CPA Auditing and Attestation

CPA Auditing and Attestation practice questions, page 19 of 41, with answer review and explanations.

Question 91

Subsequent to the issuance of an auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next:

  1. Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information.
  2. Request that management disclose the newly discovered information by issuing revised financial statements.
  3. Issue revised pro forma financial statements taking into consideration the newly discovered information.
  4. Give public notice that the auditor is no longer associated with financial statements.

Question 92

On March 15, X4, Kent, CPA, issued an unqualified opinion on a client's audited financial statements for the year ended December 31, X3. On May 4, X4, Kent's internal inspection program disclosed that engagement personnel failed to observe the client's physical inventory. Omission of this procedure impairs Kent's present ability to support the unqualified opinion. If the stockholders are currently relying on the opinion, Kent should first:

  1. Advise management to disclose to the stockholders that Kent's unqualified opinion should not be relied on.
  2. Undertake to apply alternative procedures that would provide a satisfactory basis for the unqualified opinion.
  3. Reissue the auditor's report and add an explanatory paragraph describing the departure from generally accepted auditing standards.
  4. Compensate for the omitted procedure by performing tests of controls to reduce audit risk to a sufficiently low level.

Question 93

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 technological development that could affect the entity's future ability to continue as a going concern.
  2. The discovery of information regarding a contingency that existed before the financial statements were issued.
  3. The entity's sale of a subsidiary that accounts for 30% of the entity's consolidated sales.
  4. The final resolution of a lawsuit explained in a separate paragraph of the auditor's report. B

Question 94

Wilson, CPA, obtained sufficient appropriate audit evidence to render an opinion on Abco's December 31, X1, financial statements on March 6, X2. A subsequent event requiring adjustment to the X1 financial statements occurred on April 10, X2, and came to Wilson's attention on April 24, X2. If the adjustment is made without disclosure of the event, Wilson's report ordinarily should be dated:

  1. March 6, X2.
  2. April 10, X2.
  3. April 24, X2.
  4. Using dual dating. A

Question 95

An auditor concludes that a substantive auditing procedure considered necessary during the prior period's audit was omitted. Which of the following factors would most likely cause the auditor promptly to apply the omitted procedure?

  1. There are no alternative procedures available to provide the same evidence as the omitted procedure.
  2. The omission of the procedure impairs the auditor's present ability to support the previously expressed opinion.
  3. The source documents needed to perform the omitted procedure are still available.
  4. The auditor's opinion on the prior period's financial statements was unqualified.