The auditors determined that the entity is suffering financial difficulty and its going-concern status is

seriously in doubt. Assuming that the entity adequately disclosed this matter in the financial statements,
the auditors must choose between which of the following auditors report alternatives?

Standard (unmodified) report or adverse opinion.

Qualified opinion or adverse opinion.
Standard (unmodified) report or a disclaimer of opinion.
Unmodified opinion with a reference to going-concern or disclaimer of opinion.
Which of the following is not included in the standard (unmodified) report on the financial statements?

An opinion that the financial statements present financial position in accordance with GAAP.
An emphasis-of-matter paragraph commenting on the effect of economic conditions on the
entity.
A general description of an audit.
An identification of the financial statements that were audited.
R. Wolfe became the new auditor for Royal Corporation, succeeding C. Mason, who audited the financial
statements last year. Wolfe needs to report on Royals comparative financial statements and should
disclose in the report an explanation about other auditors having audited the prior year

To describe the prior audit and the opinion but not name Mason as the predecessor auditor.
To describe the audit and the opinion and name Mason as the predecessor auditor.
Only if Masons opinion last year was qualified.
To describe the audit but not reveal the type of opinion issued by Mason.
When auditors wish to issue an unmodified opinion but highlight that the entity changed its method of
accounting for software development costs, they would most appropriately identify the change in
accounting method in which of the following?

The introductory paragraph.

The opinion paragraph.
An other-matter paragraph.
An emphasis-of-matter paragraph.
When reporting under GAAS, certain statements are required in all auditors reports (explicit) and
others are required only under certain conditions (implicit). Which combination that follows correctly
describes the auditors responsibilities for reporting?
Going
GAAP
Consistency
Opinion
concern
Implicit
Implicit
Explicit
Implicit
Implicit
Explicit
Explicit
Implicit
Explicit
Implicit
Implicit
Explicit
Explicit
Explicit
Implicit
Explicit
Which of these situations would require auditors to append an emphasis-of-matter paragraph about
consistency to an otherwise unmodified opinion?

Entity changed its inventory costing method from FIFO to LIFO.

Entity changed its estimated allowance for uncollectible accounts receivable.
Entity corrected a prior mistake in accounting for interest capitalization.
Entity sold one of its subsidiaries and consolidated six subsidiaries this year compared to seven last
year.
When financial statements are presented in comparative form and another firm audited the prior-years
financial statements (but the other firms report is not presented with the financial statements), the

auditors report on the current-year financial statements should

Not refer to the prior-years financial statements.

Refer to the report and type of opinion issued by the other firm on the prior-years financial
statements.
Disclaim an opinion on the prior-years financial statements.
Refer to any procedures performed by the current auditor to verify the opinion on the prior-years
financial statements.
If the opinion issued on prior-years financial statements is no longer appropriate and financial statements
are presented in comparative form, the auditors current report should

Express the revised opinion on the prior-years financial statements without referencing the
previously-issued opinion.
Not reference the prior-years financial statements.
Indicate that the opinion on the prior-years financial statements cannot be relied upon.
Reference the type of opinion issued on the prior-years financial statements and indicate
that the current opinion on these financial statements differs from that expressed in the prior
years.
Company A hired Samson & Delilah, CPAs, to audit the financial statements of Company B and deliver
the report to Megabank. Who is the client?

Samson & Delilah.

Company A.
Megabank.
Company B.
If the auditors decide to present separate reports on the entitys financial statements and internal control
over financial reporting, which of the following should be modified to refer to the other report?
Report on
Financial
Statements
No
No
Yes
Yes

Report on Internal Control

over Financial Reporting
Yes
No
No
Yes

Under which of the following conditions can a disclaimer of opinion never be issued?

The auditors own stock in the entity.

The entitys going-concern problems are highly material and pervasive.
The entity does not allow the auditors access to evidence about important accounts.
The auditors have determined that the entity uses the NIFO (next-in, first-out) inventory
costing method.
Auditors found that the entity has not capitalized a material amount of leases in the financial statements.
When considering the materiality of this departure from GAAP, the auditors would choose between which
reporting options?

Unmodified opinion or qualified opinion.

Unmodified opinion with an emphasis-of-matter paragraph or an adverse opinion.
Qualified opinion or adverse opinion.

Unmodified opinion or disclaimer of opinion.

How is the auditors responsibility for expressing the opinion on financial statements disclosed in the
standard (unmodified) report?

Unstated but understood in the Auditors Responsibility section.

Stated explicitly in the Auditors Responsibility section.
Stated explicitly in the opinion paragraph.
Stated explicitly in the introductory paragraph.
When component auditors are involved in the audit of group financial statements, the group
auditors may issue a report that
Does not consider or evaluate the component auditors work but expresses an unmodified opinion in
a standard report.
Names the component auditors, describes their work, and presents only the group auditors report.
Places primary responsibility for the reporting on the component auditors.
Refers to the component auditors, describes the extent of the component auditors work, and
expresses an unmodified opinion.
Which of the following is not a difference in the audit examinations and reports for public and nonpublic
entities?

Auditors are required to express an opinion on internal control in the audit of nonpublic
entities but not in the audit of public entities.
The reports for both public and nonpublic entities express an opinion on the entitys financial
statements.
Audit examinations for nonpublic entities are based on user demand but based on legislative
requirements for public entities.
Management is responsible for the fairness of the financial statements for public entities, but the
auditors are responsible for the fairness of the financial statements for nonpublic entities.