Chapter 15 - Part 2

1.

1 point

In which one of the following instances would an auditor not issue a disclaimer of opinion?

The auditors are not invited to the periodic inventory at year end.

There are significant misstatements in the financial statements.

There is a significant limitation on the scope of the engagement.

There is insufficient evidence for the auditor to form an opinion on the fairness of the financial statements.

2.

1 point

In which of the following situations would the auditor modify the audit report on ICFR?

When the auditor relies on the work of other auditors but decides not to include a reference to the other auditors.

When the auditor is unable to perform all procedures needed to evaluate the internal controls.

When the auditor concludes that management’s report on ICFR is not complete or is improperly presented.

When the auditor identifies multiple unrelated significant deficiencies in ICFR.

3.

1 point

When an auditor lacks independence with respect to a client, which of the following should the auditor issue?

A disclaimer of opinion.

An adverse opinion.

A qualified opinion with explanatory paragraph.

An unqualified opinion.

4.

1 point

Which of the following phrases should not be used when the auditor is qualifying the audit opinion?

Except for.

Subject to.

With the exception of.

With the qualification of.

5.

1 point

When an auditor is faced with a material departure from GAAP that is pervasive, which of the following should the audit report contain?

An unqualified opinion.

A qualified opinion with an explanatory paragraph.

An adverse opinion.

A disclaimer of opinion.

6.

1 point

Scope limitations resulting in disclaimers under U.S. auditing standards affect the standard audit report through which of the following?

Modifying the introductory paragraph.

Eliminating the scope paragraph.

Adding an explanatory paragraph before the disclaimer paragraph.

Both B and C.

All of the above.

7.

1 point

Disclaimers of opinion can only be issued by auditors based on which of the following?

Violations of GAAP.

Substantial scope limitations.

Going concern.

Lack of independence.

Either B or D.

8.

1 point

When management chooses to include information in its report on ICFR that is in addition to the information required to be provided, what should the auditor do?

The auditor must endorse the information.

The auditor must include the information as part of the opinion.

The auditor will disclaim an opinion on that additional information.

The auditor will present the information in a separate schedule in the footnotes.

9.

1 point

In which of the following circumstances would an auditor be most likely to express an adverse opinion on a company’s financial statements?

The client has had significant transactions with related entities that the auditor wants to emphasize.

The financial statements are not in conformity with FASB requirements regarding the capitalization of leases.

The auditor is not independent.

There is substantial doubt about the entity’s ability to continue as a going concern.

10.

1 point

An emphasis of a matter may result in which of the following?

A disclaimer of an audit opinion.

A qualified audit opinion.

An adverse opinion.

An unqualified audit opinion with an explanatory paragraph either before or after the opinion paragraph.

11.

1 point

In which one of the following instances would an auditor most likely issue a disclaimer of opinion?

Management will not sign a management representation letter.

Management declines to provide a statement of cash flow.

The auditor is independent of the client.

The auditor is unable to confirm receivables but performs alternative procedures.

12.

1 point

A justified departure from GAAP may result in which of the following?

A disclaimer of an audit opinion.

An unqualified audit opinion with an explanatory paragraph either before or after the opinion paragraph.

An adverse opinion.

A qualified opinion.

13.

1 point

Adverse opinions can only be issued by auditors based on which of the following?

Violations of GAAP.

Scope limitations.

Going concern.

Lack of independence.

Either B or D.

14.

1 point

When might an auditor modify the introductory paragraph and replace the scope paragraph with explanatory paragraph?

When a scope limitation exists.

When there is substantial doubt about going-concern.

When the auditor lacks independence.

When there is an emphasis of a matter.

15.

1 point

If a client expensed the acquisition cost of some assets that should have been capitalized and depreciated them over their useful lives, which of the following would be incorrect?

A qualified opinion would be appropriate.

The opinion paragraph should be modified to include language such as: “except for the effects of not capitalizing the acquisition costs of some assets...”

An explanatory paragraph should include the effects of the subject matter of the qualification, where practicable.

An explanatory paragraph should be modified to include language such as: “subject to the qualified act...”

16.

1 point

Adverse opinions affect the standard audit report in which of the following ways?

Modifying the scope paragraph.

Adding an explanatory paragraph before the opinion paragraph.

Modifying the opinion paragraph to read “ does not present fairly.”

Both B and C.

All of the above.

17.

1 point

A reference to another auditor under U.S. auditing standards may result in which of the following?

A disclaimer of an audit opinion.

A qualified audit opinion.

An adverse opinion.

An unqualified audit opinion with modified wording for all three paragraphs.

18.

1 point

PCAOB Auditing Standard 5 does not identify which of the following situations as one in which the auditor will modify the audit report on ICFR effectiveness?

When there is a restriction on the scope of the engagement.

When there is other information contained in management's annual report on ICFR.

When elements of management's annual report on internal control are incomplete or improperly presented.

When the annual report includes a copy of the annual certification pursuant to Section 302 of the Sarbanes-Oxley Act.

19.

1 point

When an auditor issues an adverse opinion, which of the following should be included in the opinion paragraph?

The financial statement effects of the departure from GAAP.

A statement that indicates that the financial statements are fairly stated except for a reason that is described in the separate paragraph.

A reference to a separate paragraph that describes the reason for the adverse opinion.

The reasons that the financial statements are misleading.

20.

1 point

In which one of the following instances would an auditor most likely issue an adverse opinion?

Management declines to present earnings per share in the income statement.

There is substantial doubt about the entity's ability to continue as a going concern.

There is a material dollar misstatement that overshadows the overall financial statements.

The client does not allow the auditor to send confirmations to its three largest customers.

21.

1 point

The opinion paragraph of the audit report for Schnook Co. states that the financial statements "do not present fairly". Which type of audit report is this?

Improper.

Adverse.

Disclaimer.

Qualified.

22.

1 point

An audit of the Flagler Company, a diamond mining company, brings to light the fact that its equipment has been marked up to the owners’ expectation of market values. Such a situation will most likely result in which type of report?

Disclaimer.

Review.

Adverse.

Unqualified with explanatory language.

23.

1 point

A justified departure from GAAP may result in which of the following?

A disclaimer of an audit opinion.

An adverse opinion.

An unqualified audit opinion with an explanatory paragraph before the opinion paragraph or a qualified opinion.

A standard unqualified opinion.

24.

1 point

When there is a restriction on the scope of the internal control over financial reporting (ICFR) engagement, what should the auditor do?

The auditor will either withdraw from the engagement or disclaim an opinion.

The auditor will issue an adverse opinion.

The auditor will issue an opinion on the ICFR based on another audit firm’s work.

The auditor will report this directly to the Treadway Commission.

25.

1 point

Which of the following is an example of circumstances that would not limit the audit scope?

An inadequacy in the accounting records.

The inability to gather sufficient competent evidence.

Emphasis of an important matter.

The timing of the fieldwork.

26.

1 point

When the auditor is not independent with respect to a client, what must the auditor do?

Not accept an audit engagement.

Include a separate paragraph in the audit report stating the lack of independence.

Provide a review report.

Report the non-compliance to the AICPA.