AUD 1.3 - FS

Question 1

Going concern (how to alleviate)

Answer 1

• Increase ownership equity
• borrow money
• restructure debt
• sell assets
• reduce/delay expenditures”

Question 2

Going concern (auditor’s report)

Answer 2

• "”substantial doubt”” and ““Going concern”” = auditor’s report language
• time period NOT mentioned

Options - if properly disclosed

1. Disclaimer; or
2. Unmodified w/ Emphasis of Matter

Option if NOT properly disclosed

1. Qualified
2. Adverse”

Question 3

Going concern (comparative FS)

Answer 3

“If going concern in PY but removed in CY:

remove PY’s emphasis of matter and NO description why going concern removed”

Question 4

Accounting principle change

Answer 4

If NOT material, then do NOT refer in emphasis of matter paragraph

Question 5

Inventory (insufficient evidence @ beginning year)

Answer 5

“Impact to BS and Income Statement:
BS: no impact as long as YE BS amount has sufficient evidence
IS: disclaimer since insufficient for COGS”

Question 6

Contingent liability

Answer 6

“Only accrue if probable AND estimable

If either or neither, then simply disclose”

Question 7

Insufficient audit evidence

Answer 7

Basis of Qualified Opinion preceding the Opinion Paragraph

Question 8

Accounting principle change

Answer 8

Makes reference to the FS in the emphasis of matter paragraph

Question 9

Restrictions on scope of audit

Answer 9

“Qualified or Disclaimer:

• insufficient evidence
• inadequate records
• timing of the work”

Question 10

Scope limitation

Answer 10

“1. Disclaimer; or

2. Qualified”

Question 11

Going concern (ISA vs GAAS)

Answer 11

“ISA - at least 12 months from date of audited FS

US GAAS - no more than 12 months of audited FS”

Question 12

Disclaimer of Opinion

Answer 12

“1. Significant scope limitation

2. auditor not independent
3. FS not audited”