Ch 3b

Question 1

What are important causes in explanatory paragraph or a modification in the wording of the standard unqualified report

Answer 1

1) Lack of consistent application of generally accepted accounting principles
2) Substantial doubt about going concern
3) auditor agrees with a departure from promulgated accounting principles
4) Emphasis of other matters
5) Reports involving other auditors

Question 2

If auditor agrees that audit reflects a departure from principle, auditor expects….

Answer 2

1) Departure may not require a qualified or adverse opinion
2) The auditor must separately explain in the audit report that adhering to the principle would have produced a misleading result
3) Circumstances are unusual

this rule follows AICPA’s rule 203

Question 3

What are expectations in financial statements that emphasis of a matter?

Answer 3

1) Financial statement comparability
2) subsequent events from balance sheet
3) Related party transactions
4) Material uncertainties ( referred in footnotes)