AUD

AUD practice questions, page 20 of 41, with answer review and explanations.

Question 96

Which of the following events occurring after the issuance of an auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

  1. A lawsuit is resolved that is explained in a separate paragraph of the prior-year's auditor's report.
  2. New information is discovered concerning undisclosed related party transactions of the prior year.
  3. A technological development occurs that affects the entity's ability to continue as a going concern.
  4. The entity sells a subsidiary that accounts for 35% of the entity's consolidated sales.

Question 97

On February 9, Brown, CPA, expressed an unqualified opinion on the financial statements of Web Co. On October 9, during a peer review of Brown's practice, the reviewer informed Brown that engagement personnel failed to perform a search for subsequent events for the Web engagement. Brown should first:

  1. Request Web's permission to perform substantive procedures that would provide a satisfactory basis for the opinion.
  2. Inquire of Web whether there are persons currently relying, or likely to rely, on the financial statements.
  3. Take no additional action because subsequent events have no effect on the financial statements that were reported on.
  4. Assess the importance of the omitted procedures to Brown's present ability to support the opinion.

Question 98

Which of the following is not true regarding an engagement to provide a written report on the application of accounting principles?

  1. An accountant is prohibited from providing a report on the application of accounting principles to a transaction not involving the facts and circumstances of a specific entity.
  2. The accountant's written report on the application of accounting principles should include an identification of the specific entity involved.
  3. An accountant is prohibited from providing a report on the application of accounting principles to a proposed future transaction involving the facts and circumstances of a specific entity.
  4. The accountant's written report on the application of accounting principles should include a paragraph restricting the use of the report.

Question 99

Before reporting on the financial statements of a U.S. entity that have been prepared in conformity with another country's accounting principles, an auditor practicing in the U.S. should:

  1. Understand the accounting principles generally accepted in the other country.
  2. Be certified by the appropriate auditing or accountancy board of the other country.
  3. Notify management that the auditor is required to disclaim an opinion on the financial statements.
  4. Receive a waiver from the auditor's state board of accountancy to perform the engagement.

Question 100

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 accounting principles to a specific transaction. The accountant's report should include a statement that:

  1. Any difference in the facts, circumstances, or assumptions presented may change the report.
  2. The engagement was performed in accordance with Statements on Standards for Consulting Services.
  3. The guidance provided is for management use only and may not be communicated to the prior or continuing auditors.
  4. Nothing came to the accountant's attention that caused the accountant to believe that the accounting principles violated GAAP.