Audit CPA || all accurately answered.
Under which of the following circumstances would a disclaimer of opinion not be appropriate?
correct answers Management does not provide reasonable justification for a change in
accounting principle.
When qualifying an opinion due to an inability to obtain sufficient appropriate audit evidence, an
auditor of a nonissuer should include the reasons for that inability to obtain sufficient
information in: correct answers No, Yes
An auditor may issue a qualified opinion under which of the following circumstances?
Lack of sufficient appropriate audit evidence
Restrictions of the scope of the audit correct answers Yes - Yes.
An auditor may issue a qualified opinion (or a disclaimer, depending on materiality) when there
is a lack of sufficient appropriate audit evidence, or when there are restrictions on the scope of
the audit.
Green, CPA, was engaged to audit the financial statements of Essex Co. after its fiscal year had
ended. The timing of Green's appointment as auditor and the start of fieldwork made
confirmation of accounts receivable by direct communication with the debtors ineffective.
However, Green applied other procedures and was satisfied as to the reasonableness of the
account balances. Green's auditor's report most likely contained correct answers Unmodified
opinion.
Morris, CPA, suspects that a pervasive scheme of illegal bribes exists throughout the operations
of Worldwide Import-Export, Inc., a new audit client. Morris notified the audit committee and
Worldwide's legal counsel, but neither could assist Morris in determining whether the amounts
involved were material to the financial statements or whether senior management was involved
in the scheme. Under these circumstances, Morris should: correct answers Choice "A" is correct.
Since the CPA could not determine whether the suspected illegal bribes were material to the
financial statements, or whether senior management was involved in the scheme, Morris should
disclaim an opinion on the financial statements.
,A scope limitation sufficient to preclude an unmodified opinion always will result when
management: correct answers Refuses to acknowledge its responsibility for the fair presentation
of the financial statements in conformity with GAAP.
An auditor most likely would issue a disclaimer of opinion because of: correct answers
Management's refusal to furnish written representations.
The auditor may not issue a qualified opinion when: correct answers The auditor is not
independent with respect to the audited entity.
Under which of the following circumstances would an auditor most likely issue either a qualified
or a disclaimer of opinion? correct answers The client's attorney refused to respond to the letter
of audit inquiry.
If an auditor is precluded by the issuer from obtaining sufficient appropriate evidence to evaluate
whether an illegal act that could be material to the financial statements has occurred, then the
auditor generally should: correct answers Disclaim an opinion on the financial statements.
Management refuses to allow an auditor to observe inventory. Inventory accounts for 60% of the
entity's assets. Alternative auditing procedures cannot be applied. Based on this information, the
auditor should: correct answers Issue a disclaimer of opinion or withdraw from the engagement.
A limitation on the scope of an audit sufficient to preclude an unmodified opinion will usually
result when management: correct answers Is unable to obtain audited financial statements
supporting the entity's investment in a foreign subsidiary.
An auditor was unable to obtain sufficient appropriate audit evidence concerning certain
transactions due to an inadequacy in the entity's accounting records. The auditor would choose
between issuing a(an): correct answers Disclaimer of opinion and a qualified opinion.
, If an auditor is unable to determine whether management's estimate of the effects of future
events is reasonable, and the effect of those events is believed to be material, he or she should
express: correct answers A qualified opinion or a disclaimer of opinion
During an audit, the auditor sent the client's attorney a letter of inquiry for any pending litigation
or unasserted claims. The attorney returned the letter, indicating that the attorney would not
respond to the inquiry. Under these circumstances the auditor most likely would: correct answers
Consider the impact of a scope limitation
When a qualified opinion results from a limitation on the scope of the audit of a nonissuer, the
situation should be described in a Basis for Modification paragraph: correct answers Following
the Opinion section, should have the heading "Basis for Qualified Opinion" and should describe
the reasons for the inability to obtain sufficient appropriate audit evidence.
An auditor decides to issue a qualified opinion on an entity's financial statements because a
major inadequacy in its computerized accounting records prevents the auditor from applying
necessary procedures. The opinion paragraph of the auditor's report should state that the
qualification pertains to: correct answers The possible effects on the financial statements.
When an auditor of a nonissuer qualifies an opinion because of the inability to confirm accounts
receivable by direct communication with debtors, the wording of the qualified opinion paragraph
of the auditor's report should indicate that the qualification pertains to the: correct answers
Possible effects on the financial statements.
Management of a nonissuer believes and the auditor is satisfied that a material loss probably will
occur when pending litigation is resolved. Management is unable to make a reasonable estimate
of the amount or range of the potential loss, but fully discloses the situation in the notes to the
financial statements. If management does not make an accrual in the financial statements, the
auditor should express a (an): correct answers Unmodified opinion.
If not, estimable it should be disclosed in the footnotes.
Under which of the following circumstances would a disclaimer of opinion not be appropriate?
correct answers Management does not provide reasonable justification for a change in
accounting principle.
When qualifying an opinion due to an inability to obtain sufficient appropriate audit evidence, an
auditor of a nonissuer should include the reasons for that inability to obtain sufficient
information in: correct answers No, Yes
An auditor may issue a qualified opinion under which of the following circumstances?
Lack of sufficient appropriate audit evidence
Restrictions of the scope of the audit correct answers Yes - Yes.
An auditor may issue a qualified opinion (or a disclaimer, depending on materiality) when there
is a lack of sufficient appropriate audit evidence, or when there are restrictions on the scope of
the audit.
Green, CPA, was engaged to audit the financial statements of Essex Co. after its fiscal year had
ended. The timing of Green's appointment as auditor and the start of fieldwork made
confirmation of accounts receivable by direct communication with the debtors ineffective.
However, Green applied other procedures and was satisfied as to the reasonableness of the
account balances. Green's auditor's report most likely contained correct answers Unmodified
opinion.
Morris, CPA, suspects that a pervasive scheme of illegal bribes exists throughout the operations
of Worldwide Import-Export, Inc., a new audit client. Morris notified the audit committee and
Worldwide's legal counsel, but neither could assist Morris in determining whether the amounts
involved were material to the financial statements or whether senior management was involved
in the scheme. Under these circumstances, Morris should: correct answers Choice "A" is correct.
Since the CPA could not determine whether the suspected illegal bribes were material to the
financial statements, or whether senior management was involved in the scheme, Morris should
disclaim an opinion on the financial statements.
,A scope limitation sufficient to preclude an unmodified opinion always will result when
management: correct answers Refuses to acknowledge its responsibility for the fair presentation
of the financial statements in conformity with GAAP.
An auditor most likely would issue a disclaimer of opinion because of: correct answers
Management's refusal to furnish written representations.
The auditor may not issue a qualified opinion when: correct answers The auditor is not
independent with respect to the audited entity.
Under which of the following circumstances would an auditor most likely issue either a qualified
or a disclaimer of opinion? correct answers The client's attorney refused to respond to the letter
of audit inquiry.
If an auditor is precluded by the issuer from obtaining sufficient appropriate evidence to evaluate
whether an illegal act that could be material to the financial statements has occurred, then the
auditor generally should: correct answers Disclaim an opinion on the financial statements.
Management refuses to allow an auditor to observe inventory. Inventory accounts for 60% of the
entity's assets. Alternative auditing procedures cannot be applied. Based on this information, the
auditor should: correct answers Issue a disclaimer of opinion or withdraw from the engagement.
A limitation on the scope of an audit sufficient to preclude an unmodified opinion will usually
result when management: correct answers Is unable to obtain audited financial statements
supporting the entity's investment in a foreign subsidiary.
An auditor was unable to obtain sufficient appropriate audit evidence concerning certain
transactions due to an inadequacy in the entity's accounting records. The auditor would choose
between issuing a(an): correct answers Disclaimer of opinion and a qualified opinion.
, If an auditor is unable to determine whether management's estimate of the effects of future
events is reasonable, and the effect of those events is believed to be material, he or she should
express: correct answers A qualified opinion or a disclaimer of opinion
During an audit, the auditor sent the client's attorney a letter of inquiry for any pending litigation
or unasserted claims. The attorney returned the letter, indicating that the attorney would not
respond to the inquiry. Under these circumstances the auditor most likely would: correct answers
Consider the impact of a scope limitation
When a qualified opinion results from a limitation on the scope of the audit of a nonissuer, the
situation should be described in a Basis for Modification paragraph: correct answers Following
the Opinion section, should have the heading "Basis for Qualified Opinion" and should describe
the reasons for the inability to obtain sufficient appropriate audit evidence.
An auditor decides to issue a qualified opinion on an entity's financial statements because a
major inadequacy in its computerized accounting records prevents the auditor from applying
necessary procedures. The opinion paragraph of the auditor's report should state that the
qualification pertains to: correct answers The possible effects on the financial statements.
When an auditor of a nonissuer qualifies an opinion because of the inability to confirm accounts
receivable by direct communication with debtors, the wording of the qualified opinion paragraph
of the auditor's report should indicate that the qualification pertains to the: correct answers
Possible effects on the financial statements.
Management of a nonissuer believes and the auditor is satisfied that a material loss probably will
occur when pending litigation is resolved. Management is unable to make a reasonable estimate
of the amount or range of the potential loss, but fully discloses the situation in the notes to the
financial statements. If management does not make an accrual in the financial statements, the
auditor should express a (an): correct answers Unmodified opinion.
If not, estimable it should be disclosed in the footnotes.
