CPA Test practice questions, page 8 of 13, with answer review and explanations.
Question 36
Reference in a principal auditor's report to the fact that part of the audit was performed by another auditor most likely would be an indication of the:
Divided responsibility between the auditors who conducted the audits of the components of the overall financial statements.
Lack of materiality of the portion of the financial statements audited by the other auditor.
Principal auditor's recognition of the other auditor's competence, reputation, and professional certification.
Different opinions the auditors are expressing on the components of the financial statements that each audited.
Question 37
An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that the entity being reported on had significant transactions with related parties. The inclusion of this separate paragraph:
Is considered an "except for" qualification of the opinion.
Violates generally accepted auditing standards if this information is already disclosed in footnotes to the financial statements.
Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing Explanation: ."
Is appropriate and would not negate the unqualified opinion.
Question 38
When there has been a change in accounting principles, but the effect of the change on the comparability of the financial statements is not material, the auditor should:
Refer to the change in an explanatory paragraph.
Explicitly concur that the change is preferred.
Not refer to consistency in the auditor's report.
Refer to the change in the opinion paragraph.
Question 39
When single-year financial statements are presented, an auditor ordinarily would express an unqualified opinion in an unmodified report if the:
Auditor is unable to obtain audited financial statements supporting the entity's investment in a foreign affiliate.
Entity declines to present a statement of cash flows with its balance sheet and related statements of income and retained earnings.
Auditor wishes to emphasize an accounting matter affecting the comparability of the financial statements with those of the prior year.
Prior year's financial statements were audited by another CPA whose report, which expressed an unqualified opinion, is not presented.
Question 40
Park, CPA, was engaged to audit the financial statements of Tech Co., a new client, for the year ended December 31, 20X3. Park obtained sufficient audit evidence for all of Tech's financial statement items except Tech's opening inventory. Due to inadequate financial records, Park could not verify Tech's January 1, 20X3, inventory balances. Park's opinion on Tech's 20X3 financial statements most likely will be: