Question 1

The final phase of an audit is to assess all of the audit evidence obtained and determine whether it is sufficient and appropriate.

Accepted Answer

This statement is true. The final phase of an audit is the auditor's assessment of the audit evidence obtained to determine whether it is sufficient and appropriate to support the auditor's opinion on the financial statements under audit.

Question 2

Sufficiency relatto the quality of audit evidence gathered.

Accepted Answer

False

Question 3

When Eddie Okulicz released the audit report of C Corp. he did not anticipate that there would follow an announcement two days later that several days after year-end his client's foreign subsidiary had been nationalized by Libya for non-compliance to environmental laws of the country. What type of subsequent event was this?
A) Type 1
B) Type 2
C) Type 1 and 2
D) this was not a subsequent event

Accepted Answer

This was a Type 2 subsequent event, as it occurred after the balance sheet date but before the audit report release date. The information should have been disclosed or dealt with in the financial statements or notes.

Question 4

When Sydney Burns was unable to perform work on inventory because of a client's insistence that she not perform an inventory taking, what kind of audit opinion would she most likely consider?
A) adverse opinion
B) emphasis of matter
C) limitation of scope
D) disclaimer of opinion

Accepted Answer

Sydney Burns was unable to perform work on inventory due to the client's insistence, which means she had a limitation of scope. Therefore, she would most likely consider a limitation of scope opinion.

Question 5

An error is an intentional misstatement in the client's financial statements.

Accepted Answer

An error is an unintentional misstatement in the client's financial statements. It is different from fraud, which is an intentional misstatement.

Question 6

A limitation on the scope of the auditor's work could result from an inability to perform proceduror an imposition by the entity.

Accepted Answer

A limitation on the scope of the auditor's work can occur when the auditor is unable to perform certain procedures due to factors such as time, resource constraints, or lack of access to necessary information. It could also result from the entity imposing restrictions on the auditor's work, such as limiting the scope of the audit or withholding certain information.

Question 7

An unqualified audit report with an emphasis of matter should be issued if a subsequent event has occurred that has resulted in a new audit report being prepared on a revised financial statement.

Accepted Answer

An unqualified audit report with an emphasis of matter is appropriate if there is a subsequent event that has occurred that affects the financial statements, but the overall financial statements are still fairly presented. This would require a new audit report on the revised financial statements.

Question 8

Syed Hussein, the partner on the Rimouski Copper audit called a meeting of his senior staff during the engagement wrap-up. Which of the following areas would be the least likely to be covered during the wrap up?
A) consideration of the amount used for materiality
B) removal of all unnecessary documentation from the engagement files
C) performing analytical procedures on the adjusted financial statements
D) preparation of budgets for the following year's audit

Accepted Answer

The preparation of budgets for the following year's audit is not typically covered during the wrap-up of the current year's audit. It is a task that would be performed in advance of the next year's audit. The other options are more likely to be discussed during the wrap-up, as they relate to materiality, documentation, and analytical procedures on the financial statements.

Question 9

Ron Nucci is trying to gather sufficient appropriate evidence. Which of these are factors to consider in evaluating the sufficiency and appropriateness of audit evidence?
A) audit risk
B) control risk
C) quality of information obtained
D) none of the above

Accepted Answer

The sufficiency and appropriateness of audit evidence depends on the quality of information obtained during the audit. Factors such as audit risk and control risk are important in determining the nature and extent of audit procedures, but do not directly impact the sufficiency and appropriateness of audit evidence.

Question 10

A public auditor in practice can only perform audits and review and is prohibited from completing non-assurance engagements such as compilations of financial information and tax engagements.

Accepted Answer

A public auditor in practice can perform non-assurance engagements such as compilations of financial information and tax engagements as long as they are not prohibited by their professional standards or by law.

Question 11

The auditor's responsibility for the financial statements includselecting and applying appropriate accounting policies.

Accepted Answer

The responsibility for selecting and applying appropriate accounting policies lies with the management of the company, not the auditor. The auditor's role is to assess whether these policies are applied correctly and result in fair presentation of the financial statements.

Question 12

The client's compliance with contractual requirements of operating agreements is an example of a qualitative factor that may cause misstatements of quantitatively immaterial amounts to be considered material.

Accepted Answer

This is because the client's compliance with contractual requirements is important for maintaining the integrity of the financial information, even if the dollar amounts involved are not significant. If the client has breached the terms of a significant operating agreement, it could cast doubt on the reliability of their reporting and therefore be considered material.

Question 13

The uninsured loss of inventory as a result of fire subsequent to year-end is an example of a type 2 subsequent event.

Accepted Answer

This is an example of a type 2 subsequent event because it provides additional information about conditions that existed at the end of the reporting period (uninsured loss of inventory), but arose after the reporting period ended (the fire).

Question 14

Generally, the further into the future an event is likely to take place, the greater the uncertainty surrounding the event.

Accepted Answer

This is because there are many variables that can change over time, making it difficult to predict with accuracy what will happen in the distant future. As we move closer to the event, more information becomes available and the uncertainty decreases.

Question 15

A type 1 subsequent event providevidence with respect to conditions that developed subsequent to year-end.

Accepted Answer

A type 1 subsequent event provides evidence about conditions that existed at the balance sheet date, not conditions that developed after year-end.

Question 16

As soon as practicable, the auditor should communicate weaknessin internal controls to management or those charged with governance.

Accepted Answer

It is the responsibility of the auditor to communicate any weaknesses in internal controls to management or those charged with governance as soon as possible. This helps them take appropriate action to address the identified weaknesses and improve the effectiveness of internal controls. Delaying communication can lead to increased risks and potential adverse effects on the organization.

Question 17

At year-end MarisAlbion sent out accounts receivable confirmations. One of the major customers of her client confirmed that they would not be able to pay off the receivable. The client subsequently went bankrupt and an aggrieved shareholder of Marissa's client sued her firm. What type of subsequent event was this?
A) Type 1
B) Type 2
C) Type 1 and 2
D) this was not a subsequent event

Accepted Answer

This is a Type 1 subsequent event, as it provides additional evidence about conditions that existed at the balance sheet date, indicating that the receivable was uncollectible.

Question 18

Subsequent events procedurare normally performed through to and including the date of the auditor's report.

Accepted Answer

Subsequent events procedures involve evaluating events that occur after the date of the financial statements but before the auditor's report is issued. Therefore, these procedures are typically performed through to and including the date of the auditor's report.

Question 19

Matters of governance that the auditor may wish to discuss with those charged with governance include any practical difficultiencountered in performing the audit.

Accepted Answer

Matters of governance that may affect the audit, including any practical difficulties encountered, should be discussed with those charged with governance. This is consistent with the requirements of auditing standards.

Question 20

When Paul Sliz was reviewing existing or possible obligations on the balance sheet, he was told that the outcome for these obligations was uncertain and that the company was awaiting a future event. Paul Sliz was reviewing
A) accruals.
B) going concern.
C) materiality.
D) contingent liabilities.

Accepted Answer

Paul Sliz was reviewing possible or existing obligations for which the outcome is uncertain and dependent on a future event. This is a clear indication of contingent liabilities, which are potential liabilities that may or may not occur depending on the outcome of a future event. Accruals refer to expenses or revenues that have been recognized but not yet paid or received. Going concern refers to assessing a company's ability to continue operations in the foreseeable future. Materiality refers to the level of significance of an item or transaction in the financial statements.

Quiz 13: Completing and Reporting on the Audit