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Question(s) / Instruction(s):

41.     Whenever there is scope restriction, the approprite response is to issue
medium     a.     a disclaimer of opinion.
     b.     an adverse opinion.
     c.     a qualified opinion.
     d.     an unqualified report, a qualification of scope and opinion, or a disclaimer, depending on materiality.
     

42.
medium     Which of the following is least likely to cause uncertainty about the ability of a company to continue as a going concern?
     a.     Legal proceedings against another company in which the audit client claims the other party      has infringed on the company’s patent.
     b.     Loss of major customers.
     c.     Significant recurring operating losses.
     d.     Working capital deficiencies.
     
43.
medium
     The client has presented all required financial statements with the exception of the statement of cash flows. The auditor has completed the audit and is satisfied that everything, with the exception of the missing statement, is presented fairly. According to SAS No. 58, the auditor
     a.     may issue either an unqualified or a qualified opinion with “except for” in the opinion      paragraph.
     b.     must issue an adverse opinion with “except for” in the opinion paragraph.
     c.     may issue an unqualified opinion.
     d.     must issue a qualified opinion with “except for” in the opinion paragraph.
     
44.     When a disclaimer is issued because the auditor lacks independence,
medium     a.     no report title is included on the report.
     b.     a one-paragraph audit report is issued.
     c.     the only reason cited for issuing the disclaimer is the lack of independence.
     d.     all of the above are correct.
     
45.     In a qualified, adverse, or disclaimer report, the auditor
medium     a.     has not performed a satisfactory audit.
     b.     is not satisfied that the financial statements are presented fairly.
     c.     either a or b.
     d.     none of these.
     
46.
medium     When the client has not been consistent in applying GAAP from year one to year two and the auditor does not concur with the appropriateness of the change, the auditor will issue a(n)
     a.     disclaimer.
     b.     adverse opinion.
     c.     unqualified opinion.
     d.     qualified opinion.
     
47.
medium     Which of the following is not a change which affects consistency and, therefore, does not require an explanatory paragraph?
     a.     Change in accounting principle, such as a change from LIFO to FIFO.
     b.     Change in reporting entity, such as the inclusion of an additional company in combined financial statements.
     c.     Change in an estimate, such as a decrease in the life of an asset for depreciation purposes.
     d.     Correction of errors by changing from non-GAAP to GAAP.
     
48.
medium
     Items that materially affect the comparability of financial statements generally require disclosure in the footnotes. If the client refuses to properly disclose the item, the auditor may be required to issue
     a.     the disclaimer.
     b.     an unqualified opinion.
     c.     a qualified opinion.
     d.     an adverse opinion.
     

49.
medium     Auditors sometimes encounter situations in which the outcome of a matter cannot be reasonably estimated at the time the financial statements are issued. These matters are referred to as
     a.     inestimable matters.
     b.     non sequiturs.
     c.     uncertainties.
     d.     in suspense matters.
     
50.
medium     Three of the paragraphs of the report modified for uncertainties are the same as the standard unqualified report. The explanatory paragraph which describes the uncertainty is added as the
     a.     first paragraph.
     b.     fourth and last paragraph.
     c.     third paragraph with the opinion paragraph last.
     d.     second paragraph with the opinion paragraph last.
     
51.
medium
     When there is uncertainty about a company’s ability to continue as a going concern, the auditor’s concern is the possibility that the client may not be able to continue its operations or meet its obligations for a “reasonable period of time.” For this purpose, a reasonable period of time is considered not to exceed
     a.     six months from the date of the financial statements.
     b.     six months from the date of the audit report.
     c.     one year from the date of the financial statements.
     d.     one year from the date of the audit report.
     
52.
medium     When the auditor concludes that there is substantial doubt about the entity’s ability to continue as a going concern, the appropriate audit report would be
     a.     an unqualified opinion with an explanatory paragraph.
     b.     a qualified opinion with an explanatory paragraph.
     c.     a disclaimer of opinion.
     d.     a and c are correct.
     
53.     When a qualified or adverse opinion is issued, the qualifying paragraph is inserted
medium     a.     between the introductory and scope paragraphs.
     b.     between the scope and opinion paragraphs.
     c.     after the opinion paragraph, as a fourth paragraph.
     d.     immediately after the address, as the first paragraph.
     
54.     For the report containing a disclaimer for lack of independence, the disclaimer is in the
medium     a.     third or opinion paragraph.
     b.     second or scope paragraph.
     c.     first and only paragraph.
     d.     fourth or explanatory paragraph.
     
55.     An auditor may not issue a qualified opinion when
medium     a.     a scope limitation prevents the auditor from completing an important audit procedure.
     b.     the auditor’s report refers to the work of a specialist.
     c.     the auditor lacks independence with respect to the audited entity.
     d.     an accounting principle at variance with generally accepted accounting principles is used.
     

56.
medium     When a company’s financial statements contain a departure from GAAP with which the auditor concurs, the departure should be explained in
     a.     the scope paragraph.
     b.     an explanatory paragraph between the scope and opinion paragraphs.
     c.     the opinion paragraph.
     d.     an explanatory paragraph following the opinion paragraph.
     
57.
medium     Which of the following representations does an auditor make explicitly and which implicitly when issuing an unqualified opinion?
     Conformity          Adequacy of
     with GAAP          disclosure
     a.     Explicitly          Explicitly
     b.     Implicitly          Implicitly
     c.     Implicitly          Explicitly
     d.     Explicitly          Implicitly
     
58.
medium
     Dennen, CPA, is the principal auditor for a multi-national corporation. Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation. Dennen is satisfied with the independence and professional reputation of the other auditor, as well as the quality of the other auditor’s examination. With respect to Dennen’s report on the consolidated financial statements, taken as a whole, Dennen
     a.     must not refer to the examination of the other auditor.
     b.     must refer to the examination of the other auditor.
     c.     may refer to the examination of the other auditor.
     d.     may refer to the examination of the other auditor, in which case Dennen must include in the auditor’s report on the consolidated financial statements a qualified opinion with respect to the examination of the other auditor.
     
59.
medium
     A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles. The auditor’s report on the financial statements of the year of the change should include
     a.     no reference to consistency.
     b.     a reference to a prior period adjustment in the opinion paragraph.
     c.     an explanatory paragraph that justifies the change and explains the impact of the change on reported net income.
     d.     an explanatory paragraph explaining the change.
     
60. (Public)
medium
     Srbnes-Oxley requires uditors of public compny to ttest to mngement’s report on the effectiveness of internl control over finncil reporting. Wht type of ssurnce does the uditor provide in this report?
     .     Positive ssurnce on the finncil sttements nd on the effectiveness of internl control      over finncil reporting.
     b.     Positive ssurnce on the finncil sttements nd negtive ssurnce on the effectiveness of internl control over finncil reporting.
     c.     Limited ssurnce on the finncil sttements nd on the effectiveness of internl control over finncil reporting.
     d.     There is no guidnce on wht level of ssurnce to provide.

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