ch11 - Solutions Chapter 11 Multiple Choice 1 2 3 4 5 6 7 8...

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Solutions – Chapter 11 Multiple Choice 1. c 2. c 3. d 4. c 5. c 6. b 7. a 8. c 9. b 10. a 11. b 12. b 13. c 14. c 15. a Discussion Questions 16. Types of audit reports can be unqualified, qualified, adverse and disclaimer. Adverse and disclaimer types of reports are rare for public companies, since the repercussions for public companies can be dire if those opinions are issued, such as delisting from stock exchanges. 17. An auditor can issue an unqualified or adverse opinion on ICFR. If the auditor determines that there is even one material weakness in ICFR, the auditor expresses an adverse opinion. Additionally, when there is a scope limitation, a disclaimer of opinion may be issued on ICFR. 18. In addition to presenting an adverse opinion or disclaiming an opinion, the auditor may modify an unqualified opinion on ICFR to refer to the report of other auditors when it is used as part of the basis for the auditor’s own report. Regarding subsequent events, assuming management modifies its report appropriately, the auditor adds only explanatory language to an unqualified ICFR audit report if a subsequent event occurs after the date of management’s assessment causing ICFR to become ineffective . 19. Reasons for explanatory language or an explanatory paragraph are as follows:
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a. The auditor’s opinion is based in part on the report of another auditor. b. Substantial doubt exists about an entity’s ability to continue as a going concern. c. The accounting principles or the way they are applied has changed in a material way. d. A previously issued financial statement contained a material misstatement that has been corrected. e. Other circumstances, beyond a change in accounting principles, exist that affect the comparability of the financial statements. f. Information required by the SEC as a part of the quarterly financial data has been omitted or has not been reviewed. g. The company is required to provide supplementary information by a standard setting body (such as the FASB or GASB) and that information is either not provided, is not presented according to the guidelines, or the auditor has not been able to perform whatever procedures are required related to the information. h. Other information in a document that includes the audited financial statements (such as when the audited financial statements are in the annual report) is materially inconsistent with information in the financial statements. 20. The audit report date is “no earlier than the date on which the auditor has obtained sufficient appropriate evidence to support the auditor’s opinion” (AS 5.89). This date is consistent with the date on which the auditor completes all the audit work, including the wrap-up phase of the audit. The audit report date signifies the end of audit work. The auditor’s level of responsibility for knowledge about the company drops after the report date. 21.
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ch11 - Solutions Chapter 11 Multiple Choice 1 2 3 4 5 6 7 8...

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