CPA Auditing and Attestation

CPA Auditing and Attestation practice questions, page 16 of 41, with answer review and explanations.

Question 76

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 77

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.

Question 78

Under which of the following circumstances would an auditor's expression of an unqualified opinion be inappropriate?

  1. The auditor is unable to obtain the audited financial statements of a significant subsidiary.
  2. The financial statements are prepared on the entity's income tax basis.
  3. There are significant deficiencies in the design and operation of the entity's internal control.
  4. Analytical procedures indicate that many year-end account balances are not comparable with the prior year's balances.

Question 79

Jewel, CPA, audited Infinite Co.'s prior-year financial statements. These statements are presented with those of the current year for comparative purposes without Jewel's auditor's report, which expressed a qualified opinion. In drafting the current year's auditor's report, Crain, CPA, the successor auditor, should: I. Not name Jewel as the predecessor auditor. II. Indicate the type of report issued by Jewel. III. Indicate the substantive reasons for Jewel's qualification.

  1. I only.
  2. I and II only.
  3. II and III only.
  4. I, II, and III. D

Question 80

A registration statement filed with the SEC contains the reports of two independent auditors on their audits of financial statements for different periods. The predecessor auditor who audited the prior-period financial statements generally should obtain a letter of representation from the:

  1. Successor independent auditor.
  2. Client's audit committee.
  3. Principal underwriter.
  4. Securities and Exchange Commission.