Question

Which of the following situations would require the external auditor to include an emphasis-of-matter paragraph that refers to consistency in an unqualified audit opinion?

Select one:

a. Entity sold a subsidiary and consolidated six subsidiaries this year compared to seven from last few years.

b. Entity corrected a prior mistake in accounting for capitalization of interest.

c. Entity changed the estimated allowance for uncollectible accounts receivable after feedback from the auditor.

d. Entity changed its inventory costing method from FIFO to LIFO

The audit team has been tasked with determining the amount of work that will be expected to complete and evidence to collect.

A member of the audit team has been assigned responsibility for investigating the general operations of the company, the industry to which the company belongs, competitors and the types of transactions the company (and companies in the industry) are involved in on a day-to-day basis.

The task of the audit team member is best described as evaluating the level of ______________________ of the client.

Select one:

a. Enterprise Risk

b. Engagement Risk

c. Inherent Risk

d. Audit Risk

Answer 1

Which of the following situations would require the external auditor to include an emphasis-of-matter paragraph that refers to consistency in an unqualified audit opinion?
Select one:
a. Entity sold a subsidiary and consolidated six subsidiaries this year compared to seven from last few years.
b. Entity corrected a prior mistake in accounting for capitalization of interest.
c. Entity changed the estimated allowance for uncollectible accounts receivable after feedback from the auditor.
d. Entity changed its inventory costing method from FIFO to LIFO	Correct	A company has made a material change in its method of inventory measurement from an unacceptable one to one in accordance with the applicable financial reporting framework. The auditor’s report on the financial statements of the year of the change should include an emphasis-of-matter paragraph to describe the correction of a material misstatement in previous statements.
A member of the audit team has been assigned responsibility for investigating the general operations of the company, the industry to which the company belongs, competitors and the types of transactions the company (and companies in the industry) are involved in on a day-to-day basis.
The task of the audit team member is best described as evaluating the level of ______________________ of the client.
Select one:
a. Enterprise Risk
b. Engagement Risk
c. Inherent Risk
d. Audit Risk	Correct	The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated