the audit opinion formulation process

Chapter 15-16


Why is the audit report important to the audit opinion formulation process?


What are the requirements of the AICPA’s Principles 1 and 7 regarding audit reporting?


Under what circumstances may an auditor express an unqualified opinion when the related financial statements contain a material departure from a FASB standard?


What conditions must be present for an auditor to be able to issue a standard unqualified audit report similar to the ones presented Exhibit 15.1?


Review Exhibit 15.2 and identify the timing requirements for U.S. public companies to file audited financial statements with the SEC.


List the components of a standard unqualified audit report for a U.S. public company.

Chapter 16


Is it reasonable for the auditor to make judgments about the acceptability of subjective estimates made by the client? If yes, explain the process by which an auditor makes such judgments.


Are inventory, accounts receivable, and property, plant, and equipment subject to fair value estimates? Explain and state how the fair value concept is applicable to these accounts.


Review Exhibit 16.2 and identify balance sheet accounts requiring subjective judgments and describe the nature of those judgments.


What are the differences between the rollover method and the iron curtain method in terms of evaluating uncorrected misstatements?


Should the materiality of misstatements be considered individually or combined to be considered in aggregate with other misstatements when considering whether the financial statements are misstated? When a misstatement is considered clearly trivial?


When might a quantitatively small misstatement be considered material?


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