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Multiple Choice
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1

The basic elements of a standard unqualified report include all of the following except:
A)A statement that the financial statements are the responsibility of management.
B)A title that includes the word "Independent".
C)A statement that although estimates are believed to be reasonable, there are normally differences between actual and estimated results.
D)A statement that an audit includes examining supporting evidence "on a test basis".
2

An auditor notifies management that there is a material inconsistency between information in the audited financial statements and other information provided in the annual report. If management refuses to correct the material inconsistency, the auditor can do any of the following except:
A)Issue a qualified audit opinion.
B)Include an explanatory paragraph in the otherwise unqualified audit opinion.
C)Withhold the audit report.
D)Withdraw from the engagement.
3

Which of the following is true with respect to a scope limitation?
A)The auditor can choose to issue an adverse opinion or disclaim an opinion.
B)The auditor will generally issue a qualified opinion or disclaim an opinion.
C)The auditor may not issue an unqualified opinion even if the auditor can compensate for the scope limitation by performing alternative procedures.
D)The auditor should withdraw from the engagement.
4

An auditor decides to issue a qualified opinion on an entity's financial statements because a major inadequacy in the entity's 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 client-imposed scope limitation.
B)A departure from generally accepted auditing standards.
C)The possible effects on the financial statements.
D)Inadequate disclosure of necessary information.
5

An auditor has previously expressed a qualified opinion on the financial statements of a prior period because of a departure from generally accepted accounting principles. The prior-period financial statements are restated in the current period to conform with generally accepted accounting principles. The auditor's updated report on the prior-period financial statements should:
A)Express an unqualified opinion concerning the restated financial statements.
B)Be accompanied by the original auditor's report on the prior period.
C)Bear the same date as the original auditor's report on the prior period.
D)Qualify the opinion concerning the restated financial statements because of a change in accounting principle.
6

In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion?
A)The auditor did not observe the entity's physical inventory and is unable to become satisfied about its balance by other auditing procedures.
B)Conditions that cause the auditor to have substantial doubt about the entity's ability to continue as a going concern are not disclosed.
C)There has been a change in accounting principles that has a material effect on the comparability of the entity's financial statements.
D)The auditor is unable to apply necessary procedures concerning an investor's share of an investee's earnings recognized on the equity method.
7

All of the following would require the auditor to include a paragraph in the audit report for a lack of consistency except
A)The client changed its inventory accounting from LIFO to FIFO.
B)The client increased its calculation of bad debt expense from one percent of net sales to two percent of net sales.
C)The client reports consolidated financial statements this year whereas last year the subsidiary was accounted for based on the equity method.
D)The client changed from an unacceptable inventory accounting method in prior years to FIFO this year.
8

If the principal auditor decides to make reference to other auditors used in the engagement, the audit report must make reference to:
A)The portion or parts of the financial statements examined by the other auditors.
B)The name of the other auditor.
C)Whether or not a subsidiary corporation was examined.
D)Whether the other auditors are members of the SEC Division of firms.
9

Which of the following statements is true related to an auditor's opinion on the effectiveness of a client's internal controls over financial reporting?
A)The opinion must either be unqualified or adverse.
B)An unqualified opinion may be issued even if significant deficiencies exist.
C)The presence of material weaknesses results in a qualified opinion.
D)The auditor is precluded from issuing an unqualified opinion on the financial statements unless an unqualified opinion has also been given on the internal control effectiveness.
10

PCAOB requirements related to the auditor's opinion of internal controls over financial reporting for public companies:
A)Permit audit firms to either issue a separate report or combine this report with the auditor's opinion on the financial statements.
B)Require audit firms to issue three different reports as part of a financial statement audit.
C)Are optional if the client outsources it's internal control testing and evaluation.
D)Require an unqualified opinion before an opinion on the financial statements can be issued.





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