Section 7 F8

The auditor of S Co has concluded that the use of the going concern assumption is appropriate and that the material uncertainty has been adequately disclosed. What is the impact of this conclusion on the auditor's report?

• A Adverse opinion
• B Qualified opinion
• C Unmodified opinion without an emphasis of matter paragraph
• D Unmodified opinion with an emphasis of matter paragraph

The auditor of Y Co has concluded that Y Co is not a going concern. The financial statements have been prepared on a going concern basis and management has refused to change them. What form of audit opinion will be issued by the auditor?

• A An unmodified opinion
• B A qualified 'except for' opinion due to material misstatement
• C A qualified 'except for' opinion due to insufficient appropriate audit evidence
• D An adverse opinion

Misstatements can arise from error or fraud. Which of the following statements is correct regarding the auditor's accumulation of identified misstatements?

• A The auditor must accumulate all misstatements identified during the audit.
• B The auditor must only accumulate individually material misstatements identified during the audit.
• C The auditor must accumulate misstatements identified during the audit, other than those that are clearly trivial

ISA 700 Forming an opinion and reporting on financial statements sets out the basic elements of an auditor's report. Which of the following is not included in an unmodified auditor's report?

• A Management's responsibility for the financial statements
• B Auditors' responsibilities
• C Audit opinion
• D Deficiencies of internal controls

The auditor of Q Co has completed the audit and has concluded that sufficient appropriate evidence has been obtained, which confirms that the financial statements are not materially misstated. Which form of audit opinion will the auditor issue?

• A Adverse opinion
• B Qualified opinion
• C Unmodified opinion
• D A disclaimer of opinion

ISA 705 Modification to the opinion in the independent auditor's report identifies three possible types of modification. In which of the following circumstances would a disclaimer of opinion be issued?

• A The auditor concludes that the financial statements include misstatements which are material but not pervasive to the financial statements.
• B The auditor concludes that the financial statements include misstatements which are both material and pervasive to the financial statements.
• C The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion but has concluded that the possible effects of any undetected misstatements could be material but not pervasive .
• D The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion and has concluded that the possible effects of any undetected misstatements could be both material and pervasive.

The auditor of B Co has concluded that inventory is overstated as a number of lines have not been valued at the lower of cost and net realisable value. The overstatement is material but not pervasive to the financial statements. Management has refused to make an adjustment to the financial statements. What form of modified opinion should the auditor issue?

• A Adverse opinion
• B Disclaimer of opinion
• C Qualified opinion due to a material misstatement
• D Qualified opinion due to insufficient appropriate evidence on which to base an opinion

The financial statements of Z Co include a receivables balance of $20,000 which the auditors do not believe will be recovered. Materiality has been set at $100,000. There are no other unadjusted misstatements. What form of audit opinion would be issued by the auditor?

• A Statement of financial position only
• B Statement of profit or loss only
• C Statement of financial position and statement of profit or loss
• D Neither the statement of financial position nor the statement of profit or loss

An emphasis of matter paragraph is used in an audit report to draw attention to a matter affecting the financial statements. Which two of the following are correct in relation to an Emphasis of Matter Paragraph in the Auditor's Report? (1) It is used when there is a material uncertainty. (2) It constitutes a modified audit opinion. (3) The auditor's report is referred to as an unmodified report. (4) The matter is deemed to be fundamental to the users understanding of the financial statements.

• A (1) and (2)
• B (1) and (4)
• C (1) and (3)
• D (2) and (4)

P Co is being sued by a customer for the supply of faulty products. At the year end the outcome of the legal case is still uncertain. The directors have fully disclosed the matter as a contingent liability and the auditors are satisfied with the treatment and the level of disclosure. The auditors have concluded that the uncertainty is fundamental to the understanding of the financial statements. What form of audit opinion would the auditor give?

• A Disclaimer
• B Unmodified opinion with an emphasis of matter paragraph
• C Unmodified opinion without an emphasis of matter paragraph
• D Qualified opinion