Question

1. Which of the following is not a required paragraph in unmodified paragraph for US nonpublic companies?

		Introductory Paragraph
		Auditor’s responsibilities paragraph
		Management’s responsibilities paragraph
		Signature, tenure, location, and date

2.

When a subsequent event provides evidence about conditions that did not exist at the balance sheet date, the auditor should do which of the following?

		ensure that any necessary footnote disclosures be included with the statements.
		ensure that the financial statements are adjusted to reflect the information, including any necessary footnote disclosures.
		give an inappropriate opinion.
		provide management with a new engagement letter to document the terms of the revised arrangement.

3.

Which of the following is true regarding the audit report for a US public company (issuer)?

		Reference should be made to both PCAOB and AICPA audit reporting standards.
		PCAOB standards should not be mentioned at all, although their use is implied in the auditor's report.
		The report should include references to PCAOB audit reporting standards.
		Reference may be made to either PCAOB standards or AICPA audit reporting standards.

4.

The audit procedure of vouching down from financial statement to supporting documents can be used to test which type of error?

		overstatement
		understatement
		either overstatement or understatement
		neither overstatement nor understatement

5.

In the audit risk model, what is the expected relationship between the amount and persuasiveness of audit evidence and detection risk?

		Direct.
		Indirect.
		Inverse.
		Reversed.

Answer 1

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1. Which of the following is not a required paragraph in unmodified paragraph for US nonpublic companies?

The standard unmodified opinion audit report for a non-public entity contains "The introductory paragraphs" and has separate paragraphs for management's and the auditor's responsibility. These paragraphs provide additional information on the nature of these responsibilities.

So Answer is- Signature, tenure, location, and date

2. When a subsequent event provides evidence about conditions that did not exist at the balance sheet date, the auditor should do which of the following?

An independent auditor's report ordinarily is issued in connection with historical financial statements that purport to present financial position at a stated date and results of operations and cash flows for a period ended on that date. However, events or transactions sometimes occur subsequent to the balance-sheet date, but prior to the issuance of the financial statements, that have a material effect on the financial statements and therefore require adjustment or disclosure in the statements

So Answer is- ensure that the financial statements are adjusted to reflect the information, including any necessary footnote disclosures.

3. Which of the following is true regarding the audit report for a US public company (issuer)?

The report should include references to PCAOB audit reporting standards.

4. The audit procedure of vouching down from financial statement to supporting documents can be used to test which type of error?

Vouching is the practice followed in an audit, with the objective of establishing the authenticity of the transactions recorded in the primary books of account. It essentially consists of verifying a transaction recorded in the books of account with the relevant documentary evidence and the authority on the basis of which the entry has been made; also confirming that the amount mentioned in the voucher has been posted to an appropriate account which would disclose the nature of the transaction on its inclusion in the final statements of account. Vouching does not include valuation.

So Answer is- neither overstatement nor understatement.

5. In the audit risk model, what is the expected relationship between the amount and persuasiveness of audit evidence and detection risk?

Audit risk and detection risk are inverse. Client risk and detection are direct.

So Answer is- Inverse.