Auditing Final Exam UPDATED ACTUAL
Exam Questions and CORRECT Answers
A control deficiency that is more than a significant deficiency is most likely to result in what
form of audit opinion relating to internal control? - CORRECT ANSWER✔✔- Adverse
Inability to evaluate internal control due to a circumstance-caused scope limitation relating to
a significant account in a Sarbanes-Oxley Section 404 internal control audit is most likely to
result in what form of audit opinion? - CORRECT ANSWER✔✔- Disclaimer of Opinion
An Auditor identified a material weakness in December. The client was informed and
corrected it shortly after the "as of date" (December 31); the auditor agrees that the correction
eliminates the material weakness as of January 31. The appropriate report under PCAOB
Standard 5 audit of Internal control is: - CORRECT ANSWER✔✔- Adverse
In an integrated audit, what type of weaknesses lead to an adverse opinion on internal
control? - CORRECT ANSWER✔✔- Only Material Weaknesses
What is not included in a standard unqualified opinion on internal control over financial
reporting performed under PCAOB requirements? - CORRECT ANSWER✔✔- "The
Company management and audit committee are responsible for maintaining effective internal
control over financial reporting."
An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that
the entity being reported on had significant transactions with related parties. Is the conclusion
of this paragraph allowed? - CORRECT ANSWER✔✔- It is appropriate and would not
negate the unqualified opinion.
An auditor concludes that a client's illegal act, which has a material effect on the financial
statements, has not been properly accounted for or disclosed. Depending on the materiality of
the effect on the financial statements, the auditor should express what kind of audit opinion? -
CORRECT ANSWER✔✔- Qualified or Adverse.
What phrase would an auditor include in the auditor's report when expressing a qualified
opinion because of inadequate disclosure? - CORRECT ANSWER✔✔- "Except for the
omission of the information discussed in the preceding paragraph"
, In what circumstance would an auditor be likely to express an adverse opinion on the client's
financial statements? - CORRECT ANSWER✔✔- The financial statements are not in
conformity with the FASB statements regarding the capitalization of leases.
When an auditor qualifies an opinion because of inadequate disclosure, the auditor should
describe the nature of the omission in a separate explanatory paragraph and modify what
other paragraph? - CORRECT ANSWER✔✔- Only the Opinion paragraph.
Park, CPA was engaged to audit the financial statements of Tech Co., a new client for the year
ended December 31, 2001. Park obtained sufficient audit evidence for all of Tech's financial
statement items except Tech's operating inventory. Due to inadequate financial records, Park
could not verify Tech's January 1, 2001 inventory balances. Park's opinion on Tech's 2001
financial statements most likely would be what regarding the Balance Sheet and Income
Statement? - CORRECT ANSWER✔✔- Balance Sheet: Unqualified
Income Statement: Disclaimer
When an auditor expresses an adverse opinion, the opinion paragraph should include what? -
CORRECT ANSWER✔✔- A direct reference to a separate paragraph disclosing the basis for
the opinion.
The existence of Audit risk is recognized by the statement in the auditor's standard report that
the auditor: - CORRECT ANSWER✔✔- Obtains reasonable assurance about whether the
financial statements are free of material misstatement.
A principal auditor decides not to refer to the audit of another CPA who audited a subsidiary
of the principal auditor's client. After making inquiries about the other CPA's professional
reputation and independence, what would the principal auditor most likely do? - CORRECT
ANSWER✔✔- Contact the other CPA and review the audit programs and working papers
pertaining to the subsidiary.
the introductory paragraph of an auditor's report contains wording indicating that the author
submitting this paragraph did not audit the subsidiary of the parent company but that they
relied on the financials of the subsidiary. It says that it is relying solely on the work of the
other auditors of the subsidiary. What does this wording indicate? - CORRECT
ANSWER✔✔- It indicates a division of responsibility.
Exam Questions and CORRECT Answers
A control deficiency that is more than a significant deficiency is most likely to result in what
form of audit opinion relating to internal control? - CORRECT ANSWER✔✔- Adverse
Inability to evaluate internal control due to a circumstance-caused scope limitation relating to
a significant account in a Sarbanes-Oxley Section 404 internal control audit is most likely to
result in what form of audit opinion? - CORRECT ANSWER✔✔- Disclaimer of Opinion
An Auditor identified a material weakness in December. The client was informed and
corrected it shortly after the "as of date" (December 31); the auditor agrees that the correction
eliminates the material weakness as of January 31. The appropriate report under PCAOB
Standard 5 audit of Internal control is: - CORRECT ANSWER✔✔- Adverse
In an integrated audit, what type of weaknesses lead to an adverse opinion on internal
control? - CORRECT ANSWER✔✔- Only Material Weaknesses
What is not included in a standard unqualified opinion on internal control over financial
reporting performed under PCAOB requirements? - CORRECT ANSWER✔✔- "The
Company management and audit committee are responsible for maintaining effective internal
control over financial reporting."
An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that
the entity being reported on had significant transactions with related parties. Is the conclusion
of this paragraph allowed? - CORRECT ANSWER✔✔- It is appropriate and would not
negate the unqualified opinion.
An auditor concludes that a client's illegal act, which has a material effect on the financial
statements, has not been properly accounted for or disclosed. Depending on the materiality of
the effect on the financial statements, the auditor should express what kind of audit opinion? -
CORRECT ANSWER✔✔- Qualified or Adverse.
What phrase would an auditor include in the auditor's report when expressing a qualified
opinion because of inadequate disclosure? - CORRECT ANSWER✔✔- "Except for the
omission of the information discussed in the preceding paragraph"
, In what circumstance would an auditor be likely to express an adverse opinion on the client's
financial statements? - CORRECT ANSWER✔✔- The financial statements are not in
conformity with the FASB statements regarding the capitalization of leases.
When an auditor qualifies an opinion because of inadequate disclosure, the auditor should
describe the nature of the omission in a separate explanatory paragraph and modify what
other paragraph? - CORRECT ANSWER✔✔- Only the Opinion paragraph.
Park, CPA was engaged to audit the financial statements of Tech Co., a new client for the year
ended December 31, 2001. Park obtained sufficient audit evidence for all of Tech's financial
statement items except Tech's operating inventory. Due to inadequate financial records, Park
could not verify Tech's January 1, 2001 inventory balances. Park's opinion on Tech's 2001
financial statements most likely would be what regarding the Balance Sheet and Income
Statement? - CORRECT ANSWER✔✔- Balance Sheet: Unqualified
Income Statement: Disclaimer
When an auditor expresses an adverse opinion, the opinion paragraph should include what? -
CORRECT ANSWER✔✔- A direct reference to a separate paragraph disclosing the basis for
the opinion.
The existence of Audit risk is recognized by the statement in the auditor's standard report that
the auditor: - CORRECT ANSWER✔✔- Obtains reasonable assurance about whether the
financial statements are free of material misstatement.
A principal auditor decides not to refer to the audit of another CPA who audited a subsidiary
of the principal auditor's client. After making inquiries about the other CPA's professional
reputation and independence, what would the principal auditor most likely do? - CORRECT
ANSWER✔✔- Contact the other CPA and review the audit programs and working papers
pertaining to the subsidiary.
the introductory paragraph of an auditor's report contains wording indicating that the author
submitting this paragraph did not audit the subsidiary of the parent company but that they
relied on the financials of the subsidiary. It says that it is relying solely on the work of the
other auditors of the subsidiary. What does this wording indicate? - CORRECT
ANSWER✔✔- It indicates a division of responsibility.
