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Types of auditor reports, practice exam questions

50. An explanation of reliance on the reports of other auditors is an illustration of report departures referred to as
A. Qualifications.
B. Divisions of responsibility.
C. Expansions of scope.
D. Scope limitations.

1. If management fails to provide adequate justification for a change from one generally accepted accounting principle to another, the auditors should
A. Add an explanatory paragraph and express a qualified or an adverse opinion on the entity's financial statements for lack of conformity with generally accepted accounting principles.
B. Disclaim an opinion on the entity's financial statements because of uncertainty.
C. Disclose the matter in a separate explanatory paragraph but not modify the opinion paragraph on the entity's financial statements.
D. Neither modify the opinion on the entity's financial statements nor disclose the matter because both principles are generally accepted accounting principles.

2. Independent auditors must consider whether the entity has the ability to continue as a going concern. If a substantial doubt exists but disclosure is adequate and no other basis exists for modifying the report, the auditors would normally
A. Disclaim an opinion.
B. Express an adverse opinion.
C. Qualify the opinion.
D. Express an unqualified opinion with another paragraph describing the going-concern uncertainty.

3. Which of the following is not included in the introductory paragraph of the standard report on the entity's financial statements?
A. The names of the financial statements audited.
B. The auditors' responsibility to express an opinion on the entity's financial statements.
C. Management's responsibility for the financial statements.
D. The fact that an audit provides a reasonable basis for an opinion.

4. When disclaiming an opinion due to a client-imposed scope limitation, auditors should indicate in a separate paragraph why the audit did not comply with the standards of the PCAOB. The auditors should also omit the
A. Scope Paragraph: No; Opinion Paragraph: Yes
B. Scope Paragraph: Yes; Opinion Paragraph: Yes
C. Scope Paragraph: No; Opinion Paragraph: No
D. Scope Paragraph: Yes; Opinion Paragraph: No

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50. An explanation of reliance on the reports of other auditors is an illustration of report departures referred to as
A. Qualifications.
*B. Divisions of responsibility.
C. Expansions of scope.
D. Scope limitations.

1. If management fails to provide adequate justification for a change from one generally accepted accounting principle to another, the auditors should
A. Add an explanatory paragraph and express a qualified or an adverse opinion on the entity's financial statements for lack of conformity with generally accepted accounting principles.
B. Disclaim an opinion on the entity's financial statements because of uncertainty.
*C. Disclose the matter in a separate explanatory paragraph but not modify the opinion paragraph on the entity's financial statements.
D. Neither modify the opinion on the entity's financial statements nor disclose the matter because both principles are generally accepted accounting principles.
Source: AU508 ...

Solution Summary

Your guidance is a selection and a copy of the standard auditor's report and the link to the PCAOB site where these matter are explained.

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