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455: Practice Questions and Answers 2024
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455: Practice Questions
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455: Practice QuestionsSecurimax Limited has been an audit client of KFP Partners for the past 15 years. Securimax is based in Waterloo, Ontario, where it manufactures high-tech armour-
plated personnel carriers. Securimax often has to go through a competitive market tender process to win large government contracts. Its main product, the small but powerful Terrain Master, is highly specialized, and Securimax does business only with nations that have a recognized, democratically elected government. Securimax maintains a highly secure environment, given the sensitive and confidential nature of its vehicle designs and its clients.Clarke Field has been the engagement partner on the Securimax audit for the last five years.The board of Securimax is considering changing from an audit engagement to a review engagement and has approached Clarke to discuss the implications of this change. Clarke suggests that KFP could perform the review engagement.S - answerA. Reasonable assurance is only provided with an audit
C. If Securimax is planning an initial public offering, an audit would likely be recommended
D. Review engagement reporting is more limited than audit engagement reporting
G. An audit will provide a greater level of assurance than a review
Which of the following apply to an emphasis of matter paragraph?
(Choose any and all correct answers)
A. A common circumstance that warrants an emphasis of matter paragraph is the existence of a significant uncertainty, the resolution of which may materially affect the financial statements.
B. The emphasis of matter paragraph is used when the entity has not disclosed an issue in its report and the auditor believes an issue should be disclosed.
C. The purpose of the paragraph is to ensure that the reader pays appropriate attention to the issue when reading the financial statements.
D. It is included in the audit report whenever the auditor finds a problem with the client's financial statements which the client will not fix.
E. If the audit report includes an emphasis of matter paragraph, it becomes a modified opinion. F. It is a paragraph included in the auditor's report that refers to a matter appropriately pre - answerA. A common circumstance that warrants an emphasis of matter paragraph
is the existence of a significant uncertainty, the resolution of which may materially affect the financial statements.
C. The purpose of the paragraph is to ensure that the reader pays appropriate attention to the issue when reading the financial statements.
F. It is a paragraph included in the auditor's report that refers to a matter appropriately presented or disclosed in the financial statements.
The accounting firm of Jovanovic and St. Pierre has discovered, during its audit of Robson Chemicals Inc., that the client is being sued for $3 million, a material amount. Allegedly, one of its products exploded and severely injured a customer. In the firm's discussion with Robson's lawyers, Jovanovic and St. Pierre ascertained that it is very likely that Robson will indeed have to pay this entire amount when the lawsuit is resolved. To provide for this, Robson's chief financial officer has included information relating to the lawsuit in the notes to its financial statements, but did not otherwise reflect it in its financial statements.
Using Situation 2, what types of audit opinion could be issued?
(Choose any and all correct answers)
A. Unqualified Report
B. Adverse opinion
C. Qualified report due to a GAAp departure
D. Unqualified with emphasis of matter paragraph regarding the lawsuit
E. Qualified report due to - answerB. Adverse opinion
C. Qualified report due to a GAAp departure
You have recently graduated from university and have started work with an audit firm. You meet an old school friend, Kim, for dinner—you haven't seen each other for several
years. Kim is surprised that you are now working as an auditor, because your childhood dream was to be a ballet dancer. Unfortunately, your knees were damaged in a fall and you can no longer dance. The conversation turns to your work and Kim wants to know how you do your job. Kim asks about the purpose of an audit and wants to know if as an
auditor, you would have to assume that you cannot believe anything a company manager says to you.
Which of the following describes the concept of professional scepticisim as it relates to the auditors?
(Choose any and all correct answers)
A. Assume management is always trying to deceive auditors
B. Questioning mind that investigates information presented by the client
C. Take the client's word without trying t - answerB. Questioning mind that investigates information presented by the client
D. Be alert to the fact that some managers will try to deceive
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