Modified Opinions Due to Audit Issues A1 M6

Question 1

How should a Independent CPA who are associated with a public company un-audited or reviewed financial statements issue a report?

Answer 1

The Accountant should issue a disclaimer of opinion.

Question 2

What is the wording in the opinion paragraph for scope limitation GAAS problem?

Answer 2

• “In our opinion, except for the possible effects_ of the matter described in the Basis for Qualified Opinion section . . . .”
• A disclaimer of opinion should include the phrase, “Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.”

Question 3

What can an Auditor perform an opinion on if new client does not have opening balance?

Answer 3

• If the auditor is unable to form an opinion on a new client’s opening inventory balances, the auditor will issue an opinion on the closing balance sheet only
• issue a disclaimer of opinion on the statements of income, retained earnings and cash flows.

Question 4

What phrase is included in a qualified opinion section?

Answer 4

A qualified opinion phrase is, “In our opinion, except for … described in the Basis for Qualification section of our report…”

Question 5

What are examples of Scope Limitations?

Answer 5

• The inability to obtain audited financial statements of a consolidated investee represents a scope limitation that may result in either a qualified opinion or a disclaimer of opinion.

Question 6

When to use Other Matter Paragraph?

Answer 6

• Omission of selected quarterly data required by SEC regulations is disclosed in an other-matter paragraph added to an otherwise unmodified opinion.

Question 7

When to use emphasis of the matter paragraph?

Answer 7

• A material change in accounting principles between periods. (Consistency is implied)
• Unusually important subsequent event.
• Reporting on comparative financials and the predecessors report is not given (OMP if predecessor issued EOM to explain why)
• Reporting on OCBOA when it is regulatory and contractual basis only