EBK AUDITING & ASSURANCE SERVICES: A SY
11th Edition
ISBN: 9781260687668
Author: Jr
Publisher: MCGRAW-HILL LEARNING SOLN.(CC)
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Chapter 18, Problem 18.11MCQ
To determine
Concept Introduction:
Audit report includes the opinion of the auditor on the financial statements. Auditors provide their opinions based on the audit evidences obtained during the
To choose: Thetype of the audit report to be issued for the given case.
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An entity changes its depreciation
method for production equipment
from straight line method to units of
activity method. The effect of this
change is pervasively material. The
auditor does not concur with the
change. The auditor would issue a(n): *
Unqualified opinion with an
explanatory paragraph.
O Adverse opinion
O Qualified opinion
Unqualified opinion
The client has restated the prior-year statements because of a changefrom LIFO to FIFO. How should this be reflected in the auditor’s report?
The client has changed from double declining balance to straight line depreciation for its equipment. The effect on this year’s income is material, and no information is disclosed in footnotes related to the change. You believed the change aligns with change in usage pattern of the equipment, except that adequate disclosure is made relating to the change of depreciation method after your advice, will your opinion be different?
Q) Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion.
Chapter 18 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
Ch. 18 - Prob. 18.1RQCh. 18 - Prob. 18.2RQCh. 18 - Prob. 18.3RQCh. 18 - Prob. 18.4RQCh. 18 - Prob. 18.5RQCh. 18 - Prob. 18.6RQCh. 18 - Prob. 18.7RQCh. 18 - Prob. 18.8RQCh. 18 - Prob. 18.9RQCh. 18 - Prob. 18.10MCQ
Ch. 18 - Prob. 18.11MCQCh. 18 - Prob. 18.12MCQCh. 18 - Prob. 18.13MCQCh. 18 - Prob. 18.14MCQCh. 18 - Prob. 18.15MCQCh. 18 - Prob. 18.16MCQCh. 18 - Prob. 18.17MCQCh. 18 - Prob. 18.18MCQCh. 18 - Prob. 18.19MCQCh. 18 - Prob. 18.20MCQCh. 18 - Prob. 18.21MCQCh. 18 - Prob. 18.22PCh. 18 - Prob. 18.23PCh. 18 - Prob. 18.24PCh. 18 - Prob. 18.25PCh. 18 - Prob. 18.26PCh. 18 - Prob. 18.27PCh. 18 - Prob. 18.28P
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- For the following independent situations, assume that you are the audit partner on the engagement: 1. The client has changed from double declining balance to straight line depreciation for its equipment. The effect on this year’s income is material, and no information is disclosed in footnotes related to the change. You believed the change aligns with change in usage pattern of the equipment. Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion.arrow_forwardWhich of the following is true if an auditor performs nonaudit services for a governmententity?a. The scope of the audit must be reduced so that the auditor does not audit the area forwhich the nonaudit work was performed.b. The auditor is prohibited from providing nonaudit work in areas directly related to theproduction of accounting information.c. The senior members of the government entity must document their review of the nonaudit service and indicate why it is appropriate for the auditors to perform this service.d. The scope of the audit cannot be reduced because the nonaudit work was performed bythe public accounting firm.arrow_forwardAccording to auditing standards, financial statements presented on a special-purpose framework should nota. Contain a note describing the special-purpose framework.b. Describe in general how the special-purpose framework differs from generally acceptedaccounting principles.c. Be accompanied by an audit report that gives an unmodified opinion with reference tothe special-purpose framework.d. Contain a note with a quantified dollar reconciliation of the assets based on the specialpurpose framework with the assets based on generally accepted accounting principles.arrow_forward
- 8. An auditor should be aware of subsequent event that provide evidence concerning conditions that did not exist at year end but arose after year end. These events may be important to the auditor because they may: a. Have been recorded based on preliminary accounting estimates. b. Require adjustments to the financial statements as of the year end. c. Have been recorded based on year-end tests for asset obsolescence. d. Require disclosure to keep the financial statement from being misleading. 9. Analytical procedures used in planning an audit should focus on: a. Identifying material weaknesses in internal control. b. Enhancing the auditor’s understanding of the client’s business. c. Testing individual account balances that depend on accounting estimates. d. Evaluating the adequacy of evidence gathered concerning unusual balances.arrow_forwardRayan Company, a CPA firm, conducted an audit for the 2020 financial statements of Tia Corporation. During the course of the audit, the auditors noticed that repairs and maintenance expenses were recorded as an addition to fixed assets to decrease expenses amount in the financial statements. Which one of the following assertions was violated? Occurrence Completeness Existence Accuracy None of the abovearrow_forwardWhat type of auditor report would be issued in each of the following cases? Justify your choice. Bowles Company is engaged in a hazardous trade and cannot obtain insurance coverage from any source. A material portion of the company’s assets could be destroyed by a serious accident. Drave Company owns substantial properties that have appreciated significantly in value since the date purchase. The properties were appraised and are reported in the balance sheet at the appraised values with full disclosure. The CIAs believe that the appraised values reported in the balance sheet reasonably estimate the assets current values. The CIA firm is auditing the financial statement that are to be included in the annual report to the stockholder of Eagle Company, A regulated company Eagle’s Financial Statement are prepared as prescribed by a regulatory agency of the Pakistan Government and some items are not presented in accordance with generally accepted accounting principles. The amounts…arrow_forward
- When comparative financial statements are presented but the predecessor auditor's report is not presented, the current auditor should do which of the following in the audit report? a. Disclaim an opinion on the prior year's financial statements. b. Identify the predecessor auditor who audited the financial statements of the prior year. c. Indicate the type of opinion expressed by the predecessor auditor. d. Make no comment with respect to the predecessor audit. e. Include a KAM paragraph that indicates the refusal by the predecessor auditor to re-issue the prior-year opinion.arrow_forwardplease answer with reasonarrow_forwardConsider the following independent situations relating to the audit of five different audit clients for year ended 30 June 20X8. Assume that all the situations are material. For each of the above cases, state the appropriate audit opinion that the auditor would require. Give reasons 1. new client has changed its valuation method of property, plant and equipment. It has adopted the Fair Value Revaluation Model to replace the Historic cost measurement method. Whilst the auditor does not object to the change in the valuation model, the new method has a material effect on the financial statements and has not been disclosed. A special meeting was held between the CFO and the Finance Team and the Lead Partner from the Audit team, but nothing was resolved 2. (ii) A new start-up company specialising in air-drone mail/package delivery has grown strongly in the past year. Over the past three years the company has made consistent losses, borrowed heavily, experienced staff turnover and dealt with…arrow_forward
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