PLEASE EXPLAIN

Initial Audit EngagementsOpening Balances

1. For initial audit engagements, the auditor should obtain sufficient appropriate audit evidence that:

a. The opening balances do not contain misstatements that materially affect the current period's financial statements.

b. The prior period's closing balances have been correctly brought forward to the current period or, when appropriate, have been restated.

c. Appropriate accounting policies are consistently applied or changes in accounting policies have been properly accounted for and adequately disclosed.

d. All of the above.

2. Statement 1: Opening balances include matters requiring disclosure that existed at the beginning of the period, such as contingencies and commitments.

Statement 2: Initial audit engagement is an engagement in which the financial statements for the prior period were not audited. It does not include an engagement in which the financial statements for the prior period were audited by a predecessor auditor.

Statement 3: If the prior period's financial statements were audited by a predecessor auditor and there was a modification to the opinion, the auditor shall evaluate the effect of the matter giving rise to the modification in assessing the risks of material misstatement in the current period's financial statements

a. True, true, true c. False, true, true

b. True, false, true d. False, false, true

3. Which of the following is least considered in determining the sufficiency and appropriateness of the audit evidence that the auditor will obtain regarding opening balances?

a. The materiality of the opening balances relative to the current period's financial statements.

b. The accounting policies adopted by the entity.

c. The risk of misstatements of accounts.

d. The length of years in operations of the entity.

4. The following audit procedures may be deemed necessary by the auditor in obtaining sufficient appropriate audit evidence regarding opening balances, except:

a. Reading the most recent financial statements, if any, and the predecessor auditor's report thereon, if any, for information relevant to opening balances, including disclosures.

b. Reviewing the predecessor auditor's audit engagement letter.

c. Evaluating whether audit procedures performed in the current period provide evidence relevant to the opening balances.

d. Performing specific audit procedures to obtain evidence regarding the opening balances.

5. Which of the following accounts is most difficult for the auditor to be satisfied as to the balance at the beginning of the period?

a. Accounts receivable c. Inventory

b. Accounts payable d. Accrued interest payable

6. If, after performing necessary audit procedures, the auditor is unable to obtain sufficient appropriate audit evidence concerning opening balances, the auditor's report should include:

I. A qualified opinion

II. A disclaimer of opinion

III. An opinion which is qualified or disclaimed regarding the results of operations and cash flows and unqualified regarding financial position

a. Any of the above c. Either I or II

b. None of the above d. I only

7. If the opening balances contain misstatements which could materially affect the current period's financial statements and the effect of the misstatement is not properly accounted for and adequately disclosed, the auditor should express a

a. Unqualified opinion with explanatory paragraph.

b. Qualified or adverse opinion.

c. Qualified or disclaimer of opinion.

d. Adverse or disclaimer of opinion.

8. If the current period's accounting policies have not been consistently applied in relation to opening balances and if the change has not been properly accounted for and adequately disclosed, the auditor should express a

a. Unqualified opinion with explanatory paragraph.

b. Qualified or adverse opinion.

c. Qualified or disclaimer of opinion.

d. Adverse or disclaimer of opinion.

The Entity's Use of a Service Organization

9. Which of the following statements is true with respect to Type 1 Report as referred to in PSA 402

a. Report on the description and design of controls at a service organization.

b. A report that comprises a description, prepared by management of the service organization, of the service organization's system, control objectives and related controls that have been designed and implemented as at a specified date.

c. A report that comprises a report by the service auditor with the objective of conveying reasonable assurance that includes the service auditor's opinion on the description of the service organization's system, control objectives and related controls and the suitability of the design of the controls to achieve the specified control objectives.

d. All of the above.

10. Which of the following statements is true with respect to Type 2 Report as referred to in PSA 402

a. Report on the description, design, and operating effectiveness of controls at a service organization

b. A report that comprises a description, prepared by management of the service organization, of the service organization's system, control objectives and related controls, their design and implementation as at a specified date or throughout a specified period and, in some cases, their operating effectiveness throughout a specified period

c. A report that comprises a report by the service auditor with the objective of conveying reasonable assurance that includes: (a) The service auditor's opinion on the description of the service organization's system, control objectives and related controls, the suitability of the design of the controls to achieve the specified control objectives, and the operating effectiveness of the controls; and (b) A description of the service auditor's tests of the controls and the results thereof.

d. All of the above

CORRECT ANSWERS ONLY. WILL RATE DISLIKE IF PROVIDED WITH WRONG ANSWER