FAC Auditing Principles & Procedures 2

Question 1

Which type of audit opinion is issued when financial statements contain a material misstatement that is not pervasive?

Accepted Answer

Qualified opinion

Answer

A qualified opinion is issued when a misstatement is material but not pervasive, using the phrase 'except for' in the report.

Question 2

What is the primary purpose of an audit engagement letter?

Accepted Answer

To establish the terms and objectives of the engagement

Answer

An engagement letter establishes the terms, objectives, scope, and responsibilities of the audit engagement before work begins.

Question 3

Which sampling method gives every item in the population an equal probability of selection?

Accepted Answer

Simple random sampling

Answer

Simple random sampling ensures each item has an equal and independent chance of being selected from the population.

Question 4

When an auditor lacks independence, what audit opinion should be issued?

Accepted Answer

Disclaimer of opinion

Answer

Lack of independence requires a disclaimer of opinion because the auditor cannot express any assurance on the financial statements.

Question 5

Which procedure provides the MOST reliable audit evidence?

Accepted Answer

Physical inspection by the auditor

Answer

Physical inspection performed directly by the auditor is highly reliable because it is first-hand evidence obtained independently.

(FAC) Finance and Accounting Certification Practice Test