Question 1

If information is included the audit report relating to a discrepancy between a company's MD & A and comparative information from other periods, it would appear in a(n) ________ paragraph.

Accepted Answer

A)   Scope
B)   Other Matter
C)   Opinion
D)   Emphasis of Matter B

Question 2

What are the various causes of misstatements? Are they intentional?

Accepted Answer

Misstatements have various causes, such as arithmetical mistakes (e.g., an addition error in a physical inventory count), use of inappropriate accounting principles, incorrect application of accounting principles, and disagreements about valuation or other estimates. They may occur accidentally or through misunderstanding, be the result of embezzlement, or be deliberate misrepresentations. A key qualitative factor in the auditor's assessment is evidence of deliberate misstatements intended to improve or defer earnings to achieve management's goals. These goals, such as obtaining an earnings-based bonus, may not be aligned with those of the company's capital providers, who are usually the most important users of the audited financial statements.

Question 3

The three criteria for fairness of presentation reporting suggest ________ reasoning for accounting.

Accepted Answer

A)   compliance-based
B)   principles-based
C)   engagement-based
D)   fairness-based B

Question 4

To assess fair presentation, the audit engagement partner considers the results of the final overall financial statement analysis, and assesses whether the overall presentation, structure, and content of the financial statements and notes represent the underlying transactions and events fairly, from the perspective of users. The auditor must be satisfied that the information presented in the financial statements is all of the following EXCEPT ________.

Accepted Answer

A)   relevant
B)   reliable
C)   confidential
D)   understandable

Question 5

Before adjusting entries proposed by the auditors are included in financial statements, they must be approved by the ________.

Accepted Answer

A)   client's management
B)   audit manager
C)   engagement partner
D)   cold review partner

Question 6

When a report is double-dated, the auditor has no responsibility for other events that have occurred after the end of fieldwork.

Accepted Answer

A) True 
 B)False

Question 7

The most common reporting framework in Canada is the ________.

Accepted Answer

A)   fair presentation framework
B)   special purpose framework
C)   compliance framework
D)   general purpose framework

Question 8

Which of the following statements regarding fair presentation is FALSE?

Accepted Answer

A)   Fair presentation also requires the financial statements to adequately disclose the significant accounting policies applied so that users can understand the effect of transactions and events on the information.
B)   The auditor assesses whether the terminology used and the titles of financial statements are appropriate and understandable.
C)   The final analysis considers the qualitative aspects of the accounting used.
D)   The final analysis does not consider indications of management bias in selecting accounting policies and making accounting estimates.

Question 9

Further possible misstatements are those that could exist over and above the total of known and likely misstatements because of the fundamental limitations of auditing.

Accepted Answer

A) True 
 B)False

Question 10

If an audit report contains information relating to a company's MD&A, it would be found in a(n) ________ paragraph.

Accepted Answer

A)   Opinion
B)   Scope
C)   Other Matter
D)   Emphasis of Matter

Question 11

The Orange Corporation was audited for the year-ended December 31, the fieldwork was completed on January 25, and the audit report was delivered on February 15. The auditor learned about a two-for-one stock split on February 1. How should the report be dated?

Accepted Answer

A)   December 31 and January 25.
B)   January 25 and February 1.
C)   January 25 and February 15.
D)   February 1 and February 15.

Question 12

What is "dual dating" in the audit report?

Accepted Answer

The answer of What is "dual dating" in the audit...

Question 13

Likely misstatements ________.

Accepted Answer

A)   are those actually identified during the audit, so there is no uncertainty about their existence
B)   are those that probably exist, based on audit evidence examined
C)   are those that could exist over and above the total of known and likely misstatements because of the fundamental limitations of auditing
D)   are those for which the amount of possible misstatement cannot be precisely quantified

Question 14

Auditors are responsible to search for both types of subsequent events between ________.

Accepted Answer

A)   the financial statement year-end date and the audited financial statement issue date
B)   the audit report date and the audited financial statement issue date
C)   the financial statement year-end date and the audit report date
D)   the interim audit date and the audit report date

Question 15

Subsequent to the issuance of the audit report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should ________.

Accepted Answer

A)   determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information
B)   request that management disclose the newly discovered information by issuing revised financial statements
C)   issue revised pro forma financial statements taking into consideration the newly discovered information
D)   give public notice that the auditor is no longer associated with the financial statements

Question 16

Briefly explain the auditor's responsibility for the subsequent discovery of facts that occurred between the date of the financial statements and the date of the auditor's report.

Accepted Answer

The answer of Briefly explain the auditor's responsibility for the...

Question 17

________ paragraphs relate to information that is not required to be disclosed in the financial statements.

Accepted Answer

A)   Scope
B)   Other Matter
C)   Opinion
D)   Emphasis of Matter

Question 18

Dual dating refers to instances of dating the audit report as of the date that financial statements are approved by the auditee's responsible parties (e.g., the company's board of directors) and attaching an additional later date to disclosure of a significant subsequent event that requires financial statements to be amended.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements regarding management estimates is FALSE?

Accepted Answer

A)   Complications in audit evaluation can arise from measurements involving management estimates.
B)   Auditors typically do not keep track of the differences between management estimates and the most reasonable estimates supported by audit evidence.
C)   They also identify estimates with high risk due to forecast errors, and assess whether these are fairly presented in the circumstances.
D)   In areas where GAAP are evolving, the auditor needs to exercise judgment, guided by general principles and reporting objectives, to assess fair presentation.

Question 20

Arithmetical mistakes, use of inappropriate accounting principles, incorrect application of accounting principles, and disagreements about valuation or other estimates are the causes of ________.

Accepted Answer

A)   fraud
B)   misstatements
C)   materiality
D)   adjustments

Exam 16: Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

If information is included the audit report relating to a discrepancy between a company's MD & A and comparative information from other periods, it would appear in a(n) ________ paragraph.

What are the various causes of misstatements? Are they intentional?

The three criteria for fairness of presentation reporting suggest ________ reasoning for accounting.

Before adjusting entries proposed by the auditors are included in financial statements, they must be approved by the ________.

When a report is double-dated, the auditor has no responsibility for other events that have occurred after the end of fieldwork.

The most common reporting framework in Canada is the ________.

Which of the following statements regarding fair presentation is FALSE?

Further possible misstatements are those that could exist over and above the total of known and likely misstatements because of the fundamental limitations of auditing.

If an audit report contains information relating to a company's MD&A, it would be found in a(n) ________ paragraph.

The Orange Corporation was audited for the year-ended December 31, the fieldwork was completed on January 25, and the audit report was delivered on February 15. The auditor learned about a two-for-one stock split on February 1. How should the report be dated?

What is "dual dating" in the audit report?

Likely misstatements ________.

Auditors are responsible to search for both types of subsequent events between ________.

Subsequent to the issuance of the audit report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should ________.

Briefly explain the auditor's responsibility for the subsequent discovery of facts that occurred between the date of the financial statements and the date of the auditor's report.

________ paragraphs relate to information that is not required to be disclosed in the financial statements.

Which of the following statements regarding management estimates is FALSE?

Arithmetical mistakes, use of inappropriate accounting principles, incorrect application of accounting principles, and disagreements about valuation or other estimates are the causes of ________.