Restrictions imposed by a retail entity that is a new client prevent an auditor from observing any physical inventories. These inventories account for 40% of the entity's assets. Alternative auditing procedures cannot be applied due to the nature of the entity's records. Under these circumstances, the auditor should express a(an):
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1 .After considering management's plans, an auditor concludes that there is substantial doubt about a client's ability to continue as a going concern for a reasonable period of time. The auditor's responsibility includes:
A Indicating to the client's audit committee whether management's plans for dealing with the adverse effects of the financial difficulties can be effectively implemented. B Disclaiming an opinion on the financial statements due to the indications of possible financial difficulties. C Issuing a quali...
2 .In which of the following circumstances would an auditor be most likely to express an adverse opinion?
A The financial statements are not in conformity with the GAAP rules regarding the capitalization of leases. B Tests of controls show that the entity's internal control is so poor that it cannot be relied upon. C Information comes to the auditor's attention that raises substantial doubt about the en...
3 .Which of the following phrases should be included in the opinion paragraph when an auditor expresses a qualified opinion?When read inconjunction withNote XWith the foregoingexplanation
A Yes........Yes B Yes........No C No.........Yes D No.........No
4 .When an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, the appropriate form of report to be issued must include a(an):
A Disclaimer of opinion. B Regulation S-X exemption. C Report on pro forma financial statements. D Unaudited association report.
5 .When disclaiming an opinion due to a client-imposed scope limitation, an auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also omit the:Auditor'sResponsibilityparagraphOpinionparagraph
A Yes........Yes B Yes........No C No.........No D No.........Yes
7 .When an independent CPA assists in preparing the financial statements of a publicly held entity, but has not audited or reviewed them, the CPA should issue a disclaimer of opinion. In such situations, the CPA has no responsibility to apply any procedures beyond:
A Ascertaining whether the financial statements are in conformity with generally accepted accounting principles. B Documenting that the internal control structure is not being relied on. C Determining whether management has elected to omit substantially all required disclosures. D Reading the financ...
8 .An auditor may issue a qualified opinion under which of the following circumstances?Lack of sufficientappropriateaudit evidenceRestrictions of thescope of the audit
A No.........No B Yes........No C Yes........Yes D No.........Yes
9 .Jewel, CPA, audited Infinite Co.'s prior-year financial statements. These statements are presented with those of the current year for comparative purposes without Jewel's auditor's report, which expressed a qualified opinion. In drafting the current year's auditor's report, Crain, CPA, the successor auditor, should:I.Not name Jewel as the predecessor auditor.II.Indicate the type of report issued by Jewel.III.Indicate the substantive reasons for Jewel's qualification.
A I, II, and III. B II and III only. C I and II only. D I only.
10 .An entity's comparative financial statements include the financial statements of the prior year that were audited by a predecessor auditor whose report is not presented. If the predecessor's report was qualified, the successor should:
A Explain to the client that comparative financial statements may not be presented under these circumstances. B Indicate the substantive reasons for the qualification in the predecessor auditor's opinion. C Express an opinion only on the current year's financial statements and make no reference to t...
