Items 1 through 6 present various independent factual situations an auditor might encounter in conducting an audit. List A represents the types of opinions the auditor ordinarily would issue and List B represents the report modifications (if any) that would be necessary. For each situation, select only one response from List A. You will not receive credit for your answer if you select more than one response from List A. You may select more than one response for List B if appropriate but you will not receive credit if you include an incorrect response for List B. Select as the best answer for each item the action the auditor normally would take. If you feel it is necessary, you may describe any assumptions you made which support your answer. The types of opinions in List A and the report modifications in List B may be selected once, more than once, or not at all.

Please enter your answers in the text box. (ie. 1. A, 1 etc.)

Assume:

1. The client is a nonissuer.
2. Absent information to the contrary, the auditor is independent.
3. The previous year's financial statements received an unqualified opinion.
4. Only single-year (not comparative) statements are presented for the current year.
5. The conditions for an unmodified opinion exist unless contradicted in the factual situations.
6. The conditions stated in the factual situations are at least material.
7. No report modifications are to be made except in response to the factual situation.

List A	List B		Situation
		1	You are auditing Deep Trouble for the first time. Deep Trouble has been in business for several years but over the last two years has struggled to stay afloat given the economic conditions. Based on your audit work, you have substantial doubt that Deep Trouble will be in business by the end of the next fiscal year.The facts are adequately disclosed in the footnotes.
		2	Your client, Rollercoaster Enterprises, changed the depreciable life of certain assets from 20 years to 25 years. You concur with the change.
		3	The controller of Bamazon Industries will not allow you to confirm the receivable balance from two if its major customers. The amounts of the receivables are at least material in relation to Bamazon Industries' financial statements.You are unable to satisfy yourself as to the receivable balances by alternative procedures.
		4	Approximately 10% of the audit of Ina's Imports, Inc. was performed by a different CPA firm, selected by you.You have reviewed their audit files and believe they did an excellent job on their portion of the audit.Therefore, you plan to take complete responsibility for their work.
		5	Your firm completes the audit of Quinn's Hot Springs Resort, Inc. and, in your opinion, the financial statements are fairly presented. On the last day of the audit, you discover that the senior auditor in charge of the audit of Quinn's has a material financial investment in this audit client.
		6	Your client, CableCo, Inc. has prepared GAAP financial statements but has decided not to disclose certain material related party transactions. The auditor determines that the omitted disclosures are required by GAAP.

List A: Types of Opinions

A. An unmodified opinion.

B. A disclaimer of opinion.

C. A qualified opinion.

D. An adverse opinion.

E. Either a qualified opinion or a disclaimer of opinion.

F. Either a qualified opinion or an adverse opinion.

G. Either an unmodified opinion or a disclaimer of opinion.

H. Either an adverse opinion or a disclaimer of opinion.

List B: Report Modifications

1. Issue the standard auditor's report without modification
2. Describe the circumstances in an explanatory (EOM or OM) paragraph following the opinion without modifying the other paragraphs.
3. Describe the circumstances in an explanatory (BFM) paragraph and modify the opinion paragraph.
4. Describe the circumstances in an explanatory (BFM) paragraph and modify the opinion and basis for opinion paragraphs.
5. Describe the circumstances in an explanatory (BFM) paragraph and modify all other paragraphs.
6. Describe the circumstances within the opinion and basis for opinion paragraphs without adding an explanatory paragraph.