ACCT 410 Chapter 18 GRADE
BOOSTING EXAM
QUESTIONS WITH CORRECT
ANSWERS||100% GUARANTEED
PASS||A+ GRADED||UPDATED
2026/2027 SYLLABUS||<<NEWEST
VERSION>>
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
In previous years, your client, Merc International, has consolidated its Panamanian
subsidiary. Because of restrictions on repatriation of earnings placed on all
foreignowned corporations in Panama, Merc International has decided to account
for the subsidiary on the equity basis in the current year. You concur with the
change. - ANSWER ✓ This is a change in reporting entity that requires the auditor
to modify the standard unmodified audit report by adding an emphasis-of-matter
paragraph describing the change
Leak Technology justifiably changed the service lives for depreciation purposes on
its autos from five years to three years. This change resulted in a material amount
of additional depreciation expense - ANSWER ✓ This is a change in accounting
estimate. Such a change does not affect consistency in the application of
accounting principles, and the auditor should thus issue a standard unmodified
audit report.
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
During the audit of Brannon Bakery Equipment, you found that a material amount
of inventory had been excluded from the company's financial statements. After
discussing this problem with management, you become convinced that it was an
, unintentional oversight. Management appropriately corrected the error prior to
your finalization of field work. - ANSWER ✓ The auditor should issue a standard
unmodified audit report because the client corrected the mistake before issuing the
financial statements.
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
Jay Rich, CPA, holds 10 percent of the stock in Rothenburg Construction
Company. The board of directors of Rothenburg asks Rich to conduct its audit.
Rich completes the audit and determines that the financial statements present fairly
in accordance with generally accepted accounting principles. - ANSWER ✓ The
CPA is not independent of the company and should issue a disclaimer for a lack of
independence
Johnstone Manufacturing Company has used the double-declining balance method
to depreciate its machinery. During the current year, management switched to the
straight-line method because it felt that it better represented the utilization of the
assets. You concur with its decision. All information is adequately disclosed in the
financial statements. - ANSWER ✓ Recall that the instructions to the problem
indicate the assumption that all matters listed are at least material. Since the change
in accounting principle is properly accounted for, the auditor should issue an
unqualified audit report with an explanatory paragraph for a lack of consistency in
the application of GAAP.
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
Thibodeau Mines, Inc., uses LIFO for valuing inventories held in the United States
and FIFO for inventories produced and held in its foreign operations. - ANSWER
✓ The auditor should issue a standard unmodified audit report. It is acceptable for
an entity to use different inventory methods in different international regions.
Many countries do not allow LIFO, and it can be costly for the entity to maintain
inventory records using both valuation methods
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
BOOSTING EXAM
QUESTIONS WITH CORRECT
ANSWERS||100% GUARANTEED
PASS||A+ GRADED||UPDATED
2026/2027 SYLLABUS||<<NEWEST
VERSION>>
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
In previous years, your client, Merc International, has consolidated its Panamanian
subsidiary. Because of restrictions on repatriation of earnings placed on all
foreignowned corporations in Panama, Merc International has decided to account
for the subsidiary on the equity basis in the current year. You concur with the
change. - ANSWER ✓ This is a change in reporting entity that requires the auditor
to modify the standard unmodified audit report by adding an emphasis-of-matter
paragraph describing the change
Leak Technology justifiably changed the service lives for depreciation purposes on
its autos from five years to three years. This change resulted in a material amount
of additional depreciation expense - ANSWER ✓ This is a change in accounting
estimate. Such a change does not affect consistency in the application of
accounting principles, and the auditor should thus issue a standard unmodified
audit report.
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
During the audit of Brannon Bakery Equipment, you found that a material amount
of inventory had been excluded from the company's financial statements. After
discussing this problem with management, you become convinced that it was an
, unintentional oversight. Management appropriately corrected the error prior to
your finalization of field work. - ANSWER ✓ The auditor should issue a standard
unmodified audit report because the client corrected the mistake before issuing the
financial statements.
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
Jay Rich, CPA, holds 10 percent of the stock in Rothenburg Construction
Company. The board of directors of Rothenburg asks Rich to conduct its audit.
Rich completes the audit and determines that the financial statements present fairly
in accordance with generally accepted accounting principles. - ANSWER ✓ The
CPA is not independent of the company and should issue a disclaimer for a lack of
independence
Johnstone Manufacturing Company has used the double-declining balance method
to depreciate its machinery. During the current year, management switched to the
straight-line method because it felt that it better represented the utilization of the
assets. You concur with its decision. All information is adequately disclosed in the
financial statements. - ANSWER ✓ Recall that the instructions to the problem
indicate the assumption that all matters listed are at least material. Since the change
in accounting principle is properly accounted for, the auditor should issue an
unqualified audit report with an explanatory paragraph for a lack of consistency in
the application of GAAP.
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
companies mentioned are private companies and that each item is at least material.
Thibodeau Mines, Inc., uses LIFO for valuing inventories held in the United States
and FIFO for inventories produced and held in its foreign operations. - ANSWER
✓ The auditor should issue a standard unmodified audit report. It is acceptable for
an entity to use different inventory methods in different international regions.
Many countries do not allow LIFO, and it can be costly for the entity to maintain
inventory records using both valuation methods
For each of the following independent situations, indicate the reason for and the
type of financial statement audit report that you would issue. Assume that all
