Exam 3: Reports on Audited Financial Statements and Audited Internal Controlt

An organization undergoing significant going concern problems presents several challenges for the PA to consider.Discuss some of these.

Free

(Essay)

4.7/5

(42)

Question 1

Correct Answer:

Verified

"Dealing with questions of going concern is difficult because auditors are forced to evaluate matters of financial analysis, financial forecasting and business strategy.Management tends to be optimistic in their estimates and are usually unwilling to give up and close their businesses without strong attempts to survive.Auditors must attempt to bring a realistic view to accounting estimates, while realizing that they are not likely as familiar as management with opportunities in the business.
Managers and auditors both view news of financial troubles in an audit report as a self- fulfilling prophecy that causes bankruptcy.Even though the going concern issue may be fully disclosed in a note, the extra credibility enjoyed by public accountants makes their emphasis of the matter in their audit report increase the perception of risk of business failure.The mere
fact that the report is a non-standard report raises concerns as well.Nonetheless, auditors have an obligation to the users of financial statements to make sure they are aware of the possibility of bankruptcy."

Auditors cannot give negative assurance in an audit report.

Free

(True/False)

4.8/5

(30)

Question 2

Correct Answer:

Verified

True

Restrictions imposed by a client prohibited the observation of physical inventories that account for 35% of total assets.Alternative audit procedures for inventory were not feasible, although the auditor was able to obtain satisfactory evidence for all other items in the financial statements.The auditor should express

Free

(Multiple Choice)

4.7/5

(39)

Question 3

Correct Answer:

Verified

Levels of assurance refer to

(Multiple Choice)

4.9/5

(39)

Question 4

A disclaimer of opinion generally indicates

(Multiple Choice)

4.8/5

(38)

Question 5

What is the best description of the basis on which an auditor issues her report on financial statements?

(Multiple Choice)

4.9/5

(43)

Question 6

An audit report included an additional paragraph disclosing a difference of opinion between the auditor and the client.The auditor believed that an adjustment should be made to the financial statements.The opinion paragraph of the audit report should express

(Multiple Choice)

4.9/5

(45)

Question 7

An auditor who is reporting on financial statements that contain a material departure from generally accepted accounting principles should include a separate explanatory paragraph and

(Multiple Choice)

4.7/5

(41)

Question 8

By its silence, a clean opinion implies that the financial statement disclosures are reasonably adequate.

(True/False)

4.9/5

(37)

Question 9

What are the three ways that accountants become associated with financial information issued by an enterprise?

(Essay)

4.9/5

(42)

Question 10

Many users interpret audit reports based on the number of paragraphs.In a standard audit report on financial statements, how many paragraphs are there?

(Multiple Choice)

4.7/5

(45)

Question 11

When the auditor is not independent, a GAAP departure qualification is required.

(True/False)

4.9/5

(40)

Question 12

Green, CPA, was engaged to audit the financial statements of Essex Co.after its fiscal Year had ended.The timing of Green's appointment as auditor and the start of field work made confirmation of accounts receivable by direct communication with the debtors impracticable.Green applied other procedures and was satisfied as to the reasonableness of the account balances.Green's auditor's report most likely contained a (an)

(Multiple Choice)

4.8/5

(43)

Question 13

An accountant becomes associated with financial statements when they sign them as the Chief Financial Officer

(True/False)

4.9/5

(38)

Question 14

Under which of the following circumstances would a disclaimer of opinion be appropriate?

(Multiple Choice)

4.8/5

(35)

Question 15

CA has been engaged to audit the financial statements of Marchano Ltd., a manufacturer of toys.Several individuals are suing the company because of a toy that injured children.The company has not disclosed the lawsuit in its financial statements.The type of audit report issued should be:

(Multiple Choice)

4.9/5

(38)

Question 16

"The company has not made an allowance for bad debts for an account deemed uncollectible in the amount of $250,000 as of the year ended December 31, 2001..." is an example of a

(Multiple Choice)

4.9/5

(41)

Question 17

Under which of the following circumstances does an accountant become associated with a financial report?

(Multiple Choice)

4.9/5

(44)

Question 18

Why must a CA issue a report when associated with financial information?

(Essay)

4.8/5

(42)

Question 19

Auditing standards require that an appropriate communication be issued in all cases where an accountant's name is associated with financial information.

(True/False)

4.8/5

(33)

Question 20

Showing 1 - 20 of 47

An organization undergoing significant going concern problems presents several challenges for the PA to consider.Discuss some of these.

Auditors cannot give negative assurance in an audit report.

Levels of assurance refer to

A disclaimer of opinion generally indicates

What is the best description of the basis on which an auditor issues her report on financial statements?

An audit report included an additional paragraph disclosing a difference of opinion between the auditor and the client.The auditor believed that an adjustment should be made to the financial statements.The opinion paragraph of the audit report should express

An auditor who is reporting on financial statements that contain a material departure from generally accepted accounting principles should include a separate explanatory paragraph and

By its silence, a clean opinion implies that the financial statement disclosures are reasonably adequate.

What are the three ways that accountants become associated with financial information issued by an enterprise?

Many users interpret audit reports based on the number of paragraphs.In a standard audit report on financial statements, how many paragraphs are there?

When the auditor is not independent, a GAAP departure qualification is required.

An accountant becomes associated with financial statements when they sign them as the Chief Financial Officer

Under which of the following circumstances would a disclaimer of opinion be appropriate?

CA has been engaged to audit the financial statements of Marchano Ltd., a manufacturer of toys.Several individuals are suing the company because of a toy that injured children.The company has not disclosed the lawsuit in its financial statements.The type of audit report issued should be:

"The company has not made an allowance for bad debts for an account deemed uncollectible in the amount of $250,000 as of the year ended December 31, 2001..." is an example of a

Under which of the following circumstances does an accountant become associated with a financial report?

Why must a CA issue a report when associated with financial information?

Auditing standards require that an appropriate communication be issued in all cases where an accountant's name is associated with financial information.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters