Modified opinions

Question 1

what are two scenarios that would cause auditors to modify opinions (for private and public company clients)

Answer 1

1. accounting problem
2. audit problems

Question 2

what are the different types of modified opinions

Answer 2

1. qualified
2. adverse
3. disclaimer of opinion

Question 3

if a misstatement is considered __________ it could affect decisions of reasonable users if they were made aware of the misstatements

Answer 3

material

Question 4

if a ___________ is material then the auditors cannot state a conclusion without evidence to support the conclusion

Answer 4

scope limitation

Question 5

what are some characters of pervasive misstatements or scope limitation

Answer 5

• not confined to specific elements, accounts or items of the financial statements
• if it’s confined it represents or could represent a substantial portion of the financial statements
• in context of disclosure its fundamental to users’ understanding of FS

Question 6

if a FS misstatement is material and pervasive a(n) ____________ opinion is issued

Answer 6

adverse

Question 7

if a FS misstatement is material and not pervasive a(n) ____________ opinion is issued

Answer 7

qualified

Question 8

if a scope limitation is material but not pervasive a(n) _____________ opinion is issued

Answer 8

qualified

Question 9

if a scope limitation is material and pervasive then a(n) ____________ is issued

Answer 9

disclaimer of opinion

Question 10

if the auditors are not independent then a(n) ______________ is issued

Answer 10

disclaimer of opinion

Question 11

an adverse opinion can only be given if it is a ____________ problem

Answer 11

GAAP

Question 12

what are the changes made within the auditor’s report for a qualified opinion

Answer 12

• opinion section is now called the “qualified opinion” section
• there is an “except for” phrase in the opinion section
  - financial statement is fairly presented
  except for material departure from
  framework
• the “basis for opinion” section now called the “basis for qualified opinion”
• in the basis for qualified opinion there is a paragraph explaining the situation

Question 13

what changes are make to the auditor’s report if a disclaimer of opinion is given

Answer 13

• “opinion” section is now “disclaimer of opinion” section
• in the “disclaimer of opinion section” the phrase “we have audited” is changed to “we were engaged to audit
• auditors DO NOT express an opinion
  “basis of disclaimer of opinion” section explains the situation