cpa audit review ch 16 review 4

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Joens1313
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286224
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cpa audit review ch 16 review 4
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2014-10-19 00:31:54
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cpa audit review 16
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cpa audit review ch 16 review 4
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  1. When an auditor expresses an adverse opinion, the opinion paragraph should include

    A.The effects of the material misstatement.

    B.The financial effects of the misstatement.

    C.A direct reference to a separate paragraph disclosing the basis for the opinion.

    D.A description of the uncertainty or scope limitation that prevents an unmodified opinion.
    C.A direct reference to a separate paragraph disclosing the basis for the opinion.

    An adverse opinion states that the financial statements are not fairly presented in accordance with the applicable financial reporting framework. When an adverse opinion is expressed, the opinion paragraph should directly refer to a basis for adverse opinion paragraph that discloses the basis for the adverse opinion. This paragraph should precede the opinion paragraph (AU-C 705).
  2. An auditor’s report includes the following statement: “The financial statements referred to above do not present fairly the financial position, results of operations, or cash flows in conformity with U.S. generally accepted accounting principles.” This auditor’s report was most likely issued in connection with financial statements that are

    A.Misleading.

    B.Based on prospective financial information.

    C.Affected by a material uncertainty.

    D.Inconsistent.
    A.Misleading.

    The language quoted states an adverse opinion. The essence of an adverse opinion is that the statements reported on, as a whole, are materially and pervasively misstated. If financial statements fail to meet the standards, they are misleading.
  3. An auditor released an audit report that was dual-dated for a subsequently discovered fact occurring after the date of the auditor’s report but before issuance of the related financial statements. The auditor’s responsibility for events occurring subsequent to the original report date was

    A.Extended to subsequent events occurring through the date of issuance of the related financial statements.

    B.Limited to include only events occurring before the date of the last subsequent event referenced.

    C.Extended to include all events occurring since the original report date.

    D.Limited to the specific event referenced.
    D.Limited to the specific event referenced.

    Subsequent to the original report date, the auditor is responsible only for the specific subsequently discovered fact for which the report was dual-dated. (S)he is responsible for other events only up to the original report date.
  4. When the financial statements contain a misstatement, the effect of which is material but not pervasive, the auditor should

    A.Qualify the opinion and include a basis for qualified opinion paragraph that describes the matter resulting in the qualification.

    B.Qualify the opinion and describe the misstatement within the opinion paragraph.

    C.Disclaim an opinion and explain the effect of the misstatement in a disclaimer of opinion paragraph.

    D.Disclaim an opinion and describe the misstatement within the opinion paragraph.
    A.Qualify the opinion and include a basis for qualified opinion paragraph that describes the matter resulting in the qualification.

    When the financial statements are materially misstated, but the effects are not pervasive, the auditor should express a qualified opinion. The report should contain a basis for qualified opinion paragraph preceding the opinion paragraph. If the material misstatement relates to specific amounts, the basis paragraph should describe and quantify the financial effects, if practicable. If the misstatement relates to narrative disclosures, the auditor should include an explanation. If the misstatement relates to an omission of required information, the auditor should describe the nature of the information and, if practicable, include the information. The opinion paragraph should refer to the basis paragraph.

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