Wiley CPA Excel Exam Review Study Guide Auditing And Attestation 2015 14th Edition O. Ray Whittington - Solutions

An independent accountant’s report is based on a review of interim financial information. If this report is presented in a registration statement, a prospectus should include a statement clarifying that thea. Accountant’s review report is not a part of the registration statement within the
The objective of a review of interim financial information of a public entity (issuer) is to provide an accountant with a basis for reporting whethera. Material modifications should be made to conform with generally accepted accounting principles.b. A reasonable basis exists for expressing an
When an independent CPA has reviewed the interim financial statements of a public client, which procedure is least likely to have been performed?a. Obtaining written representations from management for all interim financial information presented.b. Observing the interim count of inventory.c.
A CPA is permitted to accept a separate engagement (not in conjunction with an audit of financial statements) to audit an entity’s Schedule of accounts receivable Schedule of royaltiesa. Yes Yesb. Yes Noc. No Yesd. No No G.1.b. Reviewed Interim (Quarterly)Statements
Field is an employee of Gold Enterprises. Hardy, CPA, is asked to express an opinion on Field’s profit participation in Gold’s net income. Hardy may accept this engagement only ifa. Hardy also audits Gold’s complete financial statements.b. Gold’s financial statements are prepared in
Financial information is presented in a printed form that prescribes the wording of the independent auditor’s report.The form is not acceptable to the auditor because the form calls for statements that are inconsistent with the auditor’s responsibility. Under these circumstances, the auditor
Delta Life Insurance Co. prepares its financial statements on an accounting basis insurance companies use pursuant to the rules of a state insurance commission. If Wall, CPA, Delta’s auditor, discovers that the statements are not suitably titled, Wall shoulda. Disclose any reservations in an
An auditor’s report would refer to a basis of accounting other than GAAP in which of the following situations?a. Interim financial information of a publicly held company that is subject to a limited review.b. Compliance with aspects of regulatory requirements related to audited financial
An auditor’s report on financial statements prepared in conformity with the cash basis of accounting should include a separate emphasis-of-matter paragraph thata. Justifies the reasons for departing from generally accepted accounting principles.b. States whether the financial statements are
Helpful Co., a nonprofit entity, prepared its financial statements on an accounting basis prescribed by a regulatory agency solely for filing with that agency. Green audited the financial statements in accordance with generally accepted auditing standards and concluded that the financial statements
When an auditor reports on financial statements prepared on an entity’s income tax basis, the auditor’s report shoulda. Disclaim an opinion on whether the statements were examined in accordance with generally accepted auditing standards.b. Not express an opinion on whether the statements are
An auditor should disclose the substantive reasons for expressing an adverse opinion in a basis for modification paragrapha. Preceding the scope paragraph.b. Preceding the opinion paragraph.c. Following the opinion paragraph.d. Within the notes to the financial statements.F.1. Audits of Financial
The financial statements of KCP America, a US entity, are prepared for inclusion in the consolidated financial statements of its non-US parent. These financial statements are prepared in conformity with the accounting principles generally accepted in the parent’s country and are for use only in
Before reporting on the financial statements of a US entity that have been prepared in conformity with another country’s accounting principles, an auditor practicing in the US shoulda. Understand the accounting principles generally accepted in the other country.b. Be certified by the appropriate
An auditor expressed a qualified opinion on the prior year’s financial statements because of a lack of adequate disclosure. These financial statements are properly restated in the current year and presented in comparative form with the current year’s financial statements. The auditor’s
Which of the following is least likely to be a restricted use report?a. A report on internal control significant deficiencies noted in an audit.b. A required communication with the audit committee.c. A report on financial statements prepared following a financial reporting framework other than
Which of the following types of reports is most likely to include an alert as to its use being restricted to certain specified parties?a. Audit report.b. Review report.c. Compilation report.d. Agreed-upon procedures report.
Which of the following statements is correct concerning an auditor’s responsibility for controlling the distribution by the client of a restricted-use report?a. An auditor must make clear to the client that it is illegal to distribute such a report beyond to specified parties.b. When an auditor
If an auditor is asked to provide an opinion relating to information accompanying the financial statements in a document, the opinion will ordinarily be upon whether the information is fairly stated ina. Accordance with US generally accepted auditing standards.b. Conformity with US generally
If management declines to present supplementary information required by the Governmental Accounting Standards Board (GASB), the auditor should issue a(n)a. Adverse opinion.b. Qualified opinion with an other-matter paragraph.c. Unmodified opinion.d. Unmodified opinion with an additional other-matter
In an audit of a nonissuer company, which statement is correct concerning required supplementary information by a designated accounting standards setter?a. The auditor has no responsibility for required supplementary information as long as it is outside the basic financial statements.b. The
An auditor may express an opinion on an entity’s accounts receivable balance even if the auditor has disclaimed an opinion on the financial statements taken as a whole provided thea. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial
When audited financial statements are presented in a client’s document containing other information, the auditor shoulda. Perform inquiry and analytical procedures to ascertain whether the other information is reasonable.b. Add an emphasis-of-matter paragraph to the auditor’s report without
An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the client refuses to revise or eliminate the
Compiled financial statements for the prior year presented in comparative form with audited financial statements for the current year should be clearly marked to indicate their status and I. The report on the prior period should be reissued to accompany the current period report.II. The report on
The predecessor auditor, who is satisfied after properly communicating with the successor auditor, has reissued a report because the audit client desires comparative financial statements. The predecessor auditor’s report should makea. Reference to the report of the successor auditor only in the
A client is presenting comparative (two-year) financial statements. Which of the following is correct concerning reporting responsibilities of a continuing auditor?a. The auditor should issue one audit report that is on both presented years.b. The auditor should issue two audit reports, one on each
When single-year financial statements are presented, an auditor ordinarily would express a standard audit report if thea. Auditor is unable to obtain audited financial statements supporting the entity’s investment in a foreign affiliate.b. Entity declines to present a statement of cash ows with
Before reissuing the prior year’s auditor’s report on the financial statements of a former client, the predecessor auditor should obtain a letter of representations from the Former client’s management Successor auditora. Yes Yesb. Yes Noc. No Yesd. No No
Jewel, CPA, audited Infinite Co.’s prior year financial statements. These statements are presented with those of the current year for comparative purposes without Jewel’s auditor’s report, which expressed a qualified opinion. In drafting the current year’s auditor’s report, Crain, CPA,
When reporting on comparative financial statements, an auditor ordinarily should change the previously issued opinion on the prior year’s financial statements if thea. Prior year’s financial statements are restated to conform with generally accepted accounting principles.b. Auditor is a
In May 20X9, an auditor reissues the auditor’s report on the 20X7 financial statements at a continuing client’s request.The 20X7 financial statements are not restated and the auditor does not revise the wording of the report. The auditor shoulda. Dual date the reissued report.b. Use the release
A client follows US GAAP for its domestic operations and foreign GAAP for a foreign subsidiary. The foreign subsidiary is audited by a component auditor, while the group auditor audits the remainder of the corporation and issues an audit report on consolidated operations.Which auditor(s) is (are)
When financial statements of a company that follows GASB standards would be misleading due to unusual circumstances depart from those standards, the auditor should explain the unusual circumstances in a separate paragraph and express an opinion that isa. Unmodified.b. Qualified.c. Adverse.d.
In the auditor’s report, the group engagement partner decides not to make reference to a component auditor who audited a client’s subsidiary. The group engagement partner could justify this decision if, among other requirements, he or shea. Issues an unmodified opinion on the consolidated
An auditor may issue the standard audit report when thea. Auditor refers to the findings of a specialist.b. Financial statements are derived and summarized from complete audited financial statements that are filed with a regulatory agency.c. Financial statements are prepared on the cash receipts
The auditor’s responsibility section of a nonpublic company’s auditor’s report contains the following sentences:We did not audit the financial statements of EZ Inc., a wholly owned subsidiary, which statements reect total assets and revenues constituting 27% and 29%, respectively, of the
A group engagement partner decides not to refer to the audit of another CPA who audited a component of the overall group financial statements. After making inquiries about the other CPA’s professional reputation and independence, the principal auditor most likely woulda. Add an emphasis-of-matter
In which of the following situations would an auditor ordinarily issue an unmodified audit opinion without an emphasis-of-matter paragraph?a. The auditor wishes to emphasize that the entity had significant related-party transactions.b. The auditor decides to make reference to the report of an
An auditor concludes that extreme doubt exists about the integrity of management and the representations obtained from management relating to the fairness of the financial statements and the completeness of the record of transactions. If the auditor retains the client, which audit report is most
A scope limitation sufficient to preclude an unmodified opinion always will result when managementa. Prevents the auditor from reviewing the working papers of the predecessor auditor.b. Engages the auditor after the year-end physical inventory is completed.c. Requests that certain material accounts
An auditor decides to issue a qualified opinion on an entity’s financial statements because a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures. The opinion paragraph of the auditor’s report should state that the qualification
When disclaiming an opinion due to a client-imposed scope limitation on a nonpublic company’s financial statements, an auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also omit which of the two sections
Harris, CPA, has been asked to audit and report on the balance sheet of Fox Co. but not on the statements of income, retained earnings, or cash ows. Harris will have access to all information underlying the basic financial statements. Under these circumstances, Harris maya. Not accept the
An auditor who qualifies an opinion because of an insufficiency of audit evidence should describe the limitations in a basis for modification paragraph. The auditor should also refer to the limitation in the Auditor’s responsibility section Opinion paragraph Notes to the financial statementsa.
Park, CPA, was engaged to audit the financial statements of Tech Co., a new client, for the year ended December 31, 2009. 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
Due to a scope limitation, an auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor’s report included a statement that the current asset portion of the entity’s balance sheet was fairly stated. The inclusion of this statement isa. Not appropriate because it
In which of the following circumstances would an auditor not express an unmodified opinion?a. There has been a material change between periods in accounting principles.b. Quarterly financial data required by the SEC has been omitted.c. The auditor wishes to emphasize an unusually important
In the first audit of a client, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. This was due to the
In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion?a. The auditor did not observe the entity’s physical inventory and is unable to become satisfied about its balance by other auditing procedures.b. Conditions that
In which of the following situations would an auditor ordinarily choose between expressing an “except for” qualified opinion or an adverse opinion?a. The auditor did not observe the entity’s physical inventory and is unable to become satisfied as to its balance by other auditing procedures.b.
If a publicly held company issues financial statements that purport to present its financial position and results of operations but omits the statement of cash ows, which of the following types of opinion is most likely to be appropriate?a. Disclaimer of opinion.b. Qualified opinion.c. Review
When an auditor qualifies an opinion because of inadequate disclosure, the auditor should describe the nature of the omission in a basis for qualification paragraph and modify the Introductory paragraph Auditor responsibility paragraphs Opinion paragrapha. Yes No Nob. Yes Yes Noc. No Yes Yesd. No
In which of the following circumstances would an auditor be most likely to express an adverse opinion?a. The chief executive officer refuses the auditor access to minutes of board of directors’ meetings.b. Tests of controls show that the entity’s internal control is so poor that it cannot be
Which of the following phrases would an auditor most likely include in the auditor’s report when expressing a qualified opinion because of inadequate disclosure?a. Subject to the departure from US generally accepted accounting principles, as described above.b. With the foregoing explanation of
An auditor concludes that a client’s illegal act, which has a material effect on the financial statements, has not been properly accounted for or disclosed. Depending on the materiality of the effect on the financial statements, the auditor should express either a(n)a. Adverse opinion or a
When an auditor expresses an adverse opinion, the opinion paragraph should includea. The principal effects of the departure from generally accepted accounting principles.b. A direct reference to a separate paragraph disclosing the basis for the opinion.c. The substantive reasons for the financial
In an accountant’s review of interim financial information, the accountant typically performs each of the following, excepta. Reading the available minutes of the latest stockholders’meeting.b. Applying financial ratios to the interim financial information.c. Inquiring of the accounting
An auditor may not issue a qualified opinion whena. An accounting principle at variance with GAAP is used.b. The auditor lacks independence with respect to the audited entity.c. A scope limitation prevents the auditor from completing an important audit procedure.d. The auditor’s report refers to
Which of the following phrases should be included in the opinion paragraph when an auditor expresses a qualified opinion?When read in conjunction with Note X With the foregoing explanationa. Yes Nob. No Yesc. Yes Yesd. No No
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 paragrapha. Is considered an “except for” qualification of the opinion.b. Violates
An auditor issued an audit report that was dual dated for a subsequent event occurring after the completion of fieldwork but before issuance of the auditor’s report. The auditor’s responsibility for events occurring subsequent to the completion of fieldwork wasa. Extended to subsequent events
Wilson, CPA, completed gathering sufficient appropriate audit evidence for the audit of Abco’s December 31, 20X8 financial statements on March 6, 20X9. A subsequent event requiring adjustment to the 20X8 financial statements occurred on April 10, 20X9 and came to Wilson’s attention on April 24,
An uncertainty facing the firm relating to the possible future results of litigation filed against client is most likely to result in which of the following types of audit report?a. Adverse with a basis for adverse opinion paragraph.b. Qualified due to a scope limitation.c. Qualified with a basis
An entity changed from the straight-line method to the declining balance method of depreciation for all newly acquired assets. This change has no material effect on the current year’s financial statements, but is reasonably certain to have a substantial effect in later years. If the change is
When an entity changes its method of accounting for income taxes, which has a material effect on comparability, the auditor should refer to the change in an emphasis-of-matter paragraph added to the auditor’s report. This paragraph should identify the nature of the change anda. Explain why the
When management does not provide reasonable justification that a change in accounting principle is preferable and it presents comparative financial statements, the auditor should express a qualified opiniona. Only in the year of the accounting principle change.b. Each year that the financial
In the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. Under these circumstances, the auditor shoulda. Not report on the client’s income statement.b. Not refer to consistency in the auditor’s report.c. State that
Digit Co. uses the FIFO method of costing for its international subsidiary’s inventory and LIFO for its domestic inventory. Under these circumstances, the auditor’s report on Digit’s financial statements should express ana. Unmodified opinion.b. Opinion qualified because of a lack of
Under which of the following circumstances would a disclaimer of opinion not be appropriate?a. The auditor is unable to determine the amounts associated with an employee fraud scheme.b. Management does not provide reasonable justification for a change in accounting principles.c. The client refuses
An auditor would express an unmodified opinion and add an emphasis-of-matter paragraph for An unjustified accounting change A material weakness in the internal controla. Yes Yesb. Yes Noc. No Yesd. No No
For which of the following events would an auditor issue a report that omits any reference to consistency?a. A change in the method of accounting for inventories.b. A change from an accounting principle that is not generally accepted to one that is generally accepted.c. A change in the useful life
The adverse effects of events causing an auditor to believe there is substantial doubt about an entity’s ability to continue as a going concern would most likely be mitigated by evidence relating to thea. Ability to expand operations into new product lines in the future.b. Feasibility of plans to
Davis, CPA, believes there is substantial doubt about the ability of Hill Co. to continue as a going concern for a reasonable period of time. In evaluating Hill’s plans for dealing with the adverse effects of future conditions and events, Davis most likely would consider, as a mitigating factor,
Which of the following audit procedures would most likely assist an auditor in identifying conditions and events that may indicate there could be substantial doubt about an entity’s ability to continue as a going concern?a. Review compliance with the terms of debt agreements.b. Confirmation of
Which of the following auditing procedures most likely would assist an auditor in identifying conditions and events that may indicate substantial doubt about an entity’s ability to continue as a going concern?a. Inspecting title documents to verify whether any assets are pledged as collateral.b.
Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity’s ability to continue as a going concern?a. Cash ows from operating activities are negative.b. Research and development projects are postponed.c. Significant related-party
Cooper, CPA, believes there is substantial doubt about the ability of Zero Corp. to continue as a going concern for a reasonable period of time. In evaluating Zero’s plans for dealing with the adverse effects of future conditions and events, Cooper most likely would consider, as a mitigating
Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity’s ability to continue as a going concern?a. Significant related-party transactions are pervasive.b. Usual trade credit from suppliers is denied.c. Arrearages in preferred stock
After considering an entity’s negative trends and financial difficulties, an auditor has substantial doubt about the entity’s ability to continue as a going concern. The auditor’s considerations relating to management’s plans for dealing with the adverse effects of these conditions most
In which of the following circumstances would an auditor most likely add an emphasis-of-matter paragraph to the audit report while not affecting the auditor’s unmodified opinion?a. The auditor is asked to report on the balance sheet, but not on the other basic financial statements.b. There is
Green, CPA, concludes that there is substantial doubt about JKL Co.’s ability to continue as a going concern. If JKL’s financial statements adequately disclose its financial difficulties, Green’s auditor’s report should Include an emphasis-ofmatter paragraph following the opinion paragraph
When an auditor concludes there is substantial doubt about a continuing audit client’s ability to continue as a going concern for a reasonable period of time, the auditor’s responsibility is toa. Issue a qualified or adverse opinion, depending upon materiality, due to the possible effects on
Mead, CPA, had substantial doubt about Tech Co.’s ability to continue as a going concern when reporting on Tech’s audited financial statements for the year ended June 30, 20X1. That doubt has been removed in 20X1. What is Mead’s reporting responsibility if Tech is presenting its financial
An auditor concludes that there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time. If the entity’s financial statements adequately disclose its financial difficulties, the auditor’s report is required to include an emphasis-of-matter
Which of the following is not correct concerning information included in an audit report of financial statements issued under the requirements of the Public Company Accounting Oversight Board?a. The report should include the title “Report of Independent Registered Public Accounting Firm.”b. The
A financial statement audit report issued for the audit of an issuer (public) company concludes that the financial statements followa. Generally accepted accounting principles.b. Public Company Accounting Oversight Board standards.c. Generally accepted auditing standards.d. International accounting
Which of the following best describes the reference to the expression “taken as a whole” in the PCAOB’s fourth generally accepted auditing standard of reporting?a. It applies equally to a complete set of financial statements and to each individual financial statement.b. It applies only to a
How does an auditor make the following representations when issuing the standard public company auditor’s report on comparative financial statements?Examination of evidence on a test basis Consistent application of accounting principlesa. Explicitly Explicitlyb. Implicitly Implicitlyc. Implicitly
For a nonpublic company audit report, a statement that the auditor has audited the financial statements followed by the titles of the financial statements is included in thea. Management’s responsibility section of the audit report.b. The opening paragraph of the auditor’s standard report.c.
For a nonpublic company, which section (paragraph) of the audit report includes a statement that the auditor believes that the audit evidence obtained is sufficient?a. Introductory.b. Opinion.c. Auditor’s responsibility.d. Management’s responsibility.
Which of the following statements is a basic element of the auditor’s standard report on financial statements?a. The disclosures provide reasonable assurance that the financial statements are free of material misstatement.b. The auditor evaluated the overall internal control and provides limited
March, CPA, is engaged by Monday Corp., a client, to audit the financial statements of Wall Corp., a company that is not March’s client. Monday expects to present Wall’s audited financial statements with March’s auditor’s report to 1st Federal Bank to obtain financing in Monday’s attempt
When an accountant performs more than one level of service (for example, a compilation and a review, or a compilation and an audit) concerning the financial statements of a nonissuer (nonpublic) entity, the accountant generally should issue the report that is appropriate fora. The lowest level of
The existence of audit risk is recognized by the statement in the auditor’s standard report that the auditora. Obtains reasonable assurance about whether the financial statements are free of material misstatement.b. Assesses the accounting principles used and also evaluates the overall financial
A typical objective of an operational audit is to determine whether an entity’sa. Internal control is adequately operating as designed.b. Operational information is in accordance with generally accepted governmental auditing standards.c. Financial statements present fairly the results of
Operational auditing is primarily oriented towarda. Future improvements to accomplish the goals of management.b. The accuracy of data reected in management’s financial records.c. The verification that a company’s financial statements are fairly presented.d. Past protection provided by existing
Which of the following procedures would an auditor most likely perform during an audit engagement’s overall review stage in formulating an opinion on an entity’s financial statements?a. Obtain assurance from the entity’s attorney that all material litigation has been disclosed in the
Cutoff tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about management’s assertion ofa. Presentation.b. Completeness.c. Rights.d. Existence.
Which of the following most likely would be detected by an auditor’s review of a client’s sales cutoff?a. Shipments lacking sales invoices and shipping documents.b. Excessive write-offs of accounts receivable.c. Unrecorded sales at year-end.d. Lapping of year-end accounts receivable.

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Wiley CPA Excel Exam Review Study Guide Auditing And Attestation 2015 14th Edition O. Ray Whittington - Solutions

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