MaoEn/USCPA_AUD_Data huggingface dataset:
Choice "C" is incorrect. An auditor is likely to compare the financial statements being reported on with those of the prior year in the planning stage of the audit when the auditor is performing analytical procedures. The auditor is unlikely to perform this procedure to obtain evidence about the occurrence of subsequent events."
n the audit of a nonissuer, reference in a group engagement partner's report to the fact that part of the audit was performed by another auditor most likely would be an indication of the:
A.
Different opinions the auditors are expressing on the components of the financial statements that each audited.
B.
Group engagement partner's recognition of the component auditor's competence, reputation, and professional certification.
C.
Lack of materiality of the portion of the financial statements audited by the other auditor.
D.
Divided responsibility between the auditors who conducted the audits of the components of the overall financial statements.,"Choice "D" is correct. Reference to a component auditor indicates division of responsibility for the audits of the components of the overall financial statements.
Choice "A" is incorrect. The reference to the component auditor would be made regardless of what type of opinion is expressed by each auditor.
Choice "B" is incorrect. The reference in the report is not meant to recognize the qualifications of the other auditor, but simply to divide the responsibility between the two auditors.
Choice "C" is incorrect. Reference to a component auditor would not generally be made if the component auditor's portion of the financial statements is immaterial."
In which of the following sections of an auditor's report for a nonissuer does an auditor communicate the nature of the engagement and the specific financial statements covered by the audit?
A.
Opinion
B.
Scope
C.
Basis for Opinion
D.
Emphasis-of-matter,"Choice "A" is correct. The auditor's Opinion section indicates the nature of the engagement (i.e., audit), the financial statements covered in the (audit) engagement, the name of the entity whose financial statements have been audited, and the dates covered by each financial statement.
Choice "B" is incorrect. There is no scope paragraph in a nonissuer audit report.
Choice "C" is incorrect. The Basis for Opinion section references GAAS, auditor independence, and states whether or not the auditor believes sufficient appropriate evidence was obtained to provide a basis for the auditor's opinion.
Choice "D" is incorrect. Emphasis-of-matter paragraphs are used when required by SAS or when the auditor believes they are necessary. They are used when referring to a matter that is appropriately presented or disclosed in the financial statements and is of such importance that it is fundamental to the users' understanding of the financial statements. This paragraph does not affect the auditor's opinion."
An auditor may issue a qualified opinion under which of the following circumstances?
Lack of sufficient
appropriate
audit evidence
Restrictions of the
scope of the audit
A.
No
No
B.
Yes
No
C.
No
Yes
D.
Yes
Yes,"Choice "D" is correct. Yes - Yes.
An auditor may issue a qualified opinion (or a disclaimer, depending on materiality) when there is a lack of sufficient appropriate audit evidence, or when there are restrictions on the scope of the audit.
Choice "A" is incorrect. A qualified opinion can be issued when material, but not pervasive, audit or financial statement issues are identified.
Choice "B" is incorrect. A qualified opinion can be issued when a scope limitation exists and it is determined to be material, but not pervasive, to the financial statements.
Choice "C" is incorrect. A qualified opinion can be issued when there is a financial statement issue that is determined to be material, but not pervasive, to the financial statements."
An annual shareholders’ report includes audited financial statements and contains a report by management on operations. The audited financial statements are fairly stated. The auditor is not engaged to report on the other information included in the annual report, but the auditor notices that there is a material inconsistency between the amount of revenue reported by management in the report on operations and the amount of revenue reported in the audited financial statements. If management refuses to make the revision to the revenue included in management’s report on operations, the auditor least likely would:
A.
Withhold the use of the auditor’s report.
B.
Withdraw from the engagement.
C.
Modify the opinion on the audited financial statements to a qualified or adverse opinion.
D.
Include in the auditor’s report a separate section with the heading "Other Information" describing the inconsistency.,"Choice “C” is correct. The auditor’s opinion on the audited financial statements relates to the basic financial statements and related footnotes. The information included in the financial statements is fairly stated; therefore, the opinion related to these financial statements and footnotes should not be modified.
Choice “A” is incorrect. If management refuses to revise other information, the auditor may withhold the use of the auditor’s report.
Choice “B” is incorrect. If management refuses to revise other information, the auditor may withdraw from the engagement.
Choice “D” is incorrect. If management refuses to revise other information, the auditor may include a separate "Other Information" section describing the inconsistency."
For a nonissuer, which of the following procedures would an auditor most appropriately perform to provide an opinion on whether supplementary information presented with financial statements is fairly stated in relation to the financial statements?
A.
Inquire of management about the purpose of the supplementary information and the criteria used by management to prepare the information.
B.
Obtain verbal representations from management about any significant assumptions or interpretations underlying the measurement of the supplementary information.
C.
Obtain verbal representations from management stating that it acknowledges its responsibility for the presentation of the supplementary information.
D.
Evaluate the appropriateness, but not the completeness, of the supplementary information.,"Choice "A" is correct. The auditor should inquire of management regarding the purpose of the supplementary information and the criteria used to prepare the information. This is done in addition to the procedures performed during the audit of the financial statements.
Choice "B" is incorrect. The auditor should inquire regarding any significant assumptions underlying the preparation or presentation of the supplementary information.
Choice "C" is incorrect. The auditor should obtain written representations from management regarding the supplementary information.
Choice "D" is incorrect. The auditor should evaluate both the appropriateness and the completeness of the supplementary information."
An auditor most likely would add an other-matter paragraph when:
A.
The auditor concludes that substantial doubt remains about the entity’s ability to continue as a going concern for a reasonable amount of time.
B.
Current period financial statements are audited and presented in comparative form with reviewed financial statements from the prior period.
C.
A change in a reporting entity results in financial statements which, in effect, are those of a different reporting entity.
D.
The entity changes the depreciable life of an asset from eight years to five years.,"Choice “B” is correct. An auditor would add an other-matter paragraph when current period financial statements are audited and presented in comparative form with compiled or reviewed financial statements from the prior period or in comparative form with prior period financial statements that were not audited, reviewed, or compiled.
Choice “A” is incorrect. An auditor would include a separate section with the heading "Substantial Doubt About the Entity's Ability to Continue as a Going Concern" when the auditor concludes that there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable amount of time.
Choice “C” is incorrect. An auditor would add an emphasis-of-matter paragraph when there is an item that affects the consistency of the financial statements, such as a change in a reporting entity that results in financial statements which, in effect, are those of a different reporting entity.
Choice “D” is incorrect. A change in estimate does not require an other-matter or emphasis-of-matter paragraph."
Which of the following is true?
A.
The auditor may issue an unmodified opinion when a correction of an error in accounting principle occurs.
B.
When a material accounting change has been properly accounted for and disclosed, the auditor may not issue an unmodified opinion.
C.
If an auditor believes there is substantial doubt about an entity's ability to continue as a going concern remains, and management has properly disclosed the situation, the auditor may not issue an unmodified opinion.
D.
When an auditor includes a paragraph emphasizing a significant related party transaction, the opinion would be considered a qualified opinion.,"Choice "A" is correct. When a correction occurs related to a previously incorrect application of an accounting principle, consistency is affected and the auditor may issue an unmodified opinion with an emphasis-of-matter paragraph.
Choice "B" is incorrect. A lack of consistency that has a material effect must be disclosed in an emphasis-of-matter paragraph. If all the acceptability criteria for the accounting change are met, the auditor may issue an unmodified opinion. In evaluating the acceptability of the accounting change, the auditor should consider whether the newly adopted accounting principle is in accordance with the applicable financial reporting framework, the method of accounting for the change is acceptable, the disclosures related to the change are appropriate and adequate, and the entity has justified that the alternative accounting principle is preferable.
Choice "C" is incorrect. If the auditor concludes that substantial doubt remains but is satisfied that the going concern disclosures by management are adequate, an unmodified (unqualified) opinion with a separate section with the heading "Substantial Doubt About the Entity's Ability to Continue as a Going Concern" (nonissuer) or explanatory paragraph (issuer) can be issued.
Choice "D" is incorrect. An auditor may decide to use an emphasis-of-matter paragraph, but this does not constitute a qualified opinion. This is still an unmodified form of the opinion."
Which of the following events occurring after the issuance of an auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?
A.
The entity's sale of a subsidiary that accounts for 30% of the entity's consolidated sales.
B.
The discovery of information regarding a contingency that existed before the financial statements were issued.
C.
The final resolution of a lawsuit explained in a separate paragraph of the auditor's report.
D.
A technological development that could affect the entity's future ability to continue as a going concern.,"Choice "B" is correct. With respect to events occurring after the issuance of an auditor's report, the auditor is only responsible for information that existed at the audit report date.
Choice "A" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.
Choice "C" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.
Choice "D" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry."
An annual shareholders' report includes audited financial statements and contains supplementary information required by GAAP. Is it permissible for the auditor to report on such information?
A.
No, because such reporting may lead to the belief that the auditor is responsible for the information.
B.
No, because the auditor has no responsibility to read the other information in a document containing audited financial statements.
C.
Yes, provided the report provides negative assurance only.
D.
Yes, provided the auditor performs sufficient audit procedures to determine whether the information is fairly stated, in all material respects, in relation to the financial statements.,"Choice "D" is correct. If the auditor performs sufficient procedures, he or she may report on whether the information is fairly stated, in all material respects, in relation to the financial statements.
Choice "A" is incorrect. The auditor may report on the information and should state that the information is the responsibility of management.
Choice "B" is incorrect. The auditor does have responsibility to read the information.
Choice "C" is incorrect. The report provides positive assurance about whether the information is fairly stated, in all material respects, in relation to the financial statements."
Which of the following statements is not true regarding the auditor's responsibility for subsequent events?
A.
The auditor has an active responsibility to make continuing inquiries between the date of the auditor's report and the date on which the report is submitted.
B.
The auditor has no active responsibility to make continuing inquiries after the date of the auditor's report.
C.
The auditor has an active responsibility to make continuing inquiries between the date of the financial statements and the date of the auditor's report.
D.
The auditor has an active responsibility to make continuing inquiries between the date of the financial statements and the date on which sufficient appropriate audit evidence has been obtained.,"Choice "A" is correct. The auditor has no active responsibility to make continuing inquiries between the date of the auditor's report and the date on which the report is submitted. The auditor's active responsibility stops on the date of the auditor's report.
Choice "B" is incorrect. The auditor has no active responsibility to make continuing inquiries after the date of the auditor's report.
Choice "C" is incorrect. The auditor does have an active responsibility to make continuing inquiries between the date of the financial statements and the date of the auditor's report.
Choice "D" is incorrect. The auditor does have an active responsibility to make continuing inquiries between the date of the financial statements and the date on which sufficient appropriate audit evidence has been obtained."
An auditor completed an audit of a nonissuer's December 31, Year 3, financial statements and dated the audit report as of March 13, Year 4. On March 14, Year 4, prior to the release of the audit report, an event occurred that required management to revise the Year 3 financial statements and describe the event in a note. The auditor's report on the revised Year 3 financial statements was newly dated as of April 11, Year 4, and released on April 12, Year 4. In this situation, the auditor has taken responsibility for all subsequent events that occurred from January 1, Year 4, until:
A.
April 11, Year 4.
B.
April 12, Year 4.
C.
March 14, Year 4.
D.
March 13, Year 4.,"Choice "A" is correct. Since the auditor's report was newly dated as of April 11, Year 4, the auditor is responsible for subsequent events until that date. The period between the date of the financial statements and the date of the auditor's report is the subsequent period, during which the auditor is responsible for investigating certain subsequent events.
Choice "B" is incorrect. April 12, Year 4, is the new report release date. The auditor is responsible until the date of the auditor's report, which is April 11, Year 4.
Choice "C" is incorrect. March 14, Year 4, is the date of the event requiring management to revise the financial statements, so the auditor revised the report and is then responsible until the new date of April 11, Year 4.
Choice "D" is incorrect. March 13, Year 4, was the original report date. If the auditor's report was revised with a new date, the auditor is responsible until the new date of April 11, Year 4."
In planning the audit, the auditor should consider materiality for the financial statements as a whole in terms of:A.
The largest aggregate level of misstatement that could be considered material to any one of the financial statements.
B.
The largest aggregate level of misstatement that could be considered material to the financial statements taken as a whole.
C.
The smallest aggregate level of misstatement that could be considered material to any one of the financial statements.
D.
The smallest aggregate level of misstatement that could be considered material to the financial statements taken as a whole.,"Choice "C" is correct. Because the financial statements are interrelated, the auditor should consider materiality in terms of the smallest aggregate level of misstatement that could be material to any one of the financial statements.
Choices "B" or "A" are incorrect. The auditor is concerned with identifying the smallest aggregate level of misstatement that would affect the judgment of a reasonable person, not the largest such level. The smallest level provides a cutoff beneath which the auditor need not consider; the largest level provides no such cutoff.
Choice "D" is incorrect. Because the financial statements are interrelated, the auditor should consider materiality in terms of the smallest aggregate level of misstatement that could be material to any one of the financial statements."
Which of the following statements concerning the auditor’s use of the work of a specialist is correct? A.
If the specialist is related to the client, the auditor is not permitted to use the specialist's findings as corroborative evidence.
B.
The auditor need not obtain an understanding of the methods and assumptions used by the specialist.
C.
The auditor should refer to the work or findings of the specialist in the auditor’s report when an unmodified opinion is issued.
D.
The auditor may engage a specialist and use that specialist's work as audit evidence in performing substantive tests to evaluate material financial statement assertions.,"Choice "D" is correct. The auditor may use the work of a specialist to obtain appropriate audit evidence.
Choice "A" is incorrect. A specialist who is related to the client may be acceptable in some circumstances, but the auditor may choose to perform additional procedures in those cases. The auditor may still use the specialist's findings in such situations.
Choice "B" is incorrect. The auditor should understand the methods and assumptions used by the specialist.
Choice "C" is incorrect. Generally the auditor should not refer to the work or findings of the specialist when an unmodified opinion is issued."
An auditor ordinarily uses a working trial balance resembling the financial statements without footnotes, but containing columns for: A.
Expense and revenue summaries.
B.
Reconciliations and tickmarks.
C.
Reclassifications and adjustments.
D.
Accruals and deferrals.,"Choice "C" is correct. An auditor's working trial balance generally contains columns for reclassifications and adjustments.
Choice "A" is incorrect. Expense and revenue summaries are included within audit documentation, but would not necessarily be shown in columns on the working trial balance.
Choice "B" is incorrect. Reconciliations and tickmarks are included within audit documentation, but would not necessarily be shown in columns on the working trial balance.
Choice "D" is incorrect. Accruals and deferrals are included within audit documentation, but would not necessarily be shown in columns on the working trial balance."
Which of the following is not true about audit documentation? A.
Audit documentation should demonstrate that sufficient appropriate audit evidence has been obtained to support the conclusions reached and the report to be issued.
B.
Audit documentation should include identification of the staff who performed the audit work.
C.
Audit documentation should include a separate page for each material account balance or transaction class.
D.
Audit documentation should include information related to the selection and application of accounting principles.,"Choice "C" is correct. There is no requirement that documentation related to each material account balance or transaction class be included on a separate page. In fact, it is common for related accounts to be audited and documented together.
Choice "A" is incorrect. Audit documentation should demonstrate that appropriate audit evidence has been obtained to support the conclusions reached and the report to be issued.
Choice "B" is incorrect. Audit documentation should include identification of the staff who performed the audit work.
Choice "D" is incorrect. Audit documentation should include significant audit findings, such as matters that are related to the selection and application of accounting principles."
Whitney, CPA, is assessing the auditability of Nissen Manufacturing, a possible new client. Which of the following would be least likely to cause Whitney to reject Nissen as a new client?  A.
Management of Nissen is unable to provide financial records for the second half of the year due to a computer malfunction.
B.
Management of Nissen is unwilling to provide all financial records to Whitney, due to a desire to keep such information confidential.
C.
Management of Nissen is unwilling to send accounts receivable confirmations, due to a desire not to trouble customers.
D.
Management of Nissen expresses a disregard for maintaining an adequate internal control environment.,"Choice "C" is correct. If a potential client is unwilling to send accounts receivable confirmations, the auditor may perform alternative procedures, such as reviewing subsequent cash receipts.
Choices "A" and "B" are incorrect. If a potential client is unable or unwilling to provide the financial information needed by the auditor to complete the audit, the auditor may not be willing to accept the engagement.
Choice "D" is incorrect. Management's disregard for its responsibility to maintain an adequate internal control environment compromises its ability to provide reasonable assurance regarding reliable financial reporting and may lead the auditor to decide not to accept a new engagement because the risk of financial statement misstatement is too high."
Which of the following are elements of a firm's quality control that should be considered in establishing its quality control policies and procedures? A.
Assigning personnel, client acceptance, and professional development.
B.
Assigning personnel, professional development, and analytical review.
C.
Client acceptance, professional development, and analytical review.
D.
Assigning personnel, client acceptance, and analytical review.,"Choice "A" is correct. Assigning personnel to engagements and providing for professional development are part of the human resources element of quality control. Engagement/client acceptance and continuance is another element of quality control.
Choices "C", "B", or "D" are incorrect. Analytical review procedures are not an element of a firm's system of quality control."
In order to have an effective system of internal controls, the Integrated Framework requires that each of the following exists, except that:
A.
Strategic objectives are supported by operating, reporting, and compliance objectives.
B.
The components operate together as an integrated system.
C.
The components and associated principles are “functioning” as designed.
D.
The components and associated principles are “present” in the system.,"Choice “A” is correct. Strategic objectives are established as part of enterprise risk management. The objectives included in the Internal Control—Integrated Framework are the operating, reporting, and compliance objectives only.
Choice “B” is incorrect. An effective system of internal controls has all five components operating together in an integrated system.
Choice “C” is incorrect. An effective system of internal controls has all components and associated principles “functioning” as designed in the system.