When an auditor issues a disclaimer of opinion The implication is that the auditor?

Chapter 3

Multiple-Choice Questions

1.Auditing standards require that the audit report must be titled and that the title must:

easya.include the word “independent.”

ab.indicate if the auditor is a CPA.

c.indicate if the auditor is a proprietorship, partnership, or incorporated.

d.indicate the type of audit opinion issued.

2.

Medium

a

To emphasize the fact that the auditor is independent, a typical addressee of the audit report

could be:

Company ControllerShareholdersBoard of Directors

a.NoYesYes

b.NoNoYes

c.YesYesNo

d.YesNoNo

3.The purpose of the introductory paragraph in the standard unqualified report is:

easya.to identify that the type of opinion issued is unqualified.

bb.to identify the financial statements audited and the dates and time periods covered by the

report.

c.to indicate the CPA followed applicable audit standards.

d.to indicate all the financial statements are in accordance with GAAP.

4.The scope paragraph of the standard unqualified audit report states that the audit is designed to:

easya.discover all errors and/or irregularities.

db.discover material errors and/or irregularities.

c.conform to generally accepted accounting principles.

d.obtain reasonable assurance whether the statements are free of material misstatement.

5.The audit report date on a standard unqualified report indicates:

easya.the last day of the fiscal period.

db.the date on which the financial statements were filed with the Securities and Exchange

Commission.

c.the last date on which users may institute a lawsuit against either client or auditor.

d.the last day of the auditors responsibility for the review of significant events that

occurred subsequent to the date of the financial statements.

6.

easy

d

As a result of management’s refusal to permit the auditor to physically examine inventory, the

auditor has not accumulated sufficient appropriate evidence to conclude whether financial

statements are stated in accordance with GAAP. The auditor must depart from the unqualified

audit report because:

a.the financial statements have not been prepared in accordance with GAAP.

b.the scope of the audit has been restricted by circumstances beyond either the client’s or

auditors control.

c.the auditor has lost independence.

d.the scope of the audit has been restricted.

7.An adverse opinion is issued when the auditor believes:

easya.some parts of the financial statements are materially misstated or misleading.

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What is a disclaimer of opinion in an audit?

Disclaimer of Opinion-Disclaimer Report When an auditor issues a disclaimer of opinion report, it means that they are distancing themselves from providing any opinion at all related to the financial statements.

When should an auditor issue a disclaimer of opinion?

The auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. 10.

What are the impact of disclaimer?

As explained at paragraph 34.69, the effect of a disclaimer is to end the insolvent's interest in the disclaimed property and, therefore, any sub-leases created as a result of the insolvent's interest in the lease would also be ended.

What happens if an auditor issues an adverse opinion?

When an auditor issues an adverse opinion, there are material exceptions to GAAP that affect the financial statements as a whole. Here, the auditor indicates that the financial statements aren't presented fairly. Typically, an adverse opinion letter outlines these exceptions.

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