I just took the Becker Final Exam 2 and am struggling to understand these questions, Can someone please help explain the solutions?
1. Auditing standards require that the independent auditor's report shall contain either an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. Which of the following would be prohibited by auditing standards?
a. The auditor disclaims an opinion on the entire set of financial statements.
b. The auditor disclaims an opinion on the income statement and on the statement of cash flows, but renders an unmodified opinion on the balance sheet.
c. None of the above are prohibited.
d. An auditor is hired to render an opinion on the balance sheet only
Correct Answer is C…. I selected A —- isn't that piecemeal?
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2. Jamison, CPA, is auditing the financial statements of Deegan Industries. Jamison had obtained appropriate audit evidence, sufficient to support an opinion, by January 24, year 3, and issued his audit report (dated January 24, year 3) on February 12, year 3. In which case would Jamison most likely use dual dating?
a. On February 8, year 3, a lawsuit in which Deegan was the defendant was settled out of court. The year 3 financial statements were appropriately adjusted to reflect the resolution of this matter, and a footnote explanation was added.
b. On February 10, year 3, a fire occurred at Deegan's manufacturing plant. The fire had no material effect on Deegan's year 2 financial statements, and no disclosure of the fire was deemed necessary.
c. On January 10, year 3, one of Deegan's primary customers declared bankruptcy due to its deteriorating financial condition. As a result, Deegan wrote off a material account receivable that had been included in the year 2 balance sheet. A note was also added to the year 2 financial statements to discuss the financial impact of losing this customer.
d. On January 18, year 3, the partner in charge of the Deegan audit retired and was replaced by an alternative partner.
Correct answer is A —- should that read YEAR 2 Financial statements were revised? The audit is for year 2, if they adjusted year 3 financials, it would have no effect on the current audit.
Thanks for your help!
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