Chap018 - Chapter 18 - Reports on Audited Financial...

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Chapter 18 - Reports on Audited Financial Statements Chapter 18 Reports on Audited Financial Statements True / False Questions 1. A going concern issue requires a modification of the wording to the three-paragraph standard unqualified audit report. True False 2. An opinion based in part on the report of another auditor requires an explanatory paragraph be added to the standard unqualified audit report. True False 3. A basic assumption that underlies financial reporting is that an entity will continue as a going concern. True False 4. A change in accounting estimate is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report. True False 5. A change in reporting entity is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report. True False 6. Changes that do not affect consistency are normally disclosed in the footnotes but do not require an explanatory paragraph in the audit report. True False 18-1
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Chapter 18 - Reports on Audited Financial Statements 7. An auditor may be unable to express an unqualified opinion if an immaterial departure from GAAP is present in the financial statements. True False 8. An auditor must disclaim an opinion when the auditor lacks independence. True False 9. The choice of which audit report to issue depends on the condition and the materiality of any departure. True False 10. A scope limitation results from an inability to obtain sufficient appropriate evidence about some component of the financial statements. True False Multiple Choice Questions 11. Which of the following parties is responsible for the fairness of the representations made in financial statements? A. Client's management B. Independent auditor C. Audit committee D. AICPA 12. Which of the following situations will not result in modification of the auditor's report because of a scope limitation? A. Restriction imposed by the client B. Reliance placed on the report of another auditor C. Inability to obtain sufficient appropriate evidential matter D. Inadequacy in the accounting records 18-2
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Chapter 18 - Reports on Audited Financial Statements 13. When the audited financial statements of the prior year are presented together with those of the current year, the continuing auditor's report should cover A. Both years B. Only the current year C. Only the current year, but the prior year's report should be presented D. Only the current year, but the prior year's report should be referred to 14. Management believes and the auditor is satisfied, that a material loss probably will occur when pending litigation is resolved. Management is unable to make a reasonable estimate of the amount or range of the potential loss, but fully discloses the situation in the notes to the financial statements. If the auditor wishes to call attention to the matter and management does not make an accrual in the financial statements, the auditor should express a(an)
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Chap018 - Chapter 18 - Reports on Audited Financial...

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