AICPA Exam CPA-Auditing Topic 2 Question 64 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 64
Topic #: 2

In which of the following situations would an auditor ordinarily choose between expressing an "except for" qualified opinion or an adverse opinion?

AThe auditor did not observe the entity's physical inventory and is unable to become satisfied as to its balance by other auditing procedures.

BThe financial statements fail to disclose information that is required by generally accepted accounting principles.

CThe auditor is asked to report only on the entity's balance sheet and not on the other basic financial statements.

DEvents disclosed in the financial statements cause the auditor to have substantial doubt about the entity's ability to continue as a going concern.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. The auditor's report on compliance and on internal control over financial recording (based on an audit) must include the scope of testing of compliance and internal control.

Choice 'b' is incorrect. Material indications of illegal acts are not only reported to the members of the governing body of the audited entity and their senior staff officials but, in some circumstances, auditors should report illegal acts directly to external parties (such as the grantor agency).

Choice 'c' is incorrect. Although GAO standards require that the auditor communicate information regarding the nature, timing and extent of planned testing to officials of the audited entity and to individuals contracting for the audit, reporting of all changes is not required. (For example, immaterial changes to the audit program need not be reported.)

Choice 'd' is incorrect. Certain privileged or confidential information may be prohibited from general disclosure and should not be included in the audit report. The report should, however, disclose the nature of the information omitted and the requirement that makes an opinion necessary.

by Pete at Jan 04, 2023, 11:46 PM

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Tandra

1 months ago

I'd go with the 'except for' qualified opinion for the inventory issue. Gotta maintain those auditing standards, even if it means getting a little 'except for' in there.

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Macy

5 days ago

A) The auditor did not observe the entity's physical inventory and is unable to become satisfied as to its balance by other auditing procedures.

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Galen

2 months ago

Substantial doubt about going concern? That's a tough one. I suppose an adverse opinion is the right call, since the financial statements don't reflect the entity's ability to continue.

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Evan

3 days ago

An adverse opinion is definitely the right call in that situation.

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Felice

5 days ago

D) Events disclosed in the financial statements cause the auditor to have substantial doubt about the entity's ability to continue as a going concern.

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Vesta

8 days ago

A) The auditor did not observe the entity's physical inventory and is unable to become satisfied as to its balance by other auditing procedures.

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Marsha

2 months ago

Reporting only on the balance sheet? That's a bit odd. I'd probably go with a qualified opinion there - can't give a proper opinion without the full set of statements.

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Alva

17 days ago

C) The auditor is asked to report only on the entity's balance sheet and not on the other basic financial statements.

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Virgie

19 days ago

B) The financial statements fail to disclose information that is required by generally accepted accounting principles.

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Lashawn

24 days ago

A) The auditor did not observe the entity's physical inventory and is unable to become satisfied as to its balance by other auditing procedures.

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Kendra

2 months ago

But what if the auditor did not observe the entity's physical inventory and is unable to become satisfied as to its balance by other auditing procedures? Wouldn't that also be a situation where they might choose an 'except for' qualified opinion?

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Malissa

2 months ago

Hmm, failing to disclose GAAP-required information? Definitely grounds for an adverse opinion. The financial statements are misleading without that info.

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Shenika

1 months ago

B) Definitely, that would definitely lead to an adverse opinion. It's important for the statements to be accurate and complete.

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Jarod

2 months ago

A) The financial statements fail to disclose information that is required by generally accepted accounting principles.

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Beckie

2 months ago

If the auditor is unable to verify the physical inventory, an 'except for' qualified opinion is the way to go. Can't just ignore a major asset like that!

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Gianna

1 months ago

In that case, an adverse opinion might be necessary to reflect the seriousness of the situation.

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Raina

1 months ago

D) Events disclosed in the financial statements cause the auditor to have substantial doubt about the entity's ability to continue as a going concern.

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Kizzy

2 months ago

That's right, it's important to address that issue in the opinion.

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Edna

2 months ago

A) The auditor did not observe the entity's physical inventory and is unable to become satisfied as to its balance by other auditing procedures.

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Trinidad

2 months ago

I agree with Marilynn. If there are events causing substantial doubt about the entity's ability to continue as a going concern, the auditor may need to consider an adverse opinion.

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Marilynn

3 months ago

I think the auditor would choose between expressing an 'except for' qualified opinion or an adverse opinion in situation D.

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