Material Uncertainty Related to Going Concern

31. Which of the following is not a condition to include a separate going concern section with a heading "Material Uncertainty Related to Going Concern" in the auditor's report?

a. The use of the GC basis of accounting is appropriate.

b. A modified opinion is appropriate in respect of the matter.

c. Reference to the note in the financial statements that describes the material uncertainty.

d. A statement that these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the entity's ability to continue as a going concern.

32. C Co has a substantial bank loan which is due to mature in 20X8, and the company plans to negotiate for a new loan in March 20X8. The auditors concluded that the company's use of the going concern assumption in the financial statements for the year ended 31 December 20X7 is appropriate. However, they believe there is a material uncertainty related to going concern, which has been appropriately disclosed in the financial statements. What action should the auditor take with regards to going concern in the auditor's report?

a. Express an unmodified opinion and describe the material uncertainty in the other matter paragraph

b. Express an unmodified opinion and describe the material uncertainty in the material uncertainty related to going concern paragraph

c. Express a modified opinion and describe the material uncertainty in the emphasis of matter paragraph

d. Express a qualified opinion and describe the material uncertainty in the basis for qualified opinion paragraph

Key Audit Matter

33. In which of the following situations the auditor may communicate KAM in the auditor's report?

a. When a law or regulation precludes disclosure.

b. When adverse consequences of communicating the KAM would reasonably be expected to outweigh the public interest benefits of such communication.

c. When a disclaimer of opinion is expressed.

d. When a qualified or adverse opinion is expressed.

34. Under PSA 701, which of the following refers to the term "Key Audit Matters (KAM)"?

a. Matters that were communicated with those charged with governance.

b. Matters that required significant auditor attention.

c. Matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period.

d. It exists when the magnitude of its potential impact is such that, in the auditor's judgment, clear disclosure of the nature and implications of the uncertainty is necessary for the presentation of the financial statements not to be misleading.

35. PSA 701 sets out a decision framework for auditors using the communications with those charged with governance as a starting point. From the matters communicated with those charged with governance, the auditor determines those matters that required significant auditor attention. In fulfilling this requirement, the auditor is NOT always required to explicitly consider

a. Areas of higher assessed risks of material misstatement, or significant risks identified.

b. Areas of lower assessed risks of material misstatement, or no significant risks identified.

c. Significant auditor judgments relating to areas in the financial statements that involved significant management judgment, including accounting estimates that have been identified as having high estimation uncertainty.

d. The effect on the audit of significant events or transactions that occurred during the year.

36. Which of the following is not included in the description of a KAM in the auditor's report?

a. Why the matter was considered to be a KAM

b. How the matter was addressed in the audit

c. Reference to the any related disclosure(s)

d. Standardized, highly technical language and not entity-specific to promote comparability of reports

Other Information

37. Which of the following best describes the auditor's responsibility for "other information" included in the annual report to stockholders, which contains financial statements and the auditor's report?

a. The auditor has no obligation to read the "other information."

b. The auditor has no obligation to corroborate the "other information" but should read the "other information" to determine whether it is materially inconsistent with the financial statements.

c. The auditor should extend the examination to the extent necessary to verify the "other information."

d. The auditor must modify the auditor's report to state that the "other information is unaudited" or "not covered by the auditor's report."

38. It exists when other information contradicts information contained in the audited financial statements.

a. Material inconsistency

b. Material misstatement of fact

c. Material weaknesses

d. Misstatement

39. If an amendment to other information in a document containing audited financial statements is necessary and the entity refuses to make the amendment, the auditor would consider issuing:

a. Qualified or adverse opinion

b. Unqualified opinion with explanatory paragraph

c. Qualified or disclaimer of opinion

d. Unqualified opinion.

Responsibilities of MGT and TCWG for the F/S

40. An entity's management is responsible for the preparation and fair presentation of the financial statements. Its responsibility includes the following, except

a. Designing, implementing, and maintaining internal control relevant to the preparation and presentation of financial statements.

b. Making accounting estimates that are reasonable in the circumstances and selecting and applying appropriate accounting policies.

c. The assessment of the entity's ability to continue as a going concern and the appropriateness of the going concern.

d. Assessing the risks of material misstatement of the financial statements.

I NEED YOUR ANSWERS QUICKLY