Question

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. Question

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.

Answers

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 paragraph, but wording modification in the report

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

Answer 1

1.A. Qualified opinion or Disclaimer of opinion

2.B. Qualified opinion

3.F. Unmodified with an emphasis of a matter paragraph

4.E. Qualified opinion or Adverse opinion

5.F. Unmodified with an emphasis of a matter paragraph describing material inconsistency

6.D. Adverse opinion

7.C. Disclaimer of opinion on the component audited by other auditor

8.H. Unmodified opinion, no explanatory paragraph, no wording modifications

9.B. Qualified opinion

10.C. Disclaimer of opinion for the unaudited Financial Information