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Restrictions imposed by a client prohibit the observation of physical inventories, which account for 35% of all assets. Alternative audit procedures cannot be applied, although the auditor was able to examine satisfactory evidence for all other items in the financial statements. The auditor should issue a(an): Neither the auditor responsibility section nor the opinion paragraph is deleted, although they are both modified. Under which of the following circumstances would a disclaimer of opinion not be appropriate? The financial statements fail to contain adequate disclosure of related-party transactions. This answer is correct because a failure to contain adequate disclosure of related-party transactions represents a departure from generally accepted accounting principles and disclaimers are not appropriate in such circumstances. Under which of the following circumstances would a disclaimer of opinion not be appropriate? Management does not provide reasonable justification for a change in accounting principles. When management does not provide reasonable justification of a change in accounting principles either a qualified or an adverse opinion is appropriate, not a disclaimer. When the auditor is unable to determine the amounts associated with the illegal acts of client personnel because of an inability to obtain sufficient appropriate audit evidence, the auditor should issue a(n) Disclaimer of opinion. This answer is correct because in such circumstances, the auditor is to either qualify or disclaim an opinion, and in this question qualified is not one of the answer choices. Restrictions imposed by a client prohibit the observation of physical inventories, which account for an extremely significant portion of total assets (65%). Alternative audit procedures cannot be applied, although the auditor was able to examine satisfactory evidence for all other items in the financial statements. The auditor should issue a(n) Disclaimer of opinion. This answer is correct because scope limitations relating to such a pervasive portion of the financial statements are likely to result in a disclaimer of opinion. When management refuses to disclose illegal activities which were identified by the independent auditor, the independent auditor may be charged with violating the AICPA Code of Professional Conduct for Issuing a disclaimer of opinion. This answer is correct because in such situations in which the auditor knows of the illegal act, a simple disclaimer will not suffice, since the lack of disclosure represents a departure from GAAP. This departure from GAAP will result in a qualified opinion or an adverse opinion. Under which of the following circumstances would the expression of a disclaimer of opinion be inappropriate? Management does not provide reasonable justification for a change in accounting principles. This answer is correct because a lack of reasonable justification for a change in accounting principle is a departure from GAAP, and such departures require either a qualified or adverse 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 Disclaim an opinion on the financial statements. This answer is correct because the inability to obtain sufficient appropriate audit evidence will lead to a situation in which the auditor generally should disclaim an opinion on the financial statements. When a client will not make essential corporate minutes available to the auditor, the audit report will probably contain a(n) Disclaimer of opinion. This answer is correct because when restrictions that so significantly limit the scope of the audit are imposed by the client, the auditor generally will be required to disclaim an opinion on the financial statements. The auditor would most likely issue a disclaimer of opinion because of A client-imposed scope limitation. This answer is correct because scope limitations lead to either a qualified opinion or a disclaimer of opinion. Under which of the following circumstances would the expression of a disclaimer of opinion be inappropriate? The company issues financial statements that purport to present financial position and results of operations, but refuses to include the related statement of cash flows. This answer is correct because a client who presents financial statements that purport to present financial position and result of operations is required to also include a statement of cash flows—otherwise, a departure from GAAP exists which will result in a qualified or adverse opinion, but not a disclaimer. When a client with a history of much costly litigation will not permit inquiry of outside legal counsel, the audit report will ordinarily contain a(n) Disclaimer of opinion. This answer is correct because such a client imposed scope limitation is most likely to result in a disclaimer of 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 Express an unmodified opinion with a separate emphasis-of-matter paragraph. Disclaim an opinion on the financial statements. Morris should disclaim an opinion because of the pervasiveness of the scheme and the nature of the items involved. Although the auditor was not precluded by the client from obtaining sufficient evidence to evaluate the impact of the illegal bribes on the financial statements, the fact that they could not ascertain whether senior management was involved is a critical deficiency. Under which of the following circumstances would a disclaimer of opinion not be appropriate? The financial statements fail to contain adequate disclosure concerning related party transactions. A disclaimer is issued when the scope limitations pertaining to the audit are so pervasive that the auditor in unable to express an opinion. Lack of adequate disclosures in the financial statements is a GAAP departure, not a scope limitation. Thus, a disclaimer of opinion would not be appropriate. When disclaiming an opinion due to a client-imposed scope limitation, an auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also Responsibility Section Yes No A disclaimer report omits the scope paragraph (the second paragraph in the auditor's responsibility section that describes an audit) and adds a separate paragraph explaining why the audit did not comply with generally accepted auditing standards (Basis for Disclaimer of Opinion). The scope paragraph is omitted because any descriptions of procedures performed could be misunderstood. If a disclaimer is issued, the auditor does not feel that the audit work performed was sufficient to render an opinion. The opinion paragraph remains but it indicates that the scope of work was insufficient to support an opinion. In which of the following circumstances would a qualified opinion not be appropriate?In which of the following circumstances would a qualified opinion not be appropriate? The auditors lack independence with respect to the audited entity. a violation of generally accepted accounting principles is sufficiently material and pervasive that a qualified opinion is not justified. Under what circumstances is the expression of a qualified opinion appropriate?Understanding a Qualified Opinion A qualified opinion may be given when a company's financial records have not followed GAAP in all financial transactions, but only if the deviation from GAAP is not pervasive. The term "pervasive" can be interpreted differently based on an auditor's professional judgment. In which two situations does an auditor express a qualified opinion?There are two circumstances when the auditor may choose not to issue an unmodified opinion: When the financial statements are not free from material misstatement or. When they have been unable to obtain sufficient appropriate evidence. In which the circumstances would an adverse opinion be appropriate?The auditor shall express an adverse opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements. 9. In which the circumstances would an adverse opinion be appropriate?The auditor shall express an adverse opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements. 9.
In which of the following circumstances would auditors be most likely to express an adverse opinion?09 The auditor should express an adverse opinion when the auditor, hav- ing obtained sufficient appropriate audit evidence, concludes that misstate- ments, individually or in the aggregate, are both material and pervasive to the financial statements.
In which of the following circumstances will it be most likely that an adverse opinion is considered appropriate group of answer choices?In which of the following circumstances will it be most likely that an adverse opinion is considered appropriate? The statements are not in conformity with generally accepted accounting principles regarding pension plans.
Under what circumstances would an auditor modify adverse opinion?Modifications to the opinion
There are two circumstances when the auditor may choose not to issue an unmodified opinion: When the financial statements are not free from material misstatement or. When they have been unable to obtain sufficient appropriate evidence.
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