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LESSON _8 - report The opinion on the 2007 financial...

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18-3 An example of a client-imposed scope limitation is where a client requests that the auditor not confirm accounts receivable because of concerns about creating conflicts with customers over amounts owed. An example of a circumstances-imposed scope limitation is when the auditor is not engaged to conduct the audit until after year-end. Under such circumstances, the auditor may not be able to observe inventory. Auditors should be particularly cautious when a client places a limit on the scope of the engagement because the client may be trying to prevent the auditor from discovering material misstatements. Auditing standards suggest that when restrictions imposed by the client significantly limit the scope of the engagement, the auditor should disclaim an opinion on the financial statements 18-5 The auditor should issue an unqualified report on the 2006 financial statements and a qualified report on the 2007 financial statements because the current year is not in conformity with GAAP. The non-GAAP accounting for the lease transaction should be disclosed in the audit
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Unformatted text preview: report. The opinion on the 2007 financial statements would not be adverse because, while the misstatement is material, it is not highly material or pervasive 18-22 A. Unqualified opinion with added explanatory B. The auditor should issue a qualified audit report because management has not complied with GAAP C. Adverse opinion D. If the auditor is satisfied that the controller's motivation for not sending confirmation is appropriate, the auditor should issue a qualified audit report for a scope limitation due to a lack of evidence on the accounts receivable balance. If the question had indicated that the accounts receivable balance was highly material, a disclaimer of opinion would have been the appropriate response. E. Unqualified report F. Qualifed or Adverse audit report G. Unqualified opinion with added explanatory 18-10 B 18-11 C 18-12 A 18-13 B 18-14 A 18-15 C 18-16 C 18-17 B 18-18 B 18-19 B 18-20 C 18-21 C...
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