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11.4 Understand managers' and auditors' responsibilities for the financial statement

1) Companies issuing publicly-traded stock are required to have their financial statements audited by an external auditor. This requirement is placed on corporations by the:

A) Canada Revenue Agency

B) Provincial Securities Commissions

C) Various federal and provincial incorporating acts

D) the Prime Minister of Canada

2) The paragraph in a typical audit report that describes how the audit was performed is the:

A) first paragraph

B) second paragraph

C) third paragraph

D) footnotes to the audit report

3) The primary responsibility of the independent auditor is to decide whether the company's:

A) internal controls are effective

B) financial statements are free from errors

C) management has complied with all applicable laws and regulations during the fiscal year under audit

D) financial statements comply with generally accepted accounting principles (GAAP)

4) The responsibility for a company's financial statements rests with:

A) the treasurer of the company

B) top management of the company

C) the controller of the company

D) the external accountants that perform the independent audit

5) A standard audit report issued by outside auditors typically contains:

A) 1 paragraph

B) 2 paragraphs

C) 3 paragraphs

D) 4 paragraphs and footnotes when necessary

6) In which paragraph, if any, of a standard unqualified audit report does the auditor state his or her opinion regarding the reliability of the financial statements?

A) first paragraph

B) third paragraph

C) third paragraph if the audit opinion is qualified

D) fourth paragraph if a disclaimer is issued

7) In which paragraph, if any, of a standard unqualified audit report does the auditor state his or her opinion regarding the effectiveness of the company's internal controls?

A) second paragraph

B) third paragraph

C) The auditor does not make an opinion regarding the effectiveness of the company's internal controls.

D) the footnotes to the audit report

8) An unqualified (or clean) opinion issued by an external auditor means:

A) the financial statements are reliable, except for one or more items stated in the third paragraph

B) the financial statements are unreliable

C) the auditor was unable to reach a professional opinion

D) the statements are reliable

9) An adverse opinion issued by the external auditor means that, in the auditor's opinion, the statements are:

A) reliable

B) reliable, except for one or more items stated in the third paragraph

C) unreliable

D) the auditor is unable to form an opinion regarding the financial statements

10) In a standard Statement of Management Responsibility for the Financial Statements, management indicates:

A) that it has audited the financial statements found in the annual report

B) it is responsible for the financial statements and all related financial information contained in the annual report

C) that no amounts found in the financial statements are based either on estimates or judgments

D) tha


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