Author Question: Audit situations 1 through 10 present various independent factual situations an auditor might ... (Read 63 times)

markburs · **on:** Aug 21, 2022

Audit situations 1 through 10 present various independent factual situations an auditor might encounter in conducting an audit. List A represents the types of opinions the auditor ordinarily would issue, and List B represents the report modifications (if any) that would be necessary. For each situation, select one response from List A and one from List B. Select, as the best answer for each item, the action the auditor normally would take. Items from either list may be selected once, more than once, or not at all.

Assume the following:

•	The auditor is independent

•

The auditor previously expressed an unmodified opinion on the prior-year financial statements unless otherwise noted

•

Only single-year (not comparative) statements are presented for the current year (unless otherwise stated)

•	The conditions for an unmodified opinion exist unless contradicted in the factual scenario

•	The conditions stated in the factual scenario are material

•	No report modifications are to be made except in response to the factual scenario

Factual Scenario
1. The financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with GAAP.
2. In auditing the Long-Term Investments account, an auditor is unable to obtain audited financial statements for an investee located in a foreign country. The auditor concludes that sufficient competent evidential matter regarding this investment cannot be obtained but it is not pervasive to the financials as a whole.
3. Due to recurring operating losses and working capital deficiencies the auditor has substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. However, the financial statement disclosures are adequate.
4. The principal auditor decides to refer to the work of another auditor, who audited a wholly owned subsidiary of the entity and issued an unqualified opinion.
5. An entity issues financial statements that present financial position and results of operations but omits the related statement of cash flows. Management discloses in the notes to the financial statements that it does not believe the statement of cash flows to be useful.
6. An entity changes its depreciation method for production equipment from straight-line to units of production based on hours of utilization. The auditor concurs with the change, although it has a material effect on the comparability of the entity's financial statements.
7. An entity is a defendant in a lawsuit alleging infringement of certain patent rights. However, management cannot reasonably estimate the ultimate outcome of the litigation. The auditor believes that there is a reasonable possibility of a significant material loss, but the lawsuit is adequately disclosed in the notes to the financial statements.
8. An entity discloses certain lease obligations in the notes to the financial statements. The auditor believes that the failure to capitalize these leases is a departure from GAAP.
9. The entity wishes to show comparative financial statements and include the prior year. However, the prior year financial statements contained a qualification due to an inappropriate method of GAAP. Accordingly, management corrected the prior year GAAP deficiency and included the updated numbers in the comparative financials for the current year.
10. The entity wishes to show comparative financial statements and include the prior year. However, the prior year financial statements were audited by another auditor who refuses to reissue his opinion.

List A Opinion Choices	List B Report Modification Choices
A Qualified	H Describe the circumstances in an emphasis-of-matter paragraph preceding the opinion paragraph w/o modifying the three standard paragraphs.
B Unmodified	I Describe the circumstances in the opinion paragraph w/o adding an emphasis-of-matter paragraph.
C Adverse	J Describe the circumstances in an emphasis-of-matter paragraph preceding the opinion paragraph and modify the opinion paragraph.
D Disclaimer	K Describe the circumstances in an emphasis-of-matter paragraph following the opinion paragraph and modify the opinion paragraph.
E Either Qualified or Adverse	L Describe the circumstances in an emphasis-of-matter paragraph preceding the opinion paragraph and modify the scope & opinion paragraph.
F Either Disclaimer or Adverse	M Describe the circumstances in an emphasis-of-matter paragraph following the opinion paragraph and modify the scope & opinion paragraph.
G Either Qualified or Disclaimer	N Describe the circumstances in the scope paragraph w/o adding an emphasis-of-matter paragraph.
	O Describe the circumstances in an emphasis-of-matter paragraph following the opinion paragraph w/o modifying the three standard paragraphs.
	P Describe the circumstances in the introductory paragraph w/o adding an emphasis-of-matter paragraph.
.	Q Describe the circumstances in the introductory paragraph w/o adding an emphasis-of-matter paragraph, and modify the scope & opinion paragraphs.
	R Issue the standard auditor's report w/o modification.
	S None of the above.

Auditing and Assurance Services ¦ Arens, Elder, Beasley, Hogan ¦ 17^th Edition

Buy Test-Bank

Need homework help now?

Ask unlimited questions for free

Ask a Question

Marked as best answer by markburs on Aug 21, 2022

jacquelyngibson

Full Member
Posts: 161

Reply #1 on: Aug 21, 2022

A FREE account is required to view all solutions!

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 25% of students answer this correctly

markburs

Member
Posts: 147

Reply 2 on: Aug 21, 2022

Thanks for the timely response, appreciate it

blakcmamba

Member
Posts: 335

Reply 3 on: Yesterday

Excellent

Print

« previous next »

Did you know?

Adolescents often feel clumsy during puberty because during this time of development, their hands and feet grow faster than their arms and legs do. The body is therefore out of proportion. One out of five adolescents actually experiences growing pains during this period.

Did you know?

About one in five American adults and teenagers have had a genital herpes infection—and most of them don't know it. People with genital herpes have at least twice the risk of becoming infected with HIV if exposed to it than those people who do not have genital herpes.

Did you know?

The first successful kidney transplant was performed in 1954 and occurred in Boston. A kidney from an identical twin was transplanted into his dying brother's body and was not rejected because it did not appear foreign to his body.

Did you know?

The senior population grows every year. Seniors older than 65 years of age now comprise more than 13% of the total population. However, women outlive men. In the 85-and-over age group, there are only 45 men to every 100 women.

Did you know?

Drying your hands with a paper towel will reduce the bacterial count on your hands by 45–60%.

Independent assortment of chromosomes at meiosis explains Mendel's ratio

Independent assortment of chromosomes at meiosis explains MendelÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s ratio

Independent Assortment p1

School-age children are often independent and industrious, with a developing sense of self-confidenc

Coding for Special Situations

Mendel’s observations about segregation and independent assortment are explained by the behavior ...

Video: Pericarditis

For a complete list of videos, visit our video library