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B) unqualified audit report.C) scope limited audit report.D) adverse audit report.Answer: BTerms: Standard unqualified audit reportDiff: ChallengingObjective: LO 3-8AACSB: Reflective thinking skills59
4) More than one modification should be included in the audit report when:A) the auditor is not independent and the auditor knows that the company has not followed generally accepted accounting principles.B) there is substantial doubt about the going concern of the company and information about the causes of the uncertainties is not adequately disclosed in the footnotes.C) there is a scope limitation and there is substantial doubt about the company's ability to continue as a going concern.D) all of the above.Answer: DTerms: Standard report; More than one condition requiring a departure or modificationDiff: ModerateObjective: LO 3-8AACSB: Reflective thinking skills5) When there is a justified departure from GAAP which is considered material, the auditor should issue a(n):A) standard unqualified audit report.B) disclaimer of opinion.C) unqualified audit report with an explanatory paragraph.D) adverse opinion.Answer: CTerms: Audit report and different levels of materialityDiff: ModerateObjective: LO 3-8AACSB: Reflective thinking skills6) If there is a deviation in the statements' preparation in accordance with GAAP and another accounting principle was applied on a basis that was not consistent with that of the preceding year:A) the auditor must choose which modification to include in the audit report.B) only the most material modification can be disclosed.C) more than one modification should be included in the report.D) none of the above.Answer: CTerms: Standard report; More than one condition requiring a departure or modificationDiff: ModerateObjective: LO 3-8AACSB: Reflective thinking skills60
7) After the auditor determines whether any conditions exist which require a departure from a standard unqualified report, the next step in the decision process for audit reports is to:A) write the report.B) decide the materiality for each condition.C) decide the appropriate type of report for the condition.D) discuss the report with management.Answer: BTerms: Auditor's decision process for audit reportsDiff: EasyObjective: LO 3-8AACSB: Reflective thinking skills8) The final step in the auditor's decision process for audit reports is to write the audit report.A) TrueB) FalseAnswer: ATerms: Auditor's decision process for audit reportsDiff: EasyObjective: LO 3-8AACSB: Reflective thinking skills9) Academic research is underway to study the effectiveness of communications provided by auditors in the audit report.A) TrueB) FalseAnswer: ATerms: Research underway on audit reportDiff: ModerateObjective: LO 3-8AACSB: Reflective thinking skillsLearning Objective 3-91) Auditing standards in the United States allow an auditor to perform an audit of a U.S. entity inaccordance with both generally accepted auditing standards in the U.S. and the ISAs.