29 Questions
When might a CPA want to emphasize specific matters regarding financial statements?
When expressing an unqualified opinion
In what situation must the auditor state that adhering to a principle would have produced a misleading result?
When adhering to the principle would be misleading
What must the auditor do when agreeing with a departure from a promulgated principle?
Include it in the audit report
Under what circumstances might legislation jeopardize an entity's ability to operate?
When legal proceedings occur
Why might the CPA want to emphasize specific matters regarding the financial statements?
To provide additional clarity
When would an auditor issue an adverse opinion?
When the financial statements are so materially misstated
In what situation would an auditor issue a disclaimer of opinion?
Auditor is unable to be satisfied about the fairness of the financial statements
What may trigger the need for a disclaimer of opinion even if audit procedures were conducted?
Lack of independence as per AICPA Code of Professional Conduct
What is the primary reason for issuing an adverse opinion?
To highlight significant misstatements in the financial statements
Which scenario would most likely lead to an auditor issuing a disclaimer of opinion?
Inability to verify certain transactions in the financial records
Why is it crucial for an auditor to be independent as per professional codes?
To ensure fairness and objectivity in their assessment
What are examples of matters that may lead to an emphasis-of-matter explanatory paragraph in an audit report?
Material related party transactions
When might a qualified opinion be issued?
When there is a limitation on the scope of the audit
Which of the following is NOT a reason for issuing a qualified opinion?
Existence of material related party transactions
What might lead to the inclusion of an emphasis-of-matter explanatory paragraph in an audit report?
The presence of material uncertainties disclosed in footnotes
Which type of opinion report can result from a limitation on the scope of the audit?
Qualified opinion
In what situation might an emphasis-of-matter explanatory paragraph be included in an audit report?
For material uncertainties disclosed in the footnotes
What are the four categories of audit reports mentioned in the text?
Unqualified, Unqualified with explanatory paragraph, Qualified, Adverse or disclaimer
In what circumstance would an auditor issue an unqualified report with an explanatory paragraph?
To emphasize a specific matter in the financial statements
What criteria does the unmodified opinion audit report with emphasis-of-matter paragraph meet?
Complete audit with financial statements that are fairly presented
Which situation would lead to an auditor issuing a report with substantial doubt about going concern?
Inability to pay company obligations
What is emphasized in an unqualified report with an explanatory paragraph?
Certain matters or additional information
Which of the following is NOT one of the four categories of audit reports mentioned in the text?
Emphasis-of-matter
What type of report is issued when the auditor is not independent?
Disclaimer of opinion
In what scenario would an unqualified report include an additional paragraph and a qualified opinion?
Statements not prepared in accordance with GAAP
What does an unqualified shared report with other auditors indicate?
Materiality is material
Under what condition would an adverse opinion be issued?
Scope limited by the client
When would a qualified report include both scope and opinion qualifications?
Statements not prepared in accordance with GAAP
How many paragraphs does a standard unqualified report typically contain?
3
Explore examples of emphasis of other matters in an audit report, including material related party transactions, significant events post balance sheet date, disclosed material uncertainties like litigation, and major catastrophes' impact.
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