Problem 10: For the following scenarios, assume you are the CPA reporting on the client's financial

statements Determine the circumstance that applies to the situation and the type of opinion that

needs to be issued for this nonpublic company. You may use all, some, or none of the circumstances

and opinions.

the Circumstancethe Type of Opinion ConsistencyUnmodified Emphasis of Matter or other-matter paragraphQualified Going ConcernDisclaimer Justified departure from GAAPAdverse Other auditors Scope limitation Unjustified departure from GAAP No circumstance applies 1. A client has departed from GAAP for what you, the auditor, considers to be not justifiable. It has caused the financial statements to be materially misstated.Circumstance: Type of Opinion:

2. A client has departed from GAAP for what you, the auditor, considers to be justifiable. The financial statements

would have been misleading if the client had not departed from GAAP. Circumstance: Type of Opinion: 3. While auditing the long term investments for a new client, you the auditor, are unable to obtain the audited financial statements for the investee located in Dubai. You have concluded that it is impossible to obtain sufficient, appropriate evidence regarding the specific investment. Circumstance: Type of Opinion:

4. The client is involved in a major lawsuit. This leads you to believe that there is substantial

doubt about the client's ability to continue as a going conern for a reasonable period of time.

You feel that the financial statement disclosures related to the lawsuit are adequate. This leads you

to not issue a disclaimer of opinion.

Circumstance: Type of Opinion:

5. You have chosen to take responsibility for the work of another CPA firm who audited a 60%

owned subsidiary and issued an unmodified opinion. The total assets and revenue of the subsidiary are 4 % and 7%, respectively of the total assets & revenues of the company being audited. Circumstance: Type of Opinion: 6. The client is involved in a major lawsuit. It is probable that the company is going to lose a material amount when paying out to the defendant. It is impossible to calculate the amount though. The financial statements have included the note disclosure adequately describing the matter. You feel that everything has been properly reported. Circumstance: Type of Opinion: 7. The client has refused to depreciate their equipment this year because they said that the depreciation expense would reduce this year's already small net profit to a a loss. They don't want to give the negative news of a loss to their board of directors, so they are not going to take the expense per your very strong advice. Circumstance: Type of Opinion: 8. The company changed their remaining life on a piece of equipment from 14 years to 11 years. You feel that the change is reasonable. Circumstance: Type of Opinion: