chapter 22 problems and case - 22-21 1 Denial of opinion...

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22-21 1. Denial of opinion. Because the client refuses to allow the auditor to expand the scope of his examination, a denial of opinion is appropriate rather than a qualified scope and opinion. 2. Denial of opinion. The auditor cannot issue an unqualified opinion on the income statement or the statement of changes in financial position because a denial of opinion is necessary for the beginning balance sheet. 3. Unqualified opinion. Since the auditor is able to satisfy him or herself with the use of alternative procedures, a qualified opinion is not necessary. 4. Qualified opinion or adverse opinion for failure to follow generally accepted accounting principles. The materiality of 20 percent of net earnings before taxes would be sufficient for many auditors to require an adverse opinion if there are going concern issues. 5. You probably should not issue any opinion but should consider resigning from the engagement. It may be possible to reperform the audit with independent staff, which would result in an unqualified opinion. 6. Unqualified opinion. The company has made a decision to follow a different financing method which is adequately disclosed. There is no change of accounting principle. 22-22 Part a. Conditions 1. Failure to follow GAAP 2. Substantial doubt as to Going Concern 3. Report involving other auditors 4. Scope of the auditor’s examination has been restricted 5. None Parts b. and c. Note that the appropriate report is identified first (part c.), then the materiality (part b.) with some additional explanation for the solution given.
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