ACCOUNTING-Instructions Your firm has many clients and many audit reporting obligations

Description

Standard Audit Report (12 points)

Instructions

Your firm has many clients and many audit reporting obligations.
The audits of most clients result in a standard report. The
following draft represents the standard report that you contemplate for your
nonissuers. Embedded in the draft are choices of words or phrases, two of
which correspond with each blank in the Independent Auditor’s Report. Select
the appropriate word or phrase that should be included in each indicated area
of the standard report. Note: you must match the word or phrase EXACTLY from the
choices given. Take care in re-typing, and/or be certain you capture the
entire word or phrase if you copy/paste from the choices provided.

.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id=_128419_1&course_id=_89051_1&content_id=_3248385_1&step=null”>Independent
Auditor’s Report
To: The Board of Directors
We have Blank 1(examined,
audited) the accompanying balance sheet of X Company as of December 31, Year 1,
and the Blank 2(related,
accompanying) statements of income, retained earnings, and cash flows for the
year then ended. These financial statements are the responsibility of
Blank 3(the auditor,
the entity’s management). Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance
with U.S. Blank 4(Generally
Accepted Auditing Standards, Generally Accepted Accounting Principles).
Those standards require that we plan and perform the audit to obtain
Blank 5(reasonable, absolute)
assurance about whether the financial statements are Blank 6(free
of, free of material) misstatement. An audit includes examining, on a
Blank 7(sample, test)
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also indicates Blank 8(examining,
assessing) the accounting principles used and significant estimates made by
Blank 9(management,
the auditor), as well as evaluating the overall financial statement
presentation. We believe that our audit provides Blank 10(an
absolute, reasonable) basis for our opinion.
In our opinion, the financial
statements referred to above present fairly, Blank 11(in
all respects, in all material respects) the financial position of X Company and
its operations and its cash flows for the year then ended in conformity with
U.S. Blank 12(Generally
Accepted Auditing Standards, Generally Accepted Accounting Principles).
Signature
Date

Description

Other Independent
Auditors (4 points)

Instructions

The CPA firm’s partner
in charge is reviewing a draft of a paragraph that is intended to go into an
audit report. The paragraph describes the use of an audit report
prepared by other independent auditors on a client’s subsidiary in forming an
opinion on the client’s statements. The draft is as follows:
We did not audit the
financial statements of D Company, which is a wholly owned subsidiary.
Those statements were prepared by other auditors, and our opinion is based
solely on the report of the other auditors.
Indicate which of the
following statements about the draft paragraph are “true” or “false” by
selecting the appropriate choice.
.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id=_128420_1&course_id=_89051_1&content_id=_3248386_1&step=null”>
The
paragraph is a qualification of the audit opinion.
True

False

1
points
.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id=_128420_1&course_id=_89051_1&content_id=_3248386_1&step=null”>
It is
appropriate to divide responsibility with other auditors in a report.
True

False

1
points
.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id=_128420_1&course_id=_89051_1&content_id=_3248386_1&step=null”>
The
paragraph should state that the financial statements of D Company were
audited by the other auditors.
True

False

1
points
.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id=_128420_1&course_id=_89051_1&content_id=_3248386_1&step=null”>
The
principal auditor’s report should refer to the other auditor in the opinion
paragraph of the report as well as in the scope paragraph.
True

False

Description

Audit Opinions (6
points)

Instructions

Each of the following
is phrase from a paragraph in an auditor’s report. Assume that, except
for the information indicated in the phrase, the report would have been a
standard audit report. Select from the choices provided the most likely
report type for each phrase. Each choice may be used once, more than
once, or not at all.

Each of the following is phrase from a
paragraph in an auditor’s report. Assume that, except for the
information indicated in the phrase, the report would have been a standard
audit report. Select from the choices provided the most likely report
type for each phrase. Each choice may be used once, more than once,
or not at all.


A.
B.
C.
D.
E.
F.

… the scope of our
work was not sufficient to enable us …


A.
B.
C.
D.
E.
F.

As discussed in Note
12, the Company changed its method of computing depreciation.


A.
B.
C.
D.
E.
F.

We are not independent
with respect to XYZ Company …


A.
B.
C.
D.
E.
F.

… except for the
effects of not capitalizing certain lease obligations as discussed in the
preceding paragraph …


A.
B.
C.
D.
E.
F.

… based on our audit
and the report of other auditors …


A.
B.
C.
D.
E.
F.

… presents fairly in
all material respects …

A.

Adverse

B.

Subject to

C.

Qualified

D.

Disclaimer

E.

Standard Unmodified

F.

Unmodified with
Explanatory Language

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