MaoEn/USCPA_AUD_Data huggingface dataset:
Which of the following properly describes the auditor's responsibilities as opposed to management's responsibilities?   A.
Management is responsible for affirming that the effects of any uncorrected misstatements in the financial statements are immaterial and the auditor is responsible for obtaining reasonable assurance about whether the financial statements are free of material misstatement.
B.
Management is responsible for the entity's financial statements and the auditor is responsible for the selection and application of accounting principles.
C.
The auditor is responsible for identifying the laws and regulations applicable to the entity's activities and management is responsible for affirming that the effects of any uncorrected misstatements in the financial statements are immaterial.
D.
The auditor is responsible for the entity's financial statements and management is responsible for the selection and application of accounting principles.,"Choice "A" is correct. Management is responsible for affirming that the effects of any uncorrected misstatements in the financial statements are immaterial and the auditor is responsible for obtaining reasonable assurance about whether the financial statements are free of material misstatement.
Choice "C" is incorrect. Management is responsible for both identifying the laws and regulations applicable to the entity's activities, and for affirming that the effects of any uncorrected misstatements in the financial statements are immaterial.
Choices "D" and "B" are incorrect. Management is responsible for both the entity's financial statements and for the selection and application of accounting principles."
Which of the following is a required component of the independent auditor’s report expressing an unmodified opinion? A.
An Opinion section including a reference to generally accepted auditing principles.
B.
An other-matter paragraph including the reason for the unmodified opinion.
C.
A Basis for Opinion section including a reference to generally accepted auditing standards.
D.
An Auditor's Responsibility section including the audit firm name.,"Choice "C" is correct. A Basis for Opinion section including a reference to generally accepted auditing standards is a required component of the auditor’s unmodified opinion.
Choice "A" is incorrect. The Opinion section includes a reference to generally accepted accounting (not auditing) principles.
Choice "B" is incorrect. An other-matter paragraph is not where the reason for an unmodified opinion is expressed. The other-matter paragraph is used when required by GAAS or at the auditor's discretion. It refers to matters other than those presented or disclosed in the financial statements that are relevant to the user's understanding of the audit, the auditor's responsibilities, or the auditor's report.
Choice "D" is incorrect. The firm name is generally not included in the Auditor's Responsibility section."
An auditor would express an unmodified opinion with an emphasis-of-matter paragraph added to the report for: A justified
change in
accounting
principle
An unjustified
change in
accounting
principle
A justified
change in
accounting
estimate
A.
No
Yes
Yes
B.
No
No
Yes
C.
Yes
No
No
D.
Yes
Yes
No,"Choice "C" is correct. Only a justified change in accounting principle would result in an unmodified opinion with an emphasis-of-matter paragraph. An unjustified change leads to a qualified or adverse opinion, and a change in estimate does not require an emphasis-of-matter paragraph.
Choice "A" is incorrect. A justified change in accounting principle would be the other scenario of the three presented in which an unmodified opinion with an emphasis-of-matter paragraph would be appropriate.
Choice "B" is incorrect. A justified change in accounting estimate does not require the use of an emphasis-of-matter paragraph. A justified change in accounting principle would be the other scenario of the three presented in which an unmodified opinion with an emphasis-of-matter paragraph would be appropriate.
Choice "D" is incorrect. An unjustified change in accounting principle would lead to a qualified or adverse opinion."
A special report on financial statements prepared on the cash basis of accounting should include: A.
A statement that the audit was conducted in accordance with generally accepted auditing standards.
B.
A qualified or adverse opinion, due to the departure from GAAP.
C.
An emphasis-of-matter paragraph including a brief explanation of the cash basis of accounting.
D.
A disclaimer of opinion, because an auditor should not report on financial statements that are not designed to be in conformity with GAAP.,"Choice "A" is correct. A special report on financial statements prepared on the cash basis of accounting should include, in the auditor's responsibility paragraph, a statement that the audit was conducted in accordance with generally accepted auditing standards.
Choice "B" is incorrect. A special report on financial statements prepared on the cash basis of accounting does not require a qualified or adverse opinion. An "unmodified" opinion may be presented stating that the financial statements are presented fairly in conformity with the cash basis of accounting.
Choice "C" is incorrect. A special report on financial statements prepared on the cash basis of accounting does include an emphasis-of-matter paragraph, but it does not provide an explanation of the cash basis of accounting. Instead, it refers to the note that discusses the cash basis of accounting.
Choice "D" is incorrect. A special report on financial statements prepared on the cash basis of accounting includes positive assurance, not a disclaimer of opinion, regarding whether the financial statements are presented fairly in conformity with the cash basis of accounting."
Assuming no other material misstatements are found, an independent auditor determines that supplementary information is not fairly stated relative to the basic financial statements taken as a whole. In this instance where the independent auditor was engaged to audit both the financial statements and the supplementary information, the independent auditor should: A.
Issue a disclaimer of opinion on the financial statements.
B.
Issue an unmodified opinion on the financial statements without reference to the supplementary information outside the basic financial statements.
C.
Issue a qualified (except for) or adverse opinion on the financial statements.
D.
Issue an unmodified opinion on the financial statements and modify the auditor's opinion on the supplementary information within a separate section of the auditor's report with the heading "Supplementary Information.","Choice "D" is correct. Supplementary information is outside the basic financial statements, so problems with this information do not prevent the issuance of an unmodified opinion on the basic financial statements. The situation should result in a modified opinion on the supplementary information as expressed in a separate section of the auditor's report with the heading "Supplementary Information."
Choice "B" is incorrect. Auditing standards require the auditor to expand his or her report when required supplementary information is not fairly stated relative to the basic financial statements taken as a whole.
Choices "C" and "A" are incorrect. Since supplementary information is outside the basic financial statements, an unmodified opinion on the basic financial statements is still appropriate."
A limitation on the scope of an audit sufficient to preclude an unmodified opinion will usually result when the client: A.
Refuses to disclose in the notes to the financial statements a significant related party transaction.
B.
Omits the statement of cash flows.
C.
Asks the auditor to report on the balance sheet and not the other basic financial statements.
D.
Does not make the minutes of the Board of Directors meetings available to the auditor.,"Choice "D" is correct. Failure to make the minutes available is a scope limitation sufficient to preclude an unmodified opinion.
Choices "B" and "A" are incorrect. Omission of the statement of cash flows and refusal to disclose a significant related party transaction are examples of GAAP violations, but they do not constitute a limitation on the scope of the audit.
Choice "C" is incorrect. Reporting on only one financial statement and not the others simply involves a limited reporting objective. The auditor should obtain an understanding of the purpose for which the financial statement is prepared, the intended users, and the steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances. As long as these steps are taken by the auditor, auditing a single financial statement would not constitute a limitation on the scope of the audit."
An auditor’s report under U.S. auditing standards that refers to a scope limitation that is material but not pervasive contains the words, “In our opinion, except for the below-mentioned limitation on the scope of our audit . . . ." This is considered a(n):
A.
Qualified opinion
B.
Example of inappropriate wording
C.
Adverse opinion
D.
Disclaimer of opinion,"Choice “B” is correct. "In our opinion, except for the below-mentioned limitation on the scope of our audit . . ." is an example of inappropriate wording. When the auditor expresses a qualified opinion due to a scope limitation, the auditor should state in the opinion paragraph that the qualification pertains to the possible effects of the matter on the financial statements and not to the scope limitation itself. The wording used should be, “In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion section . . . .”
Choice “A” is incorrect. A qualified opinion due to a scope limitation should include the phrase, “In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion section . . . .”
Choice “C” is incorrect. An adverse opinion would include the phrase, “. . . do not present fairly . . . .”
Choice “D” is incorrect. A disclaimer of opinion should include the phrase, "Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.""
In order to address an auditor's responsibilities regarding subsequent events during an audit of a nonissuer, the auditor should:
A.
Read the minutes of all of the nonissuer's board of directors' meetings that occurred from the start of the fiscal year through the date of the financial statements.
B.
Determine that all subsequent events that require adjustment of, or disclosure in, the financial statements have been identified.
C.
Modify the auditor's opinion when subsequent events are identified by the auditor and confirmed by discussions with management.
D.
Perform audit testing of significant transactions occurring from the date of the auditor's report to the release date of the auditor's report.,"Choice "B" is correct. The auditor has an active responsibility to investigate certain subsequent events during the subsequent period. This responsibility includes both recognized and nonrecognized subsequent events.
Choice "A" is incorrect. As part of the auditor's procedures to identify subsequent events, the auditor will read minutes of the meetings during the subsequent period. Reading the minutes from throughout the year under audit is not done to identify subsequent events.
Choice "C" is incorrect. The auditor's opinion does not need to be modified when subsequent events are identified by the auditor and confirmed by management. Instead, the auditor would verify that the financial statements appropriately reflect the subsequent event.
Choice "D" is incorrect. The audit test work that the auditor performs in the subsequent period is from the date of the financial statements through the report date."
Which of the following is a condition that must be met in order for an auditor to issue an opinion on supplementary information in relation to the financial statements as a whole?
A.
The auditor must consider subsequent events with respect to supplementary information.
B.
A modified opinion was not issued on the financial statements.
C.
The supplementary information must be in a separate document from the audited financial statements.
D.
The supplementary information was derived from and relates directly to the information used to prepare the financial statements.,"Choice “D” is correct. A condition that must be met in order for an auditor to issue an opinion on supplementary information is that the supplementary information was derived from and relates directly to the information used to prepare the financial statements.
Choice “A” is incorrect. An auditor is not required to consider subsequent events with respect to supplementary information.
Choice “B” is incorrect. An auditor may issue an opinion on supplementary information if a qualified opinion is issued on the financial statements. However, the auditor may not issue an opinion on supplementary information if an adverse or disclaimer of opinion was issued on the financial statements.
Choice “C” is incorrect. An auditor may issue an opinion on supplementary information if it is in the same document as the audited financial statements. There is no requirement that the supplementary information be included in a separate document from the audited financial statements. If supplementary information is included in a separate document from the audited financial statements, then the auditor should report on supplementary information in a separate report."
Under which of the following circumstances would an entity be expected to accrue a loss contingency for the period under audit?
A.
A reasonable estimate was determined for a liability incurred after the balance sheet date.
B.
Legal counsel communicated that an unfavorable judgment from current litigation was reasonably possible.
C.
The entity recorded the amount of an asset impaired as of the balance sheet date.
D.
Before the issuance of the audit report, the entity estimated the amount of a claim that had a probable adverse outcome related to a product sold during the year under audit.,"Choice “D” is correct. Since the underlying event (product sale) relates to the year under audit and it has a probable adverse outcome, the entity should accrue a loss contingency for the period under audit. This is considered a recognized subsequent event.
Choice “A” is incorrect. A liability that was incurred after the balance sheet date would not require an accrual for the period under audit (nonrecognized subsequent event).
Choice “B” is incorrect. GAAP requires an accrual for a loss contingency for an unfavorable judgment that can be estimated and is probable, not reasonably possible.
Choice “C” is incorrect. An impairment loss, not a contingency loss, would be recorded for an asset that is impaired as of the balance sheet date. (A contingency is an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss that will be ultimately determined when a future event occurs or fails to occur.)"
For which of the following events would an auditor issue a report that omits any reference to consistency?
A.
A change from an accounting principle that is not generally accepted to one that is generally accepted that has a material impact on the financial statements.
B.
A material change in the method of accounting for inventories.
C.
A change in the useful life used to calculate the provision for depreciation expense.
D.
Management's lack of reasonable justification for a change in accounting principle.,"Choice "C" is correct. A change in accounting estimate (such as a change in the useful life of a depreciable asset) is accounted for prospectively and does not affect the comparability of financial statements between periods. Because the auditor's unmodified opinion implies that consistency exists, no modification to the report is necessary.
Choice "A" is incorrect. This change would be considered a correction of a material misstatement rather than a change in accounting principle because the original accounting principle was not in accordance with the applicable reporting framework. Therefore, an emphasis-of-matter (explanatory) paragraph that would reference consistency would be required.
Choice "B" is incorrect. A material change in accounting principle results in the addition of an emphasis-of-matter (explanatory) paragraph in the auditor's report because this type of change affects consistency (or comparability of the financial statements from year to year).
Choice "D" is incorrect. The lack of reasonable justification for a change in accounting principle may give rise to a report modification based on a material misstatement of the financial statements. "
An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements.  Under these circumstances, the report on the selected data should:
A.
State that the presentation is prepared in accordance with a special purpose framework.
B.
Indicate that the data are subject to prospective results that may not be achieved.
C.
Be limited to data derived from the entity's audited financial statements.
D.
Restrict the use of the report to those specified users within the entity.,"Choice "C" is correct. When the audit engagement includes reporting on selected financial data, the report prepared by the auditor should be limited to the data that was obtained from the financial statements
Choice "A" is incorrect. The presentation of selected financial data is not prepared in accordance with a special purpose framework.
Choice "B" is incorrect. The presentation of selected financial data is not a form of prospective financial statement.
Choice "D" is incorrect. The report is not required to be restricted to specific individuals within the organization."
An auditor issued an audit report that was dual dated for a subsequent event occurring after the original date of the auditor's report but before issuance of the related financial statements. The auditor's responsibility for events occurring subsequent to the original report date was:
A.
Limited to include only events occurring up to the date of the last subsequent event referenced.
B.
Limited to the specific event referenced.
C.
Extended to subsequent events occurring through the later date.
D.
Extended to include all events occurring since the original report date.,"Choice "B" is correct. When an auditor issues a report that is dual dated for a subsequent event occurring after the original date of the auditor's report, but before issuance of the related financial statements, the auditor's responsibility for events occurring subsequent to the original report date is limited to the specific event referenced.
Choice "A" is incorrect. A dual-dated report only extends responsibility for the particular subsequent event and not for all events taking place up to that event. The example wording would read "January 21, 20X2, except for Note 2, which is as of February 3, 20X2."
Choice "C" is incorrect. The later date only applies to the particular subsequent event and not all events taking place up to that date.
Choice "D" is incorrect. The responsibility is only extended for the particular event when a report is dual dated. "
An auditor decides to issue a qualified opinion on an entity's financial statements because a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures. The opinion paragraph of the auditor's report should state that the qualification pertains to:
A.
A departure from generally accepted auditing standards.
B.
The possible effects on the financial statements.
C.
A client-imposed scope limitation.
D.
Inadequate disclosure of necessary information.,"Choice "B" is correct. When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself.
Choice "A" is incorrect. A scope limitation is a departure from generally accepted auditing standards. However, when an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself.
Choice "C" is incorrect. When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself.
Choice "D" is incorrect. Inadequate disclosure of necessary information is a departure from GAAP, rather than a scope limitation."
Wilson, CPA, obtained sufficient appropriate audit evidence to render an opinion on Abco's December 31, Year 1, financial statements on March 6, Year 2. A subsequent event requiring adjustment to the Year 1 financial statements occurred on April 10, Year 2. Wilson decides not to dual date the report and completes the extended audit procedures for subsequent events on April 24, Year 2. If the adjustment is made without disclosure of the event, Wilson's report ordinarily should be dated:
A.
Using dual dating.
B.
March 6, Year 2.
C.
April 24, Year 2.
D.
April 10, Year 2.,"Choice "C" is correct. Adjustments or disclosures made after the original report date require the auditor to dual date or extend the date of the auditor's report. Since Wilson decided not to dual date the report, his report should be dated April 24, Year 2, the date on which sufficient appropriate audit evidence (including procedures related to subsequent events) was obtained.
Choice "A" is incorrect. Wilson decided not to use dual dating.
Choice "B" is incorrect. If adjustment or disclosure of the financial statements are made after the original date of the auditor's report, the auditor may dual date or use a later date. Since Wilson elected not to dual date the report, Wilson's report should be dated as of April 24, Year 2, the date on which sufficient appropriate audit evidence (including procedures for subsequent events) was obtained.
Choice "D" is incorrect. Since the financial statements are adjusted, Wilson's report should be dated as of April 24, Year 2, the date when sufficient appropriate audit evidence (including procedures related to subsequent events) was obtained."
Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?
A.
Trace information from shipping documents to sales invoices and sales journal transactions.
B.
Verify inventory pledged under loan agreements by confirming the details with financial institutions.
C.
Compare the financial statements being reported on with those of the prior year.
D.
Inquire about the current status of transactions that were recorded on the basis of preliminary data.,"Choice "D" is correct. The auditor is likely to inquire about the current status of transactions that were recorded on the basis of preliminary data when obtaining evidence about the occurrence of subsequent events. The additional information may affect the amount and/or disclosures in the financial statements that are under audit.
Choice "A" is incorrect. An auditor most likely will trace information from shipping documents to sales invoices and sales journal transactions to provide evidence of completeness of sales. The auditor is unlikely to perform this procedure to obtain evidence about the occurrence of subsequent events.
Choice "B" is incorrect. An auditor is likely to verify inventory pledged under loan agreements by confirming the details with financial institutions when the auditor is obtaining evidence about the rights and obligations of inventory. The auditor is unlikely to perform this procedure to obtain evidence about the occurrence of subsequent events.