For each of the following brief scenarios, assume that you are reporting on a client's financial statements. Select the type$($s$)$ of opinion $($per below$)$ possible for the scenario. In addition:$*$ Unless stated otherwise, assume the matter involved is material. If the problem doesn't tell you whether a misstatement pervasively misstates the financial statements or doesn't list a characteristic that indicates pervasiveness, two reports may be possible $($i$.$e$.,$ replies $6$ to $9).*$ Do not read more into the circumstances than what is presented$*$ Do not consider an auditor discretionary circumstance for modification of the audit report unless the situation explicitly suggests that the auditor wishes to emphasize a particular matter.

These are the options to answer the $2$ problems

$*$ Unmodified$-$standard.

$*$ Unmodified with an emphasis$-$of$-$matter paragraph.

$*$ Qualified.

$.*$ Adverse.

$*$ Disclaimer.

$*$ Unmodified with an emphasis$-$of$-$matter paragraph or disclaimer

$.*$ Qualified or adverse

$.*$ Qualified or disclaimer

$.*$ Adverse or disclaimer

$.*$ Other

Note that this simulation has more parts than one would expect in a particular CPA exam simulation. We present it to provide examples of many types of reporting situations in one problem. Types of opinion may be used once, more than once, or not at all.

$1.$ Due to recurring operating losses and working capital deficiencies, an auditor has substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. The notes to the financial statements adequately disclose the situation. The auditor has decided not to issue a disclaimer of opinion.

$2.$ During the audit of a public company the auditors identified a critical audit matter. Sufficient appropriate audit evidence was gathered to indicate the related account was properly stated. The audit report to be issued includes a Critical Audit Matters section that properly describes the matter. Reply as to additional modifications required.