CGA Auditing & Assurance 2 — Questions and Answers
Question 1: Which type of audit opinion is issued when financial statements are presented fairly in all material respects but contain a departure from GAAP that is not considered pervasive?
- Adverse opinion
- Qualified opinion (Correct answer)
- Disclaimer of opinion
- Unmodified opinion
Correct answer: Qualified opinion
A qualified opinion is issued when a material but non-pervasive GAAP departure exists, using 'except for' language.
Question 2: Under the risk-based audit approach, which component of the audit risk model represents the susceptibility of an assertion to misstatement before considering internal controls?
- Control risk
- Detection risk
- Inherent risk (Correct answer)
- Sampling risk
Correct answer: Inherent risk
Inherent risk is the susceptibility of an assertion to misstatement due to error or fraud, ignoring related controls.
Question 3: An auditor discovers that management has restricted access to key documents during the audit. Which modified opinion is most appropriate if the restriction is pervasive?
- Qualified opinion
- Adverse opinion
- Disclaimer of opinion (Correct answer)
- Unmodified opinion with emphasis paragraph
Correct answer: Disclaimer of opinion
A disclaimer of opinion is issued when a scope limitation is so pervasive that the auditor cannot express any opinion.
Question 4: Which assertion is most relevant when an auditor is verifying that all sales transactions that occurred during the period have been recorded?
- Valuation
- Rights and obligations
- Completeness (Correct answer)
- Occurrence
Correct answer: Completeness
The completeness assertion addresses whether all transactions that should have been recorded have been included in the financial statements.
Question 5: The concept of 'professional skepticism' in auditing requires the auditor to:
- Assume management is dishonest until proven otherwise
- Maintain a questioning mind and critically assess audit evidence (Correct answer)
- Accept all representations made by management at face value
- Focus exclusively on detecting fraud rather than errors
Correct answer: Maintain a questioning mind and critically assess audit evidence
Professional skepticism means maintaining a questioning mind and critically evaluating evidence without assuming either honesty or dishonesty.
Question 6: In an integrated audit required under PCAOB standards, which two opinions does the auditor express?
- Opinions on internal controls and compliance with laws
- Opinions on financial statements and internal control over financial reporting (Correct answer)
- Opinions on management's estimates and going concern
- Opinions on fraud risk and operational efficiency
Correct answer: Opinions on financial statements and internal control over financial reporting
A PCAOB-required integrated audit results in separate opinions on the financial statements and on the effectiveness of internal control over financial reporting.
Question 7: Which substantive procedure is most effective for verifying the existence of accounts receivable?
- Reviewing the aged accounts receivable trial balance
- Sending positive confirmation requests to customers (Correct answer)
- Recalculating interest on overdue accounts
- Inspecting customer contracts for revenue recognition terms
Correct answer: Sending positive confirmation requests to customers
Positive confirmations require the customer to respond whether or not they agree, providing direct third-party evidence of existence.
CGA Auditing & Assurance 2
Which type of audit opinion is issued when financial statements are presented fairly in all material respects but contain a departure from GAAP that is not considered pervasive?