Question

Match each statement below with the type of audit opinion/report that would most likely be issued...

Match each statement below with the type of audit opinion/report that would most likely be issued in the circumstance. Answer choices may be used once, multiple times, or not at all.

(1)The auditors determined that sufficient appropriate evidence could not be obtained because inventory records were destroyed in a fire.  

(2)The client failed to write down certain assets that it determined were impaired. The reasons for reporting the assets at cost instead were disclosed in the notes to the financial statements. Impairments were material, but not overwhelming.

(3)An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. The entity's financial statements adequately disclose its financial difficulties.

(4)An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. The entity's financial statements and related notes DO NOT adequately disclose its financial difficulties.

(5)There is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. The financial statements do not require revision, but the entity refuses to revise or eliminate the material inconsistency.

(6)The financial statements taken as a whole do not fairly present the financial condition and results of operations of the company.

(7)The consolidated financial statements include transactions related to a subsidiary of the company that is audited by a different audit firm. The primary auditor does not want to accept responsibility for the other auditor's work.

(8)The principal auditor for consolidated financial statements is using a qualified report of another auditor. The principal auditor does not consider the qualification material relative to the consolidated financial statements and he/she is willing to accept responsibility for the work of the other auditor.

(9)The client changed from FIFO to LIFO for the year under audit and fully disclosed the change in its financial statements. However, the auditor does not agree with the client's rationale for the change and believes it was done to boost earnings.

(10)The client is developing a promotional brochure that includes unaudited financial information, but mentions the auditor by name when it refers readers to its annual financial statements contained in the company's annual report.  

a. Qualified opinion or Disclaimer of opinion

b. Qualified opinion

c. Disclaimer of opinion

d. Adverse opinion

e. Qualified opinion or Adverse opinion

f. Unmodified with an emphasis of a matter paragraph

g. Unmodified opinion, no extra a paragraph, but wording modification in the report

h. Unmodified opinion, no explanatory paragraph, no wording modifications

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Answer #1

1- Qualified opinion or Disclaimer of Opinion- In this case auditor was not able to find evidence due to inventory report are destroy in fire , so, they can use some other method to find out evidence related to inventory by substantive procedures and other , if auditor find evidence or if auditor get any evidence fire was done by due to negligence or default of management for mitigate of evidence then they can give qualified opinion or other wise Disclaimer of opinion as the case may be.

2- Unmodified opinion, no extra a paragraph, but wording modification in the report- Due to client failed to write down assets . so, auditor should issue unmodified report because of no effect on financial statement , but also wording are also shown in report of auditor about client failed to write down certain assets, that id determined were impaired.

3-Qualified Opinion- because of there is substantital doubt about entity ability as a going concern,and also entity financial statement also disclose so, auditor should qualified in his opinion report about entity.

4- Adverse Opinion-because of there is substantital doubt about entity ability as a going concern,and entity financial statement does not  disclose so, auditor should give adverse opinion in his report.

5- Qualified Opinion or Adverse Opinion- If there is a material inconsistency in the other information , and entity also refuse to revise or eliminate the material inconsistency, then if it is affect the entity ability on going concern or materiality  affect entity then auditor should issue adverse opinion or otherwise  issue qualified report.

6- Adverse opinion- if financial statement as a whole do not fairly present financial  condition and operation then auditor should issue adverse opinion in his report.

7-Unmodified With an emphasis of matter paragraph- in this case auditor do not modified his report but they can show the matter of subsidiary company and responsibility of audit report about subsidiary company in the emphasis of matter report.

8- in this case if principal auditor not consider qualification material relative to the consolidated finacial statement , the they are liable to accept the work of other auditor report.

9- Unmodified opinion, no explanatory paragraph, no wording modifications- in this case no extra report issue change of method of ordinary accounting practice .

10.Disclaimer Report- auditor in this case only give about disclaimer of promotional brochure in his report.

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