AUD

AUD practice questions, page 6 of 41, with answer review and explanations.

Question 26

In which of the following circumstances would an auditor not express an unqualified opinion?

  1. There has been a material change between periods in accounting principles.
  2. Quarterly financial data required by the SEC has been omitted.
  3. The auditor wishes to emphasize an unusually important subsequent event.
  4. The auditor is unable to obtain audited financial statements of a consolidated investee.

Question 27

Management of Edington Industries plans to disclose an uncertainty as follows: The Company is a defendant in a lawsuit alleging infringement of certain patent rights and claiming damages. Discovery proceedings are in progress. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon adjudication has been made in the accompanying financial statements. The auditor is satisfied that sufficient audit evidence supports management's assertions about the nature and disclosure of the uncertainty. What type of opinion should the auditor express under these circumstances?

  1. Unqualified without an explanatory paragraph.
  2. "Subject to" qualified.
  3. "Except for" qualified.
  4. Disclaimer of opinion.

Question 28

Kane, CPA, concludes that there is substantial doubt about Lima Co.'s ability to continue as a going concern for a reasonable period of time. If Lima's financial statements adequately disclose its financial difficulties, Kane's auditor's report is required to include an explanatory paragraph that specifically uses the phrase(s):

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Question 29

Mead, CPA, had substantial doubt about Tech Co.'s ability to continue as a going concern when reporting on Tech's audited financial statements for the year ended June 30, 19X4. That doubt has been removed in 19X5. What is Mead's reporting responsibility if Tech is presenting its financial statements for the year ended June 30, 19X5, on a comparative basis with those of 19X4?

  1. The explanatory paragraph included in the 19X4 auditor's report should not be repeated.
  2. The explanatory paragraph included in the 19X4 auditor's report should be repeated in its entirety.
  3. A different explanatory paragraph describing Mead's reasons for the removal of doubt should be included.
  4. A different explanatory paragraph describing Tech's plans for financial recovery should be included.

Question 30

March, CPA, is engaged by Monday Corp., a client, to audit the financial statements of Wall Corp., a company that is not March's client. Monday expects to present Wall's audited financial statements with March's auditor's report to 1st Federal Bank to obtain financing in Monday's attempt to purchase Wall. In these circumstances, March's auditor's report would usually be addressed to:

  1. Monday Corp., the client that engaged March.
  2. Wall Corp., the entity audited by March.
  3. 1st Federal Bank.
  4. Both Monday Corp. and 1st Federal Bank.