Question 1

When the audit client has engaged other audit firms to audit remote locations around the country,the principal auditor must mention the other auditors in his or her report.

Accepted Answer

The principal auditor is not required to mention other auditors in the report unless they decide to take responsibility for the work of the other auditors.

Question 2

When the auditor concludes that there are no material weaknesses,that is,that internal controls are effective,the auditor would typically issue an unqualified opinion on internal controls.

Accepted Answer

When there are no material weaknesses in internal controls and the auditor concludes that they are effective, they issue an unqualified opinion on internal controls. This means that the controls are considered to be adequate and effective in ensuring the accuracy and reliability of financial reporting.

Question 3

The substantial doubt about an entity's ability to continue is a phrase that is used in an unqualified opinion with a certain type of explanatory language.

Accepted Answer

The phrase "substantial doubt about an entity's ability to continue" is used in an unqualified opinion with a going concern explanatory paragraph.

Question 4

When financial statements contain generally accepted accounting principles in the current year that are different from the generally accepted accounting principles used in the preceding year,the auditor will typically make mention of it in the opinion.

Accepted Answer

Generally accepted accounting principles that differ from the previous year would be considered a significant matter and would require disclosure in the auditor's opinion.

Question 5

If the firm auditing a company realizes that it is not independent with respect to the client,it will issue a qualified of opinion based on the inherent GAAP violation imposed by the audit firm.

Accepted Answer

A lack of independence by the audit firm is a violation of auditing standards, not GAAP, and typically results in the firm withdrawing from the engagement rather than issuing a qualified opinion.

Question 6

If the auditor concludes that the financial statements taken as a whole are not fairly presented,the auditor should issue an adverse opinion.

Accepted Answer

If the auditor concludes that the financial statements taken as a whole are not fairly presented, the auditor should issue an adverse opinion.

Question 7

The audit report delineates the responsibility of client management and that of the audit firm.

Accepted Answer

The audit report outlines the responsibilities of both the client management and the audit firm.

Question 8

Uncertainties,such as doubt about the going concern of a client,may result in an adverse opinion.

Accepted Answer

Uncertainties like doubt about the going concern of a client typically result in either a qualified opinion or an emphasis of matter paragraph in the audit report, not necessarily an adverse opinion. An adverse opinion is given when the financial statements are materially misstated.

Question 9

When the auditor is unable to obtain sufficient,competent evidence concerning the beginning inventory,which is material,the report is modified by adding an explanatory paragraph prior to the opinion paragraph and the auditor would issue an adverse opinion.

Accepted Answer

If the auditor cannot obtain sufficient evidence for the beginning inventory, they would typically issue a disclaimer of opinion, not an adverse opinion, due to the scope limitation.

Question 10

A justified departure from GAAP will result in the issuance of an adverse opinion.

Accepted Answer

A justified departure from GAAP may result in a qualified or unmodified opinion, but not necessarily an adverse opinion. An adverse opinion is issued when the financial statements are materially misstated and do not conform to GAAP.

Question 11

A client that has a departure from generally accepted accounting standards that is immaterial will receive a qualified or adverse opinion.

Accepted Answer

A departure from generally accepted accounting standards that is immaterial will not result in a qualified or adverse opinion. In fact, the auditor may issue an unmodified opinion with an explanatory paragraph explaining the departure.

Question 12

After the balance sheet date but prior to the last day of fieldwork the client decides to acquire PaperWeight Company to obtain a significant increase in revenues.The auditor would probably give a report that includes the statement: "except for the acquisition of PaperWeight Company...".

Accepted Answer

The acquisition of PaperWeight Company is a subsequent event that does not affect the financial statements as of the balance sheet date. The auditor would not modify the report with an "except for" statement but may require disclosure in the notes to the financial statements.

Question 13

The client will not allow Olivia and Company,CPAs to read the minutes of the board of director's meetings that occurred during the year under audit.Such a limitation will usually result in the auditor issuing a disclaimer/scope limitation.

Accepted Answer

If the auditor is unable to obtain sufficient evidence due to a restriction imposed by the client, it would result in a scope limitation and could lead to a disclaimer of opinion.

Question 14

An auditor is not required to tell the reader of an audit report when there has been a change in accounting principles that materially affects the financial statements.

Accepted Answer

An auditor is required to disclose any changes in accounting principles that materially affect the financial statements in the audit report. This is a requirement under Generally Accepted Accounting Principles (GAAP) and the auditing standards.

Question 15

The failure of a client to include a statement of cash flow will result in the issuance of a disclaimer of opinion by the auditor.

Accepted Answer

A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence. The absence of a statement of cash flows would more likely result in a qualified opinion or an adverse opinion, depending on the materiality and pervasiveness of the omission.

Question 16

If scope limitations that are not client-imposed exist,which makes it impossible for the auditor to form an opinion,the auditor should render an adverse opinion.

Accepted Answer

If scope limitations prevent the auditor from forming an opinion, the auditor should issue a disclaimer of opinion, not an adverse opinion.

Question 17

Negative assurance implies that nothing has come to the reviewer's attention that requires change.

Accepted Answer

Negative assurance is a type of review engagement where the reviewer expresses a conclusion that based on the review, nothing has come to the reviewer's attention that causes the reviewer to believe that the financial statements are not in accordance with the applicable financial reporting framework. Therefore, negative assurance does imply that nothing has come to the reviewer's attention that requires change.

Question 18

The term "except for" is used in the opinion paragraph of an audit report that will be qualified for a GAAP violation.

Accepted Answer

The term "except for" is commonly used to qualify an audit report when there has been a deviation from GAAP. The auditor may state that the financial statements are fairly presented, except for the specific situation that caused the GAAP violation.

Question 19

Andrews Corporation adopted an accounting principle that is a material departure from GAAP.The auditor determined that the financial statements are fairly presented,except for this specifically identifiable GAAP departure,and therefore would issue a disclaimer of opinion.

Accepted Answer

The auditor would likely issue a qualified opinion or an adverse opinion, not a disclaimer of opinion, because the departure from GAAP is specifically identifiable and the rest of the financial statements are fairly presented. A disclaimer of opinion is issued when the auditor cannot obtain sufficient appropriate audit evidence on which to base the opinion.

Question 20

Review reports issued by auditors give positive assurance as to the fair presentation of financial statements.

Accepted Answer

The answer of Review reports issued by auditors give positive...

Quiz 16: Auditors Reports