MULTIPLE CHOICE QUESTIONS FROM CPA EXAMINATIONS
3-20 (OBJECTIVES 3-1, 3-2, 3-3, 3-4, 3-8) The following questions concern unmodified opinion
audit reports. Choose the best response.
a. Which of the following is not a required element of a standard unmodified opinion
audit report issued in accordance with AICPA auditing standards?
(1) A title that emphasizes the report is from an independent auditor
(2) The city and state of the audit firm issuing the report
THE AUDITING PROFESSION
(3) A statement explaining management’s responsibilities for the financial statements
(4) The name of the engagement partner
b. The date of the CPA’s opinion on the financial statements of the client should be the date of the
(1) completion of all important audit procedures.
(2) closing of the client’s books.
(3) finalization of the terms of the audit engagement.
(4) submission of the report to the client.
c. If a principal auditor decides to refer in his or her report to the audit of another audi- tor, he or she is required to disclose the
(1) name of the other auditor.
(2) nature of the inquiry into the other auditor’s professional standing and extent of
the review of the other auditor’s work.
(3) reasons for being unwilling to assume responsibility for the other auditor’s work.
(4) portion of the financial statements audited by the other auditor.
3-21 (OBJECTIVES 3-4, 3-8) The following questions concern unmodified opinion audit re-
ports with an emphasis-of-matter explanatory paragraph or nonstandard wording in re-
port paragraphs. Choose the best response.
a. An entity changed from the straight-line method to the declining-balance method
of depreciation for all newly acquired assets. This change has no material effect on
the current year’s financial statements but is reasonably certain to have a substantial
effect in later years. If the change is disclosed in the notes to the financial statements,
the auditor should issue a report with a(n)
(1) unmodified opinion.
(2) qualified opinion.
(3) unmodified opinion with explanatory paragraph.
(4) qualified opinion with explanatory paragraph regarding consistency.
b. When the financial statements are fairly stated but the auditor concludes there is sub-
stantial doubt whether the client can continue in existence, the auditor should issue a(n)
(1) adverse opinion.
(2) qualified opinion only.
(3) unmodified opinion.
(4) unmodified opinion with explanatory paragraph.
c. The auditor’s report contains the following: “We did not audit the financial statements
of EZ, Inc., a wholly owned subsidiary, which statements reflect total assets and rev-
enues constituting 27 percent and 29 percent, respectively, of the consolidated totals.
Those statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for EZ, Inc., is based
solely on the report of the other auditors.” These sentences
(1) assume responsibility for the other auditor.
(2) indicate a division of responsibility.
(3) require a departure from an unmodified opinion.
(4) are an improper form of reporting.
