The auditor's responsibilities related to the audit opinion are - -The auditor has an obligation to ensure that users of the financial statements are informed about the misstatement and that the audit opinion should no longer be relied upon.
-Ensure the client informs the SEC and other regulat...
The auditor's responsibilities related to the audit opinion are ✔✔- -The auditor has an obligation to
ensure that users of the financial statements are informed about the misstatement and that the audit
opinion should no longer be relied upon.
-Ensure the client informs the SEC and other regulatory agencies of the misstatement, and issues revised
financial statements with an explanation of the reason for the revision.
-If the client refuses to disclose the misstatement, the auditor should inform the board of directors.
When a contingency is resolved subsequent to the issuance of audited financial statements, which
correctly contained disclosure of the contingency in the footnotes based on information available at the
date of the issuance? ✔✔- The auditor should take no action regarding the event.
Required items to be communicated by the auditor to the audit committee or others charges with
governance? ✔✔- -significant findings arising from the audit
-information about the overall scope and timing of the audit
-information about the auditor's responsibility in an audit of financial statements
Written management responsibilities obtained by the auditor in connection with a financial statement
audit should include a ✔✔- statement of management's belief that the effects of uncorrected
misstatements are not material.
A management letter ✔✔- contains recommendations from the auditor designed to help the client
improve the efficiency and effectiveness of its business
What procedures do auditors typically follow to address the completeness of disclosures? ✔✔- The
auditor is concerned with whether management has disclosed all required information for both
transactions and account balances. Auditors often use a disclosure checklist to determine that all
required disclosures are completely presented and disclosed in the financial statements and
accompanying footnotes. This helps the auditor obtain sufficient appropriate evidence about the
presentation transaction-related objective and the presentation balance-related objective.
First Type of Subsequent Event ✔✔- The first type of subsequent event is one that has a direct effect
, on the financial statements and requires adjustment.
Ex. Disposal of equipment not being used in operations at a price below the current book value & sale of
raw materials as scrap in the period subsequent to the balance sheet date.
Second Type of Subsequent Event ✔✔- The second type of subsequent event is one that has no direct
effect on the financial statements but for which disclosure is advisable.
Ex. issuance of bonds or equity securities & uninsured loss of inventories as result of fire.
Why analysis of legal expense if an essential part of every audit ✔✔- The analysis may give an
indication of contingent liabilities which may become actual liabilities in the future and require
disclosure in the current financial statements. Since any single contingency could be material, it is
important to verify all legal transactions, even if the amounts are small.
The subsequent information should be incorporated directly into the statements if the conditions
causing the change in valuation ✔✔- -took place before the balance sheet date
-occurred both before and after the balance sheet date
-are reimbursable through insurance policies
When are analytical procedures required on an audit? What is the primary purpose of analytical
procedures during each phase of the audit? ✔✔- -Analytical procedures are required during the
completion phase, as a final review for material misstatements or financial problems.
-Analytical procedures are required during the planning phase to assist the auditor in determining the
nature, extent, and timing of work to be performed.
Most important reasons for performing analytical procedures? ✔✔- - Indication of the presence of
possible misstatements in the financial statements
-reduction of detailed audit tests
-assessment of the entity's ability to continue as a going concern
-understanding the client's business and industry
Why is it important that an auditor develop an expectation of the account balance when performing
substantive analytical procedures about the reasonableness of an account balance? ✔✔- -The
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