If the audit report states that the financial statement is not free from material misstatements , it becomes a serious matter because: a remark in an audit report implies that the double entry supporting the financial statements must be correct. it damages the credibility of the financial statements. An opinion that shows auditors concern enhances the credibility of the financial statements. it provides assurance that the audit has been carried out by a qualified auditor.

If the audit report states that the financial statement is not free from material misstatements , it becomes a serious matter because: a remark in an audit report implies that the double entry supporting the financial statements must be correct. it damages the credibility of the financial statements. An opinion that shows auditors concern enhances the credibility of the financial statements. it provides assurance that the audit has been carried out by a qualified auditor.

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

Chapter14: Activities Required In Completing A Quality Audit

Section: Chapter Questions

Problem 28MCQ

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{Auditing} 10. Choose the circumstances in which financial statements are not true and fair. a. When the auditor assures outsiders that the financial statements are reliable b. When the auditor is unable to assure outsiders that the financial statements are proper c. When the auditor assures that sufficient and appropriate audit evidence are obtained in support of financial statements d. When the auditor assures outsiders that the financial statements free from manipulation
Which of the following is correct regarding the use of confirmation letters in an audit of financial statements: a. Blank confirmation letters are usually preferred when the auditor expects an overstatement error in the account balance. b. A reply from a receivable confirmation letter received from the customer through the client is considered an invalid reply, thus another set of confirmation letter should be sent. c. A positive confirmation letter is preferred over a negative confirmation letter when the auditor, based on his past experience with the client, expects minimal to zero errors. d. When an auditor does not receive a reply from a customer for a negative confirmation letter in a considerable period of time, the auditor should send out another set of confirmation letter.
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Detection risk is the risk that a client's system of internal controls will not prevent or detect a material misstatement. O the auditor's procedures will not be effective in detecting a material misstatement. O an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. the financial statements are susceptible to a material misstatement.
In a financial statement audit, inherent risk represents a. The risk that misstatements could occur and not be detected by the auditor's procedures. b. The risk that misstatements could occur and not be prevented or detected by the system of internal control. c. The risk that the auditor fails to modify materially misstated financial statements. d. The susceptibility of an account balance to misstatement that could be material.