Modified Opinion due to FS Issues

Question 1

Inadequate disclosures of a material related party transaction would result

Answer 1

In a qualified or adverse opinion.

Question 2

When would the auditor modify the auditor’s responsibility disclosure section?
What is modified when an auditor of a non-issuer qualified an opinion because of inadequate disclosure? Auditor’s responsibility section and opinion section?

Answer 2

This report would be modified if they were issuing a disclaimer of opinion but not when issuing a qualified opinion.
The auditor would modify the Opinion section by adding an “ except for … statement.” The

Question 3

Qualified or adverse of an opinion can be applied in situations where

Answer 3

Management fails to provide reasonable justification for a change in accounting principle

Adverse or qualified opinion-When the financial statements are not presented in accordance with GAAP
Exmp- Not in conformity with GAAP rules
- Leaving out certain financial statements( this is not adequate disclosure of the entity’s cash flow)

Question 4

Adverse opinion is issued

Answer 4

When amounts pervasively distort the financial statements

Question 5

Disclaimer opinion is issued

Answer 5

When the apparent scope limitations inhibit the auditor from rendering an opinion.

Example. Comp. issued financials that purport to present financial position and results of operations but refuses to include the related statement of cash flows.

Statement of cash flow is a requirement from GAAP to be considered a complete set of financial statements.

Question 6

Following phrases an auditor of a non issuer most likely include in the report when expressing a qualified opinion due to inadequate disclosure?

Answer 6

Except for the omission of the information described in the basis for qualified opinion section.

Key statement- “ In our opinion, except for the omission of the information described in the basis for qualified opinion section of our report…”