ACC 403 Week 2 Assignment and Discussion,
3-25 (a-c) The following questions concern audit reports other than unqualified audit reports with standard wording. Chose the best reponse.
- The annual audit of Midwestern Manufacturing revealed that sales were accidentally being recorded as revenue when the goods were ordered, instead of when they were shipped. Assuming the amount in question is material and the client is unwilling to correct the error, the CPA should issue:
- An unqualified opinion or adverse opinion.
- A qualified “except for” opinion or disclaimer of opinion.
- A qualified “expect for” opinion or adverse opinion.
- An unqualified opinion with an explanatory paragraph
- Under which of the following circumstances would a disclaimer of opinion not be appropriate?
- The auditor is unable to determine the amounts associated with an employee fraud scheme.
- Management does not provide reasonable justification for a change in account principles.
- The client refuses the auditor permission to confirm certain accounts receivable or apply alternative procedures to verify their balances.
- The chief executive officer is unwilling to sign the management representation letter.
- The opinion paragraph of a CPA’s reports states: “ In our opinion, except for the effects of not capitalizing certain lease obligations, as discussed in the preceding paragraph, the financial statements present fairly, in all material respects…” This paragraph expresses a(n)
- Unqualified opinion
- Unqualified opinion with explanatory paragraph
- Qualified opinion
- Adverse opinion
3-28 For the following independent situations, assume that you are the audit partner on theengagement:
- During your audit of Raceway.com, Inc., you conclude that there is a possibility that inventory is materially overstated. The client refuses to allow you to expand the
scope of your audit sufficiently to verify whether the balance is actually misstated.
- You complete the audit of Munich Department Store, and in your opinion, the financial statements are fairly presented. On the last day of the field work, you discover that one of your supervisors assigned to the audit has a material investment in Johnson.
- Auto Delivery Company has a fleet of several delivery trucks. In the past, Auto Delivery had followed the policy of purchasing all equipment. In the current year, they decided to lease the trucks. The method of accounting for the trucks is therefore changed to lease capitalization. This change in policy is fully disclosed in footnotes.
Objective 4-6) Marie Janes encounters the following situations in doing the audit of a large auto dealership. Janes is not a partner.
- The sales manager tells her that there is a sale (at a substantial discount) on new cars that is limited to long-established customers of the dealership. Because her firm has been doing the audit for several years, the sales manager has decided that Janes should also be eligible for the discount.
- The auto dealership has an executive lunchroom that is available free to employees above a certain level. The controller informs Janes that she can also eat there any time.
Janes is invited to and attends the company’s annual Christmas party. When presents are handed out, she is surprised to find her name