A CPA firm may decide not to continue doing audits for an existing audit client simply due to what the CPA firm deems to be excessive risk, alone, even if the audit engagement is very profitable to the CPA firm.

The fieldwork for the December 31, 2020 audit of Schmidt Corporation ended on March 17, 2021. The financial statements and auditor’s report were issued on March 29, 2021. In each of the material situations (1 through 5) below, indicate the appropriate action.  The situations are as follows:________ 1. On March 1, 2021, one of Schmidt Corporation’s major customers declared bankruptcy. The customer’s financial condition in 2020 was deteriorating and they owed Schmidt Corporation a large sum of money as of the balance sheet date.                           The appropriate action is to [one]. ________ 2. On February 17, 2021, Schmidt Corporation sold some machinery for its book value.                          The appropriate action is to [two].________ 3. On February 20, 2021 a flood destroyed the entire uninsured inventory in one of Schmidt’s warehouses.                           The appropriate action is to [three].________ 4. On January 5, 2021, there was a significant decline in the market value of the securities held for resale from their value as of the balance sheet date.                            The appropriate action is to [four].________ 5. On March 10, 2021, the company settled a lawsuit at an amount significantly higher than the amount recorded as a liability on the books as of the balance sheet date.                            The appropriate action is to [five].

Examples of unmodified opinions which contain modified wording (without adding an emphasis-of-matter paragraph) include

Companies may intentionally understate earnings when income is high to create ________ that may be used in future years to increase earnings.

The auditor is likely to accumulate more evidence when the audit is for a company

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called

——————————————————————————————————- ———————————————————————————————————- An auditor is evaluating internal controls over invoice verification and is going to be sampling vendor invoices.  The auditor is basing the calculations on the following conclusions:        Acceptable risk of overreliance                                                                 5%        Estimated population exception rate (in percent)                       2.50        Tolerable exception rate (in percent)                                                          6 The auditor found 1 exception in the sample.  Required:      a.  Using Table 15-8, what is the sample size?      b.  Using Table 15-9, what is the computed upper exception rate?       c.  On the basis of your sample results and your responses to parts a and b, should the auditor conclude that internal controls over invoice verification are functioning properly?  Your response must answer yes or no, along with an explanation with supporting numbers to appropriately to support your answer.  —————————————————————————————————- Be sure to label each part of your answer using the letters a-c to separately answer each of the above questions.

A bank loan officer is trying to decide whether the bank should make a loan to a particular company. The interest rate the bank will charge the company is determined by many factors. Which of the following factors is influenced by the auditor’s report?

Function of binding hormones to plasma proteins

There is a(n) ________ relationship between acceptable risk of overreliance and planned sample size.