In each of the circumstances listed below, indicate, by appropriate letter, which of the following types of opinions should be rendered on the entity's financial statements. Also, state in which of the situation an emphasis of matter paragraph can be added. A) Qualified B) Disclaimer C) Unmodified D) Adverse 1) An independent auditor has concluded that doubt remains about a nonpublic client's ability to continue as a going concern, but the client's financial statements have properly disclosed all of its solvency problems. A B C D 2) The auditor is unable to determine the amounts ninted with noncompliance with a law by client 2) The auditor is unable to determine the amounts associated with noncompliance with a law by client personnel due to a scope limitation. AB C D 3) The entity has a lawsuit pending against them. It is probable that the entity will lose the suit. Management has accrued the best estimate of the loss and provided adequate disclosure. It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern. A B C D 4) Zeta CPA firm was engaged to perform an audit of the financial statements of Mill Incorporated one month after its fiscal year had ended. Although the inventory count was not observed by Zeta, the auditors were able to obtain sufficient appropriate audit evidence by applying alternative auditing procedures. A A B C D D 5) The entity has a lawsuit pending against them. It is probable that the entity will lose the suit. Management has not accrued the best estimate of the loss, but has provided information in the footnotes. It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern. A B C D 6) Management determined it was probable that a pending litigation claim would result in a substantial material loss. The loss was disclosed in the footnotes to the financial statements but was not accrued in the income statement. A B C D 7) In auditing a client, an auditor has determined that substantial doubt exists about an entity's ability to continue as a going concern. A B C D of a potential new 8) Development costs in respect of a potential new product have been deducted in full against profit instead of being spread over the life of the relevant product as required by IAS 38; the effect of so doing has been to decrease profits before and after tax for the year by S25,000. A B C D 9) Based on recent analysis of usage, the entity has changed the useful life of its office equipment from five to four years. This change is reflected in the depreciation amounts computed for the current year. B C D 10) No depreciation has been provided on plant and equipment, a receivable balance consisting half of total receivables is irrecoverable and has not been provided and trade payables have been significantly understated. All misstatements are material and these balances are significant on the statement of financial position. A B C D
