The auditors include a separate paragraph in an otherwise unmodified report on the entity's financial statements to emphasize that the entity being reported on had significant transactions with related parties.The inclusion of this separate paragraph
A) Is considered a qualification of the opinion.
B) Violates generally accepted auditing standards if this information is already disclosed in footnotes to the financial statements.
C) Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."
D) Is appropriate and would not otherwise affect the unqualified opinion.

Question

Quizplus · Accepted Answer

The inclusion of a separate paragraph to emphasize significant transactions with related parties is not a qualification of the opinion, as long as the auditors conclude that the financial statements are fairly presented. It is also not a violation of GAAS if the disclosure is not sufficiently prominent in the footnotes. The opinion paragraph does not need to be revised with the phrase "with the foregoing explanation" as this is only required when the auditors modify or qualify the opinion.

The Auditors Include a Separate Paragraph in an Otherwise Unmodified