A departure from generally accepted auditing standards
An auditor decides to express a qualified opinion on an entity’s financial statements because a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures. The opinion paragraph of the auditor’s report should state that the qualification pertains to a. A client-imposed scope limitation. The possible effects on the financial statements. Inadequate disclosure of necessary information. Totoy, CPA, was engaged to audit the financial statements of Bibo Co. Totoy obtained sufficient audit evidence for all of Bibo’s financial statement items except Bibo’s opening inventory. Due to inadequate financial records, Totoy could not verify Bibo’s inventory balances. Totoy’s opinion on Bibo’s 2004 financial statements most likely will be Income Statement Balance Sheet a.
Disclaimer Disclaimer b. Unqualified Disclaimer c. Disclaimer Adverse d. Unqualified Adverse 20. When management prepares financial statements on the basis of a going concern and the auditor believes the company may not continue as a going concern, the auditor should issue a(n) a. A dual dated report contains the dates of a subsequent event and the date the: a. Auditor completed work in the client’s office c. Subsequent event was resolved b. Financial statements were prepared d. Audit report was delivered 22. If the principal auditor decides to take responsibility for the work of other auditors, the principal auditor should: a. Modify the opening paragraph c. Modify all three paragraphs b. Modify the opening and opinion paragraphs d. Issue a standard report 23. An auditor who concludes that an uncertainty is not adequately disclosed in the financial statements should issue a: a.
As a separate paragraph, preferably after the opinion paragraph, of the audit report
Disclaimer of opinion. Special report. Unqualified report with an explanatory paragraph. Qualified report. An auditor may wish to emphasize a matter included in the financial statements by adding an explanatory paragraph to the audit report. In this case the following paragraphs of the audit report should be modified: a. Introductory paragraph c. Opinion paragraph b. Scope paragraph d. None 25. In the case of a client imposed scope limitation, the auditor must consider issuing a: a. Qualified opinion or disclaimer of opinion c. Disclaimer of opinion or adverse opinion b. Qualified opinion or adverse opinion d. Disclaimer of opinion 26. Which of the following modifications of the standard auditor’s report does not require an explanatory paragraph. Reference to other auditors c. Scope limitation b. Inconsistency d.
Adverse opinion 27. Pamela, CPA, was engaged to audit the financial statements of One Co. The timing of Pamela’s appointment as auditor and the start of field work made confirmation of accounts receivable by direct communication with the debtors ineffective. However, Pamela applied other procedures and was satisfied as to the reasonableness of the account balances. Pamela’s auditor’s report most likely contained a(n) a. Unqualified opinion. Unqualified opinion with an explanatory paragraph. Qualified opinion because of a scope limitation. Qualified opinion because of a departure from GAAS.
28. A limitation on the scope of an audit sufficient to preclude an unqualified opinion will always result when management a. Engages the auditor after the year-end physical inventory count is completed. b. Fails to correct a material internal control weakness that had been identified during the prior year’s audit. c. Refuses to furnish a management representation letter to the auditor. d. Prevents the auditor from reviewing the working papers of the predecessor auditor. 29. When an auditor expresses an opinion other than unqualified opinion, a clear description of all substantive reasons for the modification of the opinion should be included in the report. This explanation should be presented: a. As a separate paragraph that precedes the opinion paragraph of the audit report. b. c. In the opinion paragraph d. As a separate paragraph in the notes to financial statements. 30. Where a limitation on the scope of the auditor’s work requires modification of an unqualified opinion, the auditor’s report should describe the limitation and: a. Indicate that the auditor is no longer responsible to his opinion. b. Indicate the possible adjustments to the financial statements that might have been determined to be necessary had the limitation not existed. c. Refer the users to the particular note to financial statements that adequately discusses the limitation d. Indicate that the auditor is not satisfied of the results of the alternative procedures that he had performed. 31. What is the purpose of the following paragraph in a particular audit report: “…We draw attention to note X in the financial statements which discusses that the company incurred a net loss of P6.4 million during the year ended and as of that date, the Company’s liabilities exceeded its total assets by P2,500,000. ” a. b. c. d.