Exam 13: Completing and Reporting on the Audit

Identify quantitative and qualitative considerations that are taken into account when the auditor evaluatwhether misstatements either cause financial statements to be materially misstated or require additional disclosure.

The auditor's report will not require a modified opinion where:

Demand for forensic accounting has grown following the collapsof Enron and Worldcom. Explain the important characteristics of forensic accountants and the main techniquthey use to investigate fraud.

Which of the following statements regarding judgmental misstatements is incorrect?

Matters of governance interest that the auditor may wish to discuss with those charged with governance include:

Which of the following statements is correct regarding a type 1 subsequent event?

If it is not possible to obtain sufficient appropriate audit evidence, the auditor should:

Which of the following is not an area of disagreement with those charged with governance that may result in a modified audit opinion?

When misstatements or deviations from controls are found in planned procedures, consideration should always be given to:

Which items are matters of governance interest that an auditor would wish to discuss with those charged with governance?

An unqualified audit report with an emphasis of matter should be issued if a subsequent event has occurred that has resulted in a new audit report being prepared on a revised financial statement.

Sufficiency relatto the quality of audit evidence gathered.

The uninsured loss of inventory as a result of fire subsequent to year-end is an example of a type 2 subsequent event.

When Greg Hill was preparing the audit report of his client, he did not include one of the following items in the report. Which item did he exclude?

Material disagreements with management will result in either:

Matters of governance that the auditor may wish to discuss with those charged with governance include any practical difficultiencountered in performing the audit.

Mark Danyluk, the partner in charge of the Bombardier Aerospace audit, was reviewing the work his team had completed. Bombardier is a Canadian company. They used to be involved in recreational equipment such as Ski-Doo snowmobiland Sea-Doo watercraft. Their Aerospace division, however, is probably their best known operating segment and is known as a leading manufacturer of commuter jets containing 50-100 seats. Bombardier's operations were by far the largest of the aerospace companiin Montreal and several of the new programs were very ambitious and very risky. It seemed to Mark that every review he performed had material misstatement possibilities. Mark was thinking that an audit of this magnitude was challenging his abilitiin evaluating what was sufficient and appropriate audit evidence. When Mark started the audit of the current year's operations, he was surprised with the events that took place in 2015 at the Bourget and Farnborough air shows. The anticipation for Bombardier's new CSeriaircraft turned out to be less than positive as other manufacturers seemed to pile up the orders. Airbus executivhad also been claiming for months that their company's introduction of a new engine option (NEO) for the A320 narrowbody voided the business case for the CSeries. Although Bombardier has been able to get commitments up to 100 aircraft, the company is only one-third of the way to its goal of 300 orders for the CSerischeduled service entry in late 2017. This also still leavBombardier 350 aircraft short of the salrequired for the project to break even. As Bombardier attempts to expand its aircraft product line into medium-sized aircraft (100-149 seats), it is entering a space that is getting very close to the market segment dominated by industry giants, Boeing and Airbus. While those companitend to focus on even larger aircraft, they may want to protect themselvby defending against Bombardier in the medium-sized aircraft segment because Bombardier could later expand into the lucrative large-aircraft segment. Bombardier's $3.4-billion bet on the market for narrow-bodied aircraft faca potential threat: a price war instigated by Boeing Co. and Airbus SAS. Mark Danyluk had an uneasy feeling about the viability of the Aerospace sector of the company's operations. Required: a) Describe the factors that Mark Danyluk and his firm will have to consider in evaluating the sufficiency and appropriateness of audit evidence at Bombardier Aerospace. b) What factors are relevant when management assesses the going concern issue at Bombardier?

When Olena Vardon mentioned that the financial statements were materially misstated, what kind of opinion was this?