Question 1

Due to time and staff restrictions the auditor was unable to attend the inventory stocktake at a remote branch location for Outback Ltd. The inventory at this site accounted for 30% of total assets. Alternative procedures were applied
Satisfactorily. The auditor should issue:

Accepted Answer

A)  an unmodified opinion. 
B)  an unmodified opinion with an Emphasis of Matter. 
C)  a disclaimer of opinion. 
D)  a qualified opinion.

Question 2

Taylor Ltd has disclosed the fact that they are being sued for $1 million. Taylor Ltd reported a profit for the year of $10 million and has total assets of $15 million. You conclude that disclosure of the litigation is adequate. What
Type of opinion should you express on the financial report of Taylor Ltd?

Accepted Answer

A)  Disclaimer of opinion. 
B)  Unmodified opinion with an Emphasis of Matter. 
C)  Unmodified opinion. 
D)  Qualified opinion or adverse opinion.

Question 3

When a client will not make essential corporate mins available to the auditor, the auditor's report will probably contain a(n):

Accepted Answer

A)  disclaimer of opinion. 
B)  unmodified opinion. 
C)  unmodified opinion with an Emphasis of Matter. 
D)  qualified opinion.

Question 4

For a Corporations Act 2001 audit, the auditor has reporting obligations to:

Accepted Answer

A)  management and the board of directors. 
B)  the governing body and members. 
C)  Australian Securities and Investments Commission (ASI
C) . 
D)  All of the given answers.

Question 5

When restrictions are imposed by the client, which significantly limit the auditor's ability to audit fixed assets (a material part of the balance sheet), the auditor generally should issue which of the following opinions?

Accepted Answer

A)  Unmodified with an Emphasis of Matter. 
B)  Qualified. 
C)  Disclaimer. 
D)  Adverse.

Question 6

The financial report of Quick Buck Ltd indicates that there may be some going concern problems. However, the auditor concludes, based on mitigating factors, that the client will most likely continue as a going concern during the next year. The mitigating factors are adequately disclosed in the accounts. What type of audit opinion should the auditor express?

Accepted Answer

A)  Disclaimer of opinion. 
B)  Unmodified opinion. 
C)  Qualified or adverse opinion. 
D)  Unmodified opinion with an Other Matter paragraph.

Question 7

All of the following are true with respect to the auditor's consideration of information other than the audited financial report that are included in a client's annual report except:

Accepted Answer

A)  the auditor must consider whether the other information is consistent with the information contained in the audited financial statements. 
B)  the auditor is under no obligation to perform audit procedures on this other information. 
C)  the auditor must perform audit procedures on this other information. 
D)  the auditor must request that material inconsistencies be corrected.

Question 8

Which of the following situations will not result in modification of the auditor's report because of a scope limitation?

Accepted Answer

A)  Restriction imposed by the client. 
B)  Reliance placed on the report of another auditor. 
C)  Inability to obtain sufficient competent evidential matter. 
D)  Inadequacy in the accounting records.

Question 9

An entity operates in a highly regulated industry with special, legislated reporting requirements, with which it has complied. However, this has resulted in it not complying with the requirements of some Australian Accounting
Standards. Note 1 to the accounts states that the accounts are prepared in conformity with both the special legislated
Reporting requirements and the Australian Accounting Standards. What type of audit opinion should be issued?

Accepted Answer

A)  An adverse opinion. 
B)  A qualified opinion. 
C)  An unmodified opinion with regards the special legislation and a qualified opinion with regards the departure from Australian Accounting Standards. 
D)  An unmodified opinion with an Emphasis of Matter paragraph.

Question 10

If an entity's external auditor expresses an unmodified opinion as a result of the audit of the entity's financial report, readers of the auditor's report can assume that:

Accepted Answer

A)  the entity is financially sound and the financial report is accurate. 
B)  the external auditor found no irregularities. 
C)  all material disagreements between the entity and the external auditor about the application of accounting principles were resolved to the satisfaction of the auditor. 
D)  the internal control structure is effective.

Question 11

Your client has followed approved accounting standards but a note to the financial report indicates the early application of an accounting standard that has a pervasive effect on the financial report in advance of its effective date. The note details the reasons for this view. You, as the auditor, concur that this additional note disclosure is necessary to give a true and fair value. What type of opinion should you issue?

Accepted Answer

A)  An unmodified opinion with an Emphasis of Matter. 
B)  A disclaimer of opinion. 
C)  An unmodified opinion. 
D)  A qualified opinion or adverse opinion.

Question 12

A solicitor limits a response concerning a litigation claim because the solicitor is unable to determine the likelihood of an unfavourable outcome. Which type of opinion should the auditor express if the litigation is adequately disclosed
And the range of potential loss is material in relation to the client's financial report considered as a whole?

Accepted Answer

A)  Qualified. 
B)  Unmodified with an Other Matter paragraph. 
C)  Unmodified with an Emphasis of Matter paragraph. 
D)  Unmodified.

Question 13

An auditor has been unable to obtain the audited financial report for the entity's major foreign subsidiary due to civil unrest in that country. The appropriate auditor's report is:

Accepted Answer

A)  an unmodified opinion on the consolidated accounts but a qualified opinion on the parent company's accounts. 
B)  an unmodified opinion with an Emphasis of Matter paragraph. 
C)  a qualified opinion or a disclaimer of opinion. 
D)  a qualified opinion or an adverse opinion.

Question 14

An entity is being sued for substantial damages for producing a faulty product. However, while the result of the litigation will not be known for some time, it believes that the claim is unjustified and that it will be successful in defending the action. It has included appropriate reference to the lawsuit in the financial report. What type of audit opinion should be issued?

Accepted Answer

A)  A qualified opinion. 
B)  An adverse opinion. 
C)  A disclaimer of opinion. 
D)  An unmodified opinion with an Emphasis of Matter section.

Question 15

The directors of a listed company refuse to disclose directors' remuneration of $100 000 on the basis that it is not material. Net profit after tax is $20 million and net assets are $50 million. The appropriate auditor's report is:

Accepted Answer

A)  unmodified with an Emphasis of Matter paragraph. 
B)  unmodified opinion. 
C)  a qualified opinion. 
D)  a disclaimer of opinion.

Question 16

Your client has followed approved accounting standards but a note to the financial report indicates that the application of certain standards results in the financial report being materially misstated. The note details the reasons for this view.You do not concur with this view. What type of opinion should you issue?

Accepted Answer

A)  An unmodified opinion with an Emphasis of Matter. 
B)  A disclaimer of opinion. 
C)  An unmodified opinion. 
D)  A qualified opinion or adverse opinion.

Question 17

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

Accepted Answer

A)  has an obligation to perform auditing procedures to corroborate the other information. 
B)  is required to issue a qualified opinion if the other information has a material misstatement of fact. 
C)  should read the other information to consider whether it is inconsistent with the audited financial statements. 
D)  has no responsibility for the other information because is not part of the basic financial statements.

Question 18

Under which of the following set of circumstances might an auditor disclaim an opinion?

Accepted Answer

A)  There are significant uncertainties affecting the financial report. 
B)  There has been a material change between periods in the method of the application of accounting principles 
C)  The principal auditor decides to make reference to the report of another auditor who disclaimed an opinion on
The audit of a subsidiary. The subsidiary contributed six per cent of operating revenue and profit but very little
In other aspects. 
D)  The financial report contains a departure from generally accepted accounting principles, the effect of which is material.

Question 19

An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing an audited financial report. If the auditor concludes that the financial report does require revision, but the
Client refuses to revise or eliminate the material inconsistency, the auditor may:

Accepted Answer

A)  consider the matter closed since the other information is not covered by the audited financial report. 
B)  issue a qualified opinion after discussing the matter with the client's board of directors. 
C)  revise the auditor's report to include an Emphasis of Matter paragraph describing the material inconsistency. 
D)  disclaim an opinion on the financial report after explaining the material inconsistency in a separate explanatory paragraph.

Question 20

Jodie Ltd, a listed company, refuses to separately disclose directors' fees of $2.5 million on the basis that they believe they are quantitatively immaterial. Profit for the last year was $980 million. The auditor should issue a(n):

Accepted Answer

A)  adverse opinion. 
B)  qualified opinion. 
C)  unmodified opinion with an Emphasis of Matter. 
D)  unmodified opinion.

Exam 13: The Auditors Reporting Obligations Part Five: Other Assurance Services

Due to time and staff restrictions the auditor was unable to attend the inventory stocktake at a remote branch location for Outback Ltd. The inventory at this site accounted for 30% of total assets. Alternative procedures were applied Satisfactorily. The auditor should issue:

When a client will not make essential corporate mins available to the auditor, the auditor's report will probably contain a(n) :