AUD

AUD practice questions, page 32 of 41, with answer review and explanations.

Question 156

When a principal auditor decides to make reference to another auditor's examination, the principal auditor's report should always indicate clearly, in the introductory, scope, and opinion paragraphs, the:

  1. Magnitude of the portion of the financial statements examined by the other auditor.
  2. Disclaimer of responsibility concerning the portion of the financial statements examined by the other auditor.
  3. Name of the other auditor.
  4. Division of responsibility.

Question 157

Information accompanying the basic financial statements in an auditor-submitted document should not include:

  1. An analysis of inventory by location.
  2. A statement that the allowance for doubtful accounts is adequate.
  3. A statement that the depreciable life of a new asset is 20 years.
  4. An analysis of revenue by product line.

Question 158

For a particular entity's financial statements to be presented fairly in conformity with generally accepted accounting principles, it is not required that the principles selected:

  1. Be appropriate in the circumstances for the particular entity.
  2. Reflect transactions in a manner that presents the financial statements within a range of acceptable
  3. Present information in the financial statements that is classified and summarized in a reasonable manner.
  4. Be applied on a basis consistent with those followed in the prior year.

Question 159

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor:

  1. May accept the engagement because such engagements merely involve limited reporting objectives.
  2. May accept the engagement but should disclaim an opinion because of an inability to apply the procedures considered necessary.
  3. Should refuse the engagement because there is a client-imposed scope limitation.
  4. Should refuse the engagement in accordance with generally accepted auditing standards.

Question 160

If an accounting change has no material effect on the financial statements in the current year, but the change is reasonably certain to have a material effect in later years, the change should be:

  1. Treated as a consistency modification in the auditor's report for the current year.
  2. Disclosed in the notes to the financial statements of the current year.
  3. Disclosed in the notes to the financial statements and referred to in the auditor's report for the current year.
  4. Treated as a subsequent event.