A misstatement in the financial statements can be considered material if knowledge of themisstatement will affect a decision of A. an accountant. B. the PCAOB. C. the SEC. D. a reasonable user of the financial statements

A misstatement in the financial statements can be considered material if knowledge of themisstatement will affect a decision of A. an accountant. B. the PCAOB. C. the SEC. D. a reasonable user of the financial statements

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 18MCQ

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Materiality arises when a misstatement in the financial statements could affect a decision of areasonable user of the statements.Explain the levels of materiality used for determining the type of opinion.
When an event impacts a financial statement element, it should be recognized in the accounting records even if reliability of the amount is questionable. True False
An item or information is said to be material if misstatement of which can influence the ___ a. Auditor's decision b. Audit committee's decision c. User's decision d. Management decision
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When a client’s financial statements contain a material departure from an FASB Statementon Accounting Standards and the public accounting firm believes the departure is necessaryto ensure that the statements are not misleading,a. The public accounting firm must qualify the auditors’ report for a departure from GAAP.b. The public accounting firm can explain why the departure is necessary and then give anunmodified opinion paragraph in the auditors’ report.c. The public accounting firm must give an adverse auditors’ report.d. The public accounting firm can give the standard unmodified auditors’ report with anunmodified opinion paragraph
discuss the type of opinion is issued by the auditorr if he or she is unable to determine the overall fairness of the financial statements?
For each of the following brief scenarios, assume that you are reporting on a client’s financial statements. Select the type(s) of opinion (per below) possible for the scenario. In addition: Unless stated otherwise, assume the matter involved is material. If the problem doesn’t tell you whether a misstatement pervasively misstates the financial statements or doesn’t list a characteristic that indicates pervasiveness, two reports may be possible (i.e., replies 6 to 9). Do not read more into the circumstances than what is presented. Do not consider an auditor discretionary circumstance for modification of the audit report unless the situation explicitly suggests that the auditor wishes to emphasize a particular matter. * Note that this simulation has more parts than one would expect in a particular CPA exam simulation. We present it to provide examples of many types of reporting situations in one problem. Types of opinion may be used once, more than once, or not at all. 1. A…
Evidence that will be needed by a practitioner which will assist in forming an opinion with regards to any material misstatements that are presented in financial statements is known as a report in which assurance is written. Select one: O True False
Noncompliance includes transactions entered by the entity’s employees and management in their personal capacity. The preliminary judgment or estimate about materiality represents the maximum amount by which a set of financial statements could be misstated and still not cause the auditor to believe that the decisions of reasonable users would be affected. Group of answer choices False, True True, False True, True False, False
An accountant need not assess compliance with independence rules duringa. An examination of prospective financial information.b. A preparation of financial statement engagement.c. A compilation engagement.d. A review engagement.
The concept of materiality is less important for public accountants in determining:a. The scope of the audit of certain accountsb. Certain transactions that have to be checkedc. Influence and exceptions to his opiniond. The influence of the public accountant's financial interests in the client company on its freedom.
When financial statements are affected by a material departure from generally accepted accounting principles, the auditors should: Withdraw from the engagement. Issue an unmodified opinion with a basis for modification paragraph. Issue an "except for" qualification or a disclaimer of opinion. Issue an "except for" qualification or an adverse opinion.