Question 1

An Other Matter paragraph can be used to alert the user to a material misstatement in the financial statements.

Accepted Answer

An Other Matter paragraph is used to draw attention to a matter regarding the financial statements that is not presented or disclosed in the financial statements and is relevant to users' understanding of the audit, the auditor's responsibilities, or the audit report. It is not used to alert users to a material misstatement in the financial statements; that would be the purpose of an Emphasis of Matter paragraph or a modification to the auditor's opinion.

Question 2

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

Accepted Answer

Dual dating is the practice of using two dates on a document, typically one when it was created and another when it was signed or approved. This is done to clarify when certain actions took place and to ensure that any subsequent procedural responsibility is not attributed to events that occurred after the earlier date. Therefore, the statement is true.

Question 3

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

Accepted Answer

Likely misstatements are those that are probable based on the audit evidence examined. These misstatements may be corrected by adjusting the financial statements or by communication with management.

Question 4

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

Auditors are responsible for searching for subsequent events between the financial statement year-end date and the audit report date. This is because the financial statements should reflect events that occurred up to the year-end date, but events that occur after that date could materially impact the financial statements and would need to be disclosed. The audit report date is after the audit has been completed, so subsequent events after this date would not be relevant to the audited financial statements. The interim audit date is not relevant to subsequent events, as it is the audit of only a portion of the financial statements and not the entire year-end financial statements.

Question 5

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 6

A reply to a lawyer's letters should be issued ________.
A)at the audit report date
B)near the end of the audit
C)before the engagement
D)throughout the audit

Accepted Answer

A reply to a lawyer's letters, which are part of the audit procedures to confirm the existence and details of the client's legal matters, should be issued near the end of the audit to ensure that the most current and comprehensive information is included in the audit findings.

Question 7

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 statement is true as per the auditing standards. The auditor is responsible for obtaining sufficient and appropriate audit evidence up to the date of the audit report. Any events or transactions that occur after the audit report date are considered subsequent events and may require additional disclosures or adjustments in the financial statements, but the auditor does not seek new audit evidence for these events.

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

Auditing has inherent limitations and it is possible that there may be misstatements that the auditor is unable to detect or uncover, leading to potential misstatements beyond what is already known or likely.

Question 9

In the audit of Longwind Ltd.'s January 31 financial statements,subsequent to the approval of the financial statements by the board of directors on March 11,2016 and prior to the issuance of the audit report,the auditor became aware of a lawsuit that should have been disclosed but was not.The auditor was able to conduct separate work related to the material lawsuit and note 17 related to this item was added.The additional work and change to the statement was completed April 2,2016.How should the audit report be dated?
A)March 11.
B)March 11,except for Note 17,April 2.
C)April 2.
D)An audit report cannot be issued until additional fieldwork is completed on fully revised and reissued financial statements.

Accepted Answer

The audit report should be dated March 11, except for Note 17, which should be dated April 2. This is in accordance with the subsequent events guidance in auditing standards, which allows for the inclusion of a note related to subsequent events after the date of the financial statements, as long as it does not affect the financial statements as a whole. The auditor's report should reflect the date of completion of the audit work, which was March 11, but also indicate the update related to the lawsuit in Note 17, which was completed on April 2.

Question 10

If prior year's financial statements were audited by a different audit firm,this information would appear in a(n)________ paragraph in the audit report.
A)Scope
B)Other Matter
C)Opinion
D)Emphasis of Matter

Accepted Answer

The information about prior year's financial statements being audited by a different audit firm is considered an "Other Matter" and would appear in a separate paragraph in the audit report. This paragraph is included to provide information that is relevant to the user's understanding of the audit report but is not related to the auditor's opinion on the current year's financial statements.

Question 11

A management representation letter is usually obtained at what time during the audit?
A)Before the engagement begins.
B)At the beginning of the audit.
C)At the audit report date.
D)At the interim,or as control deficiencies are discovered.

Accepted Answer

A management representation letter is typically obtained at the audit report date, after the auditor has gathered sufficient evidence to support their opinion on the financial statements. However, auditors may request additional representations from management throughout the audit process if significant control deficiencies are identified. It is not obtained before the engagement begins or at the beginning of the audit, as the auditor may not have gathered sufficient evidence at that point.

Question 12

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 definition accurately describes dual dating, which involves assigning two different dates to the audit report in order to accurately reflect when financial statements were approved and when significant subsequent events occurred.

Question 13

An auditor evaluates fair presentation in the financial statements from the auditee's perspective.

Accepted Answer

An auditor evaluates fair presentation in the financial statements from the user's perspective, not the auditee's perspective. The auditor provides an opinion on whether the financial statements are fairly presented, in all material respects, in accordance with the applicable financial reporting framework.

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 can relate to information that does not need to be disclosed in the financial statements, while an Emphasis of Matter paragraph pertains to information that is required to be disclosed.

Question 15

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

Accepted Answer

This is correct, the auditor is required to communicate any material weaknesses in internal controls to the audit committee. This communication is usually done through a letter.

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

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

This statement is false. It is the responsibility of the auditor to communicate directly with the audit committee on certain matters, such as significant accounting policies and audit adjustments. Management may be present in meetings with the audit committee, but the auditor should be able to communicate without management present to provide unbiased information.

Question 18

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 evaluate management's estimates and determine if they are reasonable based on audit evidence. If the auditor determines that management's estimate is not reasonable, they must communicate this to management and make appropriate adjustments in the financial statements.

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

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 1and February 15.

Accepted Answer

The audit report should be dual-dated as January 25 and February 1 to reflect the completion of fieldwork and the subsequent event of the stock split.

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

An Other Matter paragraph can be used to alert the user to a material misstatement in the financial statements.

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

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

Auditors are responsible to search for both types of subsequent events between ________.

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

A reply to a lawyer's letters should be issued ________.

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

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.

If prior year's financial statements were audited by a different audit firm,this information would appear in a(n) ________ paragraph in the audit report.

A management representation letter is usually obtained at what time during the audit?

An auditor evaluates fair presentation in the financial statements from the auditee's perspective.

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.

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

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

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

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

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 ________.

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?