Question

1A qualified opinion that is issued because of a departure from generally accepted accounting principles should contain a separate paragraph explaining the departure and its effects.

True

False

2

The introductory paragraph of the auditors’ report clarifies management’s responsibility for the financial statements.

True

False

3The phrase “generally accepted auditing standards” appears in the scope paragraph of the auditors’ standard report.

True

False

4An auditors’ report is in essence a guarantee by the auditors that the financial statements are correct.

True

False

5 The auditors are not responsible for the appropriateness of the going concern principle, for more than one year.

True

False

6An auditor’s standard report includes all of the following, except:

	A.	Header stating “Independent Auditor’s Report”
	B.	Statement describing that “management is responsible for the preparation of the financial statements and the auditor is responsible for issuing an opinion on the financial statements”.
	C.	Auditor’s signature and address.
	D.	Audit report signing date is the same date as the entity’s year end (i.e. 31.12.20XX).

7Which of the following audit works would generally be conducted before all of the others?

	A.	Plan the audit and gaining an understanding of the client's industry to develop an audit strategy.
	B.	Preliminary assessment of materiality and audit risk.
	C.	Auditing of business processes and related accounts.
	D.	Consideration of internal control systems.

8The major reason of auditors to gather evidence is to:

	A.	evaluate management.
	B.	assess risks.
	C.	issue an opinion on the financial statement.
	D.	detect fraud.

9Which of the following statements about working papers is correct?

	A.	Working papers provide the principal record that the auditor reaches the appropriate conclusion.
	B.	Clients’ access to the working papers is generally allowed.
	C.	Working papers serve as the primary support for management’s financial statements.
	D.	Working papers are the property of client management.

10Which of the following statements is not correct concerning the definition of external auditors?

	A.	They are independent staff, and assigned by an auditing firm to assess and evaluate financial statements of their clients.
	B.	Most external auditors are employed by auditing firms.
	C.	They are called upon from the outside of the client.
	D.	To maintain independence, they present their reports directly to the Top Management.

Answer 1

Question 1

The given statement is TRUE

When the auditor expresses a qualified opinion, he or she should disclose, in a separate paragraph following the opinion paragraph, all of the substantive reasons and effects of departure from generally accepted accounting principles.

Question 2

The given statement is TRUE

Introductory paragraph of the auditors’ report shows that the client company is responsible for preparation and fair presentation of the financial statements and the auditor expresses opinion on the financial statements.

Question 3

The given statement is TRUE

In the auditor's report, the auditor has to include a phrase stating that the audit is in accordance with ''generally accepted auditing standards''. In opinion paragraph, the auditors express their opinion.

Question 4

The given statement is FALSE

The auditor's report does not provide a guarantee that the financial statements are correct, rather it reflects the report on the financial statements not on accounting records.