqualified.