Chapter 1 Section 4
Q1. March, CPA is engaged by Monday Corp, a client , to audit the financial statements
of Wall Corp, a company that is not March's client. Monday expects to present Wall's
audited financial statement with March's auditors report to 1st Federal Bank to obtain
financing in Monday's attempt to purchase Wall. In these circumstances, March's
auditors report would usually be addressed to whom? - answerA1. Monday Corp, the
client that engaged March. The auditors should address their repot to the entity that
engaged them. In this case, Monday corp. engaged the auditor to perform an
acquisition audit and the report should be addressed to Monday
Q2. In a comparative financial statement is the consistent application of accounting
principles explicitly stated or implicitly implied? - answerA2. Implied
Q3. A client decides not to make an auditors proposed adjustments that collectively are
not material, and wants the auditor to issue the report based on the unadjusted
numbers, what does the auditor have to do? - answerA3. Nothing different, the financial
statements are free from material misstatement and no disclosure is required in the
notes to the financial statements
Q4. Digit Co a nonissuer, uses the FIFO method of costing for its international
subsidiary's inventory and LIFO for its domestic inventory, under these circumstances,
the auditor's report on digit's financial statements should express what type of opinion? -
answerA4. Unmodified, GAAP allows a company to use different methods for costing
different inventories as long as the methods are disclosed.
Q5. What are the two components to the Introductory paragraph of an audit report for
an Issuer (unqualified). - answerA5. (1). Statement that the financial statements as
identified in the report were audited; (2). A statement that the financial statements are
the responsibility of management and the auditor's responsibility is to express an
opinion.
Q6. What are the four components to the Scope paragraph of an audit report for an
Issuer (unqualified). - answerA6. (1). Audit was conducted in accordance with the
standards of the PCAOB; (2). A statement that the audit was planned and performed to
obtain reasonable assurance that the financial statements are free from material
misstatement; (3). Statement that the audit included examining evidence on a test
basis; assessing the accounting principles used and significant estimates made by
managenet and evaluating the overall presentation; A statement that the audit provides
a reasonable basis for an opinion
Q7. What are the three components of the Opinion paragraph of an audit report for an
issuer (unqualified). - answerA7. (1). A statement referring to the financial statements
Q1. March, CPA is engaged by Monday Corp, a client , to audit the financial statements
of Wall Corp, a company that is not March's client. Monday expects to present Wall's
audited financial statement with March's auditors report to 1st Federal Bank to obtain
financing in Monday's attempt to purchase Wall. In these circumstances, March's
auditors report would usually be addressed to whom? - answerA1. Monday Corp, the
client that engaged March. The auditors should address their repot to the entity that
engaged them. In this case, Monday corp. engaged the auditor to perform an
acquisition audit and the report should be addressed to Monday
Q2. In a comparative financial statement is the consistent application of accounting
principles explicitly stated or implicitly implied? - answerA2. Implied
Q3. A client decides not to make an auditors proposed adjustments that collectively are
not material, and wants the auditor to issue the report based on the unadjusted
numbers, what does the auditor have to do? - answerA3. Nothing different, the financial
statements are free from material misstatement and no disclosure is required in the
notes to the financial statements
Q4. Digit Co a nonissuer, uses the FIFO method of costing for its international
subsidiary's inventory and LIFO for its domestic inventory, under these circumstances,
the auditor's report on digit's financial statements should express what type of opinion? -
answerA4. Unmodified, GAAP allows a company to use different methods for costing
different inventories as long as the methods are disclosed.
Q5. What are the two components to the Introductory paragraph of an audit report for
an Issuer (unqualified). - answerA5. (1). Statement that the financial statements as
identified in the report were audited; (2). A statement that the financial statements are
the responsibility of management and the auditor's responsibility is to express an
opinion.
Q6. What are the four components to the Scope paragraph of an audit report for an
Issuer (unqualified). - answerA6. (1). Audit was conducted in accordance with the
standards of the PCAOB; (2). A statement that the audit was planned and performed to
obtain reasonable assurance that the financial statements are free from material
misstatement; (3). Statement that the audit included examining evidence on a test
basis; assessing the accounting principles used and significant estimates made by
managenet and evaluating the overall presentation; A statement that the audit provides
a reasonable basis for an opinion
Q7. What are the three components of the Opinion paragraph of an audit report for an
issuer (unqualified). - answerA7. (1). A statement referring to the financial statements
