inexpresses a qualified opinion because of a material misstatement related to An auditor specific amounts in the in the opinion paragraph? paraghe nancial statements. Which of the following phrases should be included When Read in Conjunction with Note X" Yes No Yes No "With the Foregoing Explanation A. B. . D. No Yes Yes No [17] Which an engagement f disclosure? of the following phrases will an auditor most likely include in the auditor's report on or a nonissuer when expressing a qualified opinion because of inadequate A. Subject 8. With the foregoing explanation of these omitted disclosures. C. Except for the omission of the information, D. Does not present fairly in all material respects to the departure from generally accepted accounting principles, as described above. [18] If the independent auditor has not become satisfied by means of other auditing procedures with respect to opening inventories, (s)he should A. Disclaim an opinion or qualify the opinion on the statements as a whole. B. Either disclaim an opinion on the statement of income or qualify the opinion, depending on materiality and the pervasiveness of the possible effects. C. Either disclaim an opinion or qualify the opinion on the statement of income, regardless of the degree of materiality of the amounts involved. D. Express an adverse opinion on the statements as a whole when the amount in question is material. (19] Which of the following actions should be taken by a CPA who has been asked to audit the financial statements of a company whose fiscal year has ended? A. Discuss with the client the possibility of an adverse opinion because of the late engagement date B. Ascertain whether circumstances are likely to permit the auditor to obtain sufficient appropriate evidence and express an unmodified opinion. C. Inform the client of the need to express a qualified opinion if the physical inventory has already been taken. D. Ascertai ma n whether an understanding of internal control can be obtained and the risks of terial misstatement can be assessed after completion of the audit. (201 An auditor's opinion reads as follows: In our opinion, except for the above limitation on the scope of our audit.... This is an example of an mentioned A. Acceptable review opinion. B. Acceptable emphasis of a matter. C. Acceptable qualified opinion. D. Unacceptable reporting practice. 121] An auditors client is required by a bond indenture to maintain a 2-to-1 current rato, otherwise, the bonds may be called immediately. The amount of the bonds is ma client's ratio is only 1.4 to 1, and the bonds have not been reclassified. disclose the violation, the auditor will most likely express If management refuses to A. An unmodified opinion or disclaim an opinion. B. An unmodified opinion. C. An adverse opinion or disclaim an opinion. D. A qualified opinion. 122] A client that issues U.S. GAAP-based financial statements increased the carrying amounts of depreciable assets to reflect their fair values. The revised amounts were included in the financial statements, which are in the process of being audited. The auditor believes that these amounts accurately measure the fair value of the assets. If the adjustments are material to the financial statements as a whole, the auditor should A. Disclaim an opinion. B. Express an unmodified opinion. C. Express a qualified opinion or disclaim an opinion. D. Express a qualified opinion or an adverse opinion. [23] Which of the following is acceptable language in an audit report? A. "In our opinion, subject to the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence... B. "In our opinion, except for the above-mentioned limitation on the scope of our audit C. 1n our opinion, except for the effects of the matters described in the basis for qualified opinion paragraph.... D. "In our opinion, except for the limitation on the scope of our audit as indicated in the tollowing paragraph.... [24] When a qualified opinion results from a scope limitation of an audit of a nonissuer, the situation should be A. Described in an emphasis-of-matter paragraph that follows the opinion paragraph. B. Referred to in the introductory and opinion paragraphs. C. Described in an emphasis-of-matter paragraph and referred to in the opinion paragraph but not in the auditor's responsibility section. D. Referred to in the auditor's responsibility section and opinion paragraph but not in the introductory paragraph. [25] An auditor may express a qualified opinion because of a(n) Material Any Change in Inability to Obtain Sufficient Appropriate Evidence Misstatement of the Financial Statements Yes No Yes Yes Accounting Princi Yes No A. No Yes No Yes B. . D. Yes 126] An auditor expresses an adverse opinion if A. A severe scope limitation has been imposed by management. B. A misstatement is material and pervasive. C. A qualified opinion cannot be expressed because the auditor lacks independence. D. The company's ability to continue as a going concem is subject to substantial doubt. [271 During the year, the research staff of Dermoplex, a nonissuer, devoted its entire efforts toward developing a skin cancer ointment. All costs that could be attributed directly to the project were accounted for as deferred charges and classified on the balance sheet as an asset. If the amounts involved are material, the auditor should A. Express an unmodified opinion with an other-matter paragraph explaining the uncertainty of cost recovery B. Disclaim an opinion. C. Express an adverse opinion. D. Express an unmodified opinion provided that the uncertainty about ultimate realization of the deferred charges is disclosed in the notes 28] In which of the following instances would it be appropriate for the auditor to refer to the work of an appraiser in the auditor's report? A. An unmodified opinion is expressed and no additional paragraph is added, but the auditor wishes to disclose the use of an auditor's specialist. B. A qualified opinion is expressed because of a ma external specialist. C. An adverse opinion is expressed based on a difference of opinion between the client and the auditor's external specialist about the value of certain assets. D. A disclaimer of opinion is expressed owing to a scope limitation imposed on the auditor by the auditor's external specialist. lpcA le (29) An expression of opinion on the fair presentation of a single financial expression of an adverse opinion on the statements as a whole is a(n) statement after the A. Qualified opinion. B. Permissible basis for reporting if the statement is not a major portion statements. C. "Subject to" opinion. D. Impermissible basis of reporting 30] When a scope limitation has precluded the auditor from obtaining evidence to determine whether certain client acts are illegal, (s)he would most sufficient appro t appropriate A. An unmodified opinion with a separate explanatory paragraph. B. Either a qualified opinion or an adverse opinion. C. Either a disclaimer of opinion or a qualified opinion. D. Either an adverse opinion or a disclaimer of opinion. [31] A disclaimer of opinion on the financial statements that was issued because of a scope limitation on an audit differs from a compilation report on the unaudited statements of a nonissuer in that A. A compil B. ation report offers some assurances. A disclaimer offers none. A compilation relates only to income statements and balance sheets. A disclaimer pertains to all financial statements presented. C. Any procedures applied in a compilation should be described in the report, but procedures applied when a disclaimer is issued should not be described. D. A compilation report states what service was performed. A disclaimer states what service was to be performed. [32] In which of the following circumstances would an auditor usually choose between expressing a qualified opinion or disclaiming an opinion? A. Material misstatement B. Inadequate disclosure of accounting policies. C. Inability to obtain sufficient appropriate audit evidence. D. Unreasonable justification for a change in accounting principle. 133] A CPA is concemed about a relationship with unaudited financial statements of an issuer because A. Users may be misled regarding the degree of responsibility the CPA is accepting. B. A fee cannot be charged unless the CPA is associated with financial statements. C. Association is necessary for compliance with the requirement of due professional care. D. An audit must be performed if the CPA is in any way related to the financial statements