2011 Becker CPA PassMaster A1 4

2011 Becker CPA PassMaster A1 4 - Becker Professional...

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Unformatted text preview: Becker Professional Education Registered to: www.‘viivid Book.org VividBookNet@Gmail.com Question CPA-03040 When reporting on comparative financial statements, an auditor ordinarily should change the previously issued opinion on the prior year‘s financial statements if the: a. Prior year's financial statements are restated to conform with generally accepted accounting principles. b. Auditor is a predecessor auditor who has been requested by a former client to reissue the previously issued report. c. Prior year's opinion was unqualified and the opinion on the current year‘s financial statements is modified due to a lack of consistency. d. Prior year's financial statements are restated following a pooling of interests in the current year. Explanation Choice "a" is correct. If, during the current audit, auditors become aware of circumstances or events that affect the financial statements of a prior period, they should consider such matters when updating the report on the financial statements of the prior period. For example, if auditors have previously qualified their opinion or expressed an adverse opinion on financial statements of a prior period because of a departure from generally accepted accounting principles, and 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 financial statements of the prior period should indicate that the statements have been restated and should express an unqualified opinion with respect to the restated financial statements. Choice "b" is incorrect. The predecessor auditor generally would not change a previously issued opinion when reissuing the audit report. Choice "c" is incorrect. A difference of opinions between periods would not result in the auditor changing the opinion on a previously issued audit report. Choice "d" is incorrect. Restatement of financial statements following a pooling of interests affects comparability of the financial statements, but would not result in a change in opinion from the audit report previously issued. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-03043 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. ll. Indicate the type of report issued by Jewel. |||. Indicate the substantive reasons for Jewel‘s qualification. a. lonly. b. land || only. c. II and “I only. d. I, II, and Ill. Explanation Choice "d" is correct. If the financial statements of a prior period have been audited by a predecessor auditor whose report is not presented, the successor auditor should indicate in the introductory paragraph of the report 1) that the financial statements of the prior period were audited by another auditor, 2) the date of the previous report, 3) the type of report issued by the predecessor auditor, and 4) if the report was other than a standard unqualified report, the substantive reasons therefor. The successor auditor may name the predecessor auditor only if the predecessor auditor's practice was acquired by or merged with that of the successor auditor. Choices "a", "b", and "c" are incorrect, based on the above explanation. 2011 Edition. Distributed by DeVryi'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘vlivid Book.org VividBookNet@Gmail.com Question CPA-03069 A registration statement filed with the SEC contains the reports of two independent auditors on their audits of financial statements for different periods. The predecessor auditor who audited the prior-period financial statements generally should obtain a letter of representation from the: a. Successor independent auditor. b. Client's audit committee. c. Principal underwriter. d. Securities and Exchange Commission. Explanation Choice "a" is correct. Before reissuing the prior year‘s audit report on the financial statements of a former client, the auditor should 1) read the financial statements of the current period, 2) compare the prior period information that the auditor reported on with the financial statements to be presented for comparative purposes, and 3) obtain letters of representation from management of the former client and from the successor auditor. The representation letter from management should indicate whether any of management's previous representations should be modified and whether there have been any subsequent events that would affect the previous financial statements. The representation letter from the successor auditor should state whether the successor auditor's audit disclosed any issues of a material nature that might affect the previous financial statements. Choice "b" is incorrect. The predecessor auditor is seeking independent confirmation regarding issues that might materially affect the previous financial statements. A representation letter from the client‘s audit committee would not provide this confirmation. Choice "c" is incorrect. The predecessor auditor is seeking independent confirmation regarding issues that might materially affect the previous financial statements. A representation letter from the principal underwriter would not provide this confirmation. Choice "d" is incorrect. The predecessor auditor is seeking independent confirmation regarding issues that might materially affect the previous financial statements. A representation letter from the SEC would not provide this confirmation. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-03075 Before reissuing the prior year's auditor's report on the financial statements of a former client, the predecessor auditor should obtain letters of representation from the: a. Former client‘s management and the board of directors. b. Former client‘s attorney and management. c. Former client's board of directors and the successor auditor. d. Successor auditor and the former client‘s management. Explanation Choice "d" is correct. Before reissuing the prior year‘s auditor's report on the financial statements of a former client, the auditor should 1) read the financial statements of the current period, 2) compare the prior-period information that the auditor reported on with the financial statements to be presented for comparative purposes, 3) obtain a letter of representation from the successor auditor, and 4) obtain a letter of representation from the former client‘s management. The representation letter from the successor auditor will state whether the successor's audit revealed any issues of a material nature that might affect the previous financial statements. The representation letter from the former client's management will indicate whether its previous representations are still accurate and whether there have been any subsequent events affecting the previous financial statements. Choices "a", "b", and "c" are incorrect. The predecessor does not request representation letters from the former client's board of directors or attorney. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-03092 In May, Year 4, an auditor reissues the auditor's report on the Year 2 financial statements at a continuing client's request. The Year 2 financial statements 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 report. d. Use the current-period auditor's report date on the reissued report. Explanation Choice "c" is correct. If the auditor reissues the audit report at the client's request, the auditor should use the original report date on the reissued report. Use of a subsequent date implies that the auditor has done additional work. Choice a Is incorrect. Use of a date subsequent to the original report date implies that the auditor has performed work subsequent to that date. Choice "b" is incorrect. Use of a date subsequent to the original report date implies that the auditor has performed work subsequent to that date. Choice "d" is incorrect. Use of a date subsequent to the original report date implies that the auditor has performed work subsequent to that date. 2011 Edition. Distributed by DeVrvaecker Educational Development Corp. Copyright ?2010 DeVrvi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-03095 An auditor expressed a qualified opinion on the prior year‘s financial statements because of a lack of adequate disclosure. These financial statements are properly restated in the current year and presented in comparative form with the current year's financial statements. The auditor's updated report on the prior year's financial statements should: a. Be accompanied by the auditor's original report on the prior year‘s financial statements. b. Continue to express a qualified opinion on the prior year's financial statements. c. Make no reference to the type of opinion expressed on the prior year‘s financial statements. d. Express an unqualified opinion on the restated financial statements of the prior year. Explanation Choice "d" is correct. If an auditor has previously qualified his or her opinion on financial statements of a prior period, and the prior period statements are restated to conform with GAAP, the auditor should express an unqualified opinion on the restated financial statements. In addition, the auditor would state the substantive reasons for the change in opinion in an explanatory paragraph preceding the opinion paragraph. Choice a Is incorrect. The original report would not be presented. Choice "b" is incorrect. The auditor would change the opinion on the restated financial statements from that previously issued. Choice c Is incorrect. The auditor would state the substantive reasons for the change in opinion in an explanatory paragraph preceding the opinion paragraph. 2011 Edition. Distributed by DeVryi'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-03097 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. Indicate the substantive reasons for the qualification in the predecessor auditor‘s opinion. b. Request the client to reissue the predecessor's report on the prior year's statements. c. Issue an updated comparative audit report indicating the division of responsibility. d. Express an opinion only on the current year's statements and make no reference to the prior year's statements. Explanation Choice "a" is correct. If the financial statements of a prior period have been audited by a predecessor auditor whose report is not presented, the successor auditor should indicate in the introductory paragraph of the audit report (1) that the financial statements of the prior period were audited by another auditor, (2) the type of report issued, and (3) if the report was other than standard, the substantive reasons therefor. Choice "b" is incorrect. The predecessor auditor, not the client, may reissue the previous year's audit report. Choice c Is incorrect. An audit report would indicate a division of responsibility when the principal auditor's opinion is based in part on the report of another auditor. Choice "d" is incorrect. If the prior year's financial statements are issued, the previous year's audit opinion must also be disclosed. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-03101 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. Explanation Choice a is correct. When prior-period financial statements are restated in the current period to conform with GAAP, the auditor‘s updated report on the prior-period financial statements should express an unqualified opinion concerning the restated financial statements. Choice "b" is incorrect. The original auditor's report on the prior period should not be presented. Choice c Is incorrect. The original report date is used only if the original report is reissued unchanged. Choice "d" is incorrect. A change in accounting principle that is properly accounted for does not result in a qualified opinion. 2011 Edition. Distributed by DeVrvi'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-04614 Comparative financial statements include the prior year's statements that were audited by a predecessor auditor whose report is not presented. If the predecessor's report was unqualified, the successor should: a. Add an explanatory paragraph that expresses only limited assurance concerning the fair presentation of the prior year's financial statements. b. Express an opinion only on the current year's financial statements and make no reference to the prior year's financial statements. c. Indicate in the auditor's report that the predecessor auditor expressed an unqualified opinion on the prior year's financial statements. d. Obtain a letter of representations from the predecessor auditor concerning any matters that might affect the successor's opinion. Explanation Choice c Is correct. When a successor auditor does not present the predecessor auditor's report, the successor should indicate in the introductory paragraph that the predecessor auditor expressed an unqualified opinion on the prior year‘s financial statements. Choice a is incorrect. No assurance is provided regarding the fair presentation of the prior year's financial statements. Choice "b" is incorrect. The auditor does make reference to the prior year's financial statements, indicating in the introductory paragraph that the predecessor auditor expressed an unqualified opinion on the prior year‘s financial statements. Choice "d" is incorrect. There is no requirement that the successor obtain a letter of representation from the predecessor auditor, although the reverse may be true (the predecessor should obtain a letter of representation from the successor if the previous report is to be reissued.) 2011 Edition. Distributed by DeVryl'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. ...
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This note was uploaded on 09/27/2011 for the course ACCT 540 taught by Professor Haight during the Spring '11 term at NMSU.

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2011 Becker CPA PassMaster A1 4 - Becker Professional...

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