his post-balance sheet date audit procedures, a CPA learned that
a recent fire caused heavy damage to one of a client's two
plants; the loss will not be reimbursed by insurance. The
newspapers described the event in detail. The financial statements
and footnotes as prepared by the client did not disclose the loss
caused by the fire.
2. During the course of his audit of the financial statements of
a corporation for the purpose of expressing an opinion on the
statements, a CPA is refused permission to inspect the minutes of
board of directors' meetings that document significant decisions
of the board. The corporation secretary instead offers to give the
CPA a certified copy of all resolutions and actions involving
accounting matters.
3. A CPA is engaged in the audit of the financial statements of
a large manufacturing company with branch offices in many widely
separated cities. The CPA was not able to count the substantial
undeposited cash receipts at the close of business on the last day
of the fiscal year at all branch offices. As an alternative to this
auditing procedure used to verify the accurate cutoff of cash
receipts, the CPA observed that deposits in transit as shown on
the year-end bank reconciliation appeared as credits on the bank
statement on the first business day of the new year. He was
satisfied as to the cutoff of cash receipts by the use of the
alternative procedure.
4. On January 2, 2020, the Retail Auto Parts Company received a
notice from its primary supplier that effective immediately, all
wholesale prices will be increased by 10 percent. On the basis of
the notice, Retail Auto Parts revalued its December 31, 2019,
inventory to reflect the higher costs. The inventory constituted a
material proportion of total assets; however, the effect of the
revaluation was material to current assets but not to total assets
or net income. The increase in valuation is adequately disclosed in
the footnotes.
5. A CPA has completed her audit of the financial statements of
a bus company for the year ended December 31, 2019. Prior to
2019, the company depreciated its buses over a 10-year period.
During 2019, the company determined that a more realistic
estimated life for its buses was 12 years and computed the 2019
depreciation on the basis of the revised estimate. The CPA has
satisfied herself that the 12-year life is reasonable. The company
has adequately disclosed the change in estimated useful lives of
its buses and the effect of the change on 2019 income in a note to
the financial statements.
6. E-Lotions.com, Inc., is an online retailer of body lotions
and other bath and body supplies. The company records revenues at
the time customer orders are placed on the website, rather than
when the goods are shipped, which is usually two days after the
order is placed. The auditor determined that the amount of orders
placed but not shipped as of the balance sheet date is not
material.
Requirements a. and b. Identify which of the conditions
requiring a deviation from a standard unmodified opinion audit
report is applicable. State the level of materiality
as immaterial, material, or highly material. If you cannot
decide the level of materiality, state the additional
information needed to make a decision.
- 1 Subsequent To The Date Of The Financial Statements As Part Of His Post Balance Sheet Date Audit Procedures A Cpa L 1 (26.74 KiB) Viewed 51 times
- 1 Subsequent To The Date Of The Financial Statements As Part Of His Post Balance Sheet Date Audit Procedures A Cpa L 2 (5.73 KiB) Viewed 51 times
(a) Condition 1. 2. 3. 4. 5. 6. Requirement c. Given your answers in parts input field is not used in the table leave the inp (b) Materiality level Highly material Immaterial Material Material or highly material Not applicable (b) Additional information needed ort from the following alte
(b) Additional information needed (a) Condition (b) Materiality level 1. 2. 3. 4. 5. 6. Requirement c. Given your answers in parts a. and b., state the appropriat Client imposed limit input field is not used in the table leave the input field empty; do not select The size of materiality (c) Audit Amount of loss Auditor's preliminary judgment
1. 2. 3. 4. 5. 6. (c) Audit Report(s)
Rea (1) Unmodified opinion-standard wording (2) Unmodified opinion-explanatory paragraph 3. (3) Unmodified opinion-nonstandard report wording 4. 5. (4) Qualified opinion-GAAP departure 6. (5) Qualified opinion-scope limitation Req inpu (6) Disclaimer (7) Adverse 1. 2. 3. 4. 5. 6. audit report from the following alternatives abel.)
(1) Unmodified opinion-standard wording (2) Unmodified opinion-explanatory paragraph (3) Unmodified opinion-nonstandard report wording (4) Qualified opinion-GAAP departure (5) Qualified opinion-scope limitation b., sta demp (6) Disclaimer (c) (7) Adverse Re