Reports rt] A major purpose of the auditor's report on financial statements is to A. Assure investors of the complete accuracy of the financial statements B. Clarity for the public the nature of the auditor s responsibility and pertormance C. Deter creditors from extending loans in high-risk situations. D. Describe the specific pocn audking procedures undertaken to gather evidence for the op procedures [21 The auditor's judgment conceming the overal timess of the presentavork of position, results of operations, and cash flows is applied within the a framew A. Quality control. erally accepted auditing standards, e auditor's assessment of the risk of material misstatement. which include the concept of materiality D. Generally accepted accounting principles. [31 Patentex developed a new secret formula that is of great value because it resulted in a virtual monopoly. Patentex has capitalized all research and developmen t costs associated with thi formula. Greene, CPA, who is auditing this account, will probabiy regarding transter of the amount from the balance sheet to the a is registered and on file with the county clerk's office. A. Confer with management income statement. B. Confirm that the secret formula C. Confer Conter with management regarding a change in the title of the account to g D. Conter with management regarding ownership of the secret formula. 4] Which of the following statements is false regarding disclosure in a client's GAAP-ba financial statements? A. Information essential for a fair presentation should be set forth in the financial statements. B. Omission of a statement of cash flows is considered inadequate disclosure. C. Inadequate disclosure normally results in the auditor including the required information in th report. D. The auditor should never disclose information in the report that the client has not shown in financial statements. [5] Which of the following is a source of authoritative accounting principles for nongovernmer entities? A. The Auditing Standards Board. B. The Financial Accounting Standards Board. C. The Govemmental Accounting Standards Board. D. The AICPA. 16] A company GAAS. The auditor's primary purpose is to s an independent auditor to conduct a traditional audit in accordance A. Report B. Attest to the presentation of the financial C. Report on D. Assure on compliance with applicable laws and regulations. statements. the e ectiveness of an entity's internal control over financial reporing. management that accounting principles have been applied correcty thout affecting the CPA's wilingness to express an unmodified opinion on the client's us. GAAP-based financial statements, corporate management may retuse a request to A. Authorize its ato management includes all items known to the attormey B. Change its basis of accounting for inventories from FIFO to LIFO because, in the opinion of prices of merchandise acquired and held by the company C. Write down to salvage value certain equipment that is no longer useful. D. Allow the CPA to examine tax retuns for years prior to that of the financial statements being mey to confirm that a list of pending or threatened lisgation prepared by metchamod tails to give adequate recognition to the extraordinary increasesin audited [8] Green, CPA, was engaged to audit the financial statements of Essex Co. ater its fiscal year had ended. The timing of Green's appointment as auditor and the start of field confirmation of accounts receivable by direct communication with However, Green applied other procedures and was saisfied as to the reasonableness of the account balances. Green's auditor's report most likely contained a(n) the debtors ineflective. A. Unmodified opinion. B. Unmodified opinion with an emphasis-of-matter paragraph. C. Qualified opinion because of a scope limitation. D. Qualified opinion because of a departure from auditing standards. [9] A critical audit matter (CAM) was included in the auditor's report on an audit under the PCAOB's auditing standards. The users of the report can conclude all of the following except that A. The audit opinion was modified because of the critical matter. B. The matter addressed was communicated or required to be communicated to those charged with governance. C. The matter relates to accounts or disclosures that are material to the financial statements. D. The matter involved especially challenging, subjective, or complex judgments by the auditor [101 An auditor of the financial statements of an issuer has determined that a critical audit matter exists. This matter A. Must be of a kind required by PCAOB standards to be communicated to the audit committee. B. May substitute for qualification of the opinion if described in the Critical Audit Matters section of the report. C. May substitute for an explanatory paragraph if the matter itself requires an explanatory paragraph. D. Involves especially challenging, subjective, or complex auditor judgment. Reports n1 Glaim Publications Inc 1] During the audit, the CPA determined that certain intormation provides important insight into the company's financial position.Diso, No othet information available in a client's records nt to the disclosure. No other basis exists tor modifying the report. The auditor should shouldonsentoDisclosing thisi ality the opinion because of a client-imposed scope limitation. B. Express an unmodified opinion. C. Qualify the opinion because of a lack of disclosure. D. Express an adverse opinion because of a lack of disclosure o Ananoial statements of an isuer involves determining whother any audit matters a A. Ordinarity is not expected to determine that an audit ma B. who reports a critical audit matter C. Should consider estimates with significant measurement whether an audit matter is critical. tter is critical must exclude information not made public by the client. uncertainty when determining D. Must document only the audit matters considered that were determined to be critical. [13] The auditor's report in an audit of an issuer may be addressed to A. The chief operating officer. B. Whom it may concern. C. The board of directors and shareholders. D. The chief financial officer. on comparative financial statements should be dated as of the date of the [14] An auditor's report A. Issuance of the report B. No earlier than completion of the auditor's most recent audit. C. Latest financial statements being reported on. D. Last subsequent event disclosed in the statements. 1151 In May Year 3, an auditor reissues the auditor's report on the Year 1 financial statements at a former client's request. The Year 1 financial statements are to be presented comparatively with subsequent audited statements. They are not restated, and the auditor does not revise the wording of the report. The auditor should A. Dual-date the reissued report. B. Use the release date of the reissued report. C. Use the original report date on the reissued r D. Use the current-period auditor's report date on the reissued report. 125] An audi tor may express a qualified opinion because of a(n) Any Change n Inability to Obtairn Misstatement of the Financial Statements Yes No Yes Yes Evidence atements AccountingSulficient Appropriate Principles A. , Yes No No Yes No Yes No Yes D. 126] An auditor expresses an adverse opinion if A. A severe scope limitation has been imposed by managemen B. A misstatement is material and pervasive. C. A qualithed opinion cannot be expressed because the auditor lacks independence. 0. The company's ability to continue as a going concem is subject to substantial doubt [27] During the year, the research staff of Demoplex, 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. It 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 matter unrelated to the work of the auditor's 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. A disclaimer of opinion is expressed owing to a scope limitation imposed on the auditor by the auditor's external specialist