115. You are the auditor for Codes Limited (Codes) for the financial year ending 30 June 2015. Fieldwork for the Codes engagement was completed on 21 August 2015 and the audit report was signed on 27 August 2015. The annual report is due to be released on 15 September 2015. On 7 September 2015, the market price of one of Codes' investments declined marginally. Which of the following describes the most appropriate action, if any, you would require Codes' management to undertake in relation to the financial statements?

a)Adjust the financial statements.

b)No action required.

c)Disclose by way of subsequent event note to the financial statements.

d)Disclose by way of contingent liability note to the balance sheet

116. An auditor was engaged to perform the financial statement audit for Kinshop Ltd (Kinshop) for the year ending 30 June 2015. The auditor did not observe the inventory count conducted by Kinshop at year end, but was able to obtain sufficient appropriate audit evidence by undertaking alternative audit procedures. Which of the following audit reports would be most likely for the Kinshop engagements?

A) Disclaimer of opinion.

b) Qualified opinion.

c) Unmodified opinion.

d) Adverse opinion.

117. During the final review of a client's annual report, an auditor notes that some of the discussion in the 'Year in Review' section of the annual report is inconsistent with the audited financial statement. This was raised with management, but they declined to change the discussion on the basis that the information was subject to interpretation. The auditor should:

A) Revise the auditor's report to include an Other Matter paragraph describing the inconsistency.

b) Issue a qualified opinion after ensuring the matter is noted in the audit letter to the client's board of directors.

c) Issue an unmodified opinion since the inconsistency is not in the audited financial statements and is subjective.

d) Revise the auditor's report to include an Emphasis of Matter paragraph describing the inconsistency.

118.Which of the following would most likely cause an auditor to increase their assessment of control risk in relation to a client's audit committee?

a)The audit committee chairperson has a substantial shareholding in the client entity

b)The audit committee members have diverse experience sitting on the boards of other organisations

c)Two out of four committee members have expertise in financial reporting

d)Only one of the audit committee members has a legal practice background

119.You are currently performing the audit of XYZ Limited (XYZ). Your audit firm has bee dispute with management over the carrying value of intangible assets (purchased lice agreements). Due to the materiality of the amounts involved you decided to engage at expert to perform an independent valuation. The result from the expert was close to y, original estimate and still materially different from that of management. The directors refuse to amend the financial report. The appropriate audit opinion is:

a)Unmodified with an Emphasis on Matter paragraph

b)Qualified

c)Adverse

d)Disclaimer.

120.The auditor engages an actuary to assist in the audit of complex calculations concerning accrued superannuation liabilities. These liabilities account for 35% of the client's total liabilities. The actuary's findings are reasonably close to the client's calculations and support the financial report account balance:

a)Qualified opinion;

b)Unmodified opinion;

c)Disclaimer;

d)Unmodified opinion with Emphasis of Matter.

121.A review of the minutes of a directors' meeting held after year end reveals that the company has decided to seek expressions of interest for the sale of the Internet division of its business' The division accounts for less than 1% of sales revenue, and was launched over one year ago with a lot of publicity. The client has disclosed the expected sale of the division in the subsequent events note to the accounts. You as auditor concur that this disclosure is adequate. The client has not adjusted the year-end accounts. What audit opinion should be issued?

a)Unmodified opinion;

b)Unmodified opinion with an Other Matter paragraph;

c)Qualified opinion;

d)Adverse opinion.

122. Your client has refused permission for you to send confirmation to two of the company's largest debtors that you had included in your sample. The most appropriate response to such a refusal is to:

a)review subsequent cash receipts, reconciliation of balances to invoices and other evidence of delivery and acceptance of goods;

b)issue an audit opinion with an Emphasis of Matter due to the inherent limitation;

c)treat these two balances as errors and extrapolate the error across the population;

d)replace these balances with two alternative debtors to complete the sample.

123.It is difficult for creditors tosuccessfully claim damages from an auditor. This is because

a)the corporate veil of incorporation ensures thereis only a relationship between auditors. and shareholders;

b)privity letters only go some way towards establishaduty of care

c)an audit opinion does not, of itself, induceathird party to act

d)the Esanda case demonstrated that creditorsrank equally with shareholders when a company is wound up