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Homework answers / question archive / Polytechnic University of the Philippines ACC 3016 1)The auditor may continue to express unqualified opinion though there are modifications made in the audit report

Polytechnic University of the Philippines ACC 3016 1)The auditor may continue to express unqualified opinion though there are modifications made in the audit report

Accounting

Polytechnic University of the Philippines

ACC 3016

1)The auditor may continue to express unqualified opinion though there are modifications made in the audit report. Which of the following situations, would the auditor likely modify his opinion?

    1. The existence of multiple uncertainties that are adequately described in the notes to financial statements.
    2. The prior year?s financial statements were audited by other CPAs.
    3. An important subsidiary whose financial statements were included in the consolidated financial statements were audited by other CPAs.
    4. A substantial doubt about the client?s ability to continue as a going concern that is adequately disclosed in the financial statements.

 

  1. In which of the following situations would qualified opinion be inappropriate?
    1. Financial statements are materially misstated.
    2. A doubt that is more than substantial about the ability of the company to continue as a going concern.
    3. A significant scope limitation.
    4. The management insisted of not attaching the statement of cash flows.

 

  1. Which of the following is not a reason to issue a modified audit report with opinion other than unqualified opinion?
    1. The scope of the auditor?s work is restricted by the client.
    2. The amount of inventories at  cost  as  presented in the balance sheet  significantly exceeded their market values.
    3. Certain significant matter is omitted from either the financial statements or notes to financial statements.
    4. An adequately disclosed significant uncertainty, the resolution of which is dependent upon future events and which may affect the financial statements.

 

  1. Which of the following situations may likely require a modified audit report with modified wordings or an emphasis of matter paragraph?
    1. A significant uncertainty, not adequately disclosed in the financial statements.
    2. An audit of inventory is restricted by the client. The auditor was satisfied about the balance of the inventory by doing alternative audit procedures.
    3. A change in the application of generally accepted accounting principle that is justified.
    4. A less than substantial doubt regarding the ability of the entity to continue as a going concern.

 

  1. Which of the following circumstances may not result to a disclaimer of opinion?
    1. A significant scope limitation in auditing the existence of inventories. The inventory amount comprises 75 percent of the total assets of the client.
    2. The auditor believes that there are multiple uncertainties that are significant to the financial statements.
    3. The accounts receivable of the client comprises 80 percent of the total assets. The auditor was instructed by the client not to confirm account balances. The auditor, however, was satisfied by the results of alternative audit procedures.
    4. The auditor?s wife owns very a few number of common shares of the client.

 

  1. An auditor may express a qualified opinion because of

 

Departure from

PFRS

Lack of

Consistency

Scope

Limitation

A.                    YES

YES

YES

B.                      NO

YES

NO

C.                    YES

NO

NO

D.                     NO

YES

YES

 

  1. Whenever an auditor issues a qualified report, he or she

 

    1. must use the term “subject to” in the opinion paragraph.
    2. may use either the terms “subject to” or “ except for” in the opinion  paragraph, depending on the nature of the qualification.
    3. must use the term “except for” in the opinion paragraph.
    4. must not use the terms “subject to” or “except for” in the opinion paragraph.

 

  1. An explanatory paragraph may be added to the audit report while at the same time issuing an unqualified opinion in all cases except when:
    1. the client has changed an accounting principle with the agreement of the auditor.
    2. there is an immaterial departure from GAAP to ensure fair presentation with the agreement of the auditor.
    3. the audit opinion is partly based on the work of another auditor.
    4. the audit work has been significantly limited by management.

 

  1. Under which of the following sets of circumstances might an auditor disclaim an opinion?
    1. The financial statements contain a departure from PFRS, the effect of which is material.
    2. The principal auditor decides to make reference to the report of another auditor who audited a subsidiary.
    3. There has been a material change between periods in the method of the application of accounting principles.
    4. There were significant limitations on the scope of the audit.

 

  1. If an auditor is engaged to audit a client?s financial statements after the annual physical inventory count was made and the accounting records are not sufficiently reliable to enable the auditor to become satisfied as to the year-end inventory balances, the opinion to be expressed is
    1. either an “except for” qualified opinion or an adverse opinion.
    2. either a disclaimer or opinion or an “except for” qualified opinion.
    3. either an adverse opinion or disclaimer of opinion.
    4. an unqualified opinion.
    5.  

 

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