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Exam 18: Reports on Audited Financial Statements

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Question 21

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An auditor may reasonably issue an "except for" qualified opinion for:

A) a scope limitation or an unjustified accounting change.
B) a scope limitation, but not an unjustified accounting change.
C) an unjustified accounting change, but not a scope limitation.
D) neither an unjustified accounting change nor a scope limitation.

E) B) and C)
F) A) and B)

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Question 22

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Discuss the new enhancements implemented by the new PCAOB reporting standards for "listed" (public)entities.

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• The Opinion section of the report is n...

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Question 23

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In the auditor's report, the principal auditor decides not to make reference to another CPA who audited an entity's subsidiary. The principal auditor could justify this decision if, among other requirements, the principal auditor:

Other bases of accounting (special purpose frameworks) include all of the following except:

Which of the following would not require an explanatory/emphasis-of-matter paragraph in the auditor's report?

When are an auditor's reporting responsibilities not met by attaching an explanation of the circumstances and a disclaimer of opinion to the entity's financial statement?

In the first audit of an entity, because of the entity's record retention policies, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. If the amounts in question could materially affect current operating results, the auditor would:

An opinion based in part on the report of another auditor requires an explanatory/emphasis-of-matter paragraph be added to the standard unqualified audit report.

The following four situations require a modification to the standard unqualified audit report for public companies. Identify the modification required for each. a. Opinion based in part on the report of another auditor. b. Going concern. c. Lack of comparability. d. Emphasize a matter.

A scope limitation sufficient to preclude an unqualified opinion always will result when management:

A special report related to compliance with contractual provisions provides:

When audited financial statements are presented in a document containing other information, the auditor:

A change in accounting estimate is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.

When reporting on comparative financial statements where the financial statements of the prior year have been examined by a predecessor auditor whose report is not presented, the successor auditor should make:

Jeff Johns is a staff accountant and has been assigned to the audit of Worldwide Enterprises, Inc. Subsequent to the completion of fieldwork; Jeff was assigned to draft the audit report. The content of one of the paragraphs he has drafted reads as follows: As explained in Note 2 to the financial statements, Worldwide Enterprises has charged goodwill and certain other intangible assets acquired in two separate acquisitions directly to shareholders' equity. Under generally accepted accounting principles, these intangibles should have been recorded as assets and amortized to income over future periods. Had these intangibles been capitalized, total assets would have increased by $400,000 as of December 31, 2011 and net income and earnings per share would be increased by $380,000 and $2.25, respectively (assuming a 20-year amortization period). a. Based on the contents of the paragraph above, which condition requiring a departure from a standard unqualified opinion exists in the engagement? b. Assuming that the engagement partner agrees with the paragraph Jeff has prepared above, where in the auditor's report should the paragraph be placed? c. How would the materiality of the condition above affect the final choice of opinion?

Auditing standards define special purpose financial statements as including those prepared under the following basis(es) :

A scope limitation results from an inability to obtain sufficient appropriate evidence about some component of the financial statements.

When an auditor reports on financial statements prepared according to a special purpose framework, the auditor's report should:

Changes that affect comparability but that do not involve a change in accounting principle or the correction of a misstatement are normally disclosed in the footnotes but do not require an explanatory paragraph in the audit report.

If a public company issues financial statements that purport to present its financial position and results of operations but omits the statement of cash flows, the auditor ordinarily will express a(n) :