Question

1. The auditor's responsibility section of the standard unmodified opinion audit report under US GAAS states:

a) that the audit is designed to obtain reasonable assurance as to whether the financial statements are free of material misstatement whether due to fraud or error

b) that the procedures performed were specified by generally accepted auditing standards

c) that the financial statement audit includes procedures sufficient to express an opinion on whether the company's internal control over financial reporting is effective

d)all of the above

2. The standard unmodified opinion audit report under US GAAS must include the name of the audit partner responsible for issuing the audit report

True False

3. Which of the following are required to be included in an audit report under the Standards of the PCAOB?

a) the name of the audit partner responsible for the audit

b) the signature of the audit firm that issued the audit report

c) a statement that the firm is a member of the AICPA

d) all of the above

4. Which of the following statements regarding internal control over financial reporting (ICFR) for US public companies are correct?

a) management of all US public companies must assess and report on the effectiveness of their ICFR

b) certain of the largest US public companies must engage their auditor to audit and report on the effectiveness of the companies' ICFR

c) PCAOB Auditing Standard No. 5 requires that the audit of internal control be integrated with the audit of the financial statements

d) all of the above

5. The auditor identified a misstatement in the financial statements that was material but not pervasive. If management fails to correct the misstatement, the auditor's report on those financial statements should include:

a) a qualified opinion

b) an adverse opinion

c) a disclaimer of opinion

d) none of the above: the auditor is required to withdraw from the audit engagement

6. The auditor was unable to audit a portion of the financial statements that was very highly material. If the audit client insists that the auditor issue a report on those financial statements, the auditor should

a) qualify the opinion for a scope limitation

b) disclaim an opinion because of a scope limitation

c) qualify the opinion for a departure from GAAP

d) issue an unqualified opinion on the financial statements with an extra paragraph describing the reasons for the scope limitation

Answer 1

1) a) As per ISA 700, the auditor's responsibility states that the audit is designed to obtain reasonable assurance as to whether the financial statements are free of material misstatement whether due to fraud or error.

The auditor uses audit procedures that are appropriate in the given circumstances and also he obtains only an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

2) True. As per ISA 700 of US GAAS, the audit report must include the name of the audit partner responsible for issuing the audit report.

3) b) As per PCAOB AS 3101, the auditor's report must include the signature of the auditor's firm that issued audit report.

4) c) As per PCAOB Auditing Standard No. 5 requires that the audit of internal control over financial reporting be integrated with the audit of the financial statements for US public companies.

5) a) As per ISA 705 of US GAAS, if the auditor identified a misstatement in the financial statements that was material but not pervasive and the management fails to correct the misstatement, then the auditor's report on those financial statements should include a qualified opinion.

If the effect of material misstatement is pervasive then provide Adverse opinion and if unable to obtain Sufficient & appropriate audit evidence and the effect of that is pervasive then provide a Disclaimer of opinion.

6) b) As per ISA 705 of US GAAP, If the auditor was unable to audit a portion of the financial statements that was very highly material and the audit client insists the auditor to issue a report on those financial statements, the auditor should disclaim an opinion because of a scope limitation.