AUD

AUD practice questions, page 15 of 41, with answer review and explanations.

Question 71

Which of the following procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity's ability to continue as a going concern?

  1. Performing cutoff tests of sales transactions with customers with long-standing receivable balances.
  2. Evaluating the entity's procedures for identifying and recording related party transactions.
  3. Inspecting title documents to verify whether any real property is pledged as collateral.
  4. Inquiring of the entity's legal counsel about litigation, claims, and assessments.

Question 72

A CPA's standard report on audited financial statements would be inappropriate if it referred to:

  1. Management's responsibility for the financial statements.
  2. An assessment of the entity's accounting principles.
  3. Significant estimates made by management.
  4. The CPA's assessment of sampling risk factors.

Question 73

When an auditor has substantial doubt about an entity's ability to continue as a going concern because of the probable discontinuance of operations, the auditor most likely would express a qualified opinion if:

  1. The effects of the adverse financial conditions likely will cause a bankruptcy filing.
  2. Information about the entity's ability to continue as a going concern is not disclosed.
  3. Management has no plans to reduce or delay future expenditures.
  4. Negative trends and recurring operating losses appear to be irreversible.

Question 74

An auditor believes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. In evaluating the entity's plans for dealing with the adverse effects of future conditions and events, the auditor most likely would consider, as a mitigating factor, the entity's plans to:

  1. Repurchase the entity's stock at a price below its book value.
  2. Issue stock options to key executives.
  3. Lease rather than purchase operating facilities.
  4. Accelerate the due date of an existing mortgage.

Question 75

Which of the following is true regarding the standard audit report for an issuer?

  1. Reference should be made in the scope paragraph to both PCAOB standards and generally accepted auditing standards.
  2. PCAOB standards should not be mentioned at all, although their use is implied in the standard auditor's report.
  3. Reference should be made in the scope paragraph to PCAOB standards, and in the opinion paragraph to generally accepted accounting principles.
  4. Reference may be made in the scope paragraph to either PCAOB standards or generally accepted auditing standards.