Explanation:
Choice "d" is correct. Details concerning the results of audit procedures (such as the results of
confirmation of receivables) generally do not appear in the footnotes. Choice "a" is incorrect.
Subsequent events may be discussed in an explanatory paragraph of the auditor's report, which
would also refer to the related footnote.
Choice "b" is incorrect. The pro forma effects of a business combination may be included in an
explanatory paragraph of the auditor's report, which would also refer to the related footnote.
Choice "c" is incorrect. Sale of a discontinued operation may be discussed in an explanatory
paragraph of the auditor's report, which would also refer to the related footnote.
QUESTION: 148
Morris, CPA, suspects that a pervasive scheme of il egal bribes exists throughout the operations
of Worldwide Import-Export, Inc., a new audit client. Morris notified the audit committee and
Worldwide's legal counsel, but neither could assist Morris in determining whether the amounts
involved were material to the financial statements or whether senior management was involved
in the scheme. Under these circumstances, Morris should:

A. Express an unqualified opinion with a separate explanatory paragraph.
B. Disclaim an opinion on the financial statements.
C. Express an adverse opinion on the financial statements.
D. Issue a special report regarding the il egal bribes.

Answer(s): B
Explanation:
Choice "b" is correct. Since the CPA could not determine whether the suspected il egal bribes
were material to the financial statements, or whether senior management was involved in the
scheme, Morris should disclaim an opinion on the financial statements. Choice "a" is incorrect.
An unqualified opinion with a separate explanatory paragraph is not appropriate if suspected
material il egal bribes cannot be disproven. Choice "c" is incorrect. An adverse opinion is
inappropriate since the suspected material illegal bribes have not been proven, nor has any
material effect on the financial statements been determined. Choice "d" is incorrect. Special
reports are not issued regarding il egal bribes.
QUESTION: 149
The first general standard requires that an audit of financial statements is to be performed by a
person or persons having:

A. Seasoned judgment in varying degrees of supervision and review.
B. Adequate technical training and proficiency.
C. Knowledge of the standards of fieldwork and reporting.
D. Independence with respect to the financial statements and supplementary disclosures.

Answer(s): B
Explanation:
Choice "b" is correct. The "first" general standard states that the auditor must have adequate
technical training and proficiency to perform the audit.
Comment: It is important to memorize the 10 auditing standards. Choices "a", "c", and "d" are
incorrect, as they do not represent a requirement of the first general standard of reporting.
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