Question

What are the three conditions that require a departure from an unmodified opinion audit​ report? Give...

What are the three conditions that require a departure from an unmodified opinion audit​ report? Give an example of each.

Begin by selecting the three conditions requiring a departure from an unmodified opinion audit report. Then select an example of​ each, referencing the example by the corresponding letter in the list of possible examples.

Example

a.

The auditor also provides tax services for the​ client's business.

b.

The auditor is friends with someone on the board of directors of the​ client's business.

c.

The auditor owns stock in the​ client's business.

d.

The client insists on using replacement costs for fixed assets.

e.

The client values fixed assets at historical cost.

f.

The client values inventory at historical cost.

g.

The client will not permit the auditor to confirm material receivables.

Conditions requiring a departure from an unmodified opinion audit report

Example

The auditor has not been paid- a,b,c,d,e,f,g

The autitor is not independent

The financial statements have not been prepared in accordance with GAAP

The other auditors are independent

The scope of the audit has been restricted

There is a lack of consistent application of GAAP

Homework Answers

Answer #1

The three conditions requiring a departure from an unqualified report are:

  • a scope restriction imposed by the client or by circumstances beyond the auditor’s or client’s control which prevents the auditor from accumulating sufficient evidence to reach a conclusion regarding whether financial statements are stated in accordance with GAAP. In this condition, the auditor would issue either a qualified scope and opinion report, or a disclaimer of opinion.
  • the financial statements were not prepared in accordance with GAAP. In this condition, the auditor would issue a qualified opinion if the GAAP violation were moderately material, or an adverse opinion if the GAAP violation were highly material.
  • the auditor is not independent. In this condition, the auditor must issue a disclaimer of opinion.
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