EBK AUDITING: A RISK BASED-APPROACH
11th Edition
ISBN: 9781337670203
Author: RITTENBERG
Publisher: YUZU
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Chapter 4, Problem 2CYBK
To determine
Introduction: The independent examination of the financial statements of an entity is termed as an audit. In an audit engagement, the auditor provides an opinion on the true and fair view of the financial statements.
To identify: Whether the given statement is true or false.
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An auditor’s analytical procedures indicate a lower than expected return on an equity methodinvestment. This situation most likely could have been caused bya. An error in recording amortization of the excess of the investor’s cost over the investment’s underlying book value.b. The investee’s decision to reduce cash dividends declared per share of its commonstock.c. An error in recording the unrealized gain from an increase in the fair value of availablefor sale securities in the income account for trading securities.d. A substantial fluctuation in the price of the investee’s common stock on a national stockexchange.
What is meant by a “colorable claim”? Do you believe auditors should be liable for investor losses even if they follow generally accepted auditing standards?
If the auditors discover that the carrying amount of a client’s investments is overstated because of a loss in value that is other than a temporary decline in market value, they should insist thata. The approximate market value of the investments be shown in parentheses on the face of the balance sheet.b. The investments be classified as long term for balance-sheet purposes with full disclosure in the footnotes.c. The loss in value be recognized in the financial statements.d. The equity section of the balance sheet separately show a charge equal to the amount of the loss.
Chapter 4 Solutions
EBK AUDITING: A RISK BASED-APPROACH
Ch. 4 - Prob. 1CYBKCh. 4 - Prob. 2CYBKCh. 4 - Prob. 3CYBKCh. 4 - Prob. 4CYBKCh. 4 - Prob. 5CYBKCh. 4 - Prob. 6CYBKCh. 4 - Prob. 7CYBKCh. 4 - Prob. 8CYBKCh. 4 - Prob. 9CYBKCh. 4 - Prob. 10CYBK
Ch. 4 - Prob. 11CYBKCh. 4 - Prob. 12CYBKCh. 4 - Prob. 1RQSCCh. 4 - Prob. 2RQSCCh. 4 - Prob. 3RQSCCh. 4 - Prob. 4RQSCCh. 4 - Prob. 5RQSCCh. 4 - Prob. 6RQSCCh. 4 - Refer to the Focus on Fraud feature “Moss Adams...Ch. 4 - Prob. 8RQSCCh. 4 - Prob. 9RQSCCh. 4 - Prob. 10RQSCCh. 4 - Prob. 11RQSCCh. 4 - Prob. 12RQSCCh. 4 - Prob. 13RQSCCh. 4 - Prob. 14RQSCCh. 4 - Prob. 15RQSCCh. 4 - Prob. 16RQSCCh. 4 - Prob. 17RQSCCh. 4 - Prob. 18RQSCCh. 4 - Prob. 19RQSCCh. 4 - Prob. 20RQSCCh. 4 - Prob. 21RQSCCh. 4 - Able Corporation decided to make a public offering...Ch. 4 - KPMG (LO 1, 2, 3) KPMG LLP served as the external...Ch. 4 - ToshIba, EY (LO 1, 2, 3) In 2015, the business...
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- Why is the risk that the auditor might make a mistake in expressing a modified opinion on financial statements, which are in reality, free from material misstatements and are fairly presented considered a business risk?arrow_forwardBecause of inadequate records the auditor is uncertain as to whether the company’s major investment is recorded at the correct cost. The auditor should issue a/an: A. Unqualified opinion with explanatory paragraphB. Qualified opinionC. Adverse opinionD. Disclaimer opinionarrow_forwardWhen an event impacts a financial statement element, it should be recognized in the accounting records even if reliability of the amount is questionable. True Falsearrow_forward
- would you say that material mistakes found in a financial statement could lead to the auditors being held liable?arrow_forwardSomething is deemed to be 'material' if its omission, non-disclosure or misstatement is likely to affect economic decisions or other evaluations made by users entitled to rely on the financial statements. Select one alternative: True Falsearrow_forwardGive an example of an error or fraud that would misstate financial statements to affect the accounts as follows, taking each case independently. (Note: “Overstate” means the account has a higher value than would be appropriate under GAAP and “understate” means it has a lower value.)a. Overstate one asset; understate another asset.b. Overstate an asset; overstate stockholders’ equity.c. Overstate an asset; overstate revenue.d. Overstate an asset; understate an expense.e. Overstate a liability; overstate an expense.f. Understate an asset; overstate an expense.g. Understate a liability; understate an expense.arrow_forward
- Which one is not the fraudulent financial reporting? Select one: a. Cash shortage b. Lack of working capital c. Favourable industry economic condition d. Frequent changes of auditorarrow_forwardWhen financial statements contain a departure from GAAP because, due to unusual circumstances, the statements would otherwise be misleading, the auditor should explain the unusual circumstances in a separate paragraph and express an opinion that is....... Select one: a. Adverse. b. Qualified. c. Qualified or adverse, depending on materiality. " d. Unqualified.arrow_forwardWhat type of opinion is issued by the auditorr if he or she is unable to determine the overall fairness of the financial statements?arrow_forward
- Accounting standards require that the statement of financial position be prepared on a classified basis. True Falsearrow_forward2. A client has departed from GAAP for what you, the auditor, considers to be justifiable. The financial statements would have been misleading if the client had not departed from GAAP. Circumstance: Type of Opinion:arrow_forwardAccountants are permitted to express “negative assurance” in which of the following reports?a. Standard unmodified audit report on financial statements.b. Compilation report on unaudited financial statements.c. Review report on unaudited financial statements.d. Adverse opinion report on financial statements.arrow_forward
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