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4. Determine whether each of the following situati...

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4. Determine whether each of the following situations would result in a modified unqualified opinion (i.e., a change to the auditor?s standard three paragraph report). For those situations that would result in a modified unqualified opinion, determine the format of the appropriate report. Assume any effects on the financial statements are material. (Please use the following key (e.g., ?A?) for your answers: A-F). Do not copy the rule itself into your student answer packet. Select from the options provided: A = Not modified unqualified B = Modified unqualified: change all three paragraphs C = Modified unqualified: explanatory paragraph before opinion paragraph D = Modified unqualified: explanatory paragraph after opinion paragraph E = Modified unqualified: explanatory paragraph either before or after opinion paragraph 1. The client has changed from accelerated depreciation to straight-line depreciation. The change had the result of improving the company?s bottom line. 2. Another auditor audits a subsidiary of the client, and the auditor decides to divide responsibility. 3. The client and another entity have developed a unique method of doing business together and current accounting policies don?t adequately reflect the substance of the related transactions. 4. The auditor concludes the client is on the verge of bankruptcy due to a significant competitive threat. 5. The client has changed from a LIFO to a FIFO cost flow assumption to better match the actual flow of its inventory. 6. Another auditor audits a subsidiary of the client and the auditor decides to assume responsibility. 7. The client is suffering from a severe cash flow shortage, but has arranged for a loan from the bank that will alleviate this problem. 8. The client is a component of a larger entity, and the auditor wishes to alert the readers of the financial statements to this fact.

 

Paper#5923 | Written in 18-Jul-2015

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