12.29
Some of the GAAS reporting standards require certain statements in all audit
reports
(“explicit”) and others require statements only under certain
conditions (“implicit”).
Which combination that follows correctly describes
these features of the reporting
standards?
Standards (a) (b) (c) (d)
1.
GAAP Explicit Explicit Implicit Implicit
2. Consistency Implicit Explicit
Explicit Implicit
3. Disclosure Implicit Implicit Explicit Explicit
4.
Report Explicit Explicit Implicit Implicit
12.30 A CPA found that the company
has not capitalized a material amount of leases in the
financial statements.
When considering the materiality of this departure from GAAP, the
CPA would
choose between which reporting options?
a. Unqualified opinion or disclaimer
of opinion.
b. Unqualified opinion or qualified opinion.
c. Emphasis
paragraph with unqualified opinion or an adverse opinion.
d. Qualified
opinion or adverse opinion.
12.31 An auditor determined that the company is
suffering financial difficulty and the goingconcern
status is seriously in
doubt. Even though the company has placed adequate disclosures
in the
financial statements, the auditor must choose between which of the
following
audit report alternatives?
a. Unqualified report with a
going-concern explanatory paragraph or disclaimer of
opinion.
b. Standard
unqualified report or a disclaimer of opinion.
c. Qualified opinion or
adverse opinion.
d. Standard unqualified report or adverse opinion.
12.32
A company accomplished an early extinguishment of debt, and the auditors believe
that
literal application of SFAS No. 98 would cause recognition of a loss
that would materially
distort the financial statements and cause them to be
misleading. Given these facts, the
auditor would probably choose which
reporting option?
a. Explain the situation and give an adverse opinion.
b.
Explain the situation and give a disclaimer of opinion.
c. Explain the
situation and give an unqualified opinion, relying on Rule 203 of the
AICPA
Code of Professional Conduct.
d. Give the standard unqualified audit
report.
12.33 Which of these situations would require an auditor to append an
explanatory paragraph
about consistency to an otherwise unqualified audit
report?
a. Company changed its estimated allowance for uncollectible accounts
receivable.
b. Company corrected a prior mistake in accounting for interest
capitalization.
c. Company sold one of its subsidiaries and consolidated six
subsidiaries this year compared
to seven last year.
d. Company changed its
inventory costing method from FIFO to LIFO.
12.34 Wolfe became the new
auditor for Royal Corporation, succeeding Mason, who audited the
financial
statements last year. Wolfe needs to report on Royal’s comparative financial
statements
and should write in his report an explanation about another
auditor having audited
the prior year
a. Only if Mason’s opinion last year
was qualified.
b. Describing the prior audit and the opinion but not naming
Mason as the predecessor
auditor.
c. Describing the audit but not
revealing the type of opinion Mason gave.
d. Describing the audit and the
opinion and naming Mason as the predecessor
auditor.
12.35 When other
independent auditors are involved in the current audit of parts of the
company’s
business, the principal auditor can write an audit report that (two
answers)
a. Mentions the other auditor, describes the extent of the other
auditor’s work, and gives an
unqualified opinion.
b. Does not mention the
other auditor and gives an unqualified opinion in a standard
unqualified
report.
c. Places primary responsibility for the audit report on the other
auditors.
d. Names the other auditors, describes their work, and presents
only the principal auditor’s
report.
12.36 An “emphasis-of-a-matter”
paragraph inserted in a standard audit report causes the report
to be
characterized as a(n)
a. Unqualified opinion report.
b. Divided
responsibility report.
c. Adverse opinion report.
d. Disclaimer of
opinion.
12.37 Under which of the following conditions can a disclaimer of
opinion never be given?
a. Going-concern problems are highly material and
significant.
b. The company does not let the auditor have access to evidence
about important accounts.
c. The auditor owns stock in the company.
d. The
auditor has found that the company has used the NIFO (next-in, first-out)
inventory
costing method.
12.38 Where will you find an auditor’s own
responsibility for expressing the opinion on financial
statements?
a.
Stated explicitly in the introductory paragraph of the standard unqualified
report.
b. Unstated but understood in the introductory paragraph of the
standard unqualified
report.
c. Stated explicitly in the opinion paragraph
of the standard unqualified report.
d. Stated explicitly in the scope
paragraph of the standard unqualified report.
Some of the GAAS reporting standards require certain statements in all audit
reports
(“explicit”) and others require statements only under certain
conditions (“implicit”).
Which combination that follows correctly describes
these features of the reporting
standards?
Standards (a) (b) (c) (d)
1.
GAAP Explicit Explicit Implicit Implicit
2. Consistency Implicit Explicit
Explicit Implicit
3. Disclosure Implicit Implicit Explicit Explicit
4.
Report Explicit Explicit Implicit Implicit
12.30 A CPA found that the company
has not capitalized a material amount of leases in the
financial statements.
When considering the materiality of this departure from GAAP, the
CPA would
choose between which reporting options?
a. Unqualified opinion or disclaimer
of opinion.
b. Unqualified opinion or qualified opinion.
c. Emphasis
paragraph with unqualified opinion or an adverse opinion.
d. Qualified
opinion or adverse opinion.
12.31 An auditor determined that the company is
suffering financial difficulty and the goingconcern
status is seriously in
doubt. Even though the company has placed adequate disclosures
in the
financial statements, the auditor must choose between which of the
following
audit report alternatives?
a. Unqualified report with a
going-concern explanatory paragraph or disclaimer of
opinion.
b. Standard
unqualified report or a disclaimer of opinion.
c. Qualified opinion or
adverse opinion.
d. Standard unqualified report or adverse opinion.
12.32
A company accomplished an early extinguishment of debt, and the auditors believe
that
literal application of SFAS No. 98 would cause recognition of a loss
that would materially
distort the financial statements and cause them to be
misleading. Given these facts, the
auditor would probably choose which
reporting option?
a. Explain the situation and give an adverse opinion.
b.
Explain the situation and give a disclaimer of opinion.
c. Explain the
situation and give an unqualified opinion, relying on Rule 203 of the
AICPA
Code of Professional Conduct.
d. Give the standard unqualified audit
report.
12.33 Which of these situations would require an auditor to append an
explanatory paragraph
about consistency to an otherwise unqualified audit
report?
a. Company changed its estimated allowance for uncollectible accounts
receivable.
b. Company corrected a prior mistake in accounting for interest
capitalization.
c. Company sold one of its subsidiaries and consolidated six
subsidiaries this year compared
to seven last year.
d. Company changed its
inventory costing method from FIFO to LIFO.
12.34 Wolfe became the new
auditor for Royal Corporation, succeeding Mason, who audited the
financial
statements last year. Wolfe needs to report on Royal’s comparative financial
statements
and should write in his report an explanation about another
auditor having audited
the prior year
a. Only if Mason’s opinion last year
was qualified.
b. Describing the prior audit and the opinion but not naming
Mason as the predecessor
auditor.
c. Describing the audit but not
revealing the type of opinion Mason gave.
d. Describing the audit and the
opinion and naming Mason as the predecessor
auditor.
12.35 When other
independent auditors are involved in the current audit of parts of the
company’s
business, the principal auditor can write an audit report that (two
answers)
a. Mentions the other auditor, describes the extent of the other
auditor’s work, and gives an
unqualified opinion.
b. Does not mention the
other auditor and gives an unqualified opinion in a standard
unqualified
report.
c. Places primary responsibility for the audit report on the other
auditors.
d. Names the other auditors, describes their work, and presents
only the principal auditor’s
report.
12.36 An “emphasis-of-a-matter”
paragraph inserted in a standard audit report causes the report
to be
characterized as a(n)
a. Unqualified opinion report.
b. Divided
responsibility report.
c. Adverse opinion report.
d. Disclaimer of
opinion.
12.37 Under which of the following conditions can a disclaimer of
opinion never be given?
a. Going-concern problems are highly material and
significant.
b. The company does not let the auditor have access to evidence
about important accounts.
c. The auditor owns stock in the company.
d. The
auditor has found that the company has used the NIFO (next-in, first-out)
inventory
costing method.
12.38 Where will you find an auditor’s own
responsibility for expressing the opinion on financial
statements?
a.
Stated explicitly in the introductory paragraph of the standard unqualified
report.
b. Unstated but understood in the introductory paragraph of the
standard unqualified
report.
c. Stated explicitly in the opinion paragraph
of the standard unqualified report.
d. Stated explicitly in the scope
paragraph of the standard unqualified report.
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