Ch3_complete_solutions

Ch3_complete_solutions - Multiple Choice Questions From CPA...

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Multiple Choice Questions From CPA Examinations 3-23 a. (2) b. (3) c. (3) 3-24 a. (3) b. (4) c. (1) 3-25 a. (3) b. (2) c. (3)
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Discussion Questions and Problems 3-26 a. "Correctly stated" implies absolute accuracy, whereas the alternative report states that no material misstatements exist. b. The reference to generally accepted accounting principles specifies rules that were followed in accounting for the transactions to date; whereas "the true economic conditions" does not identify the specific accounting procedures applied. c. The opinion paragraph is not intended to be a certification or a guarantee of the accuracy and correctness of the financial statements, but rather it is intended to be an expression of professional judgment based upon a reasonable audit of the statements and underlying records. d. The name of the CPA firm rather than that of the individual practitioner should appear on the accountant's report because it is the entire firm that accepts responsibility for the report issued. e. "Our audit was performed to detect material misstatements in the financial statements" is flawed because the purpose of the audit is to determine whether financial statements are fairly stated, not to specifically search for material errors and fraud. It also fails to recognize the audit standards followed by the auditor. "We conducted our audit in accordance with auditing standards generally accepted in the United States of America" identifies the auditor's responsibilities for the conduct of the audit, accumulation of evidence, and reporting requirements. It is a much broader statement than the alternative clause. It also implies that if the auditor has conducted the audit in accordance with generally accepted auditing standards but does not uncover certain material errors or fraud, the auditor is unlikely to have responsibility for failing to do so. 3-27 a. Items that need not be included in the auditor's report are: 1. That Bellamy is presenting comparative financial statements. (Both years' statements will be referred to in the audit report.) 2. Specific description of the change in method of accounting for long-term construction contracts need not be included in the report since it is discussed in the footnotes. But, the auditor's report must state that there is a change in accounting principles and refer to the footnote. 3. The fact that normal receivable confirmation procedures were not used should not be disclosed since the auditor was able to satisfy him or herself through alternative audit procedures. 4. The lawsuit need not be discussed in the report since it has been included in a footnote.
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3-27 (continued) b. The following deficiencies are in Patel's report: b.1. The audit report is neither addressed nor dated and it does not contain a title. The audit report date should be the last day of field work. b.2.
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This note was uploaded on 01/19/2012 for the course ACCT 2301 taught by Professor Moore,j during the Spring '08 term at HCCS.

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Ch3_complete_solutions - Multiple Choice Questions From CPA...

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