AUD Study Group – Q1 2018 - Page 9

I hope my explanation helps you.

As long as auditor finds ending balance of the inventory he can give unmodified opinion on Balance sheet only, but disclaim an opinion on other statements because, Income stat. has COGS which is the result of opening balance + purchases – Ending balance (because auditor can't find opening bal. at the beg of the year he can't express any opinion on income statement. Then from Income statement, Net income ties to Stockholder's equity and also affects the statement of cash flows. Therefore Auditor can't express an opinion on other statements except balance sheet.

In circumstances where a scope limitation prevents an auditor from obtaining sufficient appropriate audit evidence regarding an item that does not affect the ending balance of a balance sheet account, the auditor may issue an unmodified opinion in regard to financial position and disclaim an opinion in regard to the results of operations and cash flows.

@Sona, thank you so much! That just made so much more sense.

Thank you Jen! Do you know when/where scores will be posted?

@ssibi good luck!! you will do great!! just remember your NTS and your ID 😉

Thank you @Teal!

Question: What is capsule information and what does it have to do with comfort letters?

“When an accountant issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receive

a) A disclaimer on prospective financial statements.

b) Negative assurance on capsule information.

c) A limited opinion on pro forma financial statements.

d) Positive assurance on supplementary disclosures.

Explanation: The auditor may provide negative assurance regarding selected capsule financial information if the auditor has performed a review of the financial statements underlying the capsule financial information in accordance with GAAS applicable to reviews of interim financial information, and the selected capsule financial information is in accordance with minimum disclosure requirements of the applicable financial reporting framework for interim financial information.”

@itooshallpass I looked it up in Wiley and am not finding anything on capsule information. I know they provide negative insurance on the typical information a comfort letter supplies if F?S have not been audited, so maybe it doesn't matter (ie it is just an extra word)? Maybe someone else can answer.

I am consistently getting 65's when I do brand new questions. My test is on Saturday and I can't decide whether this is a bad sign or not, haha. I am doing well on the ones I have already done though!