Unformatted text preview: "d" is incorrect. As long as the auditor's scope has not been limited, the auditor may report on
only one financial statement.
Management believes and the auditor is satisfied that a material loss probably will occur when pending
litigation is resolved. Management is unable to make a reasonable estimate of the amount or range of
the potential loss, but fully discloses the situation in the notes to the financial statements. If management
does not make an accrual in the financial statements, the auditor should express a(an):
d. Qualified opinion due to a scope limitation.
Qualified opinion due to a departure from GAAP.
Unqualified opinion with an explanatory paragraph.
Unqualified opinion in a standard auditor's report. CPA-02787
Choice "d" is correct. If a contingent liability is probable, but not estimable, and it is disclosed in the
footnotes, the auditor issues an unqualified audit report without an explanatory paragraph.
Choice "a" is incorrect. When a contingent liability is probable, but not estimable, it should be disclosed in
the footnotes. A qualified opinion due to a...
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- Fall '12
- Auditor's report