Subsequent to the issuance of an auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next:
Answer(s): A
Choice "a" is correct. When subsequently discovered information is found both to be reliable and to have existed at the date of the auditor's report, the auditor should determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information.Choice "b" is incorrect. The auditor would request that management disclose the newly discovered information only after determining whether there are persons relying on the information. Choice "c" is incorrect. Management, not the auditor, may issue revised financial statements. Choice "d" is incorrect. The auditor would give public notice that he/she is no longer associated with the FS only after determining that there are persons relying on the information and only if the client refuses to issue revised FS.
On March 15, X4, Kent, CPA, issued an unqualified opinion on a client's audited financial statements for the year ended December 31, X3. On May 4, X4, Kent's internal inspection program disclosed that engagement personnel failed to observe the client's physical inventory. Omission of this procedure impairs Kent's present ability to support the unqualified opinion. If the stockholders are currently relying on the opinion, Kent should first:
Answer(s): B
Choice "b" is correct. In the event of omitted audit procedures, the auditor should first attempt to perform alternative procedures in order to ascertain whether the original opinion can be relied upon. Choice "a" is incorrect. The auditor would only advise the client to notify all stockholders and other financial statement users that the unqualified opinion cannot be relied upon if the auditor cannot satisfy himself (with alternative procedures) as to the propriety of the original opinion. Choice "c" is incorrect. The auditor may need to reissue the audit report if the auditor is unable to satisfy himself using alternative procedures; the opinion issued should be qualified or disclaimed, due to the scope limitation.Choice "d" is incorrect. Tests of controls are not appropriate alternative procedures.
Which of the following events occurring after the issuance of an auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?
Choice "b" is correct. With respect to events occurring after the issuance of an auditor's report, the auditor is only responsible for information that existed at the audit report date. Choice "a" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.Choice "c" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.Choice "d" is incorrect. Since the information did not exist at the report date, the auditor has no obligation to make any further inquiry.
Wilson, CPA, obtained sufficient appropriate audit evidence to render an opinion on Abco's December 31, X1, financial statements on March 6, X2. A subsequent event requiring adjustment to the X1 financial statements occurred on April 10, X2, and came to Wilson's attention on April 24, X2. If the adjustment is made without disclosure of the event, Wilson's report ordinarily should be dated:
Choice "a" is correct. Since the financial statements were adjusted without disclosure of the event in the footnotes, Wilson's report should be dated as of March 6, X2, the date on which sufficient appropriate audit evidence was obtained.Choice "b" is incorrect. An April 10, X2 report date would be used only if the event were disclosed and Wilson wanted to extend the responsibility for all significant events through April 10, X2. Choice "c" is incorrect. An April 24, X2 report date would be used only if the event were disclosed and Wilson wanted to extend the responsibility for all significant events through April 24, X2. Choice "d" is incorrect. Dual dating would only be used if the event were disclosed in the notes to the financial statements.
An auditor concludes that a substantive auditing procedure considered necessary during the prior period's audit was omitted. Which of the following factors would most likely cause the auditor promptly to apply the omitted procedure?
Choice "b" is correct. The factor most likely to cause the auditor to promptly apply the omitted procedure would be if the omission impairs the auditor's present ability to support the previously expressed opinion.Choice "a" is incorrect. The auditor would first need to determine whether the omission of the procedure impairs the ability to support the previously expressed opinion. It is possible that other procedures already performed tended to compensate for the omitted procedure, and therefore no further action would be necessary.Choice "c" is incorrect. The availability of the source documents needed to perform the procedure has little bearing on whether the auditor determines that it is necessary to perform the procedure. Choice "d" is incorrect. The rendering of a clean opinion has little importance. The issue is "support of the previously expressed opinion," not what the opinion was.
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