Qualified for Scope Limitation

Question 1

What type of opinions would be considered a modified opinion?

Answer 1

• Qualified Opinion
• Adverse Opinion
• Disclaimer of Opinion

Question 2

Define a qualified opinion:

Answer 2

Auditor is unable to obtain

• Sufficient appropriate audit evidence
• Effect is material but not pervasive (problem that has spread everywhere, basically the F/S are useless)

Question 3

Define a disclaimer of opinion?

Answer 3

Auditor unable to obtain sufficient appropriate audit evidence, the auditor concludes that the effect is:

• MATERIAL AND PERVASIVE

Question 4

What are some circumstances that give rise to a Scope Limitation?

Answer 4

• Circumstance beyond the control of the entity (The accounting records have been destroyed)
• Circumstances related to the Nature and Timing of the Auditor’s Work: substantive procedures alone are not sufficient and the entity’s controls are ineffective
• Limitations imposed by management: Prevents the auditor from requesting external confirmation of certain accountant balances
• If management refuses- determine if there are alternative procedures to obtain sufficient appropriate evidence
• If the auditor is unable to obtain sufficient evidence- the auditor should withdrawal from the audit

Question 5

How does a scope limitation on a qualified report affect the audit report?

Answer 5

1) Introduction: No impact
2) Audit responsibility last paragraph: change to “we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our QUALIFIED audit opinion” (one word change)
3) ADD “basis for qualified opinion” - states reasons for qualification of opinion
4) Qualified Opinion Paragraph: “In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion Paragraph, the financial statements referred above are fairly….”

Question 6

What if the scope limitation is not material, what opinion would be given?

Answer 6

Unmodified

Question 7

Define pervasive?

Answer 7

Effects not confined to specific elements, accounts, or items of the financial statements.

If confined, it is still a substantial portion of the F/S

Disclosure is fundamental to the users of the F/S