Solved > 6) Which of the following is least likely:1811774 …

6) Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?

A) The entity is suing a competitor for a minor patent infringement.

B) The entity has lost a major customer.

C) The entity has significant recurring operating losses.

D) The entity has working capital deficiencies.

7) When there is uncertainty about a company’s ability to continue as a going concern, the auditor’s concern is the possibility that the client may not be able to continue its operations or meet its obligations for a “reasonable period of time.” For this purpose, a reasonable period of time is considered not to exceed:

A) six months from the date of the financial statements.

B) one year from the date of the financial statements.

C) six months from the date of the audit report.

D) one year from the date of the audit report.

8) When the auditor concludes that there is substantial doubt about the entity’s ability to continue as a going concern, the appropriate audit report could be: unqualified opinion with an explanatory paragraph.

II.a disclaimer of opinion.

A) I only

B) II only

C) I or II

D) Neither I nor II

9) When a company’s financial statements contain a departure from GAAP with which the auditor concurs, the departure should be explained in:

A) the scope paragraph.

B) an explanatory paragraph that appears before the opinion paragraph.

C) the opinion paragraph.

D) an explanatory paragraph after the opinion paragraph.

10) William Gregory, CPA, is the principal auditor for a multi-national corporation. Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation. Gregory is satisfied with the independence and professional reputation of the other auditor, as well as the quality of the other auditor’s examination. With respect to his report on the consolidated financial statements, taken as a whole, Gregory:

A) must not refer to the examination of the other auditor.

B) must refer to the examination of the other auditor.

C) may refer to the examination of the other auditor.

D) must refer to the examination of the other auditors along with the percentage off consolidated assets and revenue that they audited.

11) A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles. The auditor’s report on the financial statements of the year of the change should include:

A) no reference to consistency.

B) a reference to a prior period adjustment in the opinion paragraph.

C) an explanatory paragraph that justifies the change and explains the impact of the change on reported net income.

D) an explanatory paragraph explaining the change.

12) Which of the following modifications of the auditor’s report does not include an explanatory paragraph?

A) A qualified report is due to a GAAP departure.

B) The report includes an emphasis of a matter.

C) There is a very material scope limitation.

D) A principal auditor accepts the work of an other auditor.

13) No reference is made in the auditor’s report to other auditors who perform a portion of the audit when:

I.The other auditor audited an immaterial portion of the audit.

II.The other auditor is well known or closely supervised by the principle auditor.

III.The principle auditor has thoroughly reviewed the work of the other auditor.

A) I and II

B) I and III

C) II and III

D) I, II and III

14) When an auditor is trying to determine how changes can affect consistency and and/or comparability, he should keep in mind that:

A) changes that affect comparability but not consistency require an explanatory paragraph.

B) items that materially affect the comparability of financial statements requires a disclaimer of opinion.

C) changes that affect consistency require an explanatory paragraph if they are material.

D) changes that involve either comparability or consistency only need to be mentioned in the footnotes.

15) All of the following would require an emphasis of matter paragraph except for:

A) the existence of material related party transactions.

B) the lack of auditor independence.

C) important events occurring subsequent to the balance sheet date.

D) material uncertainties disclosed in the footnotes. is an online academic writing platform that provides extensive assistance to graduate school students as they work through their research projects, papers and dissertations. gives students access to experienced professionals who can provide the help they need in a timely and efficient manner. The service offers a wide range of services, including editing, proofreading, formatting, researching and more that can give students the confidence they need to write the perfect paper or dissertation for their chosen subject matter.

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