Question

Under which of the following set of circumstances might the auditors disclaim an opinion?

	a	There has been a material change between periods in the method of application of accounting principles.
	b	The group auditors decide to make reference to the report of component auditor who audited a subsidiary.
	c	The financial statements contain a departure from generally accepted accounting principles, the effect of which is material.
	d	The auditors cannot observe ending inventory nor confirm accounts receivable and cannot obtain sufficient evidence using alternative procedures.

Once a CPA has determined that accounts receivable have increased due to slow collections in a "tight money" environment, the CPA would be likely to:

	a	Review the going concern ramifications.
	b	Review the credit and collection policy.
	c	Increase the balance in the allowance for bad debts accounts.
	d	Expand tests of collectibility.

Answer 1

1.
Answer is

d	The auditors cannot observe ending inventory nor confirm accounts receivable and cannot obtain sufficient evidence using alternative procedures

2.
Answer is

d	Expand tests of collectibility

This is done to ensure how much accounts are collectible whether they are valued correctly