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For Each of the Following Scenarios Below, Determine What Type

Question 72

Essay

For each of the following scenarios below, determine what type of audit opinion would be issued on the financial statements. Your choices are:
1. Unqualified
2. Unqualified with explanatory paragraph
3. Qualified
4. Qualified with explanatory paragraph
5. Disclaimer of opinion
6. Adverse opinion
7. No effect on audit opinion
TASK
A. A client refuses to provide details of all pending litigations which while material are not considered pervasive.
b. A client's warehouse burns down, making inventory observation impossible.
c. A client files for bankruptcy protection.
d. A client changes from one method of accounting to another method of accounting promulgated by GAAP.
e. A client changes from one method of accounting to another method not promulgated by GAAP.
f. A client fails to book material adjusting journal entries proposed by the auditor.
g. A client refuses to allow the auditor to access to the company's outside legal counsel. This is a scope limitation.
h. A client switches auditors prior to year-end and selects your firm. The predecessor auditor is uncooperative.
i. The auditor realizes that the partner on the client is the brother-in-law of the client's controller.
j. The client refuses to disclose material related-party disclosures.
k. Material weaknesses are found in the ICFR, although the financial statements are fairly presented.
l. The outside legal counsel refuses to comply with the request for information despite pleas from the client.

Correct Answer:

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a. A client refuses to provide details o...

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