(A1)M5-M8 Flashcards
Substantial doubt about an entity’s ability to continue as a going concern should result in the auditor issuing which type of report?
Un-modified/qualified with an Emphasis-of-Matter/Explanatory paragraph
What is management required to do if a lawsuit is “reasonably possible”?
Disclose the lawsuit in the notes to the FS
What type of opinion should be expressed when there has been a justified material change in accounting principle?
Unmodified with emphasis-of-matter paragraph
When an independent CPA is associated with the FS of a public company, but has not audited or reviewed the statements, what opinion should be issued?
Disclaimer
Does a change in accounting estimate (e.g., useful life of asset) affect the comparability of FS between periods?
No; therefore, unmodified opinion is appropriate
If a contingent liability is probable, but not estimable, and it is disclosed in the footnotes, the auditor should issue what type of opinion?
Unmodified
An emphasis-of-matter paragraph is required when you hear ___?
(G)oing concern
(A)ccounting principle (justified change that is material)
(A)udit opinion change (may use other-matter paragraph)
(S)pecial (P)urpose framework
(M)aterial misstatement in prior FS is corrected
If an updated opinion differs from the previous opinion, what must be included in the emphasis-of-matter/other-matter paragraph? (remember “DORCS”)
Date of previous report Opinion previously issued Reason for prior opinion Changes that have occurred Statement that "opinion...is different"
a division of responsibility between group auditor and component auditor requires modification to which two paragraphs and inclusion of what paragraph (nonissuer)?
modification to auditor’s responsibility paragraph and opinion paragraph. does not require inclusion of basis for opinion paragraph!!!
an auditor who is unable to form an opinion on new client’s opening inventory balance may issue an unmodified opinion on which statement?
Balance sheet and issue a disclaimer on the other FS
