Question;Question 1. Question: (TCO 2) If a misstatement is immaterial to the financial statements of the entity for the current period, but is expected to have a material effect in future periods, it is appropriate to issue a(n) Student Answer: adverse opinion. qualified opinion. unqualified opinion. disclaimer of opinion. Question 2. Question: (TCO 2) When the auditor believes a company's financial statements are misleading because they were not prepared in conformity with GAAP, the auditor must issue a(n) Student Answer: qualified opinion. adverse opinion. disclaimer of opinion. qualified or an adverse opinion, depending on materiality. Question 3. Question: (TCO 2) When qualifying an opinion because of an insufficiency of audit evidence, an auditor should refer to the situation in the: Student Answer: Auditor?s Responsibility Paragraph Notes to the Financial StatementsYes Yes Auditor?s Responsibility Paragraph Notes to the Financial StatementsYes No Auditor?s Responsibility Paragraph Notes to the Financial StatementsNo Yes Auditor?s Responsibility Paragraph Notes to the Financial StatementsNo No Question 4. Question: (TCO 2) Jewel, CPA, audited Infinite Co.'s prior-year financial statements. These statements are presented with those of the current year for comparative purposes without Jewel's auditor's report, which expressed a qualified opinion. In drafting the current year's auditor's report, Crain, CPA, the successor auditor, should:Not name Jewel as the predecessor auditor.Indicate the type of report issued by Jewel.Indicate the substantive reasons for Jewel's qualification. Student Answer: I only. I and II only. II and III only. I, II, and III. Question 5. Question: (TCO 11) Which of the following is not a purpose of the client letter of representation? Student Answer: To impress upon the audit firm its responsibility for the audit To impress upon management its responsibility for the financial statement assertions To remind management of potential misstatements or omissions in the financial statements To document the responses from management to inquiries about various aspects of the audit Question 6. Question: (TCO 2) Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern? Student Answer: Significant related party transactions are pervasive. Usual trade credit from suppliers is denied. Arrearages in preferred stock dividends are paid. Restrictions on the disposal of principal assets are present. Question 7. Question: (TCO 2) In May, Year 4, an auditor reissues the auditor's report on the Year 2 financial statements at a continuing client's request. The Year 2 financial statements are not restated and the auditor does not revise the wording of the report. The auditor should: Student Answer: Dual date the reissued report. Use the release date of the reissued report. Use the original report date on the reissued report. Use the current-period auditor's report date on the reissued report. Question 8. Question: (TCO 11) Which of the following items would ordinarily not be included in the standard letter of inquiry to the client's attorney? Student Answer: A list, prepared by management, of pending threatened litigation of material amounts. A request that the attorney furnish information or comment about the likelihood of an unfavorage outcome of litigation. A request that the attorney furnish an estimate of the amount or range of the potential loss. A request that the attorney confirm the amount of outstanding fees, which the client owes for legal services. Question 9. Question: (TCO 2) In which type of report would you read the following statement: "We believe that our examination provides a reasonable basis for our opinion."? Student Answer: Review Audit Examination Agreed-upon procedures Question 10. Question: (TCO 2) In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of the requirements of an applicable financial reporting framework to a specific transaction. The accountant's report should include a statement that: Student Answer: Any difference in the facts, circumstances, or assumptions presented may change the report. The engagement was performed in accordance with Statements on Standards for Consulting Services. The guidance provided is for management use only and may not be communicated to the prior or continuing auditors. Nothing came to the accountant's attention that caused the accountant to believe that the financial reporting framework violated GAAP.
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