cpa audit review ch 16 review 5

Card Set Information

Author:
Joens1313
ID:
286222
Filename:
cpa audit review ch 16 review 5
Updated:
2014-10-19 00:08:46
Tags:
cpa audit review 16
Folders:

Description:
cpa audit review ch 16 review 5
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user Joens1313 on FreezingBlue Flashcards. What would you like to do?


  1. The auditor should use the phrase “---------------------” to qualify an opinion, followed by the basis for the qualification and a reference to the basis for qualified opinion paragraph preceding the opinion paragraph.
    except for
  2. A CPA concludes that the unaudited financial statements of an issuer on which the CPA is disclaiming an opinion are not in conformity with generally accepted accounting principles (GAAP) because management has failed to capitalize leases. The CPA suggests appropriate revisions to the financial statements, but management refuses to accept the CPA’s suggestions. Under these circumstances, the CPA ordinarily would

    A.Restrict the distribution of the CPA’s report to management and the entity’s board of directors.

    B.Express limited assurance that no other material modifications should be made to the financial statements.

    C.Issue a qualified opinion or adverse opinion depending on the materiality of the departure from GAAP.

    D.Describe the nature of the departure from GAAP in the CPA’s report and state the effects on the financial statements, if practicable.
    D.Describe the nature of the departure from GAAP in the CPA’s report and state the effects on the financial statements, if practicable.

    PCAOB standards apply to audit engagements involving issuers. Under these standards, an accountant planning to disclaim an opinion may discover a material departure from GAAP. The accountant should disclose the departure in the disclaimer, including its effects if they have been determined by management or by the accountant’s procedures.
  3. When qualifying an opinion because of an insufficiency of appropriate audit evidence, an auditor should refer to the situation in the
    Auditor’s Responsibility Section

    An auditor may express a qualified opinion due to an inability to obtain sufficient appropriate audit evidence if the possible effects are material but not pervasive. But the notes to the financial statements are unchanged because they were not drafted by the auditor. Moreover, a sentence in the auditor’s responsibility section states, “We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.”
  4. When an auditor qualifies an opinion because of a scope limitation, which part(s) of the auditor’s report should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself?

    A.An emphasis-of-matter paragraph.

    B.The introductory paragraph.

    C.The auditor’s responsibility section.

    D.The opinion paragraph only.
    D.The opinion paragraph only.

    When a qualified opinion results from an inability to obtain sufficient appropriate evidence, the auditor describes the matter in the basis for qualified opinion paragraph, not in a note to the statement. The description of the audit scope is the responsibility of the auditor, not management. The opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements, not to the scope limitation itself. The wording “. . . except for the possible effects of the matter described in the basis for qualified opinion paragraph . . .“ is appropriate. The following are the other effects on the auditor’s report when the opinion is qualified due to an inability to obtain sufficient appropriate evidence with possible effects that are material but not pervasive: (1)  The introductory paragraph is unchanged; (2) the management’s responsibility paragraph is unchanged; and (3) the auditor’s responsibility section ends with the sentence, “We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.”
  5. An auditor’s opinion reads as follows: “In our opinion, except for the above-mentioned limitation on the scope of our audit...” This is an example of an

    A.Acceptable qualified opinion.

    B.Acceptable review opinion.

    C.Unacceptable reporting practice.

    D.Acceptable emphasis of a matter.
    C.Unacceptable reporting practice.

    When an opinion is qualified because of a scope limitation, the opinion paragraph should indicate that the qualification pertains to the possible effects on the statements of undetected misstatements (AU-C 705). The language given in the question bases the qualification on the restriction itself and is unacceptable.

What would you like to do?

Home > Flashcards > Print Preview