Question

14. An explanatory paragraph would be added to an unqualified

     audit report [“good report”] for:

        a. An accounting (GAAP) problem.

        b. A lack of evidence (scope) problem.

        c. The company’s status as a viable entity (i.e. going

            concern issue) is doubtful.

        d. Lack of independence.

26. An auditor wishes to evaluate a test of controls. A sample

    of 120 items was selected and FOUR deviations are detected.

    Some of the auditor's initial parameters were as follows:

        Tolerable deviation rate                      6.0%

        Sampling Risk i.e. Risk of Overreliance      10.0%

     Use the tables provided to answer the following two-part

     question:

          I. What is the (achieved; Computed) Upper deviation

              Rate (in percent)?

         II. Can the auditor rely on the internal control

              structure to do less substantive testing for the

              assertion the control involves? i.e. Are controls

              considered to be acceptable?

     a. I 4.4; II No    e. I 6.6; II No

     b. I 4.4; II Yes   f. I 6.6; II Yes

     c. I 5.5; II No    g. None of the above.

     d. I 5.5; II Yes

Answer 1

Question - (14)

Answer -

Particulars	Explanation
An explanatory paragraph would be added to an unqualified audit report [“good report”] for: The company’s status as a viable entity (i.e. going concern issue) is doubtful.	When an auditor concludes there is substantial doubt about the client's ability to continue as a going concern, an unqualified opinion with an explanatory paragraph following the opinion paragraph is appropriate.

Hence, Option - (c) is Correct.