Sample Questions and Answers
Which of the following is NOT a type of audit report?
A) Unqualified opinion
B) Qualified opinion
C) Adverse opinion
D) Statement of Cash Flows
Answer: D) Statement of Cash Flows
What does an unqualified audit opinion indicate?
A) The financial statements are free from material misstatements.
B) There are significant errors in the financial statements.
C) The auditor cannot express an opinion.
D) There is a scope limitation in the audit.
Answer: A) The financial statements are free from material misstatements.
Which of the following is true about a qualified audit opinion?
A) It is issued when the financial statements are misleading.
B) It indicates the auditor was unable to obtain sufficient appropriate audit evidence.
C) It suggests there is a disagreement over accounting principles.
D) It is issued when a material uncertainty exists about the entity’s ability to continue as a going concern.
Answer: B) It indicates the auditor was unable to obtain sufficient appropriate audit evidence.
When would an auditor issue an adverse opinion?
A) When there are disagreements with management regarding accounting practices.
B) When the financial statements are misstated and do not reflect a true and fair view.
C) When the auditor lacks independence.
D) When there are immaterial misstatements in the financial statements.
Answer: B) When the financial statements are misstated and do not reflect a true and fair view.
In which situation would an auditor issue a disclaimer of opinion?
A) There is a material misstatement in the financial statements.
B) The auditor cannot gather sufficient audit evidence.
C) The audit was conducted with full scope.
D) The financial statements are free from material misstatements.
Answer: B) The auditor cannot gather sufficient audit evidence.
What is the main reason an auditor would issue a qualified opinion?
A) Material misstatements in the financial statements.
B) The financial statements are presented in accordance with generally accepted accounting principles (GAAP).
C) The auditor could not obtain enough evidence to form an opinion.
D) The company is a going concern.
Answer: C) The auditor could not obtain enough evidence to form an opinion.
A “going concern” qualification in an audit report is issued when:
A) The company is facing liquidity problems but has a feasible recovery plan.
B) There is no doubt about the company’s ability to continue operations.
C) There are no material misstatements in the financial statements.
D) The auditor has doubts about the company’s ability to continue as a going concern.
Answer: D) The auditor has doubts about the company’s ability to continue as a going concern.
An unqualified audit opinion is also known as:
A) Clean opinion
B) Qualified opinion
C) Disclaimer opinion
D) Adverse opinion
Answer: A) Clean opinion
Which section of the audit report discusses the scope of the audit?
A) Introduction
B) Opinion
C) Basis for Opinion
D) Other Information
Answer: C) Basis for Opinion
If an auditor cannot express an opinion due to a limitation in the scope of their audit, which opinion is issued?
A) Unqualified opinion
B) Qualified opinion
C) Disclaimer of opinion
D) Adverse opinion
Answer: C) Disclaimer of opinion
In which scenario would an auditor issue an adverse opinion?
A) The auditor cannot obtain sufficient evidence.
B) The financial statements are in accordance with accounting standards but there are unresolved issues.
C) The auditor disagrees with the management’s interpretation of accounting principles.
D) The financial statements are not fairly presented due to material misstatements.
Answer: D) The financial statements are not fairly presented due to material misstatements.
The auditor’s report is addressed to:
A) The Financial Accounting Standards Board (FASB)
B) The shareholders and board of directors
C) The company’s legal counsel
D) The general public
Answer: B) The shareholders and board of directors
The audit report includes which of the following elements?
A) Auditor’s qualifications
B) Opinion on the financial statements
C) Auditor’s personal views
D) Financial statements
Answer: B) Opinion on the financial statements
What is the impact of a qualified opinion on the financial statements?
A) No impact
B) The financial statements are presented fairly in accordance with GAAP except for a specific issue.
C) The financial statements are not fairly presented.
D) The auditor refuses to issue any opinion on the financial statements.
Answer: B) The financial statements are presented fairly in accordance with GAAP except for a specific issue.
A “clean” audit opinion is another term for which type of opinion?
A) Unqualified opinion
B) Qualified opinion
C) Disclaimer of opinion
D) Adverse opinion
Answer: A) Unqualified opinion
Which of the following is a valid reason for issuing a qualified audit opinion?
A) The company has violated accounting standards.
B) There is a scope limitation, and the auditor cannot gather enough evidence.
C) There are material misstatements in the financial statements.
D) The company is a going concern.
Answer: B) There is a scope limitation, and the auditor cannot gather enough evidence.
What does an auditor typically assess when determining whether to issue an adverse opinion?
A) Compliance with tax regulations
B) The company’s profitability
C) The materiality of financial misstatements
D) The number of employees in the company
Answer: C) The materiality of financial misstatements
What is the key difference between an unqualified opinion and a qualified opinion?
A) The auditor disagrees with management in an unqualified opinion.
B) An unqualified opinion is issued when no misstatements are found, while a qualified opinion indicates the existence of specific misstatements.
C) A qualified opinion is more favorable than an unqualified opinion.
D) A qualified opinion is issued when an auditor cannot express an opinion.
Answer: B) An unqualified opinion is issued when no misstatements are found, while a qualified opinion indicates the existence of specific misstatements.
Which audit opinion is issued when the auditor believes that the financial statements do not fairly present the financial position and results of operations?
A) Unqualified opinion
B) Qualified opinion
C) Disclaimer of opinion
D) Adverse opinion
Answer: D) Adverse opinion
What does a “scope limitation” refer to in an audit context?
A) The financial statements are incomplete or inaccurate.
B) The auditor cannot access sufficient evidence or data to complete the audit.
C) The company is not following accounting standards.
D) The financial statements fail to comply with international standards.
Answer: B) The auditor cannot access sufficient evidence or data to complete the audit.
An auditor’s report is typically divided into how many sections?
A) One
B) Two
C) Three
D) Four
Answer: D) Four
A statement indicating that the auditor has doubts about the company’s ability to continue as a going concern should be included in which section of the audit report?
A) Opinion section
B) Basis for Opinion section
C) Going Concern section
D) Audit Procedures section
Answer: C) Going Concern section
Which type of audit report would be issued if the auditor believes the financial statements present a true and fair view but there is an unresolved disagreement over accounting principles?
A) Unqualified opinion
B) Qualified opinion
C) Disclaimer of opinion
D) Adverse opinion
Answer: B) Qualified opinion
Which of the following would likely result in a disclaimer of opinion?
A) The auditor discovers a material misstatement in the financial statements.
B) The auditor is unable to obtain sufficient appropriate audit evidence due to a scope limitation.
C) The company fails to comply with financial reporting standards.
D) The financial statements are presented in accordance with accounting standards.
Answer: B) The auditor is unable to obtain sufficient appropriate audit evidence due to a scope limitation.
In an audit report, the “opinion” section contains:
A) The auditor’s name and signature
B) A statement of the audit’s purpose
C) The auditor’s opinion on the financial statements
D) The methodology used during the audit
Answer: C) The auditor’s opinion on the financial statements
Which opinion is issued when the auditor believes that financial statements, taken as a whole, are misleading and do not conform to GAAP?
A) Qualified opinion
B) Unqualified opinion
C) Adverse opinion
D) Disclaimer of opinion
Answer: C) Adverse opinion
A “scope limitation” may arise due to:
A) An auditor’s independence issue
B) The company’s failure to comply with laws and regulations
C) The auditor’s inability to gather sufficient appropriate evidence
D) The auditor’s disagreement with accounting principles
Answer: C) The auditor’s inability to gather sufficient appropriate evidence
Which of the following is included in the basis for opinion section of the audit report?
A) Auditor’s qualifications
B) The auditor’s opinion
C) Detailed audit procedures used
D) Summary of financial statements
Answer: C) Detailed audit procedures used
What is the primary responsibility of an auditor when issuing an audit report?
A) To prepare the financial statements for the company
B) To ensure that the company complies with tax laws
C) To provide an opinion on whether the financial statements are fairly presented
D) To advise the company on improving financial performance
Answer: C) To provide an opinion on whether the financial statements are fairly presented
What does the phrase “true and fair view” in the audit report refer to?
A) The financial statements are accurate and comply with all regulations.
B) The financial statements are free of misstatements.
C) The financial statements are prepared in accordance with accounting standards and represent the company’s financial position accurately.
D) The company is performing well financially.
Answer: C) The financial statements are prepared in accordance with accounting standards and represent the company’s financial position accurately.
What is the primary purpose of an auditor’s report?
A) To assess the company’s profitability
B) To provide assurance that financial statements are free from material misstatements
C) To prepare the company’s financial statements
D) To express an opinion on the company’s internal controls
Answer: B) To provide assurance that financial statements are free from material misstatements
Which opinion is issued when the auditor is unable to gather sufficient audit evidence due to limitations imposed by management?
A) Unqualified opinion
B) Qualified opinion
C) Disclaimer of opinion
D) Adverse opinion
Answer: C) Disclaimer of opinion
Which of the following is a likely cause for issuing a qualified opinion?
A) The auditor discovers fraud in the financial statements.
B) There is a material misstatement in the financial statements, but it is not pervasive.
C) The company has failed to comply with accounting standards.
D) The auditor cannot obtain enough evidence due to a scope limitation.
Answer: B) There is a material misstatement in the financial statements, but it is not pervasive.
In which section of the audit report should the auditor discuss the risks and uncertainties associated with the company’s going concern status?
A) Opinion section
B) Basis for Opinion section
C) Going Concern section
D) Auditor’s Responsibilities section
Answer: C) Going Concern section
Which type of audit opinion would be issued if the auditor believes that the financial statements are fairly presented but there is a disagreement over the accounting treatment of a specific transaction?
A) Unqualified opinion
B) Qualified opinion
C) Disclaimer of opinion
D) Adverse opinion
Answer: B) Qualified opinion
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