AUDIT REPORT CONTENTS Flashcards
(31 cards)
What is the primary purpose of the title in an auditor’s report?
a) To attract readers
b) To differentiate it from other reports
c) To summarize audit findings
d) To highlight key issues
To differentiate it from other reports
To whom is the auditor’s report usually addressed in the case of a statutory audit?
a) Shareholders or members
b) Audit committee
c) Board of Directors
d) Government authorities
Shareholders or members
Which of the following is not included in the “Auditor’s Opinion” section?
a) Statement of compliance with AFRF
b) Statement on going concern
c) True and fair view assertion
d) Period covered by the financial statements
Statement on going concern
The “Key Audit Matters” (KAM) paragraph includes matters of high significance identified during the audit. Which of the following would most likely qualify as a KAM?
a) Non-compliance with tax laws
b) Significant management judgment required for revenue recognition in complex contracts
c) Routine transactions with related parties
d) The timing of the audit fieldwork
Significant management judgment required for revenue recognition in complex contracts
In an audit report for a listed company, the auditor has identified a significant inconsistency between the “Other Information” and the audited financial statements. How should this be addressed?
a) Issue a disclaimer of opinion on the financial statements
b) Communicate the inconsistency to those charged with governance and describe it in the audit report
c) Modify the opinion section to reflect the inconsistency
d) Ignore the inconsistency if it does not impact the financial statements directly
Communicate the inconsistency to those charged with governance and describe it in the audit report
An auditor is conducting an audit in a jurisdiction requiring reporting on additional regulatory compliance. Which of the following approaches should the auditor take?
a) Integrate the regulatory compliance report into the same section as the financial statements opinion
b) Provide a separate section in the report titled “Report on Other Legal and Regulatory Requirements”
c) Issue a completely separate report to address regulatory compliance
d) Discuss regulatory compliance only in a management letter
Provide a separate section in the report titled “Report on Other Legal and Regulatory Requirements”
Which of the following best describes the auditor’s responsibility for evaluating the overall presentation of financial statements?
a) To ensure financial statements comply with tax laws
b) To verify consistency between the financial statements and the notes to the accounts
c) To evaluate whether the financial statements provide a true and fair view in accordance with the AFRF
d) To perform procedures to detect all fraud and errors
To evaluate whether the financial statements provide a true and fair view in accordance with the AFRF
When must the date of the auditor’s report be set?
a) On the date the financial statements are signed by management
b) On the date the auditor obtains sufficient appropriate audit evidence
c) On the date the shareholders approve the financial statements
d) On the date the engagement letter is signed
On the date the auditor obtains sufficient appropriate audit evidence
Which of the following is a key responsibility of the auditor regarding fraud and error?
a) To guarantee that no fraud exists in the financial statements
b) To assess the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management
c) To conduct forensic procedures to detect intentional misstatements
d) To correct all errors identified during the audit
To assess the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by managemen
An auditor is engaged to audit a financial statement of a group where one component is audited by another auditor. What must the auditor do if they rely on the work of the other auditor?
a) Exclude the other auditor’s work from the overall conclusion and issue a disclaimer of opinion
b) Mention the other auditor in the auditor’s report without taking responsibility for their work
c) Perform procedures to assess the competence and independence of the other auditor and determine if reliance is appropriate
d) Obtain written confirmation from management regarding the work of the other auditor
Perform procedures to assess the competence and independence of the other auditor and determine if reliance is appropriate
The auditor of XYZ Ltd. identifies that the financial statements materially comply with the applicable financial reporting framework (AFRF). However, a significant inconsistency is found between the financial statements and other information presented in the annual report. The inconsistency is unresolved despite discussions with management.
What action should the auditor take?
a) Issue a qualified opinion for the financial statements
b) Include a paragraph describing the inconsistency under “Other Information” in the auditor’s report
c) Issue an adverse opinion for the financial statements
d) Ignore the inconsistency if it is not material to the financial statements
Include a paragraph describing the inconsistency under “Other Information” in the auditor’s report
While auditing ABC Ltd., the auditor identifies that the company is facing significant cash flow issues and might not be able to continue as a going concern. The company has adequately disclosed this uncertainty in the financial statements.
What should the auditor include in the report?
a) A disclaimer of opinion
b) A “Material Uncertainty Related to Going Concern” paragraph
c) A qualified opinion
d) No additional paragraph since the disclosure is adequate
A “Material Uncertainty Related to Going Concern” paragraph
During the audit of DEF Corp., the auditor finds that management has refused to provide written representations regarding compliance with laws and regulations. The auditor has performed all other procedures and obtained sufficient evidence.
What type of opinion should the auditor issue?
a) Unmodified opinion
b) Qualified opinion due to scope limitation
c) Disclaimer of opinion due to lack of evidence
d) Adverse opinion due to non-compliance with laws
Qualified opinion due to scope limitation
An auditor is conducting an audit for a listed company, LMN Ltd. Significant audit procedures involve assessing management’s estimates for goodwill impairment, which required complex judgments. The auditor concludes that these procedures were the most challenging part of the audit.
How should the auditor address this in the report?
a) Include it under the “Key Audit Matters” section
b) Modify the opinion to highlight management’s judgment
c) Address it in the “Other Information” section
d) Mention it in the management letter but exclude it from the auditor’s report
a) Include it under the “Key Audit Matters” section
Scenario: In the audit of QRS Ltd., the auditor discovers that the financial statements fail to disclose material non-compliance with tax laws. Management refuses to amend the financial statements.
What opinion should the auditor issue?
a) Disclaimer of opinion
b) Qualified opinion
c) Adverse opinion
d) Unmodified opinion with an Emphasis of Matter paragraph
Adverse opinion
The auditor of XYZ Inc. completed the audit work on March 15, 2025. On March 20, 2025, a significant event occurred that materially affects the financial statements. The event is adequately disclosed by management.
How should the auditor address this situation?
a) Change the audit opinion to qualified
b) Modify the date of the auditor’s report to March 20, 2025
c) Include an “Emphasis of Matter” paragraph in the auditor’s report
d) Issue a disclaimer of opinion
Include an “Emphasis of Matter” paragraph in the auditor’s report
In an audit of a company operating in a jurisdiction with unique regulatory requirements, the law mandates the auditor to report separately on compliance with these requirements. The financial statements are free from material misstatements.
What should the auditor include in the report?
a) An “Other Legal and Regulatory Requirements” section
b) A separate report exclusively for regulatory compliance
c) A modified opinion addressing compliance issues
d) A “Key Audit Matters” paragraph related to compliance
An “Other Legal and Regulatory Requirements” section
An auditor performing an audit of PQR Ltd. observes that the financial statements contain complex financial instruments that were challenging to value. The audit involved significant judgment and expert consultations. The financial statements comply with AFRF.
What action should the auditor take?
a) Include this as a Key Audit Matter in the report
b) Modify the opinion due to the complexity of the financial instruments
c) Mention this complexity in the Basis for Opinion section
d) Ignore the matter as the statements comply with AFRF
nclude this as a Key Audit Matter in the report
During the audit of GHI Ltd., the auditor identifies a material misstatement that management refuses to correct. The misstatement affects the true and fair presentation of the financial statements.
What type of opinion should the auditor issue?
a) Qualified opinion
b) Adverse opinion
c) Disclaimer of opinion
d) Unmodified opinion with an Emphasis of Matter paragraph
Adverse opinion
Scenario: The auditor of a small private company, STU Ltd., decides not to include the name of the engagement partner in the auditor’s report. The engagement partner raises no objection to this decision.
Under what condition is this omission acceptable?
a) If the auditor is operating in a jurisdiction that does not mandate partner identification
b) If the financial statements are not prepared under IFRS
c) If the auditor provides a separate document identifying the engagement partner
d) If the engagement partner has explicitly requested anonymity
If the auditor is operating in a jurisdiction that does not mandate partner identification
During the audit of DEF Ltd., the financial statements contain a note on a material lawsuit that may impact the company’s ability to operate. The management has disclosed the uncertainty adequately, and the auditor agrees with the disclosure. The auditor also notes that this uncertainty is fundamental to the users’ understanding of the financial statements.
What should the auditor do in the report?
a) Issue a qualified opinion due to the uncertainty
b) Include a “Material Uncertainty Related to Going Concern” paragraph
c) Modify the Basis for Opinion section to include details about the uncertainty
d) Add an Emphasis of Matter paragraph
b) Include a “Material Uncertainty Related to Going Concern” paragraph
The auditor of XYZ Inc. determines that the company’s financial statements are materially misstated due to an incorrect revenue recognition policy. The misstatement is pervasive and impacts multiple elements of the financial statements.
What opinion should the auditor issue?
a) Qualified opinion
b) Disclaimer of opinion
c) Adverse opinion
d) Unmodified opinion with an Emphasis of Matter paragraph
Adverse opinion
The audit of LMN Ltd. involves significant reliance on the work of a component auditor. The group auditor is satisfied with the competence and independence of the component auditor but identifies that the component audit report includes a qualified opinion on a material but non-pervasive issue.
How should the group auditor address this in the report?
a) Issue a qualified opinion for the group financial statements
b) Disclose the issue in the “Other Information” section
c) Reference the component auditor’s work and include a Basis for Opinion paragraph explaining the qualification
d) Exclude reference to the component auditor and issue an unmodified opinion
Issue a qualified opinion for the group financial statements
The financial statements of PQR Ltd. include significant estimates for inventory valuation due to fluctuating market prices. The auditor finds the estimates to be reasonable and in compliance with AFRF but considers the matter significant to understanding the audit process.
How should the auditor address this in the report?
a) Include the matter in the “Key Audit Matters” section
b) Modify the opinion section to highlight the use of estimates
c) Include an Emphasis of Matter paragraph to draw attention to the estimates
d) No additional disclosure is required since the estimates comply with AFRF
a) Include the matter in the “Key Audit Matters” section
