A change in accounting principle such as a change

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Unformatted text preview: n, the auditor’s concern is the possibility that the client may not be able to continue its operations or meet its obligations for a “reasonable period of time.” For this purpose, a reasonable period of time is considered not to exceed: a. six months from the date of the financial statements. b. one year from the date of the financial statements. c. six months from the date of the audit report. d. one year from the date of the audit report. 43. medium d When the auditor concludes that there is substantial doubt about the entity’s ability to continue as a going concern, the appropriate audit report would be: a. an unqualified opinion with an explanatory paragraph. b. a disclaimer of opinion. c. neither a nor b. d. either a or b. 44. medium c An auditor may not issue a qualified opinion when: a. a scope limitation prevents the auditor from completing an important audit procedure. b. the auditor’s report refers to the work of a spet. c. the auditor lacks independence with respect to the audited entity. d. an accounting principle at variance with GAAP is used. 45. medium b When a company’s financial statements contain a departure from GAAP with which the auditor concurs, the departure should be explained in: a. the scope paragraph. b. an explanatory paragraph that appears before the opinion paragraph. c. the opinion paragraph. d. an explanatory paragraph after the opinion paragraph. 46. medium b Which of the following representations does an auditor make explicitly and which implicitly when issuing an unqualified opinion? Conformity Adequacy of with GAAP disclosure a. Explicitly Explicitly 1-136 b. c. d. Explicitly Implicitly Implicitly Implicitly Explicitly Implicitly 47. medium c William Gregory, CPA, is the principal auditor for a multi-national corporation. Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation. Gregory is satisfied with the independence and professional reputation of the other auditor, as well as the quality of the other auditor’s examination. With respect to his report on the consolidated financial statements, taken as a whole, Gregory: a. must not refer to the examination of the other auditor. b. must refer to the examination of the other auditor. c. may refer to the examination of the other auditor. d. may refer to the examination of the other auditor, in which case Gregory must include in the auditor’s report on the consolidated financial statements a qualified opinion with respect to the examination of the other auditor. 48. medium d A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles. The auditor’s report on the financial statements of the year of the change should include: a. no reference to consistency. b. a reference to a prior period adjustment in the opinion paragraph. c. an explanatory paragraph that justifies the change and explains the impact of the change on reported net income. d. an explanatory paragraph explaining the change. 49. (Public) medium a Sarbanes-Oxley requires auditors of a public company to audit a company’s financial statements and attest to management’s report on the effectiveness of internal control over financial reporting. What type of assurance does the auditor provide in this report? a. Positive assurance on the financial statements and on the effectiveness of internal control over financial reporting. b. Positive assurance on the financial statements and negative assurance on the effectiveness of internal control over financial reporting. c. Limited assurance on the financial statements and on the effectiveness of internal control over financial reporting. d. There is no guidance on what level of assurance to provide. 50. medium c Whenever the client imposes restrictions on the scope of the audit, the auditor should be concerned that management may be trying to prevent discovery of misstatements. In such cases, the auditor will likely issue a: a. disclaimer of opinion in all cases. b. qualification of both scope and opinion in all cases. c. disclaimer of opinion whenever materiality is in question. d. qualification of both scope and opinion whenever materiality is in question. 51. medium b CPAs issue several types of “special audit reports.” Which of the following circumstances would not require the issuance of a special audit report? a. The client’s financial statements are prepared using the cash basis. b. The client’s financial statements are prepared using the accrual basis. c. The CPA has been retained to audit only the current assets. d. The CPA has been retained to review the internal control system, not the financial statements. 52. medium b When a qualified or adverse opinion is issued, the qualifying paragraph is inserted: a. between the introductory and scope paragraphs. b. between the scope and opinion paragraphs. c. after the opinion paragraph, as a fourth paragraph. d. immed...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.

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