Question 1

Which of the following statements regarding auditor communication with audit committees is FALSE?
A) Both the auditor and management should be present in meetings with the audit committee to discuss these reports, which may be written or oral.
B) The auditor and management should, in advance, review the information to be covered with the audit committee.
C) On all matters, management should report to the audit committee first, and the auditor then comments.
D) When the auditor communicates in writing, the report should indicate that it is intended solely for use by the audit committee.

Accepted Answer

The statement "On all matters, management should report to the audit committee first, and the auditor then comments" is false. While management should report to the audit committee, the auditor is free to communicate directly with the audit committee on any matters deemed relevant or necessary.

Question 2

The auditor actively seeks audit evidence up to the date of the audit report. After that date, the auditor does not seek new evidence.

Accepted Answer

This is known as the cut-off date or audit report date, after which the auditor does not seek new evidence as it is not relevant to the financial statements being audited. The auditor needs to ensure that all relevant evidence is gathered up to the cut-off date.

Question 3

What are the various causes of misstatements? Are they intentional?

Accepted Answer

The answer of What are the various causes of misstatements?...

Question 4

What is an Other Matter (OM) paragraph?
A.

Accepted Answer

The answer of What is an Other Matter (OM) paragraph?
A....

Question 5

Dual dating refers to instances of dating the audit report as of the date that financial statements are approved by the auditee's responsible parties (e.g., the company's board of directors) and attaching an additional later date to disclosure of a significant subsequent event that requires financial statements to be amended.

Accepted Answer

This is correct. Dual dating is a common practice in auditing where two dates are mentioned on the audit report - the date until which the financial statements have been audited and the date of the subsequent event that required amendment of financial statements.

Question 6

Auditors typically do not keep track of the differences between management estimates and the most reasonable estimates supported by audit evidence.

Accepted Answer

Auditors are required to consider and evaluate management's estimates in the financial statements and compare them with the audit evidence gathered to assess their reasonableness. If significant differences are identified, they should be communicated to management and included in the auditor's report. Therefore, auditors do keep track of the differences between management estimates and the most reasonable estimates supported by audit evidence.

Question 7

What are the three categories of uncorrected misstatements?

Accepted Answer

The answer of What are the three categories of uncorrected...

Question 8

Further possible misstatements are those that could exist over and above the total of known and likely misstatements because of the fundamental limitations of auditing.

Accepted Answer

This statement is true. The auditor's work is subject to certain limitations, such as the use of sampling techniques and reliance on representations from management. As a result, there may be misstatements that the auditor is unable to detect or that are not identified during the audit process.

Question 9

The auditor typically writes a letter to the audit committee concerning material weaknesses in internal controls.

Accepted Answer

This is a standard practice of auditors to communicate any material weaknesses in internal controls to the audit committee through a formal letter.

Question 10

The Orange Corporation was audited for the year-ended December 31, the fieldwork was completed on January 25, and the audit report was delivered on February 15. The auditor learned about a two-for-one stock split on February 1. How should the report be dated?
A) December 31 and January 25.
B) January 25 and February 1.
C) January 25 and February 15.
D) February 1 and February 15.

Accepted Answer

The answer of The Orange Corporation was audited for the...

Question 11

Likely misstatements are those that probably exist, based on audit evidence examined.

Accepted Answer

Likely misstatements are those that the auditor has identified based on audit evidence examined, but additional evidence is needed to determine whether they are actually material misstatements.

Question 12

Dual dating is used to cut off the subsequent event procedural responsibility at the earlier date.

Accepted Answer

Dual dating involves using two different dates on a document to signify different actions taken on those dates. It is often used to cut off the subsequent event procedural responsibility at the earlier date, such as signing a document before a deadline to avoid legal liability.

Question 13

Auditors are responsible to search for both types of subsequent events between ________.
A) the financial statement year-end date and the audited financial statement issue date
B) the audit report date and the audited financial statement issue date
C) the financial statement year-end date and the audit report date
D) the interim audit date and the audit report date

Accepted Answer

Subsequent events are those events that occur between the financial statement year-end date and the audit report date, but before the audited financial statements are issued. Therefore, auditors are responsible to search for subsequent events between the financial statement year-end date and the audit report date. Option A and D are incorrect because they do not include the audit report date, which is a crucial date in the search for subsequent events. Option B is incorrect because it includes events that occur after the auditor's report is issued, which are not considered subsequent events.

Question 14

An Other Matter is like an Emphasis of Matter paragraph except that it relates to information that is not required to be disclosed in the financial statements.

Accepted Answer

An Other Matter paragraph relates to information that is not required to be disclosed in the financial statements, whereas an Emphasis of Matter paragraph relates to information that is required to be disclosed but is presented or disclosed differently from what is expected.

Question 15

What is an Emphasis of Matter (EOM) paragraph?

Accepted Answer

The answer of What is an Emphasis of Matter (EOM)...

Question 16

The auditor must decide if any uncorrected misstatements are material individually but not in aggregate.

Accepted Answer

The auditor must decide if uncorrected misstatements are material, both individually and in aggregate, to determine if they affect the financial statements' overall fairness.

Question 17

Emphasis of Matter paragraphs refer only to information presented or disclosed in the financial statements.

Accepted Answer

Emphasis of Matter paragraphs in the auditor's report draw attention to information presented or disclosed in the financial statements that is of such importance that it is fundamental to users' understanding of the financial statements.

Question 18

When should an independence letter be received?
A) At the audit report date.
B) Near the end of the audit.
C) Before the engagement.
D) Throughout the audit.

Accepted Answer

An independence letter should be received before the engagement to ensure the independence of the auditor. This helps to prevent any conflicts of interest and ensures that the auditor is free to perform their work objectively and without bias. Independence is a fundamental principle of auditing, and receiving the independence letter before the engagement ensures that this principle is being upheld.

Question 19

Subsequent to the issuance of the audit report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should ________.
A) determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information
B) request that management disclose the newly discovered information by issuing revised financial statements
C) issue revised pro forma financial statements taking into consideration the newly discovered information
D) give public notice that the auditor is no longer associated with the financial statements

Accepted Answer

The answer of Subsequent to the issuance of the audit...

Question 20

When a report is double-dated, the auditor has no responsibility for other events that have occurred after the end of fieldwork.

Accepted Answer

The auditor's responsibility is limited to the period covered by the audit, which ends at the date of the auditor's report.

Quiz 16: Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Which of the following statements regarding auditor communication with audit committees is FALSE?