Chapter 3 LO1

Question 1

For the report title part of the audit report what are the 2 requirements dictated by auditing standards?

Answer 1

1. the report be titled 2. the title must include the word independent

Question 2

what is differrent about AICPA (nonpublic) and PCAOB (public)reports? what is the same

Answer 2

different-the format similar- the overall substance of the content in the report similiar under both standards

Question 3

what does the requirement that the title of the report include the word independent convey to users?

Answer 3

that the audit was unbiased in all aspects

Question 4

what does standard mean in “standard unmodified opinion audit report for nonpublic entities” ?

Answer 4

refers to the uniform wording typically used in audit reports

Question 5

what does the opinion paragraph of the report include

Answer 5

1. the sectionmust include the heading option 2. final paragraph which states the auditors conclusions based on the results of the audit.

Question 6

who do the audit report address?

Answer 6

those for whome the report is prepared, including the company, its stockholders, or the board of directors

Question 7

what is included in the signature and address of cpa firm inthe report? (2)

Answer 7

1. signature idenifies cpa firm or practicer who performed the audit. typicall firms name since all are responsible legally and professionally for the quality of the audit to meet professional standards 2. city and state of the audit firm should be indicated

Question 8

What does managemen’t responsibility in the report include?

Answer 8

1. selecting the appropriate accounting principals 2. maintaining internal control over financial reporting sufficient for preparation of financial statements that are free of material misstatements due to fraud or error

Question 9

what does the third paragraph for auditor’s responsiblity inthe report include?

Answer 9

indicates that the auditor believes that sufficient appropriate evidence has been obtained to support the auditor’s opinion

Question 10

what does the first paragraph for auditor’s responsiblity inthe report include? (3)

Answer 10

1. states that the auditor’s responsibilty is to express an opinion on the FSs 2. the audit was conducted in accordance with auditing standars generally accepted in the U.S.. 3. notes that the audit is designed to obtain reasonable assurance about whether the FSs are free of material mistatement

Question 11

why has it become customary lately to address the report to the board of directors and stockholder but not the company?

Answer 11

so that it indicates that the auditor is independent of the company

Question 12

what does the auditors responsiblity section of the report include? (4)

Answer 12

1. must include the heading “Auditor’s Responsibility” 2. must have 3 paragraphs that describe the auditor’s responsibility- look those up in different question

Question 13

T/F different auditor may alter the wording or presentation slightly of reports but the meaning will be the same

Answer 13

T

Question 14

the wording of the financial statements in the report should be identical to what?

Answer 14

the titles used by managment on the financial statements

Question 15

what does the Managements responsiblitily section of the report include?

Answer 15

1. it must include the heading “Management’s responsibility for the Financial Statements” 2. It must include a paragraph that describes managements responsibility for the financial statements

Question 16

the intenet of stating an opinion rather than as statement of fact or guarantee is what?

Answer 16

to indicat that the conclusions are based on professional judment and in our opinon indicates that ther may be some information risk even though its audited

Question 17

What are the 8 parts of the auditor’s standard unmodified opinion audit report?

Answer 17

1. report title 2. audit report address- who it addresses 3. introductory paragraph 4. management’s responsibility 5. Auditor’s responsiblity 6. Opinion paragraph 7. signature and address of CPA firm 8. Audit report date

Question 18

what is the audit report date on the report?

Answer 18

the appropriate date is the one on which the auditor completed the auditing procedures needed to obtain sufficient, appropriate audit evidence

Question 19

unmodified opinion means the auditors opinion about the financial statements contains no what ? (2)

Answer 19

1. no material exceptions 2. no qualifications

Question 20

what does unmodified opinion mean in “standard unmodified opinion audit report for nonpublic entities” ?

Answer 20

it refers to the fact that the auditors opinion about the financial statements contains no material exceptions or qualifications

Question 21

what does the second paragraph for auditor’s responsiblity inthe report include? (6)

Answer 21

1. describes scope of audit 2. describes the evidence accumulated about the amounts and disclosures in the FSs 3. indicates that the procedures depend on the auditors judgement 4. includes assessment of the risk of material mistatements in the FSs 5. indicates that the auditor considers internal control relevant to the preparation and fair presentation of the FSs in designing the audit procedures performed, but this assessement of internal control is not for the purpose of and is not sufficient to express an opion on the effectiveness of the entity’s internal control 6. indicates that the audit inclues evaluation the approprateness of accounting policies selected, the reasonableness of accounting estimates, and the overall financial statement presentation

Question 22

why is the audit report date on the report important to users?

Answer 22

it indicates the last day of the auditors responsibility for the review of significant events that occured after the date of the financial statements

Question 23

what is included in the introductory paragraph of the report? (3)

Answer 23

1. that a CPA firm has performed an audit , which distinguisheds the report from a compilation or review report 2. lists the financial statements that were audited, including the notes to the financial statement 3. lists the B/S dates, the accounting periods covered in the I/S and statement of cash flows

Question 24

if the report is on comparative financial statments, then a report on what is needed?

Answer 24

a report on both years statements