Audit Report

Auditing standards require that the audit report must be titled and that the title must:

• indicate if the auditor is a proprietorship, partnership, or incorporated.

• indicate if the auditor is a CPA.

• not include any discriminatory language.

• include the word "independent."

To emphasize the fact that the auditor is independent, the addressee of the audit report is usually not:

• the company's management.

• the board of directors of the client company.

• the stockholders of the client company.

• either B or C.

The purpose of the introductory paragraph in the standard unqualified report is:

• to identify the financial statements that were audited and the dates and time periods covered by the report.

• to communicate the responsibilities of management in preparing the financial statements and to clarify the respective roles of management and the auditor.

• to identify the entity that was audited.

• all of the above.

The scope paragraph of the standard unqualified audit report states that the audit is designed to:

• discover all errors and/or irregularities.

• discover material errors and/or irregularities.

• obtain reasonable assurance whether the statements are free of material misstatement.

• conform to generally accepted accounting principles.

The audit report date on a standard unqualified report indicates:

• the last date on which users may institute a lawsuit against either client or auditor.

• the last day of the auditor's responsibility for the review of significant events that occurred subsequent to the date of the financial statements.

• the last day of the fiscal period.

• the date on which the financial statements were filed with the Securities and Exchange Commission.

An adverse opinion is issued when the auditor believes:

• the financial statements would be found to be materially misstated if an investigation were performed.

• some parts of the financial statements are materially misstated or misleading.

• the auditor is not independent.

• A. the overall financial statements are so materially misstated that they do not present fairly the financial position or results of operations and cash flows in conformity with MASB

A disclaimer of opinion may be issued in which of the following instances?

• The auditor's scope has been restricted due to circumstances beyond the client's control.

• There are highly material misstatements in the financial statements.

• The auditor has doubts related to an entity's ability to continue as a going concern.

• A disclaimer may be issued for circumstances discussed in A and C.

Whenever an auditor issues a standard unqualified audit report, the implication is the auditor:

• believes the financial statements to be presented fairly in accordance with MFRS except for a specific aspect of them.

• does not believe the financial statements are presented fairly in accordance with MFRS.

• does not know if the financial statements are presented fairly in accordance with MFRS.

• believes the financial statements are presented fairly in accordance with MFRS.

If a misstatement is immaterial to the financial statements of the entity for the current period, but is expected to have a material effect in future periods, it is appropriate to issue a(n):

• disclaimer of opinion.

• unqualified opinion.

• qualified opinion.

• adverse opinion.

When the auditor believes a company's financial statements are misleading because they were not prepared in conformity with MFRS, the auditor must issue a(n):

• disclaimer of opinion.

• qualified opinion.

• adverse opinion.

• qualified or an adverse opinion, depending on materiality.