Question

Which of the following statements is NOT true about the opinion of the auditor on the financial statements?

Select one:

a. The auditor is responsible for the detection and prevention of frauds and errors in financial statements.

b. The auditor should examine whether recognized accounting principles have been consistently applied in preparation of the financial statements.

c. The auditor should express an opinion on the financial statements.

d. The opinion is not guarantee of the future economic viability of the company.

During the current year audit the audit team is concerned that one of the clients (ABC Limited) is not recording it sales correctly for the past year.

The audit team contacted all customers of ABC Limited who purchased large value items over 2 years ago. All the customers confirmed in writing that they had purchased the items from ABC Limited and provided the sales invoices.

The audit partner is likely to dismiss the value of the audit evidence gathered by the audit team because the audit evidence lacks:

Select one:

a. Relevance.

b. Timeliness.

c. Sufficiency.

d. Reliability.

When auditors wish to issue and unqualified opinion but highlight that the entity adjusted/changed its method of accounting for software development costs, the auditor would be best advised to identify the change in the:

Select one:

a. Emphasis-of-matter paragraph.

b. Introduction paragraph.

c. Opinion paragraph.

d. Other-matter paragraph.

The auditor found numerous unsystematic errors in the preparation of the financial statements. However, none of the errors had a material impact on the financial statements overall. However, the audit could only assess 50% of the financial documents upon which the preparation of the financial statements were based. Under the conditions above the audit is most likely to issue a(n):

Select one:

a. Material opinion.

b. Unqualified opinion.

c. Disclaimer of opinion.

d. Unqualified opinion with exceptions.

Answer 1

1.

Correct answer for the first question is option a. =The auditor is responsible for the detection and prevention of frauds and errors in financial statements.

Explanation:

• It is not the responsibility of auditor to detect fraud and error in financial statement.
• his duty is to express an opinion on the financial statements, whether or not the financial statements gives true and fair view.
• Detection of fraud and error in financial statements are responsibility of management of any organisation.
• Other statements mentioned in options b, c, d are true.

2.

Correct answer for the first question is option a = Relevance

Explanation:

• As the audit team is auditing the sales data of the past year,
• but it gathered the confirmation of sales occured over 2 years ago.
• This data is irrevant for the past year sales.
• the confirmations from customers are reliable and suffient audit evidence,
• and recieved in timely manner by audit team.
• but still not relevant for past year's audit .

3.

Correct answer for the first question is option a = Emphasis-of-matter paragraph

Explanation:

• under introduction paragraph, audit provides details of audit entity, report pertaining to which period etc.
• under opinion paragraph , auditor gives his opinion on financial statements, whether financial statements provides true and fair veiw or not.
• under Emphasis of matter paragraph, Auditor gives his comments or details about a matter , which is already disclosed in financial statements, but for which auditor feels a need to draw the attention of users.
• under other matter paragraph , auditor gives comments on matters which are not disclosed in financial statements , but for which auditor feels a need of disclosure .
• thus in the present case, Auditor will disclose the fact under emphasis of matter paragraph,  that the method of accounting for software development cost is changed .

4.

Correct answer for the first question is option b = unqualified opinion

Explanation:

• As the errors found are immaterial , and does not have any material effect overall, the accounting statements are giving a true and fair view.
• so auditor will give an unqualified opinion.
• Disclaimer of opinion is given only when there is a limit on scope of audit.
• there is no such opinion as material opinion or unqualified opinion with exception.
• when exceptions are found , qualified opinion is given.

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