ACCT 3222-3, WILEY, LSU, EXAM 1 NEWEST

ACCT 3222-3, WILEY, LSU, EXAM 1 NEWEST

ACTUAL EXAM 270 QUESTIONS AND CORRECT

DETAILED ANSWERS (VERIFIED ANSWERS)

|ALREADY GRADED A+

Audit standards require a ________ be used for all audits - ANSWER- Audit standards require a standard format of the audit report be used for all audits

Standard Unmodified Report - ANSWER- Used when auditors have determined the financial statements are presented fairly in accordance with the applicable financial reporting framework

Also called standard, unmodified/unqualified, or "clean" report

Sections of an unmodified audit report of a private company - ANSWER- 1. Independent Auditor's Report

2. To the owner's of company:

• Report on the Financial Statements (IDs the F/S and what service

performed)

• Management's Responsibility for the Financial Statements (Prep and

fair presentation of the F/S; design, implementation, and maintenance of IC; F/S free from material misstatement whether due to fraud or error)

• Auditor's Responsibility (Express an opinion, used auditing standards

(ASB), reasonable assurance F/S free from material misstatement, 1 / 4

Obtain audit evidence and Procedures on auditor's judgment, considered IC relevant to design audit procedures, no expressed opinion on IC, evidence obtained sufficient and appropriate to provide opinion)

• Opinion (present fairly, in all material respects, financial opinion in

accordance with accounting principles GAAP)

• CPA firm signature
• Date end of field work, evidence gathering complete

What does second paragraph of Auditor's Responsibilities represent? - ANSWER- How an audit is performed

PCAOB standards use the term ______ report - ANSWER- Unqualified report. Equivalent to unmodified used in private companies and sometimes used interchangeably as unmodified used to be used for private companies too.

Sections of Unqualified audit report of public company - ANSWER- 1.Report of Independent Registered Public Accounting Firm (registered w/

PCAOB)

• To the shareholders and Board of Director of company
• Opinion on the Financial Statements (note moves to top of report but

stmt stays the same as private company)

• We have also audited IC ... and reference IC report
• Basis for opinion (F/S responsibility of company's mgmt, auditor

responsibility to express an opinion and be independent

• What is an audit section 2 / 4

• Signature of audit firm
• Date (end of fieldwork)
• Statement about auditor tenure

What is unique to the public company audit report? - ANSWER- 1. Title

• registered with PCAOB
• Opinion moves from last paragraph to top of report
• Paragraph referencing the audit of IC as public companies are

required to have an audit of ICFR and auditors issue a separate opinion for that audit

• Basis for opinion paragraph - less detail than private company and

that registered with PCAOB and independence requirements of the SEC and other federal securities laws

• Scope paragraph - explicit statement that PCAOB audit standards

were followed

• Audit tenure - states the year audit firm began serving consecutively

as the company's auditor

Qualified or Adverse opinion - ANSWER- Material departures and client refuses to make corrections

Qualified or Disclaimer of Opinion - ANSWER- Material limitation known as "Scope Limitation" on auditor's ability to gather sufficient appropriate evidence

Disclaimer of Opinion - ANSWER- Auditor is not independent 3 / 4

PCAOB Auditing Standard 2201 states_____ - ANSWER- PCAOB Auditing Standard 2201 An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements states that auditors must conduct an integrated audit for public companies

AS 2201 requires - ANSWER- a standard format of the audit report be used for all audits of effectiveness of ICFR

Components of the unqualified report on ICFR - ANSWER- 1. Title - independent is also in the title of this report and registered with PCAOB

• Address - addressed to S/H and Board of Directors of company
• Opinion paragraph - explains an audit of ICFR was conducted

references the COSO IC - Integrated Framework as criteria. Second sentence states auditor's opinion

• Paragraph referencing the F/S audit and the opinion given
• Basis for opinion paragraph - states different responsibilities of mgmt

and auditors. References registration with PCAOB and independence requirements of SEC and other fed. security laws

• Scope paragraph - explains auditor's used PCAOB standards. Auditors

only required to obtain reasonable assurance and did so as basis for opinion

• Definition and inherent limitations paragraph - definition of ICFR

directly from AS 2201. Final sentence not to use CY opinion to assume future IC will be effective and circumstances may change

• Signature - audit firm's
• / 4