Management Assertions Quiz: Audit Process Questions

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Questions and Answers

There are 3 opinions that may be appropriate when a client's financial statements are not in accordance with GAAP. Which of the following 3 opinions are correct?

disclaimer, qualified opinion, & adverse opinion

unmodified opinion, disclaimer, & adverse opinion

unmodified opinion, qualified opinion, & disclaimer

unmodified opinion, qualified opinion, & adverse opinion (correct)

Select the conditions that would not require a departure from an unmodified opinion audit report.

scope of audit has been restricted

financial statements not prepared in accordance with GAAP

financial statements are presented in accordance with GAAP (correct)

the auditor is not independent

What are the 3 opinions that are appropriate when a client's financial statements are not in accordance with GAAP?

disclaimer opinion, qualified opinion, adverse opinion

unmodified opinion, qualified opinion, disclaimer

unmodified opinion, qualified opinion, adverse opinion (correct)

unmodified opinion, disclaimer, adverse opinion

Select the best option to protect an auditor when a material misstatement has not been detected in a financial statement audit. The audit was conducted

in accordance with GAAP Signup and view all the answers

An auditor must perform an audit by having an attitude of professional skepticism. This consists of several components. Select all of the ones that apply.

a questioning mind and a critical assessment of the audit evidence Signup and view all the answers

The management assertion related to account balances at period end for the assertion of existence is that

Assets, liabilities, and equity interests exist. Signup and view all the answers

The management assertion related to account balances at period end for the assertion of completeness is that

All assets, liabilities, and equity interests that should have been recorded have been recorded. Signup and view all the answers

The management assertion related to account balances at period end for the assertion of valuation and allocation is that

Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation adjustments are appropriately recorded. Signup and view all the answers

The management assertion related to account balances at period end for the assertion of rights and obligations is that

The entity holds or controls the rights to assets and the liabilities are the obligation of the entity. Signup and view all the answers

The management assertion of occurrence, related to classes of transactions and events for the period under audit, is defined as

Transactions and events that have been recorded have occurred and pertain to the entity. Signup and view all the answers

The management assertion of cutoff, related to classes of transactions and events for the period under audit, is defined as

Transactions and events have been recorded in the correct accounting period. Signup and view all the answers

The management assertion of classification, related to classes of transactions and events for the period under audit, is defined as

Transactions and events have been recorded in the proper accounts. Signup and view all the answers

The management assertion of completeness, related to classes of transactions and events for the period under audit, is defined as

All transactions and events that should have been recorded have been recorded. Signup and view all the answers

The management assertion of accuracy, related to classes of transactions and events for the period under audit, is defined as

Amounts and other data relating to recorded transactions and events have been recorded appropriately. Signup and view all the answers

The management assertion of occurrence and rights and obligations, related to the assertion for the presentation of information within the financial statements and disclosure in the notes to financial statements, is defined as

Disclosed events and transactions have occurred and pertain to the entity. Signup and view all the answers

The management assertion of completeness, related to the assertion for the presentation of information within the financial statements and disclosure in the notes to financial statements, is defined as

All disclosures that should have been included in the financial statements have been included. Signup and view all the answers

The management assertion of accuracy and valuation, related to the assertion for the presentation of information within the financial statements and disclosure in the notes to financial statements, is defined as

Financial and other information are disclosed appropriately and at appropriate amounts. Signup and view all the answers

The management assertion of classification and understandability, related to the assertion for the presentation of information within the financial statements and disclosure in the notes to financial statements, is defined as

Financial and other information is appropriately presented and described and disclosures are clearly expressed. Signup and view all the answers

Select the term that relates to the detailed instructions that explain what type of audit evidence is to be obtained in an audit.

audit procedure Signup and view all the answers

Study Notes

Audit Opinions and Reporting

When a client's financial statements are not in accordance with GAAP, three opinions may be appropriate: 1) qualified opinion, 2) adverse opinion, and 3) disclaimer of opinion.
A departure from an unmodified opinion audit report is not required when the client's financial statements are not in accordance with GAAP, but the effect is immaterial and the auditor concludes that the overall financial statements are presented fairly.

Professional Skepticism

An auditor must perform an audit with an attitude of professional skepticism, which consists of:
- A questioning mind
- A critical assessment of evidence
- A willingness to consider alternative explanations