Multiple Choice Questions
The following questions concern audit reports other than unqualified audit reports with standard wording. Choose the best response.
a. The annual audit of Midwestern Manufacturing revealed that sales were accidentally being recorded as revenue when the goods were ordered, instead of when they were shipped. Assuming the amount in question is material and the client is unwilling to correct the error, the CPA should issue:
(1) An unqualified opinion or adverse opinion.
(2) A qualified "except for" opinion or disclaimer of opinion.
(3) A qualified "except for" opinion or adverse opinion.
(4) An unqualified opinion with an explanatory paragraph
b. Under which of the following circumstances would a disclaimer of opinion not be appropriate?
(1) The auditor is unable to determine the amounts associated with an employee fraud scheme.
(2) Management does not provide reasonable justification for a change in accounting principles.
(3) The client refuses the auditor permission to confirm certain accounts receivable or apply alternative procedures to verify their balances.
(4) The chief executive officer is unwilling to sign the management representation letter.
c. The opinion paragraph of a CPA's report states: "In our opinion, except for the effects of not capitalizing certain lease obligations, as discussed in the preceding paragraph, the financial statements present fairly," in all material respects, . . . This paragraph expresses a(an)
(1) Unqualified opinion.
(2) Unqualified opinion with explanatory paragraph.
(3) Qualified opinion.
(4) Adverse opinion.