Assume that items 1–8 are situations that Blas, CPA, has encountered during his audit of GELAY, Inc., a private company. List A represents the types of opinions the auditor ordinarily would issue, and List B represents a portion of the needed report modifications — whether an additional paragraph will be included. For each situation, select one response from List A and one (1) from List B. Select the best answers for each item the action the auditor would normally The types of opinions in List A and the report modifications in List B may be selected once, more than once, or not at all. Assume the following: The auditor is independent The auditor previously expressed an unmodified opinion on the prior year’s financial Only single-year (not comparative) statements are presented for the current The conditions for an unmodified opinion exist unless contradicted by the The conditions stated in the items to be answered are material, unless otherwise Each item to be answered is independent of the No report modifications are to be made except in response to the factual The auditor will not treat a situation as an “emphasis of a matter” in what remains an unmodified audit report unless it is one of those circumstances specifically illustrated in the Professional Standards as an example of a matter an auditor may wish to List A Types of opinions List B Report modifications A. Qualified opinion or adverse opinion H. Basis for Modification paragraph B. Qualified opinion or disclaimer of opinion I. Emphasis of Matter paragraph C. Either an adverse opinion or a disclaimer of opinion J. Other Matter paragraph D. Qualified opinion K. No additional paragraph E. Unmodified opinion L. Describe the circumstances within the opinion paragraph F. An adverse opinion G. A disclaimer of opinion Types of Opinions (A–G) Additional Paragraph (H–L) 1. Blas hired an actuary to assist in corroborating GELAY’s complex pension calculations concerning accrued pension liabilities that account for 35% of the client’s total liabilities. The actuary’s findings are reasonably close to GELAY’s calculations and support the financial statements. 2. GELAY holds a note receivable consisting of principal and accrued interest receivable in 20X4. The note’s maker recently filed a voluntary bankruptcy petition, but GELAY failed to reduce the recorded value of the note to its net realizable value, which is approximately 20% of the recorded amount. 3. Blas was engaged to audit a client’s financial statements after the annual physical inventory count. The accounting records were not sufficiently reliable to enable him to become satisfied as to the year-end inventory balances.

Assume that items 1–8 are situations that Blas, CPA, has encountered during his audit of GELAY, Inc., a private company. List A represents the types of opinions the auditor ordinarily would issue, and List B represents a portion of the needed report modifications — whether an additional paragraph will be included. For each situation, select one response from List A and one (1) from List B. Select the best answers for each item the action the auditor would normally The types of opinions in List A and the report modifications in List B may be selected once, more than once, or not at all. Assume the following: The auditor is independent The auditor previously expressed an unmodified opinion on the prior year’s financial Only single-year (not comparative) statements are presented for the current The conditions for an unmodified opinion exist unless contradicted by the The conditions stated in the items to be answered are material, unless otherwise Each item to be answered is independent of the No report modifications are to be made except in response to the factual The auditor will not treat a situation as an “emphasis of a matter” in what remains an unmodified audit report unless it is one of those circumstances specifically illustrated in the Professional Standards as an example of a matter an auditor may wish to List A Types of opinions List B Report modifications A. Qualified opinion or adverse opinion H. Basis for Modification paragraph B. Qualified opinion or disclaimer of opinion I. Emphasis of Matter paragraph C. Either an adverse opinion or a disclaimer of opinion J. Other Matter paragraph D. Qualified opinion K. No additional paragraph E. Unmodified opinion L. Describe the circumstances within the opinion paragraph F. An adverse opinion G. A disclaimer of opinion Types of Opinions (A–G) Additional Paragraph (H–L) 1. Blas hired an actuary to assist in corroborating GELAY’s complex pension calculations concerning accrued pension liabilities that account for 35% of the client’s total liabilities. The actuary’s findings are reasonably close to GELAY’s calculations and support the financial statements. 2. GELAY holds a note receivable consisting of principal and accrued interest receivable in 20X4. The note’s maker recently filed a voluntary bankruptcy petition, but GELAY failed to reduce the recorded value of the note to its net realizable value, which is approximately 20% of the recorded amount. 3. Blas was engaged to audit a client’s financial statements after the annual physical inventory count. The accounting records were not sufficiently reliable to enable him to become satisfied as to the year-end inventory balances.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter15: Audit Reports For Financial Statement Audits

Section: Chapter Questions

Problem 23CYBK

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Assume the following:

The auditor is independent
The auditor previously expressed an unmodified opinion on the prior year’s financial
Only single-year (not comparative) statements are presented for the current
The conditions for an unmodified opinion exist unless contradicted by the
The conditions stated in the items to be answered are material, unless otherwise
Each item to be answered is independent of the
No report modifications are to be made except in response to the factual
The auditor will not treat a situation as an “emphasis of a matter” in what remains an unmodified audit report unless it is one of those circumstances specifically illustrated in the Professional Standards as an example of a matter an auditor may wish to

List A Types of opinions	List B Report modifications
A. Qualified opinion or adverse opinion	H. Basis for Modification paragraph
B. Qualified opinion or disclaimer of opinion	I. Emphasis of Matter paragraph
C. Either an adverse opinion or a disclaimer of opinion	J. Other Matter paragraph
D. Qualified opinion	K. No additional paragraph
E. Unmodified opinion	L. Describe the circumstances within the opinion paragraph
F. An adverse opinion
G. A disclaimer of opinion

	Types of Opinions (A–G)	Additional Paragraph (H–L)
1. Blas hired an actuary to assist in corroborating GELAY’s complex pension calculations concerning accrued pension liabilities that account for 35% of the client’s total liabilities. The actuary’s findings are reasonably close to GELAY’s calculations and support the financial statements.
2. GELAY holds a note receivable consisting of principal and accrued interest receivable in 20X4. The note’s maker recently filed a voluntary bankruptcy petition, but GELAY failed to reduce the recorded value of the note to its net realizable value, which is approximately 20% of the recorded amount.
3. Blas was engaged to audit a client’s financial statements after the annual physical inventory count. The accounting records were not sufficiently reliable to enable him to become satisfied as to the year-end inventory balances.

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