Audit Report Modifications

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. a. F. Either a disclaimer of opinion or an “except for” qualified opinion. –If the auditor is unable to obtain financial statements for an investee it is considered a scope limitation in which either a qualified opinion or a disclaimer of opinion is necessary. b. L. Describe the circumstances in an explanatory paragraph preceding 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. c. B. An unqualified opinion-If there is a doubt as to the continuance of an entity then an unqualified opinion should be issued either with an explanatory paragraph or a disclaimer. d. 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. e. B. An unqualified opinion-When the principal auditor takes responsibility for the work of another auditor then a standard unqualified opinion is appropriate. f. P. Describe the circumstances within the scope and opinion paragraphs without adding an explanatory paragraph. 4. An entity issues financial statements that