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Acc 410 Week 5 Assignment

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Accounting

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Acc 410 Week 5 Assignment
1. In auditing the long-term investments account, an auditor is unable to
obtain audited financial statements for an investee located in a foreign
country. The auditor concludes that sufficient appropriate audit evidence
regarding this investment cannot be obtained.
In this situation, where the auditor cannot obtain financial statements for
an investee, it would represent a scope of limitation for the auditor. F,
Either a disclaimer of opinion or an "except for" qualified opinion would
be used, or the auditor would have the option to use a disclaimer. The
auditor would use the report modification M, which would describe the
circumstances in an explanatory paragraph following the opinion
paragraph, and modify the scope and opinion paragraphs.
2. Due to recurring operating losses and working capital deficiencies, an
auditor has substantial doubt about an entity’s ability to continue as a
going concern for a reasonable period of time. However, the financial
statement disclosures concerning these matters are adequate.
In this situation, where the auditor has a substantial doubt about an
entity’s ability to continue as a going concern for a reasonable period of
time would lead to B, an unqualified opinion. The auditor would use
report modification I, Describe the circumstances in an explanatory
paragraph following the opinion paragraph without modifying the three
standard paragraphs.
3. A principal auditor decides to take responsibility for the work of
another CPA who audited a wholly owned subsidiary of the entity and
issued an unqualified opinion. The total assets and revenues of the
subsidiary represent 17 percent and 18 percent, respectively, for the
total assets and revenues of the entity being audited.
In this situation, where an auditor decides to take responsibility for the
work of another auditor, the auditor should issue B, an unqualified
opinion. The auditor would use report modification H, Describe the
circumstances in a explanatory paragraph preceding the opinion
paragraph without modifying the three standard paragraphs.

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4. An entity issues financial statements that present financial position
and results of operations but omits the related statement of cash flows.
Management discloses in the notes to the financial statements that it
does not believe that statement of cash flows to be a useful financial
statement.
In this situation when an entity issues financial statements that present
financial position and results of operation but omit cash flows, an auditor
should issue A, an "except for" qualified opinion. The auditor would use
report modification J, which would describe the circumstances in an
explanatory paragraph preceding the opinion paragraph, and modify the
opinion paragraph.
5. An entity changes its depreciation method for production equipment
from straight-line to a units-of-production method based on hours of
utilization. The auditor concurs with the change, although it has a
material effect on the comparability of the entity’s financial statements.
In this situation when the auditor agrees with the change in depreciation
methods, but it has a material effect on the comparability of the entity’s
financial statements, the auditor would issue B, an unqualified opinion.
The auditor would use report modification I, which would describe the
circumstances in an explanatory paragraph following the opinion
paragraph without modifying the three standard paragraphs.
6. An entity discloses certain lease obligations in the notes to the
financial statements. The auditor believes that the failure to capitalize
these leases is a departure from generally accepted accounting
principles.
In this situation where the auditor believes that the failure to capitalize
leases is a departure from GAAP, the auditor would issue E, either an
“except for” qualified opinion or an adverse opinion. This would depend
on if the auditor believed the departures where inmaterial or material.
The auditor would use report modification J, which would describe the
circumstances in an explanatory paragraph preceding the opinion
paragraph, and modify the opinion paragraph.

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References
Whittington, O.R. & Pany, K. (2012). Principles of auditing and other
assurance services (18th ed.)

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