Question

1. When there is other information in documents containing audited financial statements and the auditor’s report, the auditor should

Group of answer choices

Perform inquiry and analytical procedures to ascertain whether the other information is reasonable

Perform the appropriate substantive auditing procedures to corroborate the other information

Add an other-matter paragraph to the auditor’s report referencing the other information

Read the other information to identify material inconsistencies, if any, with the audited financial statements

2.

An auditor would express an unmodified opinion with an emphasis-of-matter paragraph added to the report for:

	A justified change in accounting principle	An unjustified change in accounting principle	A justified change in accounting estimate
I	No	Yes	Yes
II	Yes	Yes	No
III	Yes	No	No
IV	No	No	Yes

3.

Which of the following statements regarding confirmations of accounts receivable is correct?

Group of answer choices

If a CPA does not receive responses to customers who were sent a negative confirmation, they should follow up with a positive confirmation within a reasonable amount of time.

Negative confirmations should be used only when the risk of material misstatement is low.

Positive confirmations are used when the customer needs to respond that their account balance is actually higher than stated.

A CPA should use negative confirmations only when they believe that accounts receivables may be overstated.

Answer 1

Answer 1 :

As per requirements of SA 706 the auditor should

Read the other information to identify material inconsistencies, if any, with the audited financial statements

AND

Add an other-matter paragraph to the auditor’s report referencing the other information

Answer 2

As per SA 705 and SA 706

Option IV is correct

As a justified change in accounting policy warrants unmodified report. So No

An unjustified change in accounting policy warrants a modified report with qualified or adverse opinion. So No

A justified change in accounting estimate requires unmodified report with EOM Para. So Yes

Answer 3

As per SA 505

If a CPA does not receive responses to customers who were sent a negative confirmation, they should follow up with a positive confirmation within a reasonable amount of time.

AND

Negative confirmations should be used only when the risk of material misstatement is low.