Question

1.
Under which of the following circumstances would a disclaimer of opinion be appropriate?

A) The auditor believes management’s estimates of the useful lives of key assets are unreasonable, but management refuses to change the estimates.

B) Management does not provide reasonable justification for a change in accounting principles.

C) The chief executive officer is unwilling to sign the management representation letter.

D) The auditor believes, with evidence, that the chief executive officer has committed material fraud.

2.The auditor is considering the use of the client’s internal auditors to assist in the audit. As a result, the auditor is evaluating the competence and objectivity of the internal auditors. Factors the auditor will consider when evaluating an internal auditor’s competence will include the following except:

a) The internet auditor’s education

b) The internal auditor’s professional certifications

c) The organization level to which the internal auditor reports

d) The internal auditor’s experience

3.When other information accompanying audited financial statements contains a material inconsistency that management refuses to revise, the auditor may do which of the following?

a) Withhold the auditor’s report and withdraw from the engagement

b) Include an other-matter paragraph in the report

c) Withdraw from the engagement

d) Withdraw from the engagement and include

Answer 1

1) Solution: Management does not provide reasonable justification for a change in accounting principles

Explanation: When a reasonable justification for a change in accounting principles is not provided by management there would be a disclaimer of opinion

　

2) Solution: The organizational level to which the internal auditor reports

Explanation: The auditor will not be considering the reports of the internal reporter.

　

3) Solution: Withhold the auditor’s report and withdraw from the engagement

Explanation: As the auditor's report and the opinion expressed in regard to the financial statements, not the supplementary information, thus a misstatement in the supplementary information may not impact an auditor to either withdraw from an engagement or withhold the report, though these approaches.