Consider the following statements:

       I.  An Other Matter paragraph “… refers to something that has been appropriately presented or disclosed in the financial statements”.

      II.  The new PCAOB audit report includes a section involving Critical Audit Matters.

      a.  I is true;   II is true

      b.  I is true;   II is false

      c.  I is false;  II is true

      d.  I is false;  II is false

 

 2.  Consider the following statements:

I.   Inconsistent application of accounting principles (i.e. a change in accounting principle, which the auditor agrees is acceptable)  would result in a unqualified audit opinion.

II.  For a change in accounting principles that management does justify to the auditor, the auditor will likely issue an unqualified audit opinion.

      a.  I is true;   II is true

      b.  I is true;   II is false

      c.  I is false;  II is true

      d.  I is false;  II is false

 

 3.  Consider the following statements:

I.  The failure of a client to include a Statement of Cash Flows will result in the issuance of a qualified opinion by the auditor.

II.  If the CPA firm is not independent of the entity being audited, the CPA firm is required to issue a [one-paragraph] disclaimer of opinion. 

      a.  I is true;   II is true

      b.  I is true;   II is false

      c.  I is false;  II is true

      d.  I is false;  II is false

 

 4.  In which of the following instances would an auditor most likely issue a standard unqualified opinion

      WITHOUT an explanatory paragraph?

      a.  Management disclosures are missing or inadequate.

      b.  There is substantial doubt about the entity’s ability to continue as a going-concern.

      c.  Due to staffing issues, the audit report was issued later than in previous years.

      d.  There is an material deviation from GAAP related to capitalizing repairs.

      e.  None of the above.

 

 5.  Which one of the following is an example of the contents of an opinion section found in an audit report?

      a.  “We have audited …”

      b.  “Nothing came to our attention…”

      c.  “The financial statements referred to above present fairly …”

      d.  “An audit includes examining, on a test basis …”

 

 

 6.  The auditors were not permitted to observe the taking of the client’s physical inventory, a significant portion of the company’s financial statements.  What would this seem to involve?

      a.  Lack of attitude

      b.  Lack of consistency.

      c.  Lack of evidence.

      d.  Lack of independence.

 

 7.  An audit of the Flagler Company, a diamond mining company, brings to light the fact that its equipment has been marked up to the owners’ expectation of market values.  Such a situation will most likely result in which type of report?

      a.  Disclaimer.

      b.  Review.

      c.  Adverse.

      d.  Unqualified, with explanatory paragraph.

 

 8.  In which of the following situations would an auditor originally choose between expressing a qualified opinion or an adverse opinion?

a.  The auditor did not observe the entity’s physical inventory and is unable to become satisfied about its balance by other auditing procedure

b.  Conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as  a going concern are inadequately disclosed.

      c.  Both a and b.

      d.  Neither a nor b.

 

 9.  Consider Special Reports.  What type involves a “different basis of accounting”?

      a.  Agreed-upon-procedures.

      b.  Compliance Report.

      c.  Special Purpose Framework.

      d.  Specified Elements, Accounts.