After the auditor determines whether any conditions exist which require a departure from a standard unqualified report, the next step in the decision process for audit reports is to:

After the auditor determines whether any conditions exist which require a departure from a standard unqualified report, the next step in the decision process for audit reports is to:

A) write the report.
B) decide the materiality for each condition.
C) decide the appropriate type of report for the condition.
D) discuss the report with management.
Answer
B) decide the materiality for each condition.

If there is a deviation in the statements' preparation in accordance with GAAP and another accounting principle was applied on a basis that was not consistent with that of the preceding year:

A) the auditor must choose which modification to include in the audit report.
B) only the most material modification can be disclosed.
C) more than one modification should be included in the report.
D) none of the above.
 Answer
 C) more than one modification should be included in the report.

When there is a justified departure from GAAP which is considered material, the auditor should issue a(n): A) standard unqualified audit report.

B) disclaimer of opinion.
C) unqualified audit report with an explanatory paragraph.
D) adverse opinion.
Answer
 C) unqualified audit report with an explanatory paragraph.

More than one modification should be included in the audit report when:

A) the auditor is not independent and the auditor knows that the company has not followed generally accepted accounting principles.
B) there is substantial doubt about the going concern of the company and information about the causes of the uncertainties is not adequately disclosed in the footnotes.
C) there is a scope limitation and there is substantial doubt about the company's ability to continue as a going concern.
D) all of the above.
Answer
 D) all of the above.

In most audits, the auditor issues a:

A) qualified audit report.
B) unqualified audit report.
C) scope limited audit report.
D) adverse audit report.
Answer
B) unqualified audit report.

The first step to be followed when deciding the appropriate audit report in a given set of circumstances is to:

A) decide the appropriate type of report for the condition.
B) write the report.
C) determine whether any conditions exists requiring a departure from a standard unqualified report.
D) decide the materiality for each condition.
Answer
 C) determine whether any conditions exists requiring a departure from a standard unqualified report.

When accounting principles are not consistently applied, and the materiality level is immaterial, the auditor will issue a(n):

A) unqualified opinion.
B) unqualified opinion with an explanatory paragraph. C) adverse opinion.
D) disclaimer opinion
Answer
A) unqualified opinion.

After the balance sheet date but prior to issuance of the auditor's report the auditor learns that the client's facility in a foreign country has been expropriated. Management refuses to disclose this information in a financial statement footnote or present pro-forma data as to the effect of the event. The auditor should:

A) add a footnote to the financial statements.
B) disclaim an opinion due to the client imposed scope limitation.
C) provide the information in the report and modify the opinion.
D) issue an unqualified opinion but provide the information in the auditor report.
Answer
 C) provide the information in the report and modify the opinion.

When an adverse opinion is issued, a scope paragraph would be:

A) qualified.
B) unchanged.
C) deleted.
D) expanded to identify the additional procedures which the auditor performed.
Answer
 B) unchanged.

For the report containing a disclaimer for lack of independence, the disclaimer is in the:

A) second or scope paragraph.
B) third or opinion paragraph.
C) first and only paragraph.
D) fourth or explanatory paragraph.
Answer
 C) first and only paragraph.